$1.74 per gallon

This article will help explain why the Oil and Gas companies are where they are at with the FullSpeed ahead drilling and why this has come to what it is today. When we first started with the Haynesville Shale Natural Gas prices were around $13 per MCF, they are now $3.127 per MCF.....we are still drilling. Too much money has been spent on Leases and these companies are obligated to pay the Piper. These huge Shale wells cost many millions more that a traditional vertical well. I am now doing work on Laterals stretching almost 2 miles long after they reach 13,000 feet! The same things are now happening to the Oil side of the business. I have seen oil traded for $8 a barrell and I have seen it trade for $145 plus a barrell and it is all driven by how much "Money Costs" to do these wells. John

http://www.nytimes.com/2012/10/21/b...g-winners-and-losers.html?pagewanted=all&_r=0
 
Lawnboy said:
I was talking to a relative at a family reunion who has been working in the oil fields now for many years. I was always under the assumption that we were drilling the oil for us to use at home and I frankly was mad that we weren't seeing the decrease in prices here.
He informed me that the majority of the oil that we are getting out of the Dakotas is being shipped over seas. It is a higher quality of shale oil and is being sold to China/Japan if I remember the conversation correctly.
I was bummed to hear that but apparently the oil companies are fetching a higher dollar by shipping it out of country rather than sell it locally for less profit. Now because it's a free market and the companies can make their money anyway they see fit, I really don't feel bad that OPEC is causing the prices to fall (if that really is the case). To me it seems that lower fuel prices can be one of the best economy stimulants that we can have.
I'm no expert and maybe I'm way off base but that it what was explained to me by one who works in the industry.
Click to expand...
It has been against federal law since the 1975 Energy Policy and Conservation act. So your relative doesn't know what he is talking about.
 
DRAFTSTUD said:
This article will help explain why the Oil and Gas companies are where they are at with the FullSpeed ahead drilling and why this has come to what it is today. When we first started with the Haynesville Shale Natural Gas prices were around $13 per MCF, they are now $3.127 per MCF.....we are still drilling. Too much money has been spent on Leases and these companies are obligated to pay the Piper. These huge Shale wells cost many millions more that a traditional vertical well. I am now doing work on Laterals stretching almost 2 miles long after they reach 13,000 feet! The same things are now happening to the Oil side of the business. I have seen oil traded for $8 a barrell and I have seen it trade for $145 plus a barrell and it is all driven by how much "Money Costs" to do these wells. John

http://www.nytimes.com/2012/10/21/b...g-winners-and-losers.html?pagewanted=all&_r=0
Click to expand...

Worth a read..
 
The thing is, oil is a traded commodity and in some regards, is like the stock market. It can have wild swings and can dramatically overshoot and undershoot on price. Also we still import a lot of our oil, maybe 6-8 million barrels a day or something like that.
 
I work in the industry, basically mid-level management for a major oil company. I always get a chuckle out of the responses on threads regarding the oil market, like anyone has a strong handle on how oil should be priced. At the end of the day it is all supply and demand. In short, you have excess supply thanks to the incentive to ramp up drilling and production efforts when the price per barrel was high. Well, now that supply is on the market and the demand side has slowed a bit, especially in places like China and India. No doubt there are political factors in all of this, though who knows what they are (Saudi screwing the States, Saudi screwing Russia on advise from the States, who knows). Fact of the matter is OPEC isn't the player it once was. There's really no telling where the price will go. The fact of the matter is no one was overpaying for gas...you were paying what gas was worth. Prices for services in the industry follow the oil price, so wells that cost $5 million will become cheaper to drill as contracts are renegotiated. Supply will likely fall soon as the speculative producers get pushed out, but it's hard to say to what extent that'll impact supply.
 
DRAFTSTUD said:
I have seen oil traded for $8 a barrell and I have seen it trade for $145 plus a barrell and it is all driven by how much "Money Costs" to do these wells. John
Click to expand...

I may not be following what you're saying but the well costs tend to react to oil price, not vice versa. When oil price increases, everyone snags more of the margin, so costs go up.
 
True Gator, Money cost is what I am calling what we saw in the Haynesville Shale as far as what take the money brokers took for their share. The Money Costs were what drove the shale play to paying up to $30K an acre for leases. After 41 years I thought I had seen some padding of costs, but nothing like this. They had to carry that cost when they switched from Gas to Oil, so after the buyouts and such that comes with these low prices you will still be paying for what Money Costs years from now. John
 
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bigeasygator said:
At the end of the day it is all supply and demand.
Click to expand...

Over the long term yes, over the short term, I'd say not so much. The supply and demand didn't change so drastically in the last 90 days to warrant a 50% drop in price. Like you said, there are many factors involved and where the price goes from here is just a shot in the dark.
 
vdo84 said:
Over the long term yes, over the short term, I'd say not so much. The supply and demand didn't change so drastically in the last 90 days to warrant a 50% drop in price. Like you said, there are many factors involved and where the price goes from here is just a shot in the dark.
Click to expand...

I agree to an extent. There's no magic formula to calculate what the price should be given all these factors. The market moves on information, and the last three months have been full of information that's pushed the price down. Some of this is real and some is imagined.
 
vdo84 said:
Over the long term yes, over the short term, I'd say not so much. The supply and demand didn't change so drastically in the last 90 days to warrant a 50% drop in price. Like you said, there are many factors involved and where the price goes from here is just a shot in the dark.
Click to expand...

Strong dollar, high supply and weakening demand did in fact create a situation where the price fell by 50%.


The dollar and oil have an inverse relationship. 30% of the decrease in oil can be attributed to the rapid rise in the strength of the dollar.

dollarvsgold_zpsa1d99f79.jpg


Nobody knows more than the market and remember two things 1. Oil has been a boom/bust industry since it first started, 2. whenever anybody tells you that this oil boom is different than the last one you can be guaranteed it isn't.
 
Keep yer eyes peeled boys. Lots of 2014 3/4 ton trucks with lifts and fancy stickers of big racks will be coming on to the used market soon.
 
It's already been happening, long time friends lost their Company sending 10 or 12 more on the street. The Machine shop was 75 years old and boom, gone. Another company laid off around 40 and the beat goes on. All of these people were in the business of giving you that low cost gas while they followed the American dream. This might be worse than the 1984 crash, you sat there working and your fellow workers were called in and then you saw them with an empty box. That day we saw over 40% of that company gone. Hell, I might have to sell my F250. John
 
DRAFTSTUD said:
It's already been happening, long time friends lost their Company sending 10 or 12 more on the street. The Machine shop was 75 years old and boom, gone. Another company laid off around 40 and the beat goes on. All of these people were in the business of giving you that low cost gas while they followed the American dream. This might be worse than the 1984 crash, you sat there working and your fellow workers were called in and then you saw them with an empty box. That day we saw over 40% of that company gone. Hell, I might have to sell my F250. John
Click to expand...

Schlumbeger just laid off 9,000. Halliburton expected to follow suit. Growing up with parents in the oil business, we knew that the bust always comes. We lost our house, parents darned near got divorced and we had to split the family for a year while mom went to Houston to work & dad stayed in Wyoming.

Hope you weather this storm John.
 
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