T.Boone Pickens vs CNBC morons

[dan_s]

Great interview. It really shows how little the CNBC financial analysts know about this industry. When the girl said we will be "capping wells" it really showed how stupid they are. I think they thought "rigs" meant producing wells. I wonder if they think all of our production comes from 1500 wells.

Another thing (I see this repeatedly) is how people combine crude oil and NGL production and call it "oil". NGLs are not oil. Some things, including most transportation fuels, can only be made from crude oil ("black oil"). Refiners do mix a small amount of NGLs in, but it is not much. If you look at a chart of crude oil production, it did peak in 2005 and is only slightly higher today.

What I'm seeing is that the E&P companies are "Coring Up". They are all cutting their capex budgets by 20% to 50%. They will focus on developing their top tier core acreage. Exploration drilling and step out drilling will go to zero. Seismic budgets will be cut at least in half. Very few companies will be buying acreage. Some of the large-caps will buy the small-caps since proven reserves are now very cheap on Wall Street. Upstream MLPs will get some great deals on mature producing properties.

All this talk of companies going bankrupt is nonsense. No one should go bankrupt at $50 oil when production taxes + lifting costs are under $15/bbl. Netbacks of $35/bbl still bringing in plenty of cash flow. What happens in this industry is that companies reduce their capex to match cash flows. All of the good drilling companies will survive and bounce back. The industry has been down this road many times and good management knows what to do.

I agree with Boone 100% that Brent will be back to $90/bbl within 12-18 months. Saudi Arabia wants to punish Russia & Iran and they want to slow down the U.S. shale oil development. That should only take six months of low oil prices.

[setliff]

I read on the string below that the Saudi's 2015 budget is based on $75/b. strong msg there.

[dan_s]

Saudi Arabia's King Abdullah was admitted to a hospital for medical checks today, the state news agency reported. The king, 90, underwent back surgery in 2012. He has since appointed Prince Muqrin bin Abdulaziz as second in line to the throne after Crown Prince Salman

Venezuela's President Nicolas Maduro vowed an economic "counter-offensive" to steer the OPEC nation out of recession as it struggled with the world's fastest inflation. Ecuador, which relies on crude for about a third of its revenue, may cut next year's budget by as much as $1.5 billion and seek additional financing if prices don't stabilize, the Finance Ministry has said.

Oil's collapse has also threatened to push Russia, the world's second-largest crude exporter, into recession as its currency headed for its steepest annual slide since 1998. The economy, which relies on crude sales for almost half its budget, may shrink as much as 4.7 percent next year if oil averages $60 a barrel, according to the central bank. Russia must adapt to the reality of prices that could drop to as low as $40, President Vladimir Putin said on Dec. 18.