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Hey Oil Barons.......

936horn

By 936horn
in Business and Markets

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Pescado_Rojo
Pescado_Rojo

I bet you could score a Lafayette 10 for a mani/pedi gift card and a pound of boudin right now.  I was sitting in a Starbucks by the med center in Laffy once, and a brand new white Escalade, lift

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Rimbo

If you're Trump right now, you're watching Fox News, eating a cheeseburger, and getting mad about the lyin' media and preparing your next tweet about how some lupus treatment should be given to your s

fattyflattie
fattyflattie

My time finally came last Friday AM. I have survived around a dozen, give or take 1-2, since ‘08.  I was consulting for a project set to go in ‘22, but with all the uncertainty, it sounds like they’ve

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Neonmoon

Neonmoon 38,129

Posted
Posted
4 minutes ago, Parliament said:

You got a link?  Why are producers choosing to pay someone to take their oil, instead of just shutting down the well?  Is it "hard" on the well to just shut it off cold?  

Possibly because of transportation contract minimums

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Lagunamadre

Lagunamadre 1,975

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3 minutes ago, Parliament said:

You got a link?  Why are producers choosing to pay someone to take their oil, instead of just shutting down the well?  Is it "hard" on the well to just shut it off cold?  

If any of them do keep producing at negative pricing, it's because they cannot reach an agreement with their bankers to modify their credit agreements. Some CAs  have certain covenants requiring certain production levels, so if an operators production dips below a certain threshold, they will be in default. It's seems perverse now, but I don't think anybody ever incorporated a global pandemic into these agreements. 

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Lagunamadre

Lagunamadre 1,975

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On 4/17/2020 at 7:30 PM, Dr. Beeper said:

I plan on making an entry into both next week at an opportune time. I’ve always always always favored XOM. Why should get me excited about Chevron?

They rolled into this thing with the best balance sheet because of the failed APC acquisition. Thanks OXY! 

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DCA_HORN

DCA_HORN 725

Posted
Posted
If any of them do keep producing at negative pricing, it's because they cannot reach an agreement with their bankers to modify their credit agreements. Some CAs  have certain covenants requiring certain production levels, so if an operators production dips below a certain threshold, they will be in default. It's seems perverse now, but I don't think anybody ever incorporated a global pandemic into these agreements. 
Are you taking about hedging? Ive never heard of this otherwise.
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Trey3216

Trey3216 15,345

Posted
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Just now, DCA_HORN said:
4 minutes ago, Lagunamadre said:
If any of them do keep producing at negative pricing, it's because they cannot reach an agreement with their bankers to modify their credit agreements. Some CAs  have certain covenants requiring certain production levels, so if an operators production dips below a certain threshold, they will be in default. It's seems perverse now, but I don't think anybody ever incorporated a global pandemic into these agreements. 

Read more  

Are you taking about hedging? Ive never heard of this otherwise.

Some debt covenants are tied to production.  If you don’t produce x amount of product, you’re in default.  

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Lagunamadre

Lagunamadre 1,975

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6 minutes ago, Dr. Beeper said:

I don’t think many operators are selling crude below $10. And they’re certainly not going to be ruled by an obscure provision in their Credit Agreement, nor should they. They’re likely already in default anyway. 

What are your thoughts on MVCs in this environment?  

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Cajun

Cajun 11,705

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Posted (edited)

 

Quote

As long as nobody is using gasoline, it's gonna keep going down. The kung flu is a bitch. 

I drove from SA to Leaky yesterday in my F150.  Was going into about a 30-40 headwind the entire way.

Trust me, I did my part.

Edited by Cajun
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Trey3216

Trey3216 15,345

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Posted
2 hours ago, Dr. Beeper said:

@Trey3216@ryskeyhow much of the drop in prompt month price is due to delivery, and having a delivery option keeps futures prices tied to cash prices?

Pretty much everything.  At this point, the futures price has to basically get equal to the cash price by tomorrow.  So either the cash price has to come up, or the futures come down to the cellar party.  

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TonyTexas

TonyTexas 10,508

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Posted
9 minutes ago, Trey3216 said:

Pretty much everything.  At this point, the futures price has to basically get equal to the cash price by tomorrow.  So either the cash price has to come up, or the futures come down to the cellar party.  

Bingo. No one wants to take delivery. 

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Storm the Field

Storm the Field 5,294

Posted
Posted (edited)

Can someone explain the following to me? I just deal with the title/legal side of the biz but am trying to learn more about the economics and marketing aspects during downtime. 

Until the past week or so, XLE looks to pretty much be anchored to WTI price. 

wP52h7P.png?1

Edited by Storm the Field
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Neonmoon

Neonmoon 38,129

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Posted (edited)
16 minutes ago, Trey3216 said:

Pretty much everything.  At this point, the futures price has to basically get equal to the cash price by tomorrow.  So either the cash price has to come up, or the futures come down to the cellar party.  

Can you explain this again, but as if I'm really dumb. 

thanks in advance

Edited by Neonmoon
I'm dumb
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Trey3216

Trey3216 15,345

Posted
Posted
2 minutes ago, Neonmoon said:

Can you explain this again, but like I'm really dumb. 

thanks in advance

as @BTW said, spot/cash prices in Midland right now are around $4.50.  I've read on other sites that there's some areas as low as $2.  WTI traded on NYMEX is still trading well above those levels.  Because the May contract is done tomorrow, and futures contracts are based on delivery of product, then the futures contracts will gravitate towards the cash/spot delivery prices at the various terminals/fields.  No one wants delivery right now, nowhere to put it.  Thus, we have what we are seeing right now.  

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Trey3216

Trey3216 15,345

Posted
Posted (edited)
5 minutes ago, TonyTexas said:

In hindsight, this futures settlement price action was predictable. Some smart oil traders are making a fortune. 

Unless the US Govt stepped in and bought 70+mm barrels for delivery to fill up the SPR, they'd be fisted because this would be back at 17 tomorrow afternoon.  (In theory)  

Edited by Trey3216
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