Can Someone Simple 'Splain Oil Production & Sales To Me?

[Dingfod]

The spin-off company, spun off from the corporation of my employ, is into that shale drilling and is still going at it big time, but they're drilling for gas, not oil.

[SR71]

Rig count isn't recovering. Pretty clear there is a roughly proportional relation between market price and production activity.

[SR71]

Looks like gas rigs are down a lot too, about 40% year over year. That seems kind of odd to me. Wonder what the root cause of that would be?

[erimir]

I thought we were becoming energy independent with all the oil production! Now you're telling me US oil production is dependent on global prices?

[SR71]

To be fair, we are the leading producer.

It's evident though from the rig counts that a relatively small number of sites provide the lion's share of the increased production over the last decade or so. The question to my mind is how much remains in those sweet spots to be gotten out?

[Dingfod]

Natural gas prices are down this year.

[Dingfod]

From what I'm seeing from the inside of the natural gas processing and transportation industry, the low prices are creating a mixed bag of results. Some smaller oil & gas companies have shut in natural gas wells in certain areas of the country due to low market prices. I haven't seen much of an effect on production in some other areas of the country. The areas where there is production shut in are those with high hydrocarbon liquid laden natural gas production. Because of having to handle the liquids, the cost of production is probably enough higher than that of the drier gas in those other areas to make it not worth producing. So far that I've seen in areas I deal with, Big Oil is not shutting in any natural gas production yet. There are some middle-sized energy companies, not so well off financially as Big Oil, flowing more than ever from their gas wells, producing like there's no tomorrow because they need the cash flow. I'm not at liberty to say who or where this is occurring, except to say that it is in the Lower 48.

[SR71]

Report: Eagle Ford Shale Has Peaked, Lifting of Oil Export Ban Could Drain Field More Quickly | naked capitalism



This is an example of what is meant by the allusion to the Red Queen from Through the Looking Glass with respect to tight oil formations. More wells need to be drilled just to stay in place. In Texas' Eagleford formation (one of the major US formations), there are more wells than ever but production is falling off. There may be more than meets the eye here, but this is what we will eventually see in all the tight formations. The wells seem to empty out pretty quickly. You see the X axis only represents six years and documents basically the entire production history of the fracking boom in that formation.

Interestingly enough, that time span coincides with Rick Perry's claims of pulling off an economic miracle in Texas.