Tough times for shale oil

[jon_norstog]

Here we go again - $30 oil*, thanks to the market manipulations of Russia and Saudi Arabia. The last time they did this it really put a dent in the shale oil boom in North Dakota and Texas, but didn't put an end to it, and the US is still the world's champion oil and gas producer.

Looks like they are going in for the kill. Whiting, the company that owns the wells under our family farm in ND, was trading above $90 a share back in 2013. Since then it has gone through a 4-to-1 reverse stock split and right now you can buy all you want at $0.77. Somebody is buying, though and I wonder who? If I were that guy Salman I would be using the sovereign wealth fund to buy control of those shale producers. And set up a shell corporation to buy oil and gas leases on US public lands.

Why fight the competition when you can buy it?

jn

* That's the West Texas intermediate crude benchmark. Wellhead price in the Bakken is usually $2-5 LOWER

[togor]

I have an in-law who works drilling crews. At least his summer will be free!

At the same time the Saudis are growing horse fodder in the SW with water from deep wells. Basically pulling our fossil water out of the ground and exporting it as animal feed. How about a $3/gal excise tax on pumped water? Half for the state, half for Uncle Sam.

[Sunray]

Tough times for shale oil is because it's usually gathered/mined/Idunno by fracking. That for some reason has gotten the assorted tree huggers in a tizzy. Like the earth is going to collapse if the method is used.
The Russians and Saudis don't have tree huggers.

[togor]

The Saudis don't have trees. The Russians lock their tree huggers away or worse. Both places less appealing than N. America.

[jon_norstog]

I don't think the Saudis or the Russians need to frack, they just drill. A lot of the blame for where we are now on fracking goes back to Dick Cheney (remember him?) whose 2001 energy task force came up with legislation that exempted fracking from the Safe Drinking Water Act, from regulating or even reporting what was in those fluids they were pumping into the ground. It was a "comprehensive exemption" - they call it the "Halliburton exemption." Thanks, Dick.

Needless to say there are a number of chemicals that can be used for the fluid and the well developers were pretty much free to choose whatever was available and cheap. That left it to the states to regulate the wells and the disposal of old fluid, associated water and brine, etc. Some did it better than others. North Dakota wells have to be double cased, plus the shale is about a mile and a quarter below the main aquifer system. I haven't heard of any contamination that way, but there have been spills and blowouts, pipeline breaks and a lot of questions regarding the disposal of fluids and brine.

Whiting runs a pretty clean operation, probably one of the reasons they are going broke. If they all had to work to some basic standard, you would see a lot less ruined water wells and polluted ground water.

[Sandpebble]

"Whiting runs a pretty clean operation, probably one of the reasons they are going broke. If they all had to work to some basic standard, you would see a lot less ruined water wells and polluted ground water."

Spot on Jon with this comment.... I thank you for it .

I own a couple of properties in South America and do truly love it down there .... howver there are some things that pain.

One is "lack " of regulations and the other is the ability to ignore those in place .

this means that in some area's you might ave to deal with xxxxty { literally } water .

Or in others air that shouldn't be breathed

[m1ashooter]

My dad left me a gaggle load of exxon shares when he died. I should have cashed them in because I've seen a portion of my retirement money cut by 40%. I guess I need to see how long it takes to rebound.

[dryheat]

My cousin was a geologist for Exxon, which has nothing to do with anything. Waiting for the rebound is painful. I've done it a couple of times. There comes a time when the numbers(age) don't work. I am ultra conservative these days. I remember after the dot-com crash a guy I worked with lost a bunch of inherited money. It was more than halved. He was so stressed out he could barely talk. He probably needed some "professional help" as they used to say. I believe shale oil is highly financed. I used to think shale oil was akin to some kind of fusion myth but I read that it produces a lot of oil these days. It goes back a long ways. "It was the Russians" in this case. And the Saudis. They have "real oil" and we were killing the market for them with "fake oil" so to speak. That's what I read.

[Art]

Dryheat is correct about the Russians.

Remember the old days when the left told everybody we couldn't drill our way out of oil dependence. Well, as they often are, they were wrong. We developed technology that allowed us to reach previously unobtainable oil and areas where there is lots of conventionally available oil have been opened up in the past few years as well, so now this country is the equivalent of OPEC. Shale oil is very clean oil, usually and its "real" oil. A different method of extraction is being used, that's all.

The oil business is a boom - bust industry. Since We've been back to Houston in the late 70s we've seen two major boom/bust cycles not counting this one. The busts often are politically motivated. The Reagan, for example, instigated a "bust" in the 1980s as part of their strategy to kick the Soviets over the edge. It worked. A very interesting book called "Victory" was written about it. The Russians are taking a page form the Reagan cold war play book. Neither the Soviets or the Arabs, for obvious reasons want the U.S. energy independent.

When there is a bust some small to medium operators go under but much of their infrastructure remains in place waiting for the next guy.

Dryheat: The value of your stock will almost surely come back. While you won't lose anything because the stock was a bequest oil isn't going to stay at $30.00 a barrel forever. We also have some "heirloom" EXXON and just bought a little more at the lower price.

I remember a guy who had a bumper sticker on his car during the '80s bust. It said "Lord let their be one more oil boom, I promise not to pi$$ it all away this time."

[dryheat]

Thanks Art, but miss placed. I remember those bumper stickers. Booms in general.

[Gun Smoke]

The problem with waiting for the rebound is that you need to have stock in one of the "majors". Smaller oil companies that have cheaper more attractive stock often have lesser assets and reserves plus are sometimes laden with debt. These type companies cannot survive long with cheap crude and lack of demand so while waiting for the rebound they could go into bankruptcy and pull the plug leaving you with nothing.

[PWC]

I remember mny dad saying that one time in the late '50s he was offered a chance to buy stock on some company called TI for $5 a share. He didn't have any money to invest, and $5 would fill a 50# paper grocery store sack.

[jon_norstog]

I remember a guy who had a bumper sticker on his car during the '80s bust. It said "Lord let their be one more oil boom, I promise not to pi$$ it all away this time."

My felings exactly! But for now it looks like the gravy train has junped the tracks.

jn