In 2018 Oily Stuff awarded its prestigious, Dumb As a Fence Post Award to a corporation that paid $102,000,000 (million!) for an 1,180 acre mineral lease, with a 10 year term, in the Delaware Basin of New Mexico. After development costs we estimated that "lease" had to produce over 7 MM BO from the Wolfcamp and Bone Springs formations, from multiple wells in multiple benches, just to reach payout. It'll never happen; truthfully, and we've apologize to dumb fence posts around the country. At least you are "holding up" your end of the bargain.
Last year's statement by the President of the United States regarding "limitless supplies of (shale) oil and gas," that the United States can "dominate the world with abundant, inexpensive exports for decades to come," that America now was awash with hydrocarbons to such as extent it was "no longer economically imperative that Americans conserve its oil resources," won the Dumb As a Box of Rocks Award... hands down. I mean, it wasn't even close.
Exporting American shale oil to foreign countries, extracted on credit and unprofitable to produce, is bad energy policy. America has no "moral" obligation to supply the world with cheap oil; that is absolute horse shit. Many of these countries receiving US LTO exports are potential threats to our nation's security; China for instance.
The US shale oil industry has almost two times the long term debt as the Kingdom of Saudi Arabia has national debt. Bankruptcies are accelerating in America's shale oil patch, rig counts are declining, jobs are being lost and, should you be a shale oil advocate not wanting to believe how unprofitable that crap is to get out of the ground, watch for 3Q2019 earnings. Exports, however, wander around nearly 4MM BOPD down to 2 1/2 MM BOPD and are expected to double in the next five years. Almost all future growth from the Permian Basin will have to be exported to foreign countries.
An example of Mr. Trump's "freedom molecules," or Mr. Perry's "freedom gas" getting pissed off in the Bakken.
In spite of America now being the No. 1 oil producer in the world at the end of 2017 the Energy Information Agency estimated the United States had 42.0 billion barrels of proven developed crude oil and condensate reserves (PDP) to rely on. Those are known reserves, a bird in the hand, so to speak. With regards to proven reserves (1P), America is not even in the top 10. Please remember that current crude oil and condensate consumption in America is approximately 6.7 billion barrels annually. The United States is the No. 1 consumer of crude oil in the world.
The false narrative of shale oil abundance is based entirely on technically recoverable oil reserves (hypothetical reserves ) that might be extracted in the future at a much higher oil price. This estimate of theoretical reserves (please read the definition of 2PC and 2PCX, below the Rystad chart) we believe has done a great deal to mislead Americans into a false sense of energy security, a false hope for energy independence, and has adversely affected the direction of energy policies by the current administration in Washington. America's oil reserves are now based primarily on 400K BO shale oil units that cost $10MM per unit and whose total return on investment at $55 oil prices is less than 150%. We can no longer depend on technically recoverable, as yet undiscovered shale resource reserves without knowing where the money is going to come from to extract those theoretical reserves.
So, when in response to the bombing of a processing facility at Abqaiq, Saudi Arabia that threatened the loss of over 8MM BOPD of oil production several weeks ago President Trump said that "America no longer needed Middle East oil and natural gas," we about had a damn cow here at Oily Stuff.
For all this mass stupidity we award United States Energy Policy, the Oily Stuff, Dumb As a Stuffing Box Rubber Award for 2019. We know it'd only mid October but it would be hard to beat the stuff that this administration has been saying the past six months.
For winning this year's award Oily Stuff is sending the White House a handsome, leather bound copy of the book, Oil and Gas Economics for Dummies, personally autographed by Homer Simpson and the Department of Energy and the Energy Information Agency are each receiving gift certificates from Amazon.com for I'm With Stupid t-shirts in an array of different colors.
An entire box of dumb stuffing box rubbers...
...all of it !