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Sankey's warning leans on policy risk.
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Wood Mackenzie analysts, however, believe that the surge in U.S. LNG exports will combine with the power needs of the AI data centers to drive gas demand materially higher. But operators have mostly tapped out the highest-quality gas acreage, technology gains appear to be plateauing, and a decline in oil-directed drilling is set to reduce the volumes of associated gas, according to WoodMac.
We've been saying this for tw0 years at oilystuff.com; the American consumer and United States industrial might is going to pay the price.
Associated gas production from tight oil wells is waning as cores are becoming over-drilled and pressure depletion is knocking on the door.
If you question parent/child productivity degradation and pressure depletion from over drilling, check out the photograph below.
This is NOT AI generated. It is an actual photo of 14 drilling rigs (including the one from which the photo was taken) working in…
Hi Mike, Can you explain the huge difference in the oil data from the TRRC here rrc.texas.gov/oil-and-gas/research-and-statistics/production-data/texas-monthly-oil-gas-production/ and the EIA data. eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=MCRFPTX1&f=M
Look at months back in 2020 and other years when all data should have been adjusted for reporting delays. There is a huge difference with Texas often 20 million BBO per month lower in the TRRC data compared to the EIA data and it does not seem to be gas or condensate related. Any thoughts?
Dick
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A few months ago, the EIA released its estimates for U.S. proven oil reserves as of the end of 2024 at 46 billion barrels.
The definition of "proven" has been changed/altered over the past two decades but here are the Society of Petroleum Engineers definitions:
I would like for the reader to fully understand the definition of proven undeveloped reserves. Everyone uses the SEC definition as to how the term pertains to undeveloped tight oil locations within a certain radius of existing tight oil wells. Proven undeveloped (PUD) drilling locations will require additional CAPEX to convert into proven developed producing reserves (PDP). Below $85 WTI the U.S. tight oil sector is heavily dependent on borrowed money to drill future wells.
So, CAPEX is scarce, dividends to investors now make up 50% of the public tight oil companies annual net revenue spend, and on a full cycle accounting basis, drilling PUDs…
When do you think they will run out of drilling places, and drilling an infill well is too close and doesn't produce enough? Is the drilling inventory good to 2035, 2030 or sooner? The Permian is riddled with wells already. It seems like they will drill and drill until every remaining site is tier 3 or 4, and then suddenly stop, giving us an enormous enegy cliff.
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U.S. oil production was up in April, according to the EIA and some analysts are suggesting it is because of rising rig counts already. Remember, it takes 6-8 months from spud to first reported production data made to the public.
The only Basin we will see meaningful production growth in 2026 is from the Permian and that will not occur until EOY. The Permian is up only 4-5 rigs since March, two just last week. "Other" means other, like conventional wells, which some would likely not believe could be true. Conventional wells can turn actual production to the tanks much sooner than 6-8 months and at $80 dollar oil and much, much more profitable to drill that tight oil wells. This BH chart makes no distinction between vertical and HZ rigs.
Production is up in April, if true, likely because of a flurry of DUC completions.
There is nothing happening…
Mike, How can US oil be up? If you go to the TRRC site look at Texas oil production for December and it is 142,292,202 barrels which is about 4.59 million per day. If Texas is 42% of US production then back in December total US production would have been 10.928 million per day - far below what is reported. So, where is the bad data, the EIA or the TRRC? I realize later months on their site would need adjustment but December should be close to accurate ? Dick
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The agenda to print money to pump tech stocks and short oil as an economic stimulus continues. It's a big club and you ain't in it.
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At $70 WTI and some change, no shale oil well in America makes money. Not enough money to pay full-cycle corporate costs, interest on debt, dividends, future plugging liability and keep drilling $11 MM wells and pay back all the money they borrowed. Anybody that says differently is lying.
Drill baby, drill will henceforth require borrow baby, borrow. $650 B and counting. *
The U.S. shale sector has been masterful in its endeavor to raise CAPEX the past 15 years. It has created new oilfield terms, changed old definitions, thrown out traditional accounting practices, used the E in BOE like geniuses, exaggerated reserves and walked the check on $400 B so far. It created the stupid term, "breakeven" for a specific reason.
Then to make it more complicated, and get more of your money, they discount that breakeven on a NPV basis, leave out half of the real costs, ignore…
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The MOU is signed, and oil prices are falling like a stone. WTI is down to $75/barrel.
I confess, I do not know what the hell is going on. I guess we'll have to wait and see. In the meantime, oil is underpriced, again. IAE is predicting a ridiculous structural supply surplus of over 5 mmpd by 2o27.
Until the market sees a structural supply deficit and oil stocks going down w/o some artificial cause, like war, the prices oil operators in the US shales will be insufficient to cover costs. Shouldn't the smaller guys be bankrupt by now?
From what I understand, the IEA tilts toward lower demand and consistently underestimates demand while overestimating supply. This holds the price down, since traders read and believe the IEA. Traders don't need to be right; they just need to be able to predict what other traders will do.
As long as a respected world organization keeps pumping out this stuff, we will see low oil prices. I guess IEA is the inaccurate energy agency, as opposed to the EIA, which is the energy inaccuracy administration.
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Mike,
With the U.S. SPR down another 6.2 million barrels, down to 319.5 million barrels this week, Trump decides to TRIPLE DOWN and bring out the Big Guns Again.
Steve