Last week’s blog letter pointed out the now long history of insanity being followed – in lockstep – by virtually every oil company drilling for oil in the US – Keep increasing production at every turn – no matter if the end product is profitable or not.
I mean, what’s a better strategy? Having a viable E+P ready to reap the benefits of a coming oil price boom, or one that pumps flat out on their best acreage – at a loss – while simultaneously building a chain link noose of debt around your neck?
I won’t replay last week’s blog letter in its entirety. But I believe that oil is – finally – showing real signs of being ready to break out of its 2017 range, and what oil companies do now will really matter for our investments. Will they turn up the spigot at the first sign of recovering prices? Or have they been cowed enough (or just plain out of leveraging options) and will stop trying to forecast oil prices and let the market dictate their plans?
Which brings me to the top three energy stories you must read this week:
On the one side, the idea that oil companies have thrown in the towel trying to be oil traders is here in this story – as the orders for fracking sand are starting to plummet. Sand is a major outside cost for frackers, particularly in light of ever more efficient drilling technologies, which can maximize viable drill sites from equivalent acreage and initial volumes of oil from fracked wells. All of those technologies, however, require more and more sand.
The sudden drop in sand orders could mean that oil companies are taking a break on breakneck drilling. Or, it could mean that they’re fed up with rising sand costs. Or, they could be experimenting with other (cheaper?) compounds.
What do I think? I think sand frack companies are going to be the wrong place to be for a while.
On the other side, here’s one Canadian fracking services CEO who thinks that oil production in the Permian is on the verge of another big volume boost. He’s seeing the 72% year-over-year rise in ‘drilled but uncompleted wells’ (DUCs) in the Permian and expecting what the EIA is expecting – a new flood of oil.
What do I think? Well, have Permian producers like Pioneer (PXD) and Diamondback (FANG) grown tired of losing money on ever greater volumes of oil?
Yes, I think they might have.
Finally, I have finished a free report that I am calling the “Five Things You Don’t Know About Oil – But Need To.” All five of them play into my long-term thesis of $100+ barrel oil, but the last is about where we are in the timeline of the “US shale oil boom”. One piece I noticed agreeing with my long-standing view of where we are was in the Wall Street Journal this week, and needs to be read closely.
Is shale oil really going to deliver on any of its promises of energy independence? Cheap prices? Long-term supply?
What do I think?
Well, you know you’ll have to become a part of my interactive webinar – THE ENERGY WORD – to find out.
Again, I won’t be doing a show next week and have rescheduled for Monday September 11th at 4PM.
But, why don’t you sign up now and be sure not to miss it?
Have a great Labor Day Holiday.
