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Extension of oil production cuts may mean higher prices in 2018

Posted on by Todd Bennington

OPEC

Todd Bennington | Kingdom Exploration Media
http://kingdomexploration.com

OPEC and non-OPEC producers agreed last Thursday to extend oil production cuts that were set to expire in March until the end of next year. A meeting to review the agreement with an eye toward making any necessary adjustments has been scheduled for June.

Citing also the uncertainty surrounding social and political changes occurring in Saudi Arabia, at least one analyst predicts this could mean oil could reach $80 per barrel next year. [1]

Other factors potentially affecting oil prices include how the political situations in places like Libya, Nigeria, Venezuela, and Iraqi Kurdistan stabilize or deteriorate – as well as how U.S. producers react to price increases.

“If producers in the U.S. increase their rig count over the next few months due to higher prices then I expect another price collapse by the end of 2018,” an executive with one of the Permian Basin’s largest producers is quoted by Reuters as saying. “I hope that all U.S. shale companies will maintain their current rig counts and use all excess cash flow to increase dividends back to their shareholders.”[2]

[1] https://www.cnbc.com/2017/11/27/brent-crude-oil-may-hit-80-in-the-next-year-says-jim-oneill.html

[2] https://www.reuters.com/article/us-opec-meeting/opec-russia-agree-oil-cut-extension-to-end-of-2018-idUSKBN1DU0WW?il=0

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Oilprice.com editor says IEA wrong on shale

Posted on by Todd Bennington

Permian Basin oil rigs

Todd Bennington | Kingdom Exploration Media
kingdomexploration.com

The International Energy Agency is overly optimistic about the potential for shale production growth over the next decade, writes Oilprice.com editor James Stafford in an article published on Nov. 16.

Stafford cites a handful of reasons why shale may very well not live up to expectations, first noting the steep decline rates seen with shale as opposed to conventional wells.

“(Shale) drilling is like running on a treadmill—more and more wells need to be drilled just to keep production flat,” Stafford writes. “The extraordinary rate of drilling over the past few years means that the industry not only needs to keep going at that frenzied pace, but it needs to expand its rate of drilling to add more barrels.”

Other reasons shale may underperform, according to Stafford, include the fact that prime locations are given drilling priority, meaning it will be less desirable spots that will be left to drill as time goes on. Shale is also considerably less profitable than generally thought, regardless of where oil prices are at, Stafford claims, adding that the industry is being largely driven by what he calls “loose credit” and investors with unrealistic expectations.

In further support of his argument, Stafford goes on to cite skepticism on shale expressed by investment firm Morgan Stanley and an apparent trend seen among some petroleum companies to scale back drilling in favor of paying down debt, which will have a further negative effect on production growth.

The full article is available at: https://oilprice.com/Energy/Oil-Prices/The-IEA-Is-Grossly-Overestimating-Shale-Growth.html

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The establishment media and shale myth-making

Posted on by Todd Bennington
Counties of the Permian Basin
Area of Texas and New Mexico that makes up the Permian Basin

Todd Bennington, Kingdom Exploration Media

In the below uncritical account recently posted at foxnews.com, the Permian Basin is presented as a panacea for the nation’s energy needs and as the place where, with a little hard work and determination, billionaires are made every day:

http://www.foxnews.com/us/2017/10/20/texas-shale-oil-boom-yields-rags-to-riches-tales-by-barrel.html

“Like so many of the dreamer-turned-tycoon stories the area churns out,” writes the piece’s author, Barnini Chakraborty, “success at Permian wasn’t a given. It was born out of grit, determination and hard work. Making it big meant going all in on an area that was a relative latecomer to the shale revolution.”

Scarcely is any space given in the article to the actual complexities of the oil and gas industry, and tight oil in particular, or to competing views, save for a brief acknowledgement that such views do exist while glibly dismissing them:

“Despite some skeptical analysts, the shale industry in the Permian Basin – a 300-mile stretch of open land from West Texas to southeast New Mexico – isn’t showing signs of slowing down,” Chakraborty continues.

This stands in marked contrast to geological consultant Art Berman’s keynote address at the West Texas Geological Society’s annual fall symposium this past September. There, Berman characterized the Permian as providing marginal profitability when all costs are considered and as dependent on a steady stream of outside investment capital.

“That’s not enough to make the economics work, particularly with the very high acquisition prices people have been paying,” Berman is quoted as saying in the below piece by the Midland Reporter-Telegram:

http://www.mrt.com/business/oil/article/Consultant-Permian-plays-are-marginally-12235743.php

Who is right? Perhaps it’s worth recalling here the old adage that if it looks too good to be true, it probably is.

For discerning oil and gas investors, Kingdom Exploration has opportunities available in British Columbia, Canada that come without the high cost of hydraulic fracturing and which are situated adjacent proven and currently producing wells. Contact Kingdom Exploration President Sean Pruitt at sean.pruitt@kingdomexploration.com today for more information or fill out and submit the online form at the following link: http://kingdomexploration.com/?page=contact.

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