Oil’s biggest bust since the global recession was good for a few cases of whiplash.Just two months ago, Continental Resources Inc. (CLR), the shale driller founded by billionaire Harold Hamm, budgeted for $80-a-barrel oil and planned to spend $4.6 billion in 2015. Six weeks later, with crude down 29 percent in the interim, Continental cut its 2015 budget to $2.7 billion.Halliburton Co. (HAL), the world’s biggest provider of fracking services to oil companies, announced Dec. 11 that it would dismiss 1,000 workers. Two months earlier, Chairman and Chief Executive Officer Dave Lesar said “our sector will be fine” if oil prices range between $80 and $100 a barrel.Oil PricesThe U.S. shale boom that’s brought the country closer to energy self-sufficiency than at any time since the 1980s will be challenged in 2015 as never before. The benchmark U.S. crude price fell below $50 today for the first time since April 2009. Demand growth is weakening and OPEC, which controls 40 percent of supply, is unwilling to cut output.“The extent and rapidity of the price decline has been a surprise,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consultant in Houston. “They’re facing a new reality.” Photographer: Daniel Acker/BloombergPioneer Drilling Co. operations near Montrose, Pennsylvania, U.S.West Texas Intermediate reached a 2014 peak of $107.73 in June before dropping as low as $49.77 today on the New York Mercantile Exchange. The grade settled at $50.04 a barrel. That’s below the break-even price for 37 of 38 U.S. shale oilfields, according to Bloomberg New Energy Finance.RBC Capital Markets and CIBC World Markets predict prices will remain below $60 for the first three months of 2015. Societe Generale SA’s Michael Wittner forecasts an average of $64.50 in the first quarter and $61.50 in the second.
via Oil Below $60 Tests Economics of U.S. Shale Boom – Bloomberg.
Posted in Bakken, Eagle Ford, shale breakeven
Tagged Bakken, Eagle Ford, energy capex, energy capital spending, Shale breakeven, shale jobs, Shale Natural Gas, Shale oil, Shale oil breakeven
Oil-field lodgings company Civeo Corp. said it has slashed its workforce in the United States by 45 percent and in Canada by 30 percent as it prepares for weaker occupancy rates at its oil-field camps next year.The Houston-based company had more than 4,000 employees when it spun off from oil field services firm Oil States International in June.The announcement is the latest oil-field services layoffs in reaction to falling oil prices and anticipated oil-company budget cuts. Houston-based Hercules Offshore said it would reduce its headcount by 324 and oil field giant Halliburton said it would cut 1,000 jobs across multiple regions in the Eastern Hemisphere.Civeo also is cutting its spending plans for 2015 to $75 million to $85 million, down from its budget this year of $260 million to $280 million, as it anticipates lower demand for lodging services. It said it may be required to record impairment charges on its assets.
via Fuel Fix » Oil-field lodging company slashes jobs, curbs spending.
Billionaire Harold Hamm, whose early adoption of shale drilling in North Dakota helped usher in a U.S. energy renaissance, plans to cut spending by 41 percent at his company after the plunge in oil prices.Continental Resources Inc. and other U.S. producers can adjust quickly to the crude collapse and will be able to withstand the downturn better than many producing countries, which face economic “ruin,” Hamm said in an interview.“The oil and gas industry has lowered the cost of gasoline to consumers in this country,” Hamm, chairman and chief executive officer of Continental, said yesterday. “It’s been good for America, this increase in supplies that we have here. We don’t want to see it all go for naught.”Continental (CLR) and rivals including ConocoPhillips and Apache Corp. plan to trim spending and move rigs to more profitable areas while prices remain under pressure. Crude has fallen by almost 50 percent since June to a five-year low as demand forecasts fell amid a glut in supply fed in part by the shale revolution.Saudi Arabia and OPEC allies have declined to cut output to stave off price declines. U.S. prices are expected to average $63 a barrel in 2015, according to the U.S. Energy Information Administration. Photographer: Andrew Harrer/BloombergHarold Hamm, Chairman and Chief Executive Officer of Continental Resources Inc.U.S. producers have trimmed billions from 2015 spending plans as the price decline eroded potential profits from drilling in shale rock, a technological breakthrough that helped boost production to the highest level in almost 30 years.
via Billionaire Shale Pioneer Cuts Spending 41% on Oil Crash – Bloomberg.
The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year. Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.
via The Fed Helped Cause $550 Billion Energy Debt Boom, And Now It Could End In Tears – Yahoo Finance.
Posted in Bakken, Eagle Ford, energy debt, Shale, shale breakeven, Shale Natural Gas, Shale oil, shale oil breakeven
Tagged Bakken, Eagle Ford, energy breakeven, Shale breakeven, Shale Natural Gas, Shale oil, Shale oil breakeven
London-based BP PLC (NYSE: BP) plans to reduce staff by cutting mid-level managers across the board in production, refining and in corporate offices, the company told the Times of London.The announced cuts come after continued drops in oil prices, which are currently below $70 a barrel. BP, which has about 84,000 employees, is one of Houston’s largest energy employers with about 10,000 people in the region. Some cuts are expected to take place in Houston, where the company houses its main U.S. offices. Project freezes may also take place.
via BP Plc to cut jobs in production, refining as oil prices slump below $70 – Houston Business Journal.
Global oil and gas exploration projects worth more than $150 billion are likely to be put on hold next year as plunging oil prices render them uneconomic, datashows, potentially curbing supplies by the end of the decade.As big oil fields that were discovered decades ago begin to deplete, oil companies are trying to access more complex and hard to reach fields located in some cases deep under sea level. But at the same time, the cost of production has risen sharply given the rising cost of raw materials and the need for expensive new technology to reach the oil.Now the outlook for onshore and offshore developments – from the Barents Sea to the Gulf or Mexico – looks as uncertain as the price of oil, which has plunged by 40 percent in the last five months to around $70 a barrel.
via More than $150 bln of oil projects face the axe in 2015 | Reuters.
Oil market analysts are debating if oil will fall to $50. In North Dakota, prices are already there.Crude sold at the wellhead in the Bakken shale region in North Dakota fell to $49.69 a barrel on Nov. 28, according to the marketing arm of Plains All American PAA Pipeline LP. That’s down 47 percent from this year’s peak in June, and 29 percent less than the $70.15 paid for Brent, the global benchmark.The cheaper price for North Dakota crude underscores how geographic and logistical hurdles can amplify the stress that plunging futures prices have put on drillers in new shale plays that have helped push U.S. oil production to the highest level in 31 years. Other booming areas such as the Niobrara in Colorado and the Permian in Texas have also seen large discounts to Brent and U.S. benchmark West Texas Intermediate.
via Sub-$50 Oil Surfaces in North Dakota Amid Regional Discounts – Bloomberg.
Posted in Shale oil, shale oil breakeven, shale service providers, U.S. Shale
Tagged Bakken, Eagle Ford, Permian, shale, Shale breakeven, Shale oil, Shale oil breakeven, U.S. shale
Saudi Arabia has no target for crude prices and will let the market decide at what level oil should trade for now, according to a person familiar with the nation’s oil policy, who asked not to be identified.The comment echoes those made by Oil Minister Ali Al-Naimi, who said Nov. 26 that the oil market will “stabilize itself.” OPEC decided the next day not to cut its oil-output limits, triggering the biggest one-day drop in futures in more than three years.
via Saudi Arabia Said to Have No Price Target for Crude Oil for Now – Bloomberg.
Although OPEC’s decision to maintain current crude production quotas was not entirely unexpected see post, the market reaction was violent. WTI crude fell by 10% over the last two days of the week.At $66 per barrel North American producers have real problems on their hands. While Eagle Ford is still profitable, both Bakken and Permian Basin are in now the red.
via Bakken And Permian Shale Basin In Red – Business Insider.