Energy Prospectus

If you listened carefully to my last podcast (July 20) you know that U.S. oil production has been almost flat since March. The "$64 Billion Question" is what happens if total U.S. production doesn't increase at the lofty rates that EIA and IEA are expecting?

U.S. oil production is approximately 12.2 million barrels per day in July. EIA currently projects U.S daily production approaching 13.8 million BOPD by the end of 2020, an increase of about 1.6 million BOPD from present levels. Even if achieved, that would represent a growth rate of 11.5%, down from 2018's pace of 17% production growth.

Read this: https://seekingalpha.com/article/427655 ... ter-widget

If the Wall Street Gang has a "Paradigm Shift" about the global oil market (from being adequately supplied to being under-supplied), there will be a MAJOR shift of investors moving money into the upstream oil & gas producers.

What is a "Paradigm Shift": "a fundamental change in approach or underlying assumptions". Big moves in the stock market are usually the result of a paradigm shift.

Our first speaker from Raymond James will be covering this topic on July 31st at The Hess Club luncheon. Seating is limited, so PLEASE REGISTER early if you wish to attend.

From World Oil on 7-22-2019:

HOUSTON - Accelerating tight oil decline rates top a growing list of concerns for Permian basin operators, with unexpected production shortfalls prompting producers to consider stepping up drilling investment and M&A activity, Wood Mackenzie's Robert Clarke, Research Director, Lower 48 Upstream, told delegates at the Unconventional Resources Technology Conference (URTeC) in Denver.

As ultra low-cost undrilled locations become exhausted and productivity gains across wider sections of acreage continue to moderate, producers should shift their focus from early production rates to longer-term well performance and production optimization, Clarke said.

The shift is inevitable as the Permian matures, and with it, declines rates are likely to increase over time.

Clarke told delegates “Individual well productivity improvements helped to offset decline rates through 2017, but those gains have weakened over the past two years. No longer do we routinely see operators press-releasing record-setting wells. For wells drilled so far this year in the Midland Wolfcamp, average initial production (IP) rates are down 6% and we see productivity reductions across numerous benches.”

“Steeper decline rates and smaller IPs in the Permian basin will likely result in operators needing to drill more wells than originally planned, if they're committed to hitting previously established long-term targets. This will be especially challenging in the near-term because raising capital budgets today is effectively off-limits.”

He added: “Some companies are embracing economies of scale for both rigs and infrastructure as a way to enhance well performance and improve decline rates. However, our analysis indicates this approach is more effective at cutting costs than improving production characteristics.”

The alternative to raising capital budgets and drilling more wells is to turn to M&A. There was a burst of asset and private-to-public deals during the 2016-2017 “Permania” period, but that has now cooled, Clarke said.

“We are now experiencing a period of consolidation in the basin where synergies, costs and cash flow matter more than inventory. This is shrinking the number of companies that look like ideal acquisition targets,” said Clarke. “Even with accelerated declines, the remaining number of highly economic locations supports our overall Permian growth figures for the next couple of years.”