Posted on 02/18/2014 4:46:49 AM PST by thackney
Pioneer Natural Resources looks to be sitting on an unbelievable amount of oil and gas. The company now controls about 845 million barrels of oil equivalent, or BOE, proved reserves and thinks that number is only the beginning. However, on paper, its reserves are actually slowly shrinking.
Recently, the company reported its latest reserve numbers, which showed a curious negative revision to its proved reserves. The company actually axed nearly 185 million barrels of oil from its books along with another 115 billion BOE of natural gas and natural gas liquids. With oil currently selling for about $100 per barrel, that's a lot of potential future revenue that just got wiped out. It also makes one wonder how over a hundred million barrels of oil can simply vanish?
The horizontal shift Pioneer Natural Resources is one of the many energy companies in America that has made the switch from drilling vertical wells to horizontal wells. Because of this, the company isn't going to be drilling all of its planned vertical wells. It will instead eventually drill horizontal wells to tap the oil and gas located in these areas. However, because there isn't enough current data on the horizontal wells that Pioneer Natural Resources has drilled so far, it can't support the replacement of the previously booked vertical reserves with new horizontal reserves. This is how hundreds of millions of barrels of oil simply vanish, at least on paper.
This isn't an occurrence limited to Pioneer Natural Resources. Fellow Permian Basin driller Laredo Petroleum Inc also revised millions of barrels of oil off of its proved reserve estimate. Its latest proved reserve estimate shaved 18 million barrels of oil off its book. However, Laredo Petroleum had to do this because it also has removed vertical drilling locations in favor of adding higher return horizontal locations.
The great reappearing act
While these companies can't put these new reserves on the books just yet, that doesn't mean these reserves won't be added in the future. In fact, Pioneer Natural Resources expects it should be able to add more than 600 million BOE of new horizontal reserves by the end of 2016. That's on top of the 72 million BOE in new horizontal reserves the company already added this year from its horizontal development in the Permian Basin. That, however, is just the tip of the iceberg for Permian Basin drillers like Pioneer Natural Resources.
As the slide above {beelow} shows, Pioneer Natural Resources thinks that it's actually sitting on about 11 billion barrels of oil and gas. That's more than 10 times its proved reserves. The same goes for Laredo Petroleum as it sees its net resource potential being more than 10 times its current proved reserves.
It's a similar story at other Permian focused drillers. Diamondback Energy Inc , for example, has proved reserves of 63.6 million BOE. However, as it adds up the resource potential from new horizontal targets like the Wolfcamp, Spraberry, and Cline formation, it sees total horizontal resource potential of 393 million BOE. That's a pretty compelling upside for Diamondback Energy investors, and right in line with what others are seeing.
Investor takeaway
The switch from vertical to horizontal drilling in the Permian Basin is causing companies like Pioneer Natural Resources and Laredo Petroleum to shave off millions of barrels of oil reserves. However, the disappearance of those reserves is only temporary. Once these companies have more data, it's quite likely they will add back an even greater number of future reserves.
Why hasn’t that been proposed already? Because it is politically untenable. You have to win not just the vote in Congress, but the President’s signature and likely a judge’s ruling at some point in the process.
You don’t get there by fiat or whim. It will take a long term campaign to change minds, just like on abortion and guns.
From 726,542,000 barrels mid 2011 to 695,969,000 now.
History since 1982:
Weekly U.S. Ending Stocks of Crude Oil in SPR
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=WCSSTUS1&f=W
I totally disagree.
Nixon created the EPA via Executive Order.
President Cruz can abolish it just as easily.
I knew you would know where to zero in, so my continuing thanks to you for bringing to us here all which you have done, for years now.
Nonsense. We’re not avatars in some MMOG. There isn’t the political will to do it. It would be the last act of his Presidency.
It will take time, subtlety and compromise to get us where we want to go. There isn’t any superman, that’s dreamworld stuff. Reality is that it will be a long and bloody slog, uphill all the way, but if we hold Congress for a generation we’ll get there. The signs are already in place.
Try reading my post #19 again.
The President makes that repeated assertion about the over reach of the EPA.
It is NOT an impeachable offense.
It is the Job FIx the economy needs.
Noe of the rules imposed since 2008 have improved the quality of anything.
I’m not arguing in favor of the EPA’s overreach and overregulation. But, we have tens of thousands of graduates of our very best government schools who are trained enviros. They’re not going to sit tight while conservatives “destroy the environment”.
That said, we can moderate the worst laws, modify the regulations and settle court cases that tie the EPAs hands without setting off terrible alarms. Democrats get away with it because they have a capon media. We can’t, so we must be wise as serpents and gentle as lambs.
I understand your point.
I’m simply tired of tip toeing around the liberals.
If the President stands up repeatedly and makes the case I did in Post #19, there’s NOTHING “they” can do about it.
He defends his position by stating:
“I don’t care about the emotional nonsense the left is promoting.
Our air and water has been sufficiently clean for a long time, and NONE of the laws passed in the last 10 years have improved that case.
I understand your frustration and it’s easy to vent here on FR. My point is that we didn’t get here overnight. Liberals took a century to get where we are today.
I think we can get back in 25 years or less, but to do it we need to:
1. reach out to minorities and Millenials using logic, clarity and gentleness. People are emotional and confrontation rarely works.
2. Hold Congress for a generation or more and that means dealing with RINOs and liberals. There are areas of agreement where we can make real progress.
3. Share our vision in an affirmative way. We have a devil of a time at PR given that liberals have a hundred billion dollar media arm.
The reality is that we’re a minority. We have to sell our ideas to the mushy middle and even to some liberals to get them to move our way and win elections. It all starts with ideas and ends with winning elections. If you don’t win you cannot play.
Clipping the EPA’s wings is NOT such a case.
The President can do it instantly, and with a clear, unapologetic message.
Why didn’t Reagan, Bush or GW Bush do it that way then?
Under Obama, its become a blatant hammer to shut down energy, industry, and the economy.
You’re describing the reality under each of those Presidents, not one of which permanently changed or crippled the ability of the EPA to cause harm and abuse against the country.
What I want is the EPA hobbled, limited and eventually wound down and delegated to the states. No President can do that by fiat. You could do that over time via legislation, but you need to capture the mind and beliefs of the voting public first. That takes time and an education. I’d start with West Virginia coal miners and their communities.
“You quit first. I promise to follow!!”
No way! You first. ;)
“No President can do that by fiat.”
WHY NOT????
Especially after the liberties and precedence this clown has established.
There is no law constraining such action.
Bunch of job killing, paper pushers hit the streets, so the working man can produce energy and goods and services.
How will the corrupt media compete with THAT reality?
“No President can do that by fiat.”
WHY NOT????
Yeah, why not? This super turd on a stick has set the precedence of ruling by fiat with his phone & pen. It will allow the next president to do so as well.
Just just the damn beast down and be done with it.
Let em howl like starving babies.
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