Posted on 11/05/2014 5:09:15 AM PST by thackney
We’re beginning to see the effects that the low oil prices of the past few months is having on America’s domestic energy boom. On Thursday, ConocoPhillips became the first major producer to announce it plans to scale back drilling in some of the hottest U.S. oil plays, such as the Rocky Mountains and the Permian Basin of West Texas.
While ConocoPhillips still expects to boost production from other areas, chief executive Ryan Lance told reporters the company also may cut exploration spending. Oil prices on the world market have fallen more than 25 percent since June, and the price of West Texas Intermediate crude, the U.S. benchmark, is now trading at a three-year low of $76 a barrel, down from more than $107.
Meanwhile, Shell said it plans to cut spending and eliminate jobs in its U.S. operations because of weak results from its shale projects. Shell cited the Eagle Ford play in South Texas, one of the country’s hottest drilling prospects, as an area it hopes to exit.
Like many of the major oil companies, Shell came to the hydraulic fracturing game late, and even before the oil price decline it struggled to generate the higher returns it needs as a large company. Now, with commodity prices falling, its prospects of making money in shale have dimmed.
In contrast to the caution exhibited by ConocoPhillips and Shell, independent producers have said they expect to continue their fracking operations unabated. Many smaller companies have lower cost structures and can still make money fracking at current prices.
Oil would have to fall farther before they started feeling the pinch....
(Excerpt) Read more at forbes.com ...
and the Sauds will continue to decline as fracking gets cheaper, and it will. The USA and other major fracking zones will be the dominant oil supply of the world. Unfortunately that may well include Russia if American oil companies continue to develop the Russian sources for Putin.
I didn’t say super low, I said lower. Super low would be $20 a barrel. Lower would be $60 a barrel. IIRC, fracking, as well as other types of drilling are only profitable if the barrel price is over $40.
As our economy is still very weak, and unemployment is high, there is a temptation to conserve all jobs, no matter what. However, as in all products, innovation and competition lower prices, and often reduce the need for workers. In the short term, it can be devastating. In the long run, it is better for the economy as a whole.
Ours don’t carry any kind of meats but lunch meats. Some of those off brands are bad tasting so you have to be careful what you buy. Milk is high in them too.
I do most of my shopping at Kroger’s as that is gas points, and they do have food cheaper than the Military Commissary in some areas. I shop both. Kroger bread is lower sodium than name brand, and that is one of the items I have to watch like a hawk as hubby has high BP and I have Meniere’s which require low sodium eating, along with the cholesterol for him. When you have health issue your grocery shopping is more restricted.
I am a big coupon user and cut my grocery bill down quite a bit. I have a stock pile of canned goods and a few boxed items with long term dates.
My up right freezer and the fridge freezer are full from what my garden produced. And what little meat I buy I try and get from the reduced bin that is already frozen at the Commissary, as meat is cheaper there even if it is not marked down, but you still have to watch what you buy. Instead of a steak or chops I get cutlets as they are much cheaper and taste as good prepared right.
We are seniors, and our income limited. Our family has temporally grown by 2 as my son who is a type 2 diabetic so has food needs beyond the norm and grandson are now with us, to protect the grandson from his mom’s stupidity in getting involved on fb, pm with a child predator. Yes, she is that STUPID! Son is job looking every day and they are hard to find for a white man in management, in a heavy black/hispanic area called MEMPHIS, TN.
I don’t really see this lasting long like it was in ‘86. Those hungry years lasted forever. I didn’t feel even remotely safe for almost 10 years then came ‘98 and it got worse. They were hollow, painful years.
I looked at the annual report of an independent and their analyst presentation of a couple of months ago. A pure shale company. Their best production in the Eagle Ford and Wolfcamp / Bone Springs had a first year decline rate of 70 to 80%. The payouts look good at about a year or less but they posted the following for 2013.
800mm revenue, 600+ mm in expenses, 199 mm net income bfit, 1.5 BILLION in long term debt at nearly 6%. After a 70% decline and 30% drop in oil price I’d say they will be under water pretty soon. They didn’t improve their position at all in 2014... in fact they added a pile of debt and the 1.5 bil does not include the short term of about 350mm. I’d say this is pretty typical of a whole bunch of shale companies.
In broad strokes, if drilling slows a lot in the shale, and it will given these metrics, a million bopd of production can become 500 mmbopd inside a couple of years. Still a lot of oil but not a threat to world supplies.
Somebody will be right.
Thackney what about the costs or rather the sustainability of the fracking infrastructure that the costs have already been spent ?
So in short those companies that have larger debt andncosts in tracking they will either go out of business or invest money in other areas.
There has to be a silver lining in all of this.
Will America’s domestic production be able to stubstian 8 + million barrels a day in this downturn ?
Thank God Thank God Thank God for that good news.
The fracking industry will survive inspite of the lower oil price, even though some will get out, while others will cut costs, and grow at a slower pace, but still grow.
Weak economy ? Were ? Here in the USA ? or globally ?
I believe it’s the world’s economy most notible China and Europe plus the USA that is weak.
However lower oil prices will provide a much needed jolt to the US economy from cheap energy therefore the economy improves, therefore demand rises, so the price of oil rises.
But now ? We are relying more on our domestic supply that is NOT influenced by outside instability most notible the manipulation of OPEC and a unstable middle east.
They can’t keep the prices high for long because of competition in the market will force them to lower their prices.
People will just go somewhere else where its cheaper.
Notice manufactures of food, goods, products made packaging smaller in the last 6 years when the economy has not been doing good, the value of the dollar falling ? And at the same time keep the price of the product at a reasonable level ? ( I know, I know, the prices have not been at a reasonable, but what are companies to do ?
Anyway, now with lower cost of gasoline, lower costs of transportation then watch them start making the packages larger at a lower price with packaging saying “ 30% more “ for $ 2.99.
It’s in the way, it’s coming, watch for it.
We refine all we produce plus another ~7 million a day imported.
At Aldi, I get a gallon of milk for $1.99 (or less), a dozen eggs at $.99, and a loaf of bread for $.75.
Bologna and hot dogs are usually $.99 a pack.
I have three pre-teen daughters, so we go through 4-5 gallons of milk a week.
Because for some refineries it's easier to get crude oil from tankers than from domestic pipelines.
Supply chains sometimes work in strange ways. I read somewhere recently that most of the crude oil extracted in Alaska is actually shipped to Asia. Go figure.
Meat will come down again. High prices cure themselves.
So he’ll just be driving production and jobs to other more market-friendly states. Federalism works.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.