And there was much rejoicing in the land.... Gas Prices

[Denny]

I know there's one less tanker driver out in dfw!!Fuck that job the shit schedule and the pay. I have much respect for those that still perform that job though.

Finally making it big on gambling and stock trading?

[Captain Crawfish]

Finally making it big on gambling and stock trading?

The sports actually took place of the stocks. It's a lot more fun and you don't have to watch a chart all day. Delivering fuel simply doesn't pay enough for the risk. I was also driving 75 miles roundtrip to the job everyday which was getting old. My new job is 5 min away. BTW key to making money on sports is to think like a bookie. Good luck and remember there are tons of international games during the day

[Strychnine]

Kuwait Sees Crude Recovering Amid Plans to Add More Rigs

The surplus in global crude supply is smaller than the 1.8 million barrels a day Kuwait estimated last month, and prices will continue to recover, Oil Minister Ali Al-Omair said.

The Persian Gulf state producer plans by next year to add 40 more drilling rigs and raise production capacity to 3.15 million barrels a day, a 5 percent increase from today, Hashem Hashem, chief executive officer of state-run Kuwait Oil Co., told reporters at a conference in Kuwait City.

“We were expecting oil prices to recover in the second half, but they recovered faster than what we expected,” Al-Omair said Monday at the same event. “I expect oil prices to keep improving.”

http://www.bloomberg.com/news/articles/2015-02-16/more-kuwait-oil-minister-says-prices-will-recover-further-in-2h

But then that's offset with this:

Get Ready for $10 Oil

At about $50 a barrel, crude oil prices are down by more than half from their June 2014 peak of $107. They may fall more, perhaps even as low as $10 to $20. Here’s why.

U.S. economic growth has averaged 2.3 percent a year since the recovery started in mid-2009. That's about half the rate you might expect in a rebound from the deepest recession since the 1930s. Meanwhile, growth in China is slowing, is minimal in the euro zone and is negative in Japan. Throw in the large increase in U.S. vehicle gas mileage and other conservation measures and it’s clear why global oil demand is weak and might even decline.

At the same time, output is climbing, thanks in large part to increased U.S. production from hydraulic fracking and horizontal drilling. U.S. output rose by 15 percent in the 12 months through November from a year earlier, based on the latest data, while imports declined 4 percent.

Something else figures in the mix: The eroding power of the OPEC cartel. Like all cartels, the Organization of Petroleum Exporting Countries is designed to ensure stable and above-market crude prices. But those high prices encourage cheating, as cartel members exceed their quotas. For the cartel to function, its leader -- in this case, Saudi Arabia -- must accommodate the cheaters by cutting its own output to keep prices from falling. But the Saudis have seen their past cutbacks result in market-share losses.

So the Saudis, backed by other Persian Gulf oil producers with sizable financial resources -- Kuwait, Qatar and the United Arab Emirates -- embarked on a game of chicken with the cheaters. On Nov. 27, OPEC said that it wouldn't cut output, sending oil prices off a cliff. The Saudis figure they can withstand low prices for longer than their financially weaker competitors, who will have to cut production first as pumping becomes uneconomical.

What is the price at which major producers chicken out and slash output? Whatever that price is, it is much lower than the $125 a barrel Venezuela needs to support its mismanaged economy. The same goes for Ecuador, Algeria, Nigeria, Iraq, Iran and Angola.

Saudi Arabia requires a price of more than $90 to fund its budget. But it has $726 billion in foreign currency reserves and is betting it can survive for two years with prices of less than $40 a barrel.

Furthermore, the price when producers chicken out isn’t necessarily the average cost of production, which for 80 percent of new U.S. shale oil production this year will be $50 to $69 a barrel, according to Daniel Yergin of energy consultant IHS Cambridge Energy Research Associates. Instead, the chicken-out point is the marginal cost of production, or the additional costs after the wells are drilled and the pipes are laid. Another way to think of it: It's the price at which cash flow for an additional barrel falls to zero.

Last month, Wood Mackenzie, an energy research organization, found that of 2,222 oil fields surveyed worldwide, only 1.6 percent would have negative cash flow at $40 a barrel. That suggests there won't be a lot of chickening out at $40. Keep in mind that the marginal cost for efficient U.S. shale-oil producers is about $10 to $20 a barrel in the Permian Basin in Texas and about the same for oil produced in the Persian Gulf.

Also consider the conundrum financially troubled countries such as Russia and Venezuela find themselves in: They desperately need the revenue from oil exports to service foreign debts and fund imports. Yet, the lower the price, the more oil they need to produce and export to earn the same number of dollars, the currency used to price and trade oil.

With new discoveries, stability in parts of the Middle East and increasing drilling efficiency, global oil output will no doubt rise in the next several years, adding to pressure on prices. U.S. crude oil production is forecast to rise by 300,000 barrels a day during the next year from 9.1 million now. Sure, the drilling rig count is falling, but it’s the inefficient rigs that are being idled, not the horizontal rigs that are the backbone of the fracking industry. Consider also Iraq’s recent deal with the Kurds, meaning that another 550,000 barrels a day will enter the market.

While supply climbs, demand is weakening. OPEC forecasts demand for its oil at a 14-year low of 28.2 million barrels a day in 2017, 600,000 less than its forecast a year ago and down from current output of 30.7 million. It also cut its 2015 demand forecast to a 12-year low of 29.12 million barrels.

Meanwhile, the International Energy Agency reduced its 2015 global demand forecast for the fourth time in 12 months by 230,000 barrels a day to 93.3 million and sees supply exceeding demand this year by 400,000 barrels a day.

Although the 40 percent decline in U.S. gasoline prices since April 2014 has led consumers to buy more gas-guzzling SUVs and pick-up trucks, consumers during the past few years have bought the most efficient blend of cars and trucks ever. At the same time, slowing growth in China and the shift away from energy-intensive manufactured exports and infrastructure to consumer services is depressing oil demand. China accounted for two-thirds of the growth in demand for oil in the past decade.

So look for more big declines in crude oil and related energy prices. My next column will cover the winners and losers from low oil prices.

And some local TX info that I came across:

[Strychnine]

Hope none of you guys work for Magnum Hunter...

As E&P "Death List" Circulates, Some Drillers Are Turning Down Business

It is a tough market for drilling contractors and oil service firms out there right now. As E&P companies ratchet down drilling programs, their suppliers are stuck with idle equipment, spare capacity, and excess labor.

So one would think that wherever the service and drilling contractors can get work, they will take it, right? Wrong. There is a new worry rippling through the oil patch. Specifically, contractors are increasingly worried about the risk that their customers may not be able to pay the bills.

As Down-Cycle Matures, Counter-Party Risk Rises

In a good market, it is very rare that E&Ps fail to pay their contractors. But this year, counter-party risk has suddenly become a very real concern. In the first several weeks of the downturn, contractors were scrambling to find any new job as operators released rigs. Now, they are becoming more picky - screening customers to be sure they won't get stuck with bounced checks.

For some small shops, a few bad jobs in this market can be devastating. Small contractors are already grappling with deteriorating demand, and many don't have the working capital to survive if they carry out several jobs but don't get paid for the work.

These days, no E&P wants to become known as a company that is upside down on its finances, for that sort of reputation can become a black mark that limits access to suppliers and destroys business relationships. But inevitably, the next phase of the downturn will be marred by defaults and insolvency for some. Just yesterday, Quicksilver Resources announced that it will not make a $13.6mm interest payment due this week.

An E&P "Death List" Is Making The Rounds

In the major tight oil plays, a report written by the Oxford Group is making the rounds among small contractors even as larger contractors compile their own internal "Do Not Touch" lists. Titled Oil Company Death List, the report (and others like it) has caused some contractors to rethink who they are doing business with. Some service firms are shutting their doors to customers they think might go under.



Some of the company names that routinely surface in reports like these are the independent E&P operators that funded unconventional drilling programs with debt when times were good. These companies have outspent cash flow for years, chasing reserve/production growth with debt funding. This downturn does raise real questions about the sustainability of these operations if lenders walk away because of low oil prices.

20 Highly Leveraged E&Ps

I ran a screen to identify the 20 most leveraged E&Ps (using a basic Net Debt to EBITDA ratio). This statistic measures the amount of debt (less cash) each company has per dollar of annual profit. The higher the number, the more exposed the company is to default in this new low oil price environment.

Published in early-2015, the analysis in this so-called Death List isn't much different than the contents of many other Wall Street firms reports that analyze the balance sheets, debt coverage ratios, and free cash flow of E&P operators, but the bold claim on the cover page of this report is the most dire warning yet.


*Net Debt / EBITDA

I'll stop short of calling my screen the "Death List," but if I was running an oil service firm, I would think twice before doing business with some of the names on this list.

[Trip McNeely]

My company didn't even make the list thank goodness. I didn't expect it to, we have really low debt.

[slow99]

Jesus Christ at 50x Debt/EBITDA. Wonder if that's forward or trailing.

[CexMashean]

My fucking gas keeps going up. God damn assholes.

[Sean88gt]

My fucking gas keeps going up. God damn assholes.

Refinery fire in cali today, expect more fucking coming down the pipeline.

[Strychnine]

[Denny]

Midstates didn't make the list?

[slow99]

Midstates didn't make the list?

Way too small ... $70M market cap?

[Denny]

Ah, gotcha.

[Strychnine]

Thursday, 19 February 2015

Saudi Arabia is boosting oil production, pursuing its policy to maintain market share as prices fall.

Crude oil output is about 10 million barrels a day, New York-based Pira Energy Group said in a weekly report, citing discussions with Saudi customers. That would be the highest since July and up from an average of 9.7 million barrels a day in the second half of 2014, according to data from the Joint Organisations Data Initiative, an industry group supervised by the Riyadh-based International Energy Forum.


“Saudi Arabia’s oil policy has firmly moved to protect its market share. There is even tail-event risk that the kingdom chooses to increase production to ensure that this is the case, thereby placing a cap on the recovery in medium-term prices.”

- Christyan Malek, London-based analyst at Nomura International Plc

[Strychnine]

US rig count -48 this week.

1310 total now.


Think the drop is tapering off after three weeks of what looks like could be the bottom?

[Broncojohnny]

US rig count -48 this week.

1310 total now.


Think the drop is tapering off after three weeks of what looks like could be the bottom?

Doubtful, oil inventories are at a 80 year high and still increasing.