I do (try to do) long term forecasts for clients and my own investments, meaning more than one month out; my usual timeline is 2 to 10 years. The main goal isn't to hit one bullseye target, it's to come up with a range of prices and volumes that have high odds of including the actual number. When I think about the outlook for US onshore oil, my view that domestic 'black oil' production would plateau and begin to drift down in 24-26 hasn't changed for - nearly 10 years. Today's news brought another tell that this case is still the one that will make. The headline in World Oil is "ExxonMobil to sell conventional Permian oil assets for $1 billion amid shale production focus". The wells that are going on the block are old (very old) conventional wells in the Central Basin Platform. Why is that another sign that Permian's slowing down?
Possibly because of the timing. The CBP hasn't been a real play in a long time, so why sell now? Especially with gas prices at what will be decade lows? Maybe, just maybe it could be that issues with overpressured SWD zones are becoming a big deal, and some of them are there. And because of that, it would be tough to make a CCUS project work - since CO2 is injected underground at very high pressure. And, just possibly, some of those wells will need to be plugged, but maybe not as soon if a new operator can make money on them with lower overhead.
So take the money and stay in the Midland Basin. Or Guyana.
Next up, looking for CVX to do some portfolio adjustments of its own. They've owned acreage in far West Texas for a long time, and it's been known that the Barnett goes all the way out there for a long time. But we still haven't heard a lot about how prolific it is/will be. Most likely because it's mostly natural gas, like a lot of other prospects out there these days.
Gas today (August 30) at WAHA is ($8.07) Basically if you have space in a gas pipeline you can charge over $8 to take it to the coast and sell it for $1.48 - nearly $10/Mmbtu. Any wonder why we're seeing announcements about new gas lines every day? This happened with propane back in 2011 - the companies with a way to get the stuff on a boat basically made over $10 million on one cargo. So, not hard to sell out expansion capacity at the Houston Ship Channel to load more boats.
We're still expanding LPG export terminals, but many times the price to load a ship is way less than it was 20 years ago. Companies contracting for the space now are basically betting that the market price will spike periodically and they'll be there when it does. This will most likely end up being how it goes in the not too distant future with gas pipelines, too. Hard to understand how anyone would be completing wells in the Delaware right now, and how they could complete wells in Midland Basin unless they have pipe capacity, or are burning it. Gone forever.
How will Trump make "gas" cheaper than what it is now?
Makes me thing if we were to look for the equivalent canary in the coalmine what would that be? Looking at numbers we can see the event a few months in retrospective. To see it as it happens you have to have to look at things that foresee disaster. A lot of water could be one of them: https://x.com/SheDrills/status/1829488806594265359
FYI: This is a screen shot of Exxon's and Chevron's well count, WOR, and locations in the Central Basin Platform.
Anne, you are driving me freaking nuts with this:
"Gas today (August 30) at WAHA is ($8.07) Basically if you have space in a gas pipeline you can charge over $8 to take it to the coast and sell it for $1.48 - nearly $10/Mmbtu. Any wonder why we're seeing announcements about new gas lines every day? This happened with propane back in 2011 - the companies with a way to get the stuff on a boat basically made over $10 million on one cargo. So, not hard to sell out expansion capacity at the Houston Ship Channel to load more boats."
Do you think there is any room for manipulation here?
Hi, Anne; thanks for posting this. I don't much believe anything Exxon says about anything, but I believe a lot of this. And I believe your observations about it as well.
A couple of things before I disappear again. The U.S. tight oil and tight gas sectors both deserve an Emmy, or a Golden Globe, even a Nobel Prize for the masterful way in which they have lied about abundance and convinced the American public, and its public representatives, it has nothing to worry about.
Is this report, and announcement of sale, a moment of retribution for Exxon before it enters Stage 4 of cancer? Good question ! Dumping the core of its existence in the Permian Basin is NOT insignficant. Whatever the reasons. I wrote this a few years ago; Exxon came back to the Permian Basin like a salmon wanting to spawn, to die..
I can't argue with abundance anymore; I am tired of it. I stand by my 60 years in the oil and gas business, with my own money, to say depletion is the real deal and just about everybody on social media is lying about the Permian Basin. I am ashamed of my industry right now and sort of wish to not be associated with it anymore. Oilystuff.com is soon to become troutstuff.com.
Thanks, HIH. I agree about natgas.
I think people IN America sort of know this about depletion, in an abstract way, and don't care; the rest of the world probably does not fully understand how fucked up American's are now about money and how willing they are to run over their own mothers in a truck to make more of it. Excuse my language, Anne. Its true. They have all become... pirates. If you are going down, in a ball of flames, the more money you have the less painful it will be, I guess.
Quickly, I looked at EIA data today after its 914 filings for June, the New Mexico part of the Permian Basin is down, not insignficantly. Those of you who care, and believe what I have said, know that I OFTEN say as Lea County, New Mexico goes, so goes the entire Permian Basin.
Rig counts have stayed pretty high in Lea County over the past three years because of better wells than the Midland Basin, and because EOG, Devon and Conoco have most of it blocked up and have drilled it to death. Pressure depletion and rising GOR in Lea County has killed it.
It was over drilled by dumb ass American companies who no longer have the courage to look anywhere else for oil, so they mass manufacture shale oil wells in the same sweet spots, over and over again. I have some new data of GOR per bench in Lea County that would knock some people's socks off, but nobody cares...so what they hell.
One can highgrade the snot out of this stuff, on <600 foot spacing, with longer laterals, that lead to 78% first year decline rates, but sooner or later the chickens are going to come home to roost.
For Juue, 2024, it looks like they have, and New Mexico production will be down and going lower, according to the EIA.. I only believe this EIA data because they're are so few relevant, large operators in Lea and I know that on a normalzied (lateral length) basis, well productivity is tanking.
Dial down the noise, trust your instincts, and think ahead. Like Anne implies, ...its fragile. All of it.
"Usable" oil is gone in the United States, that is PRECISELY why we have to export 45% of all new U.S tight oil to foreign countries.
On the other hand, natgas is all usable. Now and even MORE usable in the future. It is stupid beyond words to be 1.) wasting it up a flare stack and/or 2.) to be freezing it an exporting it.
Global gas report by Rystad .
” Should gas demand continue to grow as in the last 4 years, without additional production development, a 22% global supply shortfall is expected by 2030. If demand continues to strengthen, the shortfall will be more pronounced. This underscores the urgent need to scale up investments. ” Best of luck .
https://www.igu.org/resources/global-gas-report-2024-edition/
That's a very informative article, Anne. This NG situation is almost unfathomable--and getting worse. The wastewater disposal is obviously more dangerous, however. As I'm sure you're aware, TexNet is a geology group within UT that has been studying seismic activity. They feel strongly that they've discovered an incipient rift (prior to graben formation) running almost parallel to I-20, which doesn't seem like serendipity to me, especially since it appears to be widening. The 5.2 and the 5.4 quakes were at opposite ends of this "gap" in the deep earth. Lots of SWD wells in that area, especially Toyah. With such a saltwater flood in mind, I would think that Exxon's asking price for their old vertical wells is magical thinking.