Mike- I hope you're fishing, playing golf, or eating a cheeseburger, and that's why you haven't posted on this.
Below is the snippet from Zerohedge about Travis Stice's letter to investors about the future of the Permian Basin and the domestic oil industry as a whole. His letter echos, essentially word for word, what you've been posting on here. Key points being "we believe we are at a tipping point for US oil production" and "geological headwinds outweigh the tailwinds provided by improvements in technology and operational efficiency".
Stice is a very smart guy. Van't Hoff, his successor (whether it's been announced or not, we all know it is), is equally smart. They bought Endeavor because in their minds, they had to. If they don't get it, Chevron is gobbling FANG up. Then they buy DE4, which most of us knew wasn't the best acreage, but it was the best of what was left. It was buy to survive.
As a final point, every company that has bought DE has had to sell except #1, which was Devon in the cline shale (a total disaster for the chinese investor $). DE2 goes to Parsley. Little Sheffield has to sell to daddy Sheffield. DE3 to Pioneer. Pioneer sells to Exxon. Guess who is next in line. We locals have a soft spot for Diamondback. They're good people, and they do a lot for the community, but that doesn't always translate to shareholder value. I hope they survive and eventually thrive, but only time will tell.
See what happened after COVID and 2020. Prices went down and rigs then went to the barn for 5-6 months ! Look what happened to production in just 5-6 months. The Bakken and Eagle Ford never recovered. If we see sub $50 for 5-6 months again, the same thing will happen.
Remember, 55% of American shale oil production is less than 18 months old ! Wow !
The Permian is the only shale oil growth America has had since 2020, up 22,000 wells and 1.7 MM BOPD. Does the Permian have another 22,000 wells in its optimum cores that will replace 40% annual decline rates and add ANOTHER 1.7 mm BOPD? No, no way. Stice is right, but it wasn't tariffs, or OPEC that topped the Permian out, it was Mother Nature and piss poor reservoir management. Good 'ol American greed.
8% recovery rates of OOIP! That will go down as the biggest failure in United States oil industry history.
Micheal , thanks for bringing up this topic . I always explain by asking two questions from the zombies with the '' smartphones ''
What is the difference between 0 degree Celsius and 1 degree Celsius .? Zombie answer --1 . I have to explain them that it is the difference between ice and water . This is called phase change -- solid to liquid .
What is the difference between 98.6 F and 100 F ? Zombie answer 1.4 . I have to explain that at the earlier you are ' fit ' and at the second you are 'sick' .
We here on OSB know that markets move not on facts but on narrative . So my question to all -- when does the oil traders tip over ? We here all know how debt has been used to cover up the fact of ''peak oil'' .
The phase change is too important -- once a female has puberty then there is no going back . If the markets will go into '' phase change '' narrative then all of a sudden it will be '' all is well'' to '' Fire '' . What then /? In my lifetime I have never witnessed a proper evacuation of a fire incident in a disco or a movie hall . More people die in stampedes in a stadium at the exit than actually die from the incident that caused the stampede in the first place .
Thanks, Michael; I hope y'all got some rain up there!
I am worried about FANG and have been railing on them some lately for their debt, so I thought I better lay low on Stice's comments. I've got a couple of old buddies working for FANG and they'd die to protect the company. I am glad you posted the zero hedge article, thank you, and I agree with you 100% on the sequence of events that puts Exxon in a Alpha predeator position in the Midland Basin.
Mr. Stice is right and his timing is appropiate. I don't see how FANG makes it, honestly, short of $5-$6 natural gas, sustained. They are becoming primarily a gas producer and last year gas and gas liquids only represented 11-12% of their revenue stream. I hope I am wrong about all that and they make it too, big time. In the same light it is not good to rely so deeply on one already overdrilled shale oil basin in America, it is not good to be totally dependent on one, or two giant operators either. America needs FANG.
Thanks again. Keep a bind on it up there for me, please, and I appreciate you stopping by.
PS: Not old enough to play golf. People use to ask Coots if he played golf and at 75 he said, "ain't old enough to play golf. When you take a bath and your balls float, thats old and you can start playing golf." 😎