Energy Prospectus

Crude at $80 a Barrel? No Sweat, Say Oil Producer CEOs

http://finance.yahoo.com/news/crude-80- ... 51612.html

The industry is used to price swings, Halliburton Co. (HAL) Chairman and Chief Executive Officer David Lesar said in an interview in his Houston office. When prices climb above $100 a barrel, oil companies are "printing money like crazy," he said. When prices fall below $80, the "doomsdayers start to come out.

‘‘If it floats between $80 and $100, our sector will be fine,'' said Lesar, who leads the world's biggest provider of fracking services to oil companies. ‘‘That's a range that the service industry and our customers can easily live within."

When I was working at Hess in 1986 the price of oil dipped to $10/bbl and stayed below $20 for years. Natural gas was below $2.00 for long periods. This industry has been through a lot worse than a few months of $80 oil prices. Plus, today a lot more companies use aggressive hedging programs to protect against price dips. - Dan

Some of the best operators can profit at far lower prices because they're learning how to drill wells more efficiently, getting more production at lower costs with more accurate fracking, better targeting of the juiciest spots in the rock, and spacing wells more closely together.

For example, in Texas's Eagle Ford Shale formation, SM Energy Co. is getting 40 percent higher production for a 10 percent increase in the cost of each well. Carrizo Oil & Gas Inc., which specializes in Eagle Ford wells, nearly doubled its cash-flow per barrel to $43.86 in the second quarter, compared to two years before.

EOG Resources Inc. boosted cash margins per barrel to $43.31 in the second quarter, up from $34.11 two years before, according to a company presentation.

A Wells Fargo & Co. analysis of three unidentified Eagle Ford operators found they would be profitable above $46 a barrel.

Yesterday, the price of WTI dropped below $80 per barrel for the first time since mid-2012. From mid-2012 to mid-2013 the price of WTI increased to $110/bbl. BTW the gloom and doom in mid-2012 was about the same as it is today.