Hey Oil Barons.......

[ZB'Tejas 593]

Shit is getting hammered... I hope this is a buying opportunity because I'm going in.

[Girdwood 118]

This is going to get 2015-16 ugly at this rate. Thank god I work for a very small private shop that has zero debt.

 

Edited March 6, 2020 by Girdwood

[Fudge Nuggets 19144]

10 minutes ago, Girdwood said:

This is going to get 2015-16 ugly at this rate. Thank god I work for a very small private shop that has zero debt.

 

I'm glad I work for a megacorp that's always blathering away about efficiencies and growth mindsets but wouldn't know either if they punched 'em in the gonads.

In other words, good to work for an oversized corporation where you can hide out until things blow over.

[Archer 474]

I’m glad I work for a large independent with a history or layoffs... Oh, wait...

[Fudge Nuggets 19144]

1 hour ago, Dr. Beeper said:

Goddamn Russians. Always trying to show the world their dick. 

 

[Message Board User 12389]

Down 10% today.  Sheesh....

[Trey3216 15325]

Just now, Message Board User said:

Down 10% today.  Sheesh....

Yep.   Fucking brutality 

[Girdwood 118]

Quote

U.S. West Texas Intermediate crude slid 10.07%, or $4.62, to settle at $41.28, its lowest level since Aug. 2016. It was WTI’s worst day since Nov. 28, 2014. Earlier in the session WTI traded as low as $41.11 per barrel.

[Texas St. Armadillos 1381]

DO continues its tumble.  Now at $2.10.

[Fudge Nuggets 19144]

25 minutes ago, Texas St. Armadillos said:

DO continues its tumble.  Now at $2.10.

DO was my canary in the coal mine for the overheated deepwater rig market back in 2013 / 2014.  They historically were very conservative almost to a fault by running a fleet of outdated worn down pieces of shit rigs - but they had a niche and made quite a bit of money.  When they started building deepwater drillships with no contracts in place I knew the bottom was about to fall out of the DW rig market.

[Neonmoon 38127]

1 hour ago, Fudge Nuggets said:

I'm glad I work for a megacorp that's always blathering away about efficiencies and growth mindsets but wouldn't know either if they punched 'em in the gonads.

In other words, good to work for an oversized corporation where you can hide out until things blow over.

I think we work for the same company 

[Johnny Chimpo 478]

OPEC and russia deal completely fell apart. Anyone want to guess the bottom? This reminds me of Thanksgiving 2014 but I think it could be worse with the big coronavirus demand shock. 

[Message Board User 12389]

 

[Etexhorn13 3034]

Being on the pipeline/data side of this is making me a little more comfortable, but damn. 

[tx 3 putt 76294]

We’re going to see $20 / barrel 

[Girdwood 118]

14 hours ago, tx 3 putt said:

We’re going to see $20 / barrel 

Very possible in my opinion. Summer travel is going to take a huge hit and the Ruskies (and Permian operators honestly) keep pumping out oil. This could get way uglier than 2015-16.

[Trey3216 15325]

Saudi is talking about a plan to absolutely crater the market, jumping from 9.3mmb/d to 12-13/mmb/d to crush prices and force weak hands out.  This sounds fun 

[Horns99 155]

This shit is about to get real ugly.... anyone else follow DRW # hot take of the day ?


Sent from my iPhone using Tapatalk

[Francisco 2.0 32313]

https://www.bloomberg.com/news/articles/2020-03-07/putin-dumps-mbs-to-start-a-war-on-america-s-shale-oil-industry

 

Quote

At 10:16 a.m. on a wet and dreary Friday morning, Russia’s energy minister walked into OPEC’s headquarters in central Vienna knowing his boss was ready to turn the global oil market upside down.

Alexander Novak told his Saudi Arabian counterpart Prince Abdulaziz bin Salman that Russia was unwilling to cut oil production further. The Kremlin had decided that propping up prices as the coronavirus ravaged energy demand would be a gift to the U.S. shale industry. The frackers had added millions of barrels of oil to the global market while Russian companies kept wells idle. Now it was time to squeeze the Americans.

 

Quote

After five hours of polite but fruitless negotiation, in which Russia clearly laid out its strategy, the talks broke down. Oil prices fell more than 10%. It wasn’t just traders who were caught out: Ministers were so shocked, they didn’t know what to say, according to a person in the room. The gathering suddenly had the atmosphere of a wake, said another.

 

Quote

For over three years, President Vladimir Putin had kept Russia inside the OPEC+ coalition, allying with Saudi Arabia and the other members of the Organization of Petroleum Exporting Countries to curb oil production and support prices. On top of helping Russia’s treasury – energy exports are the largest source of state revenue – the alliance brought foreign policy gains, creating a bond with Saudi Arabia’s new leader, Crown Prince Mohammed bin Salman.

 

Spoiler

But the OPEC+ deal also aided America’s shale industry and Russia was increasingly angry with the Trump administration’s willingness to employ energy as a political and economic tool. It was especially irked by the U.S.’s use of sanctions to prevent the completion of a pipeline linking Siberia’s gas fields with Germany, known as Nord Stream 2. The White House has also targeted the Venezuelan business of Russia’s state-oil producer Rosneft.

“The Kremlin has decided to sacrifice OPEC+ to stop U.S. shale producers and punish the U.S. for messing with Nord Stream 2,” said Alexander Dynkin, president of the Institute of World Economy and International Relations in Moscow, a state-run think tank. “Of course, to upset Saudi Arabia could be a risky thing, but this is Russia’s strategy at the moment – flexible geometry of interests.”

The First No

The OPEC+ deal had never been popular with many in the Russian oil industry, who resented having to hold back investments in new and potentially profitable projects. In particular, Igor Sechin, the powerful boss of Rosneft and a long-time Putin ally, lobbied against the curbs, according to people familiar with the matter, who asked not to be identified discussing private conversations.

The Kremlin was also disappointed the alliance with Riyadh hadn’t yielded major Saudi investments in Russia.

For several months, Novak and his team had been telling Saudi officials they liked being in the OPEC+ alliance but were reluctant to deepen production cuts, according to people familiar with the relationship. At the last OPEC meeting in December, Russia negotiated a position that allowed it to keep production fairly steady while Saudi Arabia shouldered big reductions.

When the coronavirus started devastating Chinese economic activity in early February – cutting oil demand in Saudi Arabia’s biggest customer by 20% -- Prince Abdulaziz tried to convince Novak that they should call an early OPEC+ meeting in response to cutback supply. Novak said no. The Saudi king and Putin spoke by phone ­­-- it didn’t help.

As the virus spread and analysts forecast the worst year for oil demand since the global financial crisis, the Saudi camp was hopeful Moscow could be won round at the next scheduled OPEC meeting in early March. The Russians didn’t rule out deepening cuts, but kept making the point that shale producers should be made to share the pain.

Putin, who has been the final arbiter of Russia’s OPEC+ policy since the alliance started in 2016, met oil Russian producers and key ministers last Sunday. Russia’s approach was that shale producers should share the pain caused by the drop in demand, cutting U.S. oil production, according to someone who attended.

Bad Chemistry

As ministers gathered in Vienna this week, Saudi Arabia made a final effort to force Russia’s hand. They persuaded the core OPEC group to support a deep production cut of 1.5 million barrels a day, but made it contingent on Russia and the other OPEC+ countries joining in. Novak turned up last at the Vienna headquarters where his nervous counterparts were waiting for him, and refused to budge.

The crown prince even considered calling Putin on Friday, according to a person familiar with the situation. But Putin’s spokesman made clear he had no plans to get involved. As for the two countries’ oil ministers, there was no personal chemistry between them, according to a person in the room. They didn’t exchange a single smile, said another.

With every leak from the meeting the price of oil twitched, as traders slowly came to realize a deal was going to be impossible.

Priming the Pump

Rosneft is delighted with the breakup. It can now move to boost its market share, said spokesman Mikhail Leontiev.

“If you always give in to partners, you are no longer partners. It’s called something else,” he told Bloomberg. “Let’s see how American shale exploration feels under these conditions.”

But the decision to take on shale could backfire. While many drillers in Texas and other shale regions look vulnerable, as they’re overly indebted and already battered by rock-bottom natural gas prices, significant declines in U.S. production may take time. The largest American oil companies, Exxon Mobil Corp. and Chevron Corp., now control many shale wells and have the balance sheets to withstand lower prices. Some smaller drillers may go out of business, but many will have bought financial hedges against the drop in crude.

In the short run, Russia is in a good position to withstand an oil price slump. The budget breaks even at a price of $42a barrel and the finance ministry has squirreled away billions in a rainy-day fund. Nonetheless, the coronavirus’s impact on the global economy is still unclear and with millions more barrels poised to flood the market, Wall Street analysts are warning oil could test recent lows of $26a barrel.

In Saudi Arabia, where the government is almost entirely dependent on oil to fund government spending, the economic impact will be immediate. Prince Abdulaziz and his half-brother Crown Prince Mohammed will have every incentive to boost production to maximize revenue as prices fall.

“Prices will fall until either Moscow or Riyadh call off the endurance contest” or North American production is massively curtailed, said Bob McNally, president of Rapidan Energy Advisors and a former National Security Council staffer.

Relations between the two energy ministries remain cordial and the diplomatic mechanisms of the OPEC+ group are still in place, keeping the door open in case the two sides do decide to reunite. Novak told his peers on Friday that OPEC+ isn’t over.

But a photo of the conference room after the delegates had left hinted at a different story: The small Russian flag by Novak’s seat had been knocked over. And Prince Abdulaziz left his counterparts with a grave warning: Trust me, he told them, according to a person in the room. This will be a regrettable day for us all.

 

[Cajun 11675]

Obligatory -

Edited March 8, 2020 by Cajun
FML man, FML

[Neonmoon 38127]

[LurkingHorn 1044]

Man. I was already feeling uncertain about the future of my company but I don’t see how we survive the next borrowing base redetermination with what’s about to come. Been looking around and got an interview at Aethon Energy. Anybody know much about them? I know they’re heavy NG which is also in the shitter. 

[DCA_HORN 725]

There are going to be a lot of companies going into workout this spring. Don't know much about aethon except the name.

[Johnny Chimpo 478]

7 hours ago, LurkingHorn said:

Man. I was already feeling uncertain about the future of my company but I don’t see how we survive the next borrowing base redetermination with what’s about to come. Been looking around and got an interview at Aethon Energy. Anybody know much about them? I know they’re heavy NG which is also in the shitter. 

If it’s gonna be a chapter 11 you might be able to continue working normally during bankruptcy. I know a guy who was doing that during the Energy XXI bankruptcy proceeding. 

[Parliament 14121]

Not knowing the significance of all this, I put in a buy order for some Continental Resources yesterday morning.  Looks like Vanguard did let me cancel it just now.  

[bernorange 8348]

Quote

Saudi Arabia plans to boost oil output next month to well above 10 million barrels a day, as the kingdom responds aggressively to the collapse of its OPEC+ alliance with Russia.

The world’s largest oil exporter engaged in an all-out price war on Saturday by slashing pricing for its crude by the most in more than 30 years. State energy giant Saudi Aramco is offering unprecedented discounts in Asia, Europe and the U.S. to entice refiners to use Saudi crude.

At the same time, Saudi Arabia has privately told some market participants it could raise production much higher if needed, even going to a record 12 million barrels a day, according to people familiar with the conversations, who asked not to be named to protect commercial relations. With demand ravaged by the coronavirus outbreak, opening the taps would throw the oil market into chaos.
...
Aramco’s unprecedented pricing move came just hours after the talks between the Organization of Petroleum Exporting Countries and its allies ended in dramatic failure. The breakup of the alliance effectively ends the cooperation between Saudi Arabia and Russia that has underpinned oil prices since 2016. Production limits agreed to by OPEC and its erstwhile partners expire at the end of the month, opening the way for producers to ramp up output.
...
The shock-and-awe Saudi strategy could be an attempt to impose maximum pain in the quickest possible way to Russia and other producers, in an effort to bring them back to the negotiating table, and then quickly reverse the production surge and start cutting output if a deal is achieved. In a sign that both sides remain in talks, the OPEC+ Joint Technical Committee, a body of senior oil officials who advise ministers, plans to meet on March 18 to review the global oil market, according to delegates. Saudi and Russian officials are part of the JTC.
...
The production increase and deep discounts mark a dramatic escalation by Prince Abdulaziz bin Salman, the Saudi oil minister, after his Russian counterpart Alexander Novak rejected an ultimatum on Friday in Vienna at the OPEC+ meeting to join in a collective production cut. After the talks collapsed, Novak said countries were free to pump-at-will from the end of March.
...

https://www.bloomberg.com/news/articles/2020-03-07/saudis-plan-big-oil-output-hike-beginning-all-out-price-war?srnd=premium

[Johnny Chimpo 478]

Yea. I’m thinking we might see $15/bbl. 

[Neonmoon 38127]

Just now, Johnny Chimpo said:

Yea. I’m thinking we might see $15/bbl. 

With OPEC and Russia increasing output to record levels and coronavirus crushing demand to new lows, it might get lower than $15

[Johnny Chimpo 478]

Ugh. FML. I too work for a large lumbering corporation and we’ve initiated the lay-off process. I’m doing my best to hide out a la Fudge nuggets plan above. 

[LurkingHorn 1044]

45 minutes ago, Neonmoon said:

With OPEC and Russia increasing output to record levels and coronavirus crushing demand to new lows, it might get lower than $15

Stupid question on this: what happens to the banks in this scenario? I know we’re hedged at something like $59 through 2020 which will help us on the revenue side but isn’t going to help out with borrowing base. But the banks are going to have to shell out a ton of money in that scenario. 

[DCA_HORN 725]

The hedges will help out on the borrowing base. The banks take that into account. The banks mostly don't own the hedges. They try to offload the position to a third party.

[Trey3216 15325]

Looking like we might drop 25% tomorrow 

[Trey3216 15325]

What a fucking disaster

[PittsburghTiger 6137]

19 hours ago, Trey3216 said:

Saudi is talking about a plan to absolutely crater the market, jumping from 9.3mmb/d to 12-13/mmb/d to crush prices and force weak hands out.  This sounds fun 

https://www.zerohedge.com/commodities/saudi-arabia-starts-all-out-oil-war-destroys-opec-flooding-market-slashing-oil-prices

 

With the commodity world still smarting from the Nov 2014 Saudi decision to (temporarily) break apart OPEC, and flood the market with oil in (failed) hopes of crushing US shale producers (who survived thanks to generous banks extending loan terms and even more generous buyers of junk bonds), which nonetheless resulted in a painful manufacturing recession as the price of Brent cratered as low as the mid-$20's in late 2015/early 2016, on Saturday, Saudi Arabia launched its second scorched earth, or rather scorched oil campaign in 6 years. And this time there will be blood.

[LurkingHorn 1044]

31 minutes ago, DCA_HORN said:

The hedges will help out on the borrowing base. The banks take that into account. The banks mostly don't own the hedges. They try to offload the position to a third party.

Gotcha. I was told different re: hedges counting toward borrowing base. 

[Telegraph_it 3353]

1 hour ago, Trey3216 said:

Looking like we might drop 25% tomorrow 

 

[Message Board User 12389]

 

[TonyTexas 10481]

I’d be careful about buying dips here. It often works with the stock market because crashes are usually fueled by emotions. This is fundamental and will take a while to work through. 

[Armybrat 40710]

Putin’s pissed about US attempting to discourage his pipeline making Germany dependent on Rooskie gas, so he & Saudi are trying to bust the American shale industry? Plus there is an attempted coup in the Saudi royal family circus?

Sum ting afoot, Watson! 

[DCA_HORN 725]

Recognizing losses and more bk yes but who is going to buy the assets? And the banks arent going to take the assets.

[Archer 474]

So who is going to be left standing at the end of this? 

[Hook1997 5270]

Welp I’ll be needing a job, anyone looking to hire a out of work landman to research their mineral rights? Lol.  This is going to be a rough year. 

[DCA_HORN 725]

So who is going to be left standing at the end of this? 

The handful of companies with a strong balance sheet.

[DCA_HORN 725]

Plenty of people. There is a ton of capital on the sideline to buy assets like this. Of course, they’ll value it much less in March than February. 
Banks may own the assets by engaging with a third party operating team and waiting for a sunnier day. 

I'm not sure there is anymore. How many companies did the banks take control of last time? This maybe severe enough that that happens but we shall see.

[Neonmoon 38127]

 

7 minutes ago, DCA_HORN said:

12 minutes ago, Archer said:

So who is going to be left standing at the end of this? 

The handful of companies with a strong balance sheet.

Este es verdad

[Blotto 23424]

25 minutes ago, DCA_HORN said:

30 minutes ago, Archer said:

So who is going to be left standing at the end of this? 

The handful of companies with a strong balance sheet.

I don't work in the industry and don't really invest in  O&G stocks, so I'm not particularly up to speed on which companies have the stronger balance sheets. Are you just talking about the majors here? I've been watching EOG recently, and while I wouldn't touch any stock in the sector currently,  they are one company I have assumed is financially stronger than most and may be worth a shot once it appears we may be closer to the bottom. What other companies stand out ?

Edited March 8, 2020 by Blotto

[HoustonFrog 368]

Im in E&P banking.... it’s going to be a total bloodbath in spring BBRD. We’ve released our pricing twice in the past month, and are working on another one today apparently.

We have ~10% of e&p in workout currently and will have probably 60-70% in workout after spring BBRD.

Only question is whether they let people go or decide the e&p business isn’t worth it and cut us off entirely. 2014-2015 we didn’t reduce staff.

[DCA_HORN 725]

EOG is a strong company. They are the best non major.

Fatigue is one thing but you know as well as I that banks dont want to recognize more losses immediately. They would rather kick the can. Maybe this is like the 80s and a bunch of friends and family type money scoops up pdp at a big discount but I'm not seeing it yet.

[HoustonFrog 368]

How large is your energy book?
I’m hearing of longtime Texas based banks getting rid of their energy groups for good. I find the news surprising. 

E&P is around $3Bn.

[Lobwedgephil 1139]

Looks like another massacre incoming.