Hey Oil Barons.......

[Storm the Field 5366]

Yeah, I don't know if its coordinated between the two, but same result.

Russia was definitely aiming to deal a crippling blow to the US when they walked out of the meetings 2 weeks ago. Igor Sechin, who I mentioned earlier, has been grumbling for 3+ years that the combined OPEC + Russia cuts were just propping up US shale operators at the expense of their market share. 

I don't however, think that Russia's gambit necessarily counted on Saudi's counterreaction leading to such a dramatic price tumble in such a short time-frame. I think they were more looking to start a slow bleed of the US while relying on their vast cash reserves as opposed to a sudden, massive hemorrhage affecting all sides.

Edited March 19, 2020 by Storm the Field

[sunset87 255]

43 minutes ago, Trey3216 said:

Not so behind the scenes, and not so endgame, but of course.   

Obviously a gutted US shale industry is win for SA and Russia.  I'm just wondering if the whole tiff between these two wasn't orchestrated. Their main goal is to hurt US shale not each other.  Maybe too tinfoil...

Edited March 19, 2020 by sunset87

[Rusty Shackelford 414]

https://www.wsj.com/articles/texas-weighs-curtailing-oil-production-for-first-time-in-decades-11584646724?mod=searchresults&page=1&pos=1

Texas regulators are considering curtailing oil production in America’s largest oil-producing state, something they haven’t done in decades, people familiar with the matter said.

Several oil executives have reached out to members of the Texas Railroad Commission, which regulates the industry, requesting relief following an oil-price crash, the people said. U.S. benchmark oil closed around $25 a barrel Thursday.

Texas, which hasn’t limited production since the 1970s, was a model for the Organization of the Petroleum Exporting Countries, which has sought to control world-wide oil prices in recent decades. OPEC and Russia were unable to reach a deal on reducing output in response to the coronavirus pandemic, which helped trigger the current collapse in prices.

It is unclear whether regulators will ultimately act to curtail production, but staffers are examining what would be required in such an event, the people said.

[Dr Fear 1290]

https://www.wsj.com/articles/texas-weighs-curtailing-oil-production-for-first-time-in-decades-11584646724?mod=searchresults&page=1&pos=1
Texas regulators are considering curtailing oil production in America’s largest oil-producing state, something they haven’t done in decades, people familiar with the matter said.
Several oil executives have reached out to members of the Texas Railroad Commission, which regulates the industry, requesting relief following an oil-price crash, the people said. U.S. benchmark oil closed around $25 a barrel Thursday.
Texas, which hasn’t limited production since the 1970s, was a model for the Organization of the Petroleum Exporting Countries, which has sought to control world-wide oil prices in recent decades. OPEC and Russia were unable to reach a deal on reducing output in response to the coronavirus pandemic, which helped trigger the current collapse in prices.
It is unclear whether regulators will ultimately act to curtail production, but staffers are examining what would be required in such an event, the people said.

So many questions. Would they slash allowables across the board? Say, 25%? Moratorium on new wells? Would that trigger force majeure and toll current leases?

[Dr Fear 1290]

And, would they not want to act uniformly across the big producing states? Ameripec?

[Trey3216 15452]

38 minutes ago, sunset87 said:

Obviously a gutted US shale industry is win for SA and Russia.  I'm just wondering if the whole tiff between these two wasn't orchestrated. Their main goal is to hurt US shale not each other.  Maybe too tinfoil...

I’m gonna bet on the come, and say that we as a country, are going to fuck them both up simultaneously for trying to win monopoly by loading up hotels on Mediterranean, Baltic, Oriental, Vermont and Connecticut.   

[Eastwood 4394]

4 minutes ago, Dr Fear said:

22 minutes ago, Rusty Shackelford said:

https://www.wsj.com/articles/texas-weighs-curtailing-oil-production-for-first-time-in-decades-11584646724?mod=searchresults&page=1&pos=1
Texas regulators are considering curtailing oil production in America’s largest oil-producing state, something they haven’t done in decades, people familiar with the matter said.
Several oil executives have reached out to members of the Texas Railroad Commission, which regulates the industry, requesting relief following an oil-price crash, the people said. U.S. benchmark oil closed around $25 a barrel Thursday.
Texas, which hasn’t limited production since the 1970s, was a model for the Organization of the Petroleum Exporting Countries, which has sought to control world-wide oil prices in recent decades. OPEC and Russia were unable to reach a deal on reducing output in response to the coronavirus pandemic, which helped trigger the current collapse in prices.
It is unclear whether regulators will ultimately act to curtail production, but staffers are examining what would be required in such an event, the people said.

So many questions. Would they slash allowables across the board? Say, 25%? Moratorium on new wells? Would that trigger force majeure and toll current leases?

I'm not an attorney and this isn't legal advice, but force majeure will depend on the clause in the individual leases. The most common clause contains the language "circumstances beyond the reasonable control of the lessee." Also, in New York, the courts ruled in 2012 that a fracking moratorium wasn't enough to trigger the force majeure clause, so I'm sure that case will be pointed to a lot if the RRC throws out a moratorium. There's another 1993 Texas case that states that the forcing of a well to be shut-in by the RRC didn't trigger force majeure, either, but the circumstances around that case dealt with a producer who overproduced and were then ordered to shut-in to make up for it.

So, I'd say that if you had a producing well that was fully in compliance and the company was actively operating and marketing the oil and then gets shut down due to the RRC, the operator has a good shot at triggering the clause. Marginal wells and leases that go past their primary term without any operations done in good faith to cause a producing well, less of a chance.

[Trey3216 15452]

On 3/12/2020 at 10:35 AM, Trey3216 said:

In theory, they're attempting to massively distort demand by increasing production to unsightly levels.  Their hope is that gas will be so cheap that demand picks up by a large multiple, which will drive prices higher in a more efficient and market based manner than artificial supply limitations. 

 

If I'm the US, there is a two-fold way to handle this situation.  

1) Invest in new refineries at the the governmental level.  Much of the problem with the oil we produce here in the US is that we have to export almost all of it.  Our refineries are setup to refine crude from Venezuela and KSA, etc.  Get some refineries online that refine the crude we are pumping domestically.  Completely shutoff the importation of crude from KSA.  Offer incentives in the meantime for consumers to buy new vehicles (sounds ridiculous, but having bunch of better fuel mileage vehicles on the road will both help environmentally and destroy KSA/Mother Russia's hopes of large scale demand multiple increase)  

 

2) Truly invest and build a mass transit system and extend incentives for purchasing EV's in the long term for personal use.  We've needed to do it for years, but if there were ever a time to use market forces to solve market problems, now would be it.  Domestic oil partner up/invest in mass transit projects.  Use out of work pipeline guys to help build and make HSR lines through the mass transit corridors.  Use the other oil field workers that will be in oversupply to begin work on smart hydro-electric/wind/small scale power generation projects.  We could build smaller scale power generation plants that would serve on more of a local basis than a regional basis.  Generate power via natural gas and wind/hydro combination.  Cut coal out of the picture.  

 

I'm no government interventionist at all, but we could feasibly do this with a combo of Corporate America investment and partial government subsidy/regulation.  Put our people to work, put KSA and Russia out of business.  Do it the old fashioned way, be the better businessman.  Kill them without shedding a drop of blood, just crush them via business.  

I hate quoting my own post, but I’m hearing language from people that have other people’s  ears on CNBC that ideas akin to these are being thought about.   Big oil owns more wind and solar technology Patents than the wind and solar companies do and ever will.  They will be bought up.   Just fully integrate the US Energy economy and we cut Russia, KSA and a few others at the knees.  Let them bleed the fuck out.  

[Neonmoon 38130]

It would depend on the JOA language and the lease language. 

But is a pandemic considered an act of God? or an act of nature? if not specifically listed?

 

[Trey3216 15452]

7 minutes ago, Eastwood said:

I'm not an attorney and this isn't legal advice, but force majeure will depend on the clause in the individual leases. The most common clause contains the language "circumstances beyond the reasonable control of the lessee." Also, in New York, the courts ruled in 2012 that a fracking moratorium wasn't enough to trigger the force majeure clause, so I'm sure that case will be pointed to a lot if the RRC throws out a moratorium. There's another 1993 Texas case that states that the forcing of a well to be shut-in by the RRC didn't trigger force majeure, either, but the circumstances around that case dealt with a producer who overproduced and were then ordered to shut-in to make up for it.

So, I'd say that if you had a producing well that was fully in compliance and the company was actively operating and marketing the oil and then gets shut down due to the RRC, the operator has a good shot at triggering the clause. Marginal wells and leases that go past their primary term without any operations done in good faith to cause a producing well, less of a chance.

How many guys work on a typical rig?   Could they shut down all the rigs by federal mandate via COVID-19 and that enacts force majeure? 

[Spaceman Spiff 408]

6 hours ago, Fudge Nuggets said:

Who is DRW?

David Ramsden-Wood.  His website/podcast are here: https://hottakeoftheday.com/

[Eastwood 4394]

2 minutes ago, Trey3216 said:

How many guys work on a typical rig?   Could they shut down all the rigs by federal mandate via COVID-19 and that enacts force majeure? 

That side of things I am unfamiliar with. My area is JoAs, leases, etc. I would assume it all depends on the force majeure language in all of the agreements across the board. Courts will dissect the hell out of specific language in the clause and the how that language is commonly understood in the business. Honestly, I don't think a whole lot of companies will have the stomach to fight over force majeure in this climate. Get into a legal battle that isn't resolved before one of you goes bankrupt? Pretty unappealing.

[Trey3216 15452]

8 minutes ago, Eastwood said:

That side of things I am unfamiliar with. My area is JoAs, leases, etc. I would assume it all depends on the force majeure language in all of the agreements across the board. Courts will dissect the hell out of specific language in the clause and the how that language is commonly understood in the business. Honestly, I don't think a whole lot of companies will have the stomach to fight over force majeure in this climate. Get into a legal battle that isn't resolved before one of you goes bankrupt? Pretty unappealing.

Kinda what I was thinking.  And we know the typical rig worker had multiple comorbidities.  

Edited March 19, 2020 by Trey3216

[Dr Fear 1290]

37 minutes ago, Eastwood said:

Also, in New York, the courts ruled in 2012 that a fracking moratorium wasn't enough to trigger the force majeure clause, so I'm sure that case will be pointed to a lot if the RRC throws out a moratorium.

Great points here. I read about the New York case yesterday, the winning argument for the lessors was that the operator was still able to drill a well that could produce in some quantities, and didn't care that the fracking ban made it uneconomical. I think a complete drilling ban could be easily distinguished. As you said, the court looked hard at the exact language of the clause in the lease.

I do land work in Eddy/Lea County in New Mexico.  Just took a random look as some recently filed leases and the force majeure clauses are all over the place. The Concho/COG ones in particular looked very strong.

Edited March 19, 2020 by Dr Fear

[Neonmoon 38130]

34 minutes ago, Trey3216 said:

How many guys work on a typical rig?   Could they shut down all the rigs by federal mandate via COVID-19 and that enacts force majeure? 

Depends on the size of the rig, but 10-15 (drilling). Fracking I've seen up to 35 people out there. 

[Trey3216 15452]

12 minutes ago, Dr. Beeper said:

Fully integrate partially by building additional refineries?  Trump would have to be re-elected. I’m not sure that’s probable any more. 

Building more refineries is a small part.  But Big oil owns lots of patents on battery technology and other things that they will own the wind and other industries ultimately.  

[Trey3216 15452]

15 minutes ago, Dr. Beeper said:

It may be a small part in the long run but imagine it’s more important to try and rein in the Russians and Saudis now. 

No doubt.  Building new refineries specifically to finish our own production, integrating more wind/solar into the mix, developing HSR in other major transit corridors, building localized power plants that generate from a combo of natgas/wind/solar, and other things, will keep our industry alive and well, lower our environmental footprint, and absolutely break Russia and KSA.  
 

 

doing it all at the same time as an infrastructure regime would put everyone back to work and kill them at the same time.  Would be beautiful 

Edited March 19, 2020 by Trey3216

[Trey3216 15452]

3 minutes ago, Dr. Beeper said:

That won’t happen under Sanders or Warren. Maybe Biden. Maybe Trump. He’s shown more presidential action chops this week alone than he ever has. 

I think if Trump were to come out with a plan like mine, right now, it would guarantee re-election.  It would promote American business (his base), it would actually be better for the environment, if you include my other ideas of an increased promotion of EV’s and newer more efficient vehicles, that would only increase the environmental emphasis.  You’re correct it couldn’t be done under Warren/Sanders, but this coming from him would actually have a chance of happening.  It’s ambitious, but so was Rosie Rivet, Victory Bonds and Victory Gardens. 
 

Want to get a job again?  Want to grow your own personal wealth, find someone that will make a total energy/infrastructure plan integration to vote for.  

[tx 3 putt 78682]

Occidental Petroleum Corp. bonds plunged after being downgraded to junk by Moody’s Investors Service as the Permian Basin shale producer struggles to deal with a high debt load in the face of oil’s crash.

[Eastwood 4394]

Hello, teens...

[Eastwood 4394]

2 minutes ago, Dr. Beeper said:

WTF just happened around 1 PM?

No CR, but markets and oil started going south during Trump's PC. Don't know why. Glancing at a CNBC article, Trump said that he might intervene in RU and KSA's oil price war. No idea, other than that.

[stone oak 639]

7 minutes ago, Dr. Beeper said:

WTF just happened around 1 PM?

Big sell off with Eurpoean close is what I heard

[DCA_HORN 725]

Does it really matter at this point?

[DCA_HORN 725]

Somewhat related but so is the entire country grinding to a halt.

[Eastwood 4394]

1 minute ago, DCA_HORN said:

Somewhat related but so is the entire country grinding to a halt.

Yeah, but my nerves are from knowing that my niche field isn't going to have a market for the foreseeable future. Barring a miracle, I might not last through next week, maybe even then end of today. Thankfully, we planned for this and I have other things in the works that come to fruition in about 18 months.

[DCA_HORN 725]

Im in the same boat. Most of us are. At this rate there's not going to be anything to come back to.

[Rusty Shackelford 414]

 

[Eastwood 4394]

34 minutes ago, Dr. Beeper said:

Yes there will. I’ve become convinced of that the last few days. I think the drop from $33-$35 is mostly demand related, and the supply showdown is merely noise. We get good demand supporting data, and it’s bound to only get better throughout Q2. I think the demand destruction is only gonna help supply and something will happen with the two actors on the supply side. Am I thinking too wishfully?

Closed at $22.43. I still don’t know what happened in the last few hours of trading. Went from $25 to $19.64 back up to $22.43 very suddenly at end of day. 

Trading volume skyrocketed at the very end of the day, looking at the chart. Maybe a bunch of positions playing wait and see until right before the final bell?

[Incredulity 11876]

Just heard a talking head on Bloomberg say there is “talk” that crude is headed towards being a waste product and a negative price per barrel.

 

Katie Bays from Sandhill Strategy(no idea her pedigree other than I assume she is from SV due to sandhill)

[Neonmoon 38130]

34 minutes ago, Incredulity said:

Just heard a talking head on Bloomberg say there is “talk” that crude is headed towards being a waste product and a negative price per barrel.

 

Katie Bays from Sandhill Strategy(no idea her pedigree other than I assume she is from SV due to sandhill)

OMG. No wayyyyyy. 

[Incredulity 11876]

Basically that Russia and SA aren’t going to stop pumping and that the US hasn’t either.  

I wasn’t really engaged as I was just trying to get some currency exchange info and they keep a loop going, but her line about “negative” barrel prices caught my attention.  

I don’t have any business or knowledgeable connection to the oil industry, nor any knowledge of her or her agendas.

[Hate 20249]

I have nothing to base this on, but as I mentioned earlier, Russia and SA can't sustain this price war as long as we can.  We can simply stop drilling and be ok (I know there will be impacts).  SA and Russia pretty much depend on oil to make up a large part of their economy.  They can't do this forever.

 

Edit:  I have no idea what I am talking about, but I have been drinking whiskey for a while so I feel smarter.  

Edited March 24, 2020 by Hate

[Hate 20249]

35 minutes ago, Dr. Beeper said:

How do I insert a YouTube into the link?  

Is it a video that shows I know what I'm talking about and I'm not a complete idiot?  If so, I'll tell you.

[Hate 20249]

Just copy the link and paste it as if you are making a new post.

[workswithseed 2204]

22 minutes ago, Dr. Beeper said:

No. Hilarious video. Just don’t know how to embed. 

Well?

[Parliament 14598]

That vid was definitely worth the effort.

[Neonmoon 38130]

The analyst jumping over the side was perfect. As was Oxy and Apache

[Hate 20249]

I liked "hiding in the bathroom so they can't lay you off guy".

[Fudge Nuggets 19455]

4 minutes ago, Hate said:

I liked "hiding in the bathroom so they can't lay you off guy".

If my boss calls unexpectedly, I'm going with "New phone, who dis?"

[Archer 474]

7 minutes ago, Hate said:

I liked "hiding in the bathroom so they can't lay you off guy".

We’ve all done it. 

[Hefeweizen 5444]

Shale Co. was my favorite.

[Eastwood 4394]

32 minutes ago, Fudge Nuggets said:

If my boss calls unexpectedly, I'm going with "New phone, who dis?"

Every call from my boss is expected, at this point. I've been here before, though. Twice. Bosses name pops up on the phone, that's it. Boss called two weeks ago and I thought that was it, but it was good news. Next time, I'm sure it's the call.

[52-80 19377]

Just now, Dr. Beeper said:

I’ll ask again, will we see $40 or $15 first? @ryskey@Trey3216

 

 

Yes.

[ryskey 449]

$15.  But back to $40 by Q4.  Think we will get low enough to force shut ins of 10s of millions of bpd. 

[ryskey 449]

Hell ya.  That's actually a good strategy as long as it's your gambling money.  I wouldn't do that as an E&P (depends on what the put strike price is) but as a hedge fund, yessir.  Has the volatility tamed a bit?  Last I checked last week, longer-dated puts were trading in bizarre places.

[BTW 370]

I'm tempted to start buying crude and storing it.

[Dr Fear 1290]

I'm tempted to start buying crude and storing it.

So, along with physical gold, we should be buying physical oil?

[Johnny Chimpo 489]

Yea. Problem with that is how damn cheap crude is per unit volume. Bottled water puts crude to shame. Maybe you should invest in that 😂. 

[ryskey 449]

Are assets producing?  If so, ya hedge with swaps, and if price goes to $15, shut in and save reserves.  Liquidate hedges and buy something else distressed.  Print money in the 2021-2022 structural supply deficit caused by this shit.

[Trey3216 15452]

49 minutes ago, ryskey said:

Are assets producing?  If so, ya hedge with swaps, and if price goes to $15, shut in and save reserves.  Liquidate hedges and buy something else distressed.  Print money in the 2021-2022 structural supply deficit caused by this shit.

Dangerous game to play.   Market folks know there is going to be a structural supply deficit in pretty short order.  They’re trading on the fear of the day and doing their damndest to not get caught deep on the wrong side when the reckoning happens.