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'Money for Nothing'--More accounting tricks to look forward to
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'Money for Nothing'--More accounting tricks to look forward to
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Mike Shellman
May 22, 2022
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.
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Is the Bone Spring Dry? Or just smelly?
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Mike Shellman
May 20, 2022
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.
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Energy Policy and virtue signaling
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Mike Shellman
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