Posted on 05/06/2015 7:55:55 AM PDT by bestintxas
The future of the U.S. oil industry may well be taking shape north of this town on 15 square miles of windswept prairie above the Bakken Shale. It’s about as far from the industry’s wildcatting heritage as is thinkable.
“Our idea was to build the world’s greatest oil factory,” says Chris Wright, the chief executive of Liberty Resources LLC. And if the U.S. oil industry is going to overcome several significant challenges, it may have to follow the lead of this small Denver-based company.
The U.S. oil industry boomed when crude oil prices were high, but has entered a world where low oil prices may be the norm for a while. Saudi Arabia says it won’t cut production to reduce supply, leaving U.S. companies vulnerable. After years of pell-mell development, these producers also face rising pressure from communities and regulators to be better neighbors.
“The correct focus in a price downturn is to focus on efficiency and cost mitigation, but it is much easier said than done,” says Cody Rice, a Houston-based senior research analyst for energy consultant Wood Mackenzie. “There are so many moving pieces that it is very difficult to do these things well.”
Mr. Wright’s oil factory is well-suited for this new world. It is focused on cutting operating costs and boosting output. And it is flexible, allowing oil output to be started and stopped—something that could be a big plus as volatile global crude prices require U.S. companies to adjust production levels. Reducing truck traffic
On a frigid February evening, the project was beginning
(Excerpt) Read more at wsj.com ...
This approach is one explanation as to why there are so many wells drilled and unfracced at present.
Oil and gas in the ground constitutes money in the bank.
Money that changes in value with the state of supply and demand.
That money will be withdrawn from the bank when it is profitable to do so on a case by case basis.
Too many people are determined to over-complicate the situation.
Agreed, it is simple and understandable.
unlike bank deposits where there are no taxes on deposits, oil suffers an ad valorem tax. Since the oil is not ‘proved’ due to non-completion, there is no tax.
ran across this one EOG explaining the financial benefits of its strategy.
http://www.eogresources.com/investors/slides/InvPres_0515.pdf
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