Being new to earning royalties, I am gathering from the news that oil is about to go bust. It is soon to cost more to drill than what a barrell of oil will earn. Some sources say the Saudies are doing this on purpose to make USA oil boom go bust. I am waiting for a new well to be started or done by end of year. I now fear that they may just stop with the drilling and cap the well. And would current producing wells be shut down if this occurs? For those who are in this business and in the know, should we start worrying about our royalty income ending (or even beginning as in my case)? Please share your thoughts and knowledge. Thanks - Al Freeman
I agree Al, I have 2 wells in west Texas that are producing but not a lot and the operator is a small oil Co.
some of the news stories I am reading are saying that for right now it is not a problem for a lot of the Operators
I guess only time will tell.
A little advise Al, the oil buss is VERY fickle it changes everyday, what ever you see or hear or read today it WILL change in a day or 2, if you try and figure any of this out, hope you don't mind being bald because you will pull your hair out. I have quit trying and just go day to day, wait till you start with the DOs, took us 9 months to get any money, I. E. if who ever left you the rights did not put a period on the end of his will, one of the 5 lawyers who are working on it might kick it back because of it, think I am kidding? I am not, our 2nd Divison order for our 2nd well, went to a new team of lawyers, same piece of land, same family, same EVERTHING, took us 6 months to get our first check, WHY? this lawyer hired by the SAME oil CO well, the well is 300 yards from the 1st one, but he wanted independent proof of all the info the OIL CO HAD! this started in Jan we got our first check In Sept. DONT TRUST ANYONE!! and DO NOT GET IN A HURRY! nothing you can do about it, when all this started I was SOOO excited, now I hate it, if I get a check great, if I don't o well. don't care.
Al, the costs to drill a well are sunk costs and the most likely way for the operator to recover even part of his money is to produce an oil well. If a well makes more on a monthly basis than it costs to operate, it should still produce. The operators lease may hold future value to them also and they may operate at a loss just to maintain the lease. What Mr. Rogers said below about things changing in the oil business is true, it can be quite a rollercoaster ride. Just hang in there and consider even the best sources are often wrong. I don't believe the Saudis are doing anything to us at the moment, if they really wanted to drive the price down they would increase production and I have not heard of them doing that. I believe it would hurt the Saudis more than it hurts us should they increase production, they need a high price for their oil too because I don't believe they have the reserves that they claim.
what I have learned is don't spend any $ until you get it & after the checks start don't expect that the next month will be the same as the last month,
I am glad to hear you say this, I do not worry about the price of oil, it will come back strong in time. also as you say the Saudis need a good price too. Harry, you are soo right about not counting on oil checks, that is really not smart. I just call the checks my mailbox money and use it for extras!!
r w kennedy said:
Al, the costs to drill a well are sunk costs and the most likely way for the operator to recover even part of his money is to produce an oil well. If a well makes more on a monthly basis than it costs to operate, it should still produce. The operators lease may hold future value to them also and they may operate at a loss just to maintain the lease. What Mr. Rogers said below about things changing in the oil business is true, it can be quite a rollercoaster ride. Just hang in there and consider even the best sources are often wrong. I don't believe the Saudis are doing anything to us at the moment, if they really wanted to drive the price down they would increase production and I have not heard of them doing that. I believe it would hurt the Saudis more than it hurts us should they increase production, they need a high price for their oil too because I don't believe they have the reserves that they claim.
Oil and Gas are commodities that are traded on the NASDAQ just like pork bellies and corn. Typical corrections tend to run in the 20-25% range. When you look at oil price history, that is borne out.
There is no magic oil glut that just materialized over the past 8 weeks. I do think that this is a case of the "Emperor has no clothes." I do think that OPEC is happy to see a two month fall coming up to the winter months. That would remove some incentive to drill Bakken wells through the winter months. OPEC still has the ability to manipulate pricing to some degree.
I am just surprised that when we bomb a refinery in ISIS held territory, oil drops. That makes no sense to me, but many things do not.
Best
Buddy Cotten
I think it's likely some sort of manipulation right before the election. Obama and the Democrats are about to get sunk. They want some cheap gasoline to make people think they are doing something. Would not be surprised if oil goes straight back up after the elections.
Seriously? Joe? Not really the time and place.
Oh yes. It happens most of the time before elections!!!