Small oil could end up with a big debt problem
Tom DiChristopher Friday, 7 Nov 2014 | 2:38 PM ET
“As U.S. oil prices have tumbled from their June highs, so too have the shares of many small and mid-sized players in the U.S. shale industry. Investors worry that if oil prices remain below $80—West Texas Intermediate was near $79 on Friday—some firms could see their debt loads rise and find it difficult to fund exploration and sustain production growth, analysts said.”
News from the Permian in light of recent drop in oil prices:
Well, as someone said much earlier in this thread, the “Big Boys” were “late to the party.” This may be the break they need to get a seat at the table.
The oil remains. Sooner or later, someone will pull it out of there. These prices won’t be depressed forever.
Re: the Laredo conference call where it was announced that they’d sell their northern Glasscock acreage… a week or so after that, an associate of mine talked with someone at Laredo about it. Things were articulated differently. For one, reportedly, Laredo is not selling off any properties; it was said that they were looking for minority partners for capital to be able to expand their drilling operations, and basically “ramp up” their efforts to drill. Also said that the price of oil has not affected their drilling plans for at least this year and next. Plans for HZ drilling seem to be on the table still, though the movement has slowed, more due to operator agreements than price of oil currently.
Would be interested to hear if anyone has any other or new info on this subject.
Great update and info. Nothing else out there on Laredo plans but will pass along any new info as it comes available.
Bringing in a promoted non-operating working interest partner is a great way to increase drilling capital while reducing per well costs. Something like a 1/3 for a 1/4 promote saves Laredo a bunch of money and spreads out their own capital.
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust… it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to its location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-064011434--finance.html
But they note that Laredo Petroleum is hanging in there. And my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
This is an article written by someone without a clue. The oil is still there and the infrastructure is now coming to completion. The oil companies did not spend this kind of money to let the oil stay in the ground. The problem is simple if the price is too low, do not drill, the price will go back up. IMO
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
I saw that. Notice the photographer used the most dilapidated buildings he could find. We all know Sweetwater doesn’t look like that. The hit pieces are coming fast and furious from Yahoo. Who benefits?
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
Since the Cline play was “born”, there has been a lot of drilling and science and technology applied to exploiting this resource. As a result, the “sweet spot” has been refined and logically shrunk - this is a normal evolution that has taken place in similar plays (e.g. Eagle Ford, Haynesville, Barnett, Marcellus, Bakken, etc.)
As Craig has indicated, there is “oil” in the Cline but it comes down to the economics of getting that oil out in sufficient volumes to give operators a good ROI. This was the case with $100 oil and is obviously even more extreme now.
Laredo has a ID a good area in the Cline but has also drilled a lot of crummy Cline wells too as part of this process.
Many early Cline players are bailing on the play - even before the low point on oil prices was reached. The biggest “bailing” IMO is Devon dumping over 700,000 acres that was acquired primarily for the Cline play - and doing it thru an online auction process instead of negotiated data room process (which is the norm for quality properties).
Lots of issues tied to Cline not working as everyone hoped - and no one reason is the one breaking point. Clay content, low perm, thermal maturity, organic type and distribution, brittleness issues, etc. are all on the “what is wrong list” (again IMO).
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
I don’t know what Sweetwater looks like at all; I’ve never been there. Thanks for this tidbit. “Who benefits” from this kind of spin? Those who’d like for everyone to dump and run so they can pick it up at auction prices, maybe?
j richard said:
I saw that. Notice the photographer used the most dilapidated buildings he could find. We all know Sweetwater doesn’t look like that. The hit pieces are coming fast and furious from Yahoo. Who benefits?
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
There are the obvious challenges with the Cline shale play (obvious to me and to many others thanks to your helpful info and observations, Rock Man.) Sounds like your opinion is that it’s the low price of oil and the ROI angle, only. Anything else you’re seeing, or thinking?
For those companies who aren’t talking about the Cline anymore…where else are they going to go? They can’t just move to an area that isn’t as impacted by transport and delivery infrastructure challenges if they don’t have leases in those areas. If they dump and run from the Cline as Devon is doing, who benefits? I still remember someone’s comment, a few months back, about the Big Boys being “late to the party” of the Cline shale play. Wondering who might be queuing up to purchase the holdings…is there any chatter on the wire about that?
Rock Man said:
Since the Cline play was “born”, there has been a lot of drilling and science and technology applied to exploiting this resource. As a result, the “sweet spot” has been refined and logically shrunk - this is a normal evolution that has taken place in similar plays (e.g. Eagle Ford, Haynesville, Barnett, Marcellus, Bakken, etc.)
As Craig has indicated, there is “oil” in the Cline but it comes down to the economics of getting that oil out in sufficient volumes to give operators a good ROI. This was the case with $100 oil and is obviously even more extreme now.
Laredo has a ID a good area in the Cline but has also drilled a lot of crummy Cline wells too as part of this process.
Many early Cline players are bailing on the play - even before the low point on oil prices was reached. The biggest “bailing” IMO is Devon dumping over 700,000 acres that was acquired primarily for the Cline play - and doing it thru an online auction process instead of negotiated data room process (which is the norm for quality properties).
Lots of issues tied to Cline not working as everyone hoped - and no one reason is the one breaking point. Clay content, low perm, thermal maturity, organic type and distribution, brittleness issues, etc. are all on the “what is wrong list” (again IMO).
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
“Who benefits from this kind of spin?”
Writers and publications that want to catch some attention with the “sky is falling” type of comments.
Poor journalism and editorial review as to what is happening in the oil field.
Just my opinion, as usual
John Allen said:
I don’t know what Sweetwater looks like at all; I’ve never been there. Thanks for this tidbit. “Who benefits” from this kind of spin? Those who’d like for everyone to dump and run so they can pick it up at auction prices, maybe?
j richard said:
I saw that. Notice the photographer used the most dilapidated buildings he could find. We all know Sweetwater doesn’t look like that. The hit pieces are coming fast and furious from Yahoo. Who benefits?
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
It is more than low oil prices and related ROI that is causing the Cline shale play to flounder - even if oil were at mid 2014 pricing levels, much of the Cline Shale play area as per the early maps has been drilled and proved not economic.
As for the big acreage drops? Figure that various small operators will pick up the Devon production and let the acreage expire. And where will companies go after getting out of the Cline - to the next new play whether it be in the Permian or elsewhere.
Devon has spent over a billion $$$ to get into the Eagle Ford play - better to buy into a proven play than go into risky play early and fail (as Devon has done on several occasions over past few years).
John Allen said:
There are the obvious challenges with the Cline shale play (obvious to me and to many others thanks to your helpful info and observations, Rock Man.) Sounds like your opinion is that it’s the low price of oil and the ROI angle, only. Anything else you’re seeing, or thinking?
For those companies who aren’t talking about the Cline anymore…where else are they going to go? They can’t just move to an area that isn’t as impacted by transport and delivery infrastructure challenges if they don’t have leases in those areas. If they dump and run from the Cline as Devon is doing, who benefits? I still remember someone’s comment, a few months back, about the Big Boys being “late to the party” of the Cline shale play. Wondering who might be queuing up to purchase the holdings…is there any chatter on the wire about that?
Rock Man said:
Since the Cline play was “born”, there has been a lot of drilling and science and technology applied to exploiting this resource. As a result, the “sweet spot” has been refined and logically shrunk - this is a normal evolution that has taken place in similar plays (e.g. Eagle Ford, Haynesville, Barnett, Marcellus, Bakken, etc.)
As Craig has indicated, there is “oil” in the Cline but it comes down to the economics of getting that oil out in sufficient volumes to give operators a good ROI. This was the case with $100 oil and is obviously even more extreme now.
Laredo has a ID a good area in the Cline but has also drilled a lot of crummy Cline wells too as part of this process.
Many early Cline players are bailing on the play - even before the low point on oil prices was reached. The biggest “bailing” IMO is Devon dumping over 700,000 acres that was acquired primarily for the Cline play - and doing it thru an online auction process instead of negotiated data room process (which is the norm for quality properties).
Lots of issues tied to Cline not working as everyone hoped - and no one reason is the one breaking point. Clay content, low perm, thermal maturity, organic type and distribution, brittleness issues, etc. are all on the “what is wrong list” (again IMO).
John Allen said:
So…where are we with the Cline? According to this article, it’s all doom and gloom. This particular article doesn’t make any direct observations about the reason for the bust…it barely alludes to the falling price of oil. It hints that the Cline isn’t what it was cracked up to be in this statement: “Sweetwater envisioned becoming a major player in the hydraulic fracturing boom, thanks to it’s location atop the Cline Shale, once estimated to be the nation’s largest underground petroleum formation.” Is it no longer estimated to be such? What’s the purpose of this hinted slant, in this article?
http://news.yahoo.com/texas-city-prepared-oil-boom-now-waits-bust-0…
But they note that Laredo Petroleum is hanging in there. And, my family is still getting offers to buy our holdings.
Sure would like to hear thoughts about this.
John Allen, you indicated that your family was still receiving offers. What location/section and/or County is your family’s holdings?
Thanks,
M Hall
Don’t want to be too specific in a public forum, but we’re in Glasscock County.
M Hall said:
John Allen, you indicated that your family was still receiving offers. What location/Section and/or County is your family’s holdings?
Thanks,
M Hall
Cline Shale News from “Business Wire” for 11/12/2015.
FYI
Thanks for posting this item from First Titan - interesting yet puzzling read starting with the comment that the Cline Shale play is “north/NW of Midland” (it is not). The hottest play in the US next to the Bakken seems to be something pulled from 2 year old archives since the Cline shale play has performed very poorly in most areas.
Seems like First Titan is just trying to pump up its present and (hopefully future) stockholders.
Thanks Rock Man! I’m still of the opinion that the Cline correlates very closely with the Wolfcamp “D” Bench geologic formation. Plus there are many companies that are using the same nomenclature (naming convention), too. Therefore, it is plausible that the Cline is North/Northwest of Midland and well beyond Lamesa?
Moving NW of Midland gets you up on the Central Basin Platform and out of any Cline or stratigraphic equivalent section of significance.
Moving north still gives you Cline / equivalents in the northern part of the Midland Basin but then that truncates as one comes up on the Northern Shelf. But presence of Cline does not equate to it working economically.
I agree in part with the Wolfcamp D = Cline relationship even though it is technically impossible since these are two different aged formations (Permian versus Pennsylvanian). The true Cline aged basin is on the East side of the Midland Basin centered on Glasscock County and surrounding area.
Regardless of the geology, I personally believe that First Titan is misleading readers with their comments about the “hotness” of this play - I don’t think that you will find many people who will say it is second to the Bakken right now after all the drilling that has been done. And remember that the “hot Cline” comments were made in the days of $100 oil.
Rock Man what are your feelings of the buying of the leases of Tall City and Element in Howard and Borden Counties for $1.3 billion by a Chinese Company and to be operated by Surge Operating? Since Tall City drilled their first well in the area in 12-2013 they have produced over 1 million barrels of oil in the two counties from the Wolfcamp and Spraberry Trend. Would this be considered in the Cline area?
This link indicates the company has a market capitalization of 6.49 million.