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

[Trip McNeely]

How would you like to enter into a contractual agreement with Iran. I sure as shit wouldn't. Just because it's another revenue stream to a service company, doesn't mean they will attract any bidders.

[Ruffdaddy]

How would you like to enter into a contractual agreement with Iran. I sure as shit wouldn't. Just because it's another revenue stream to a service company, doesn't mean they will attract any bidders.

Halli, schlum...and many others will...

[Trip McNeely]

I'd like to see those terms and conditions pages. lol

[Strychnine]

I'd like to see those terms and conditions pages. lol

SLB did illegally (in the eyes of the US, not Iran) it for 4 years thru the sanction period. I would guess Iran is much more concerned with getting their crude to market and generating revenue than they are interested in pissing off the international contractors who are willing to help them do it.

[Trip McNeely]

SLB did illegally (in the eyes of the US, not Iran) it for 4 years thru the sanction period. I would guess Iran is much more concerned with getting their crude to market and generating revenue than they are interested in pissing off the international contractors who are willing to help them do it.

I remember them getting fined big time for that. I believe Weatherford did as well.

[Strychnine]

Some tea leaves for everyone to interpret this week...

Pioneer Natural Resources to ramp up drilling despite loss

Pioneer Natural Resources says it will ramp up its drilling program in the Permian Basin oil fields despite reporting a second quarter loss.

The Irving-based energy company reported a second quarter net loss of $218 million, or $1.46 per diluted share. Without adjustments for noncash derivatives and other unusual items, income for the second quarter was $15 million after taxes, or 10 cents per diluted share, the earnings report stated.

CEO Scott Sheffield said the company’s drilling program in the Spraberry and Wolfcamp fields continue to show strong margins and returns in a weak commodity market because of the Pioneer’s “aggressive pursuit of cost reductions” and “efficiency gains.”

“As a result, we are putting rigs back to work and plan to return to an activity level in 2016 that can result in a similar growth trajectory that we were delivering in the second half of 2014 before the downturn,” Sheffield said in a prepared statement as part of a second quarter earnings report.

Earlier this year, Pioneer announced it was dramatically cutting back on its drilling in Texas by cutting its capital expenditures by 45 percent to $1.85 billion and operate only 16 drilling rigs in the Permian Basin and Eagle Ford Shale oil fields through the first part of the year.


Now Pioneer plans to boost its drilling budget to $2.2 billion and add an average of two rigs per month in the northern Spraberry and Wolfcamp during the second half of 2015 and plans to continue adding rigs at this pace through the first quarter of 2016, the company said in the earnings report.

The company said it has reduced up to 25 percent and hopes to cut them by 30 percent by early 2016.

The current cost of drilling the wells in the northern Spraberry and Wolfcamp is up to $8.5 million, a price the company hopes to reduce to $7.5 million to $8 million by early next year. A similar reduction is projected for the southern joint venture area, from about $7.5 million to $6.5 million to $7 million in 2016.

In February, Sheffield said he thought his company was well positioned financially to weather the storm of lower oil prices because of its operating cash flow of $1.7 billion, $1 billion in cash on hand. After the sale of its Eagle Ford Shale pipeline business, the company reported having $700 million in the bank.

Pioneer said in the report that it is the largest acreage holder in the Spraberry and Wolfcamp with about 600,000 gross acres in the northern portion of the play and about 200,000 gross acres in the southern Wolfcamp joint venture area.

Fitch: Rig-linked US shale production decline of 7% possible in second-half 2015

The nearly 55% drop in US Lower 48 rig counts during the first half of 2015 is forecast to contribute to a second-half 2015 production decline of roughly 7% in tight oil and shale gas regions at June operating and activity levels, according to Fitch Ratings. This exit production rate would be around 3% lower than year-end 2014 levels. Further, Fitch anticipates that some of the productivity gains realized during the first half of 2015 will lead to a lower, longer-term US Lower 48 rig run-rate of 1,200–1,300.

Extrapolating from US Energy Information Administration (EIA) data, Fitch forecasts that, at June operating and activity levels, oil production, including crude and condensate, declines from tight oil and shale gas regions will outpace the fall in gas production. Fitch calculates that the 2015 exit oil production rate from tight oil and shale gas regions will be about 9% below the 5.5 million barrels of oil equivalent per day (MMboe/d) June 2015 rate. The projected exit oil production rate would be nearly 6% lower than year-end 2014 levels.

The EIA's estimated new well production per rig and legacy well decline rates are key inputs for Fitch's second-half 2015 production forecasts in tight oil and shale gas regions. To account for movement in these operating metrics, Fitch conducted several sensitivity analyses. For example, a 15% improvement in new well production efficiency per rig, assuming rig counts and legacy well decline rates remain constant at June 2015 levels, second-half 2015 total production in tight oil and shale gas regions would decline by 3%. This would result in the total production exit rates being modestly higher year over year.

Fitch's longer-term US Lower 48 run-rate estimate is 1,200–1,300 rigs. This is 30%–35% below the recent peak US onshore Lower 48 rig count of 1,868 in mid-November 2014. Fitch believes that a key implication of this "new normal" run-rate for onshore drillers, such as Nabors Industries Ltd. (BBB/Stable), is likely to be the heightened importance of maintaining a US rig fleet weighted toward the most-efficient, highest-quality rigs. Fitch anticipates that these types of rigs are best positioned to work during and after the cycle.

Pricing support for a larger scale ramp-up in activity may be several years into the future. Fitch still views a longer, slower rig recovery profile as likely, based on Fitch's West Texas Intermediate (WTI) price assumption of $60 per barrel for 2016 and $70 per barrel long term. Historical down cycles suggest that trough-to-previous-peak-rig response (though tight oil and shale gas has likely created a new normal run rate) depends on the speed and intensity of the price recovery. Fitch notes that the 2001 U-shaped bear market recovery required about 35 months to return to peak levels, while the 2009 V-shaped bear market needed roughly 28 months.

Moody's: Brent and WTI assumptions lowered on higher production, muted demand

Moody’s Investors Service has lowered its price assumptions for Brent crude and West Texas Intermediate (WTI) crude to reflect increases in oil production coupled with muted demand. The rating agency has maintained its price assumptions for North American natural gas, reflecting continued strong natural gas production and demand from electrical generation.

Moody’s lowered its price assumption in 2015 for Brent crude oil, the international benchmark, to $55 from $60 per barrel and for WTI crude, the North American benchmark, to $50 from $55 per barrel.

“We expect prices to rise only gradually in 2016, but not enough to keep pace with rapidly expanding production,” said Steve Wood, a Moody’s managing director of corporate finance. “In addition, there is the risk that the recent deal between international parties and Iran could lead to an increase in the country’s exports, which would further weigh on prices.”

In Moody’s Aug. 7 report titled “Rise in Oil Inventories Compounds Risk of New Iranian Crude Exports,” Moody’s expects prices for Brent crude to average $55/barrel (bbl) in 2015, and WTI crude to average $50/bbl – both of which represent $5/bbl reductions from Moody’s previous assumptions. These full-year prices assume second-half prices of about $47/bbl for WTI and $52/bbl for Brent.

Moody’s expects prices to rise only gradually in 2016, with WTI to average $52/bbl and Brent to average $57. Moody’s medium-term assumptions are unchanged at $75/bbl for Brent and $70/bbl for WTI. The medium-term price assumptions reflect Moody’s view that supply/demand equilibrium will eventually be reached around $75/bbl for Brent. This price would support development of the world’s most expensive oil – from oil sands and deepwater resources – in an environment of lower development costs than in recent years. However, Moody’s now expects this price to be reached only at the end of the decade.

[Ruffdaddy]

Im torn on the whole drilling ramp up. I know that laying off slow crews alone was worth 15% at least in cost savings on the drilling side. Ive heard up to 30%. Drillers have also just straight up dropped their rates, the people ive spoken with say 20-30% off the top. So they really can drill at a much lower break even point than the previously.

However people arent buying capital equipment at all it seems. This has helped the rental side greatly however, but has cut a lot of middle men out of the mix. OEMs are going to up their focus on renting their own shit out too.

Now that doesnt even touch what happens if GE buys sperry and decides to start selling their tools. Thatll crush a lot of the smaller mwd companies unless drillers know the headache associated with the giant that is GE

[Trip McNeely]

However people arent buying capital equipment at all it seems.

I'm not buying any because we have a surplus from this years drop off. I have looked at rentals, but only for certain things that would normally be temporary anyways and that goes into my next point of moving shit around. Reclamation will be a big thing too moving forward.

[Ruffdaddy]

I'm not buying any because we have a surplus from this years drop off. I have looked at rentals, but only for certain things that would normally be temporary anyways and that goes into my next point of moving shit around. Reclamation will be a big thing too moving forward.

Yeah for some stuff definitelty. On my end...they seem to be running out of spare equipment because downhole tools wear out pretty quickly with all the mud flow, shock and vibe. 175C doesnt help the electronics either.

[Strychnine]

Im torn on the whole drilling ramp up. I know that laying off slow crews alone was worth 15% at least in cost savings on the drilling side. Ive heard up to 30%. Drillers have also just straight up dropped their rates, the people ive spoken with say 20-30% off the top. So they really can drill at a much lower break even point than the previously.

However people arent buying capital equipment at all it seems. This has helped the rental side greatly however, but has cut a lot of middle men out of the mix. OEMs are going to up their focus on renting their own shit out too.

Now that doesnt even touch what happens if GE buys sperry and decides to start selling their tools. Thatll crush a lot of the smaller mwd companies unless drillers know the headache associated with the giant that is GE

Not only rental but refurb and lease-to-own as well.

[Ruffdaddy]

Not only rental but refurb and lease-to-own as well.

Yep...all of that has increased with us in the past few months.

I think oil and gas will soon be much closer in operation to typical manufacturing and operations. Much less in the way of massive swings, and more on the side of almost sustaining. It will probably be long term healthy for the US, but will suck for the next year.

[Ch3rnobyl]

Our flowback rental division has boomed with the way the market is going right now. New iron sales are down about 60% from this time last year but luckily enough we scaled back on inventory as soon as the prices started to drop last August. My brothers a thread rep for casing and his work slowed wayyy down in the last 3 months also.

[no4njnk]

Lots of people buying used units and taking the good parts off of them (a lot of Baker). Meeting with a customer tomorrow using a QSX15 power pack to try and power parts of a rig. I know GoFrac sold a lot of their stuff for pennies on the dollars right before the shit hit the fan.

[Strychnine]

Fun chart

[racrguy]

I'm glad I got out when I did. I'd hate to be caught with my dick in my hand like a lot of dudes.