Posted on 08/25/2014 4:15:19 PM PDT by ckilmer
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August 25, 2014 | Comments (0)
Pioneer Natural Resources (NYSE: PXD ) stock has gone up nearly 600% in just the past five years. That has crushed the market, which is up just over 92% over that same time period. Despite the market-crushing returns, there's still a lot of fuel left in Pioneer Natural Resources' tank. Here are three reasons why the stock could continue to rise.
Pioneer Natural Resources believes that it is sitting on the biggest oil field ever discovered in the U.S. The company sees the Spraberry and Wolfcamp formations within the Permian Basin holding economically recoverable resources totaling 75 billion barrels of oil equivalent, or BOE. That is more than double the size of the Eagle Ford shale. Given Pioneer Natural Resources' large acreage position in the play, it believes it can economically recover nearly 10 billion BOE.
The key for the company will be to prove it can recover this oil and gas. In order to do that, Pioneer Natural Resources needs to continue drilling wells and gathering the data that proves just how much oil and gas can be recovered. This data provides certainty as the oil and gas moves from economically recoverable resources to proved reserves, as noted in the chart below.
Source: U.S. Energy Information Administration
Investors place more value on proved reserves because of the certainty that these do in fact exist and can be economically produced. As of the end of last year Pioneer Natural Resources had 845 million BOE in proved reserves, but just 423 million BOE in the Spraberry and Wolfcamp formations, as noted on the chart on the left-hand side of the following slide.
Source: Pioneer Natural Resources Investor Presentation.
The company believes that through 2016 it can add more than 600 million BOE in proved reserves in these two formations. As these resources move to proved reserves the stock could rise due to the added certainty that the company will indeed produce this valuable oil and gas.
This year is a transitional one for Pioneer Natural Resources, as it's moving from horizontally appraising the Spraberry and Wolfcamp formations to developing them. The transition will see the company spend less money on science to understand the rocks and more money on drilling wells that increase production and prove its reserves. Further, the company is now starting to transfer the knowledge and expertise it gained in the Eagle Ford shale to the Spraberry and Wolfcamp.
Source: Pioneer Natural Resources Investor Presentation.
This transition will make Pioneer Natural Resources a better operator. As it improves its operations it can better stretch its capital dollars, which will earn higher returns for investors. Better returns and improved profitability tend to move stocks higher.
Pioneer Natural Resources and its fellow independent oil and gas peers are pushing for the U.S. to end its more than 40 year ban on oil exports. The reason it wants the export ban lifted is because the production of light crude oil in the U.S. is growing so fast that our refineries can't keep up. This is causing the price of domestically produced crude oil, which is commonly benchmarked to WTI, to trade at a discount to the globally benchmarked Brent crude oil. As the following slide shows, the two used to trade around the same price -- but as U.S. oil production surged it has caused WTI oil to trade at a discount.
Source: Pioneer Natural Resources Investor Presentation.
Pioneer Natural Resources believes that by ending the oil export ban its oil will fetch a higher price, which will improve profits. This will also allow the company to then drill more wells, which will push U.S. oil production even higher and create more jobs, putting more tax revenue into the government's pockets and even pushing the price of gasoline down. If the industry is successful in convincing Congress to end the export ban it could lift the stock of Pioneer Natural Resources and its U.S.-focused peers.
The company believes that through 2016 it can add more than 600 million BOE in proved reserves in these two formations.[spraberry, wolfcamp]
This year is a transitional one for Pioneer Natural Resources, as it’s moving from horizontally appraising the Spraberry and Wolfcamp formations to developing them. The transition will see the company spend less money on science to understand the rocks and more money on drilling wells that increase production and prove its reserves. Further, the company is now starting to transfer the knowledge and expertise it gained in the Eagle Ford shale to the Spraberry and Wolfcamp.
Scouts Out! Cavalry Ho!
It damn sure isn’t dead dinosaurs - sorry greenies!
Has the theory of abiotic oil ever been proven or disproven?
..............
I don’t think that the theory of abiotic oil has been proven or disproven.
Rather what’s happened has been that a better understanding of oil underground has come about.
Since the dawn of the oil age 150 years ago less than 10% of the oil underground has been extracted. That means that 90% o the oil is still underground. For the past hundred and fifty years oil men could only get oil from traps under salt domes or similar structures where oil accumulated from source rock below.
The fracking revolution is enabling driller to get at the source rock. But even with today’s technology its thought thought that fracking will enable driller to get at only another 10-20% of the oil. Over time as technology improves that percentage may improve.
For example, its thought currently that the Baaken/Three Forks formation has over 900 billion barrels of oil in place of which maybe as much as 45 billion barrels is commercially addressable. But even now only a small fraction of that 45 billion barrels of commercially addressable oil is PROVED oil.(see the graphs above for an explanation of the definitions.)
10-15 years ago when you heard stories about oil structures that refilled—people opined that maybe the earth itself was making the oil. These days you wouldn’t hear that because people know that the big pools are being fed by source rock below that frackers are currently targeting.
There will always be those that believe in the wishful thinking.
But a few facts are:
Oil is only found sourced to sedimentary basins.
Oil is never found igneous rock.
Oil contains micro-fossils of the organism that were laid down in the same sediment.
Carbon in oil is too old to carbon date.
“Oil is never found igneous rock.”
Actually, a few basins do contain oil found in igneous rock.
Most think the oil is sourced from sedimentary formations.
If my memory is correct, I think Yemen has such fractured basement producers.
Sourced for igneous rock? Or sourced from sedimentary and the containing trap is igneous.
I would really like a link for more information.
If my memory is correct, I think Yemen has such fractured basement producers.
Interesting. In 1993~94, I worked Yemen Oil Field in the Masila Block. I have never heard of such a claim.
Looking for Yemen's Hidden Treasure - Schlumberger
http://www.adelphienergy.com.au/files/includes/images/projects-documents-figure-2-yemen-map.jpg
Sorry, wrong link in the above post.
Looking for Yemen’s Hidden Treasure - Schlumberger
http://www.slb.com/~/media/Files/resources/mearr/wer12/rel_pub_mewer12_2.pdf
Yeah, I recall working some Total-operated properties years ago where some production occurred from them.
Here’s what I found
http://www.geoscience.co.uk/assets/file/Reservoirs%20in%20Fractured%20Basement%20Ver%2010_JCG.pdf
Thanks for that, I’m going to read it in more detail.
At first glance I see:
Basement reservoirs are a subset of naturally fractured reservoirs, and various definitions of ‘basement rocks’ exist (see for example Landes et al 1960, P’An 1982, Koning & Darmono 1984, Aguilera 1995c and North 1990). The definition that we think is most appropriate in the context of hydrocarbon exploration is that of Landes et al (1960):
any metamorphic or igneous rock (regardless of age) which is unconformably overlain by a sedimentary sequence
North (1990) however took a different view, considering basement rocks to include those of sedimentary origin if they have little or no matrix porosity. This definition would be quite wide including fields hosted, for example, in the Cambro-Ordovician quartzitic sandstones of Algeria.
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This seems to tie the sourcing of the material to the sedimentary layer. If that layer lies on natural fractured granite, liquids from the sedimentary layers are going to be in the granite fractures.
But now I’ve got something new to read during lunch. I just got back from the local plant and you’ve saved me from pretending to be social with my co-workers.
Cheers!
Thanks for that, really. I’ve got more reading to do but it appears all are sourced from sedimentary zones.
Page 18 - Petroleum ages in Russia extend over a 1000 million year time period with source rocks ranging from late pre-Cambrian to Miocene.
I didn’t realize there was production sourced from such an early period. Thanks again.
“I didn’t realize there was production sourced from such an early period. Thanks again.”
No problem at all.
I am a petroleum engineer of 41 years and worked a number of years with exploration. Lucky for me some rubbed off, including some Yemen and Wilmington basement drilling.
My belief is like yours that all oil is sourced from sedimentary.
My work has been on the surface for production facilities, along with some midstream and downstream work. I’m an electrical engineer but have a lot of curiosity in the source of the gas and liquids that have provided for me over the years. Only 2.5 decades for me. All but the first couple years oil/gas/petrochem and the occasional odd-ball project. Turned in a bid for dinky job at a Nuclear Plant this morning; nothing related to actual nuke stuff of course.
Cheers.
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