Posted on 10/21/2014 4:58:36 AM PDT by thackney
Count Harold Hamm, the billionaire CEO of Continental Resources CLR +1.34%, as one oil man not worried about the plunge in crude prices to $82 a barrel.
Notice how it happened all at once, he says, starting off our phone call. The suddenness of oils plunge followed the Saudi assertion a week ago that oil was in oversupply, they could live with $80 oil for a couple years, and didnt plan to cut their own output.
Empty talk, not market fundamentals, moved the price, says Hamm. Its not supply-demand related. On the contrary, this is one country, the Saudis, attempting to dictate world oil prices.
And its not going to work, he says. If the Saudis really want to send oil prices lower as a method of applying political pressure to Russia and Iran theyll have to back up their jawboning by adding more barrels to the world market.
OPEC would like to grab back market share from U.S. drillers, but neither the Saudis, nor any other OPEC producer has any excess production capacity with which to push aside American barrels. So the hope is that they can slow the American oil boom by just talking prices lower, below the break-even point for drilling tight oil out of shale.
The market is not in glut, says Hamm. Its a case of the emperor has no clothes.
Indeed, the U.S. governments Energy Information Administration estimates that global oil consumption (91.5 million bpd) has kept pace with supply growth (91.8 million bpd).
And although fossil fuel demand is stagnant in developed nations like the U.S. and across Europe, it continues to surge in developing nations, with Chinas daily demand increasing by 370,000 barrels in each of the past two years, according to the EIA.
We need more supply. Its crazy....
(Excerpt) Read more at forbes.com ...
Might be time to buy a little more COP.
They pay a 4%+ dividend too. Can’t get that at the bank, that’s for sure.
“Declines are much steeper in the big new U.S. fields like the Bakken and Eagle Ford, where a well might come on line at 1,200 bpd, but lose half of that within four months.”
What these guys fail to see is that this tight oil, albeit at relatively low oil volumes, has very, very low decline rates after the wells are mature.
The tighter the oil, the more modest the decline. Only INITIAL declines are steep.
Think of it this way: in a few years, there will be 12,000 wells producing 50 bopd with less than a 5% decline to use as a base production for the next 50 years.
That is an annuity that is nice to have.
But the majority of our current tight production, has not reached that level of maturity. We would lose a lot from the current total production without another decade or so more new wells in these formations.
Click chart for source:
Development of the Bakken Resource
The Bakken/Three Forks Shale Oil Innovation Conference & Expo
Grand Forks, NDFebruary 11, 2014
page 32
Only marginal drilling will cease
Base declined are leveling off for wells drilled in years past and the new wells will continue total production
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