Oily Stuff

Yeah, John, why is that about Diamondback? I wouldn't give you squat for that Delaware Basin stuff... but why doesn't somebody big buy all that big, juicy, over drilled stuff in the Midland Basin. Odd, that.

Thank you. You are very kind to want to share and for what you said about me.

Lee, thank you for commenting and thank you for THIS piece of news. Shit. The Eagle Ford is in my neighborhood; to date I know of very few re-fracs that have been remotely economical to undertake, somewhat akin to all the dog dookey people hear about IOR via gas re-injection (EOG). It works, sorta, but its not economical. I believe these SEC "proximity" rules have been around for awhile and its always been possible to book some portion of PUD reserves based on the distance to producing wells. It never occurred to me this rule would apply to re-frac'ing. The economics at $100/$6 may have changed on re-frac's, I don't know, so indeed this scheme could be really beneficial to, for instance. small independents that can buy depleted wells from say, EOG for little more than the cost of P&A, then re-frac them for marginal returns, if any, but then be able to book proximity PUDs. I suppose the question becomes, its a good scheme (proposed, by the way, by a HPP service wanting to frac everything that doesn't move) but will lenders lend on it. It proves, by the way, how crafty these tight oil guys are. There is another word for that but I'll leave that alone. Why, by the way, at $100/6, do they even need to borrow or raise money this way? Because they can't exist without outside capital, even in the Permian. It is a bad myth that the tight oil business model can even hold its own, pay dividends and deleverage based on net revenue at higher prices. One more thing, please...well quality has greatly improved in the Eagle Ford play in the past year and one might be inclined to believe some new miracle of technology has occurred and the EF will have a new lease on life. But most of these much better wells are occurring in a very limited core area in, and around, Karnes County where the EF is very thick. These new wells are testing the bottom portion of this very thick, but limited area of EF and indeed, well productivity has improved. Its too early to know if these bigger wells are going to have higher UR's. But its very small and not too much to get excited about, IMO. Thanks again for this, Lee. And for commenting.

This is great, John! Thank you so much. I see on social media its yet another marriage of two giant tight oil producers into one, bigger and better...gas making machine. Papa was being shown the exit; this buys him a little more time, I guess. A meeting of great minds. Reeves County has been over drilled to death, clearly. What in God's name are they going to do with all that natural gas from the Delaware Basin? Build the Permian Canal, today!

Thank you, Robert !! I grew up on a single pole, double drum Cooper. When I first became and operator I still had that rig and single handed rod jobs a lot. The rigs we use today are still pole rigs and you are exactly right, it takes longer to rig up rod tongs than it does to wrench 1,800 feet out of the hole, even 3/4 rods. I will jump in now and then and wrench a few, just to show the guys I can. I am proud of you, man. You ARE the American oilfield. Remember, please: when all this tight oil and tight gas hooey is over, and will be, soon, guys like you and your production will be all the oil that America needs. Low decline, lost cost stripper production, with a little footprint, and no debt, will someday be priceless. We were here before the mighty tight oil industry was hatched 13 years ago and we'll still be standing when that entire phenomena is thought of as little more than a speedbump in the road to resource depletion.

A, thanks for this. I appreciate it. To be clear, I recall that you work in the Permian and particularly the New Mexico part of the Delaware where all the Bone Springs production is, correct? So from good men and women in West Texas, like yourself, I've heard the same thing...that H2S content in Bone Springs associated gas is bad and, apparently, getting worse. We went thru the same thing in parts of the Eagle Ford; H2S rose over time, over the life of the well. Gas volumes are going sky high in the Delaware Basin, we can see that and we know why. It would be an absolute bitch if rising gas volumes from the Bone Springs was not as marketable, or was far more costly to treat, because of H2S. I agree with you 120% that the great American industrial complex will lose its competitive advantage in the world as more LNG is exported and natgas prices goe up in the US. Nobody in their right mind could refute that, save maybe Toby Rice with EQT. 130% agree with regard to your estimates of Delaware Basin roll over; not to take away from your excellent comment but this Rystad chart just came out a few days ago. What I like to always ask people in the tight oil business in West Texas is what they would do if it was THEIR money, not other people's money. Given what some of us believe is happening in the Permian, would "you," whomever you is, invest in long term infrastructure at this late stage in the HZ tight oil play? Would you put more pipe in the ground, re-tool refineries to absorb more Permian tight oil, build more export terminals...with your money, with your families savings ? Are you sure there is that much oil and gas left in the Permian Basin HZ play? You, ABK, would not at all be surprised at the answers I get. Almost nobody is actually willing to put their money where their mouth is. Thanks again for this great comment.

Here we go. Its only mid May; West Texas is going to burn up this summer...watch. 360 MM gallons of usable, relatively fresh groundwater is used every day in the Permian Basin frac'ing Wolfcamp wells just 100 miles west of Abilene. 70% of that oil is simply exported to foreign countries. Giddy up, America.

Rod tongs? Whats dat? We still do it this way. Thanks for the comment, Grant. I appreciate it, man !

New Rystad chart that everyone will love, providing they completely ignore that its based on BOE, not BO. In fact at $6 Waha every tight oil player in the Permian headed east 18 months ago, towards better liquids production, is back in their covered wagons headed west, now, to the land of high GOR's and big BOE's at 6:1. Exxon the King of GOR in Eddy County, will be all over these high gas prices like white on rice. Notice, however, that all these projections start to really tail off by the end of 2024. The Mexican market for Permian associated gas via pipe is pretty full up at the moment, so all THIS new gas will have to be freeze dried and and sent to Europe. The wealth now being generated by these high product prices in West Texas is staggering, particularly to royalty and overriding royalty owners that don't pay the bills. The percentage of total Texans, Americans ! than own royalty in the Permian is miniscule but their income from this tight oil play is now approaching 1/2 trillion bucks. Don't argue with them about exports, or declining well quality, or remaining drilling inventory, or stupid stuff like conservation of energy security, no sireee. It'll be a chicken fight you'll never forget.

Howdy, Austin! Thanks for asking. Market, market, market. We're all over the map in Texas, particularly S. Texas, with regards to what midstream will actually pay an operator for its gas. How dry is it, how rich is it, how close is to Eagle Ford shit, what line pressures are, etc. Actual prices, as you know, are no where near the dookey you read about on the internet and Henry Hub. If there is a market nearby, and you can into that market you are OK, providing you can operate in Texas with the TRRC and are set up to disburse royalty, etc. Be prepared to set numerous plugs in it someday, or soon I fear, have to fill the son of a bitch top to bottom with at least two squeezes in between. I don't know to tell you about prices, except that if you could bottle it and put it on a ship and send to Europe, you'll be a kazillionaire over night. Just ask Toby.

This is very interesting, Mr. Burns. Thank you.

I enjoy your observations, Mr. Burns; I wish people would participate here more. Perhaps we need to use more charts and make more 30 year prediction?

Yes, Paul; that is pretty much what I have been doing for the past 2 days. The oil and natural gas industry in Texas is a train wreck right now and it is going to take weeks, even months for it to get back on its feet. Please see this mornings Texas Update post on OSB and remember all that lovely gas in Texas we like to waste into the atmosphere. Worse, people are cold, and suffering. We have no experience in dealing with this kind of weather. We weren't made for it in Texas.

This is very, very interesting, Baggen; thank you for sharing. Its a little reassuring (just kidding) that other countries throughout the world seem to suffer with the same misaligned energy policies we do in this country, though we seem to do it far better, or worse, than others. Thank you again.