Producer rates of return are far below where they were a few months back, and the Baker Hughes crude rig count is down 553 since November. A third of pre-crash crude rigs are now idled. That means that crude oil production will be falling soon, right? Not necessarily. There are a number of factors working to keep production up, not the least of which is the rapidly declining cost for drilling and completion services. Today we examine the impact of these factors, review RBN’s crude oil production scenarios and consider what it all means for the long-term relationships between prices, returns and production volumes.
|Event||Speaker||Event Date||Event Location|
|Reservoir Capital Annual Investor Day||Rusty Braziel||03/12/2015||The Pierre, New York, NY|
|School of Energy Remix||Callie Mitchell, David Braziel, Kelly Van Hull, Rick Smead, Rusty Braziel, Sandy Fielden, Scott Potter||03/30/2015 to 04/01/2015||Telus Convention Centre - Calgary, AB|
|USAEE/IAEE North American Conference||Rusty Braziel||10/26/2015||Pittsburgh, PA|
Posts from Rusty Braziel
If you work for a producer or oil field services company, you might have a bit of an issue with that title. But just for a moment, put your worries aside and consider the silver lining – huge improvements in our industry’s productivity over the last few years. Things are getting better and better. In fact that is part of the problem. Producers have just become too productive for their own good. We’ve seen the consequences of this kind of productivity improvement before, not in the energy industry, but in electronics. Moore’s law, remember? In today’s posting we’ll look at some of the evidence of huge productivity improvements, what it has meant for production volumes, and the implications for U.S. producers now facing many of the same issues that electronics companies have dealt with for decades.
Welcome to 2015! No, the last few months of 2014 were not a dream – or nightmare, depending on your perspective. Crude oil prices really did come crashing to earth, sucking down NGL prices in the process. And natural gas prices followed, falling to $3/MMbtu last week. Price relationships are out the window, as are drilling budgets. Over the next few months, these markets will be going through some of the most dynamic changes in years, with unpredictable consequences. Unpredictable? Nah. No mere market turmoil will dissuade RBN from sticking our collective necks out a third year in a row to peer once more into the crystal ball. Today we wrap up RBNs Top Ten Energy Prognostications for 2015 – Year of the Goat – #5 to #1.
Time to sober up. Not from excessive New Year’s Eve reveling, but instead from the past five years of euphoria in the shale oil and gas markets. In the past two months crude oil prices have come crashing to earth, sucking down NGL prices in the process. And lately even natural gas has succumbed to the malaise, falling below $3/MMbtu this week. Price relationships are out the window, as are drilling budgets. Over the next few months, these markets will be going through some of the most dynamic changes in years, with unpredictable consequences. Unpredictable? Nah. No mere market turmoil can dissuade RBN from sticking out our collective necks to peer into the crystal ball for a third year in a row for 2015 – Year of the Goat. Really. We did not make that up.
In time honored RBN blogging tradition – we’ve been at this blogging business three years –we look back today at the 250 blogs posted this year to see which ones had the highest hit rates. The number of hits any blog gets tells you a lot about what is going on in the energy markets – which topics resonate with our members, and which don’t attract much attention. Last year the big hitter blogs came in about 17,000 hits. This year the big numbers are closer to 50,000. With that many folks paying attention these days it is even more important that we take a page out of the late Casey Kasem’s playbook to look at the top blogs of 2014 based on numbers of website hits.
RBN’s School of Energy is headed north – all the way to Calgary. We have reworked, restructured and reorganized the curriculum to make the conference better than ever. And we guarantee it will be way cooler than our Houston Schools. We call it a Remix, because we have added new models, replaced some old models and enhanced them all. But even more important, we have increased the number of model labs from one to FOUR!! Each lab will step you through the model logic, how to input the data and how to interpret the results. You will work through cases that will test your knowledge on how the models work. And of course, all the course content has been updated to reflect the big changes in markets and pricing over the past few months. Warning, today’s blog is a blatant commercial for our Calgary conference.
RBN has been in the blogging business for almost three years, and ever since we started these postings one of the most frequent complaints we’ve heard is that “It doesn’t work on my iPhone”. Finally we are fixing that, and many more things too. But as with anything new delivered by internet, there are some things you need to know. So today is a blog about blogs, to make sure all of our members know what we are changing and how to take maximum advantage of our new website’s capabilities.
There is an onslaught of surplus natural gas supply bearing down on the Henry Hub in South Louisiana. More than 60 natural gas pipeline projects are in the process of reversing the continent's gas flows to move gas out of the Northeast, and much of that production will be moved to the Gulf Coast. That gas will slam into supplies moving in to Louisiana from the west, sourced from “wet” gas and associated gas from crude oil plays in TX, NM, OK and ND. Demand from gas fired power generation, industrial gas use and LNG exports will eventually absorb the incremental supply, but not for a few years. We’ve seen this movie before, in the 2008-10 timeframe when Rockies gas battled it out with new shale supplies from the Haynesville and Fayetteville. But this time there is a big difference in the economics of production. Today we summarize the conclusions from a new deep-dive report from RBN Energy and BTU Analytics.
It’s a Remix!! RBN’s School of Energy has been reworked, restructured and reorganized to make the conference even better. There is more course content, updated for what is happening in the market right now. We have added new models, replaced some old models and enhanced them all. But even more important, we have increased the number of model labs from one to FOUR!! Each lab will step you through the model logic, how to input the data and how to interpret the results. You will work through cases that will test your knowledge on how the models work. And we are branching out. Two School of Energy Remix conferences have been scheduled – one in Houston, October 29-31, and the other in Calgary March 30-April 1. Warning, today’s blog is a blatant commercial for our conferences.
We just wrapped up our Spring School of Energy, and it was another huge success. RBN’s School of Energy is unlike other crude oil, natural gas or natural gas liquids (NGLs) conferences. Our two-day core curriculum includes an introduction to energy market fundamentals as well as a comprehensive analysis of current markets. We walk through key developments for each of the three hydrocarbons including the increasingly important links between them. A set of spreadsheet models supplements the presentation materials. Today’s blog – fair warning this is an advertorial - introduces our latest online offering.
There simply is not enough petrochemical demand to absorb all of the ethane that the U.S. can produce. The result is rejection - ethane sold as natural gas at fuel value rather than being extracted and used as a petrochemical feedstock. Today around 250 Mb/d of ethane is being rejected, and that number could increase by 200% over the next three years. Yes, you read that right. Rejection could triple. As NGL production from the big shale plays increases, the U.S. petrochemical industry will not be able to use most of the incremental ethane - thus rejection. But it may not play out that way. All that ethane could be exported - perhaps as liquid ethane. Or is there another possibility: Spiking ethane into the soon to be exported volumes of LNG from terminals like Cheniere Sabine Pass, Freeport, ETP/Southern Union at Lake Charles and Dominion at Cove Point? Today we continue our exploration into the possibility that surplus ethane could be exported in the form of “hot” LNG.
RBN Energy is branching out! Today we are launching our new premium services package called Backstage Pass. Just like it sounds, this new service gets you deep into the details of the data and models we put together at RBN, providing what we believe is a whole new level of information access, insights and connections across energy markets. Don’t panic. The blog is still free. But if you are like the many RBN members that have asked for a much broader range of services, then you will be happy to learn that the answer is now ‘yes’. We are rolling out the service with what we believe is the definitive study assessing the crude-by-rail phenomenon. Learn everything you need to know about our new premium services in today’s blog. But be warned, this is an unabashed commercial plug for our new service. We hope you find it intriguing.
So you are feeling pretty good about 2014, eh? Stock market on a tear. Most U.S. energy markets relatively stable. Gaps in the oil and gas infrastructure getting filled. Well let’s not get cocky. U.S. energy markets are still in the middle of a revolutionary transformation from shortage to surplus. Where there are big shifts, there are big market disruptions. And in such disruptions, there are always winners and losers. You don’t want to be on the short end of that stick. So in our time honored tradition – the second year in a row – we again stick our collective RBN necks out to peer into the crystal ball to see what 2014 may hold.
On this, the last day of 2013 we thought it would be interesting to look back at the 250 or so RBN blogs posted this year to see which ones had the highest hit rates. When a blog article gets a lot of hits – some up to 17,000 or more – it tells you something about what is going on in the market. So like we did last year, we’ll take a page out of Casey Kasem’s playbook to look back at the top blogs of 2013 based on numbers of website hits.
The U.S. can make a lot more ethane than it can consume. Producers are drilling for ‘wet’ shale gas, high in natural gas liquid (NGL) content – with ethane making up more than half of that NGL volume. Unfortunately there is not enough U.S. petrochemical cracking capacity to use all that ethane. And for a whole variety of reasons the product has been notoriously difficult to export. Consequently, over 250Mb/d of ethane is being rejected – sold as natural gas instead of being processed into liquid ethane. What if there were a ready market for all this surplus ethane supply, just waiting to open its doors? Well, there just may be. The emerging U.S. LNG export market may be able to absorb a big portion of the supply imbalance, and make LNG buyers happy at the same time. In this blog series we will explore that possibility and consider the implications for the ethane market in North America.