Posted on 04/23/2020 5:26:18 PM PDT by Zhang Fei
April 23 (Reuters) - The largest oil producer in North Dakota has halted most of its production in the state, notifying some customers it would not supply crude at current pricing, according to people familiar with the matter.
Continental Resources Inc, the company controlled by billionaire Harold Hamm, stopped all drilling and shut in most of its wells in the state’s Bakken shale field, said three people familiar with production in the state. North Dakota is the second-largest oil-producing state in the United States after Texas.
Global oil prices have plunged this spring because of excess supplies and a lack of demand from coronavirus-related shutdowns. U.S. crude prices have dropped below zero in some places because of a lack of storage space to put the oil.
Bakken crude this week was selling regionally for $14 to $15 per barrel below the U.S. benchmark, said Ron Ness, president of the North Dakota Petroleum Council. The benchmark settled at $16.50 on Thursday.
A spokeswoman for Continental did not reply to requests for comment.
Bloomberg earlier reported the company declared force majeure on at least one contract to deliver oil because it could not have foreseen the price rout.
Continental is highly exposed to weak prices because it has declined to hedge future production, betting that economic growth would lift the value of its oil. Many large shale producers use derivatives as a type of insurance policy to lock in a price for their future output.
A rival who viewed Continental’s notice of force majeure said that without state regulators’ requiring output cuts, a contract could not be canceled because sales were unprofitable for a period.
Hamm, an early supporter and informal adviser to President Donald Trump, urged Texas energy regulators to consider mandating 25% production cuts in the state to boost prices.
(Excerpt) Read more at reuters.com ...
Coming to you from Zhang Fei...
Peak Oil! Muh, Peak Oil! Gas is .99 cents here in Northeast WI! What a ripoff!
Biden will stop all fracking in the US, right?
Then he can take Greta’s sailing yacht to Europe for the next G20 summit.
Lol
WI in general seems to have particularly low gas prices. Other states are “spottier” in that regard. Is there a reason why most of WI is so low?
The article is correct in that normally a bad outcome in pricing on the part of one party is not considered force majeure.
My instinct is that Continental would argue that what is unforeseen, thus qualifying for a claim of force majeure, is the Red Commie Coronavirus (unforeseen/act of God), which resulted in Stay at Home orders, thus gutting the petroleum markets.
Not sure how far they can get on that argument (if they go that route).
[The article is correct in that normally a bad outcome in pricing on the part of one party is not considered force majeure.
My instinct is that Continental would argue that what is unforeseen, thus qualifying for a claim of force majeure, is the Red Commie Coronavirus (unforeseen/act of God), which resulted in Stay at Home orders, thus gutting the petroleum markets.
Not sure how far they can get on that argument (if they go that route).]
Since the next argument will be a Chapter 11 shut down, maybe far enough?
....... With per barrel prices this low .... Fracking is now probably too expensive to justify the cost of extraction and production .... the break-even point for fracking is around $30-50 per barrel. .... As a result it will slow or stop on its own if it hasn't done so already .....
Let’s see;
I’m currently getting about 4 days to the gallon for my personal trainer dog to take me to the local National Forest for exercise.
Between the fuel in the tank and my 30 gallon tactical reserve left over from before the ski areas prematurely closed, I’m good for about 180 days.
Not including the full tanks in some other vehicles.
There is another issue here, which is that if Continental is sued, the party suing for breach of contract has to prove his damages. With oil priced far below any usual expectation what would the purchasers damages be?
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