Quote:
Originally Posted by monkeychops
Much of that production is expected to come from the Permian Basin in Texas, where prices for acquiring oilfield acreage have skyrocketed in recent months. There are now almost as many drilling rigs running in the Permian as in the rest of the country combined, including offshore.
"A few months ago rigs were being stacked on the side of roads," said Avi Mirman, CEO of Lilis Energy Inc., a small producer that operates in the Permian and the Rockies. "Today it's almost impossible to get a hot rig" with a crew.
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Last summer, I was at a Honeywell conference in San Antonio, talking to an independent producer while drinking beer in the resort swimming pool. He told me that at that point (June '16) they were losing about $400k/day at the price point WTI was at (high $30/bbl range). Their hedge against the Saudis was to stay the course and keep producing, they hadn't pushed the panic button and started capping wells/liquidating assets yet. He figured he was good through Christmas, but said he might not be back next year if someone didn't blink.
I think the Saudis and Russia are unquestionably hurting. And honestly, the worst thing that happened all year was a certain White House brokered deal that let a certain heavily sanctioned OPEC member nation trade crude again, while simultaneously freeing up to $150B in previously frozen assets. They understood that $30/bbl was much more profitable than $0/bbl, and started dumping cheap crude onto an already depressed market.
Where I work, the fallout from this combined with China's economic slowdown is becoming obvious. Light, sweet Russian crude that has been going straight to China for most of the last decade is now finding it's way around the Pacific Rim, and competing with ANS from Valdez.
Convincing these guys to cut production to potentially increase revenue is like de-escalating a Mexican Standoff: No one wants to be the first person to holster their pistol.