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Veteran Advisor

$53 crude, $2 NG

if you closely examine the extremely weak capital investment numbers, oil gas and other extractive industries are a big part of it. Other industries playing cautious on account of trade uncertainty also a part.

The sweet spot for WTI crude is probably about $70 ($3NG?)- not enough to hurt the economy or demand but enough to at least cover variable cost + for fracking and slow the cash hemorhage.

Rig count will continue to drop and if you're not drilling you're not making money- you're just losing less.

Probably need around a $100 to actually cover all costs but the land acquisition costs are already sunk and immaterial except for the debt service, or lack thereof.

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6 Replies
Honored Advisor

Re: $53 crude, $2 NG

Sounds like farming ........ "the only thing that can take you out of the game is not producing".   

 

 

Veteran Advisor

Re: $53 crude, $2 NG

We've reached Peak Oil, but not Peak Money.

Ultra low interest rates keep a strong bid under junk debt as everybody reaches for something that has some yield.

In the long run that never works out well. It take a lot of years of 3% more interest to make up for a 50% haircut.

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Veteran Advisor

Re: $53 crude, $2 NG

Also, stronger hands come in and buy up some of the assets at a steep discount.

Although at $53 a lot of it is essentially a 0 cash rent game.

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Veteran Advisor

Re: $53 crude, $2 NG

The afore prices work better than your spinning. 

Quite a bit better. 

Drilling efficiency has never been higher and keeps setting new records  .

And it seems these new sizable fields keep on being found. 

Heck w Texas and se new Mexico has more oil than the middle east... And Exxon/xto keeps drilling more daily... On a 10 yr drill development ( 169 billion drilling cost Dev ) here to rival Saudi.  

And there's the new 6 billion barrels now found in W new Mexico.

Say 37 and 1 is close to be now.  But at less than 50 it makes a lot of sense to save the assets.... Drill and cap.  

 

Veteran Advisor

Re: $53 crude, $2 NG

So  much  for  the  ''  coal  gasification  ''  process  -   -   -

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Veteran Advisor

Re: $53 crude, $2 NG


@k-289 wrote:

So  much  for  the  ''  coal  gasification  ''  process  -   -   -


Coal gasifies naturally. 

There are some good sized methane well projects.  They drill relatively shallow Wells into coal fields... . And methane just flows... Up the well to a pipeline. 

Know of a couple good coal areas where a new well per day is drilled... Been drilling at that pace for 20 years on that coal field. 

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