Posts from Donovan Schafer

Thursday, 07/27/2017

When prospective investors look at a company’s U.S. or Canadian regulatory filings, many of them may mistakenly believe they are getting a complete and accurate assessment of the crude oil, natural gas and natural gas liquids (NGLs) that could technically and economically be produced from the acreage the company controls. In fact, the rules governing the tallying of proved reserves are anything but straightforward and often result in a significant underestimation of the hydrocarbon volumes waiting to be produced. That is particularly true when it comes to reserves in shale plays, which many would argue are the most important reserves of all in today’s energy market. Today we begin a blog series that considers the arcane world of corporate reporting of proved hydrocarbon reserves and the importance of understanding the reporting rules.

Thursday, 03/23/2017

Despite OPEC’s production cuts, crude oil prices are still hovering just below $50/bbl, and there are certainly no guarantees that they won’t fall back to $40 or lower (at least for a while). So the survival of many exploration and production companies continues to depend on razor-thin margins, meaning that E&Ps need to trim their capital and operating costs to the bone. Lease operating expenses—the costs incurred by an operator to keep production flowing after the initial cost of drilling and completion—are a go-to cost component in assessing the financial health of an E&P. But there’s a lot more to LOEs than meets the eye, and understanding them in detail is as important now as ever. Today we continue our series on the little-explored but important topic of lease operating expenses.

Thursday, 01/19/2017

While oil prices have risen in recent months, they are a far cry from the $100/bbl prices of two and half years ago, and there is certainly no guarantee they won’t fall back below $50. In other words, the survival of exploration and production companies continues to depend on razor-thin margins, and E&Ps must continue to pay very close attention to their capital and operating costs. Lease operating expenses—the costs incurred by an operator to keep production flowing after the initial cost of drilling and completing a well have been incurred—are a go-to cost component in assessing the financial health of E&Ps. But there’s a lot more to LOEs than meets the eye, and understanding them in detail is as important now as ever. Today we continue our series on a little-explored but important factor in assessing oil and gas production costs.

Thursday, 11/24/2016

With today’s low crude oil and natural gas prices, the survival of exploration and production companies depends on razor-thin margins. Lease operating expenses––the costs incurred by an operator to keep production flowing after the initial cost of drilling and completing a well have been incurred––are a go-to variable in assessing the financial health of E&Ps. But it’s not enough for investors and analysts to pull LOE line items from Securities and Exchange Commission filings to find the lowest cost producers, plays, or basins. More than ever we need to understand—really, truly, deeply—what LOEs are, why they matter, how they change with commodity prices, production volumes, and other factors, and how we should use them when comparing players and plays. Today we begin a series on a little-explored but important factor in assessing oil and gas production costs.