this is catastrophic for royalty owners.
I do not think the sealed bids will be accepted by any company, in fact I think leasing is dead in the water I remember the last time the Saudis and the majors decided to crash the market oil went to 10 dollars a barrel it took years to recover.
Oil price drops in past 30 years, a comparison:
http://moneymorning.com/2014/12/09/crude-oil-price-chart-this-is-thā¦
There have been bigger drops; this oneās longer. That suggests multiple factors in Saudi OPEC policy, not just market share, especially given the timing. Informal economic sanctions against Russia in exchange for NATO drubbing of ISIS could be one of the sustaining factors, plus Saudi Arabia, the Obama Administration, and China having other common motives for making deals that drive current OPEC policy. China doesnāt mind, it gets to stockpile cheap crude from OPEC sources and enjoy some clearer air for a while. Much is made of the Chinese economic slowdown as if it were a product of market forces alone, which is as amusing to me as the Fedās QE policies must be to a Chinese observer.
On the US side, I read this S&P Earnings Per Share estimate drop for 2015 correlated with the oil price drop:
āIāve struggled to explain how the decline in energy earnings are affecting 2015 S&P estimates. Here it is: EPS growth for 2015 is now at 6.6 percent, according to S&P Capital IQ. On Dec. 1, it was 9.8 percent. That is a big drop, and it is mostly due to the decline in energy estimates. Excluding energy, 2015 EPS growth would be 11.1 percent.ā
-source: http://finance.yahoo.com/news/oil-euro-strong-dollar-154306236.htmlā¦.
Many, many interested investors and companies would like to see the oil price stabilize and recover so that estimate also recovers, i.e. optimism, willpower factor. Still, consider this quote, found at the link below it:
āI do not feel that selling at very low prices is a remedy for having failed to sell at high onesā¦I would say that it is from time to time the duty of the serious investor to accept the deprecation of his holdings with equanimity and without reproaching himselfā - John Maynard Keynes
http://yahoofinancecontributors.tumblr.com/
And the strong dollar is only an exacerbating, not causal, factor in the oil price drop, as some have blamed a weak dollar for 2008ās 72% oil price plunge. Just remember what happened to the oil price after 2008.
Then there is this financial sobriety test published by Bill Gross at Janus:
https://www.janus.com/bill-gross-investment-outlook
Anyone who is losing sleep over this, consider renting the movie āBeing Thereā with Peter Sellers. Great story with lots of wisdom in it. Funny too. In the movie, Sellers, a simple gardener mistaken for a wise man for all time (and maybe not mistakenā¦) says, āAs long as the roots are not severed, all will be well in the garden.ā
FYI - Concho sees 16-20% growth despite capex cut
By Starr Spencer || Gas Daily, 1-7-15
Permian Basin operator Concho Resources has cut its projected 2015 spending level by 33% to $2 billion owing to the recent sharp decline in commodity prices, but still expects 16-20% production growth year-over-year.
The move will also trim the number of Conchoās leased drilling rigs in the Permian, which spans West Texas and New Mexico, from 36 currently to 25 by the start of the second quarter and the rest of the year, the company said in a statement.
Concho earlier had projected 28-32% year-over-year production growth in 2015 at a $3 billion capital program with 39 drilling rigs.
At 16-20% output growth, analysts estimate Conchoās full-year 2015 production to average around 133,000 b/d of oil equivalent. The company produced 113,500 boe/d in the third quarter.
Moreover, this yearās spending could be further reined in depending on how oil service costs and commodity prices shake out as the year progresses, Concho CEO Tim Leach said.
RBC Capital Markets analyst Scott Hanold noted Concho set its preliminary 2015 budget in November when oil prices were close to $80/b. Since June, crude oil prices have slid more than 50% from a high of over $107.26/b. On Tuesday, NYMEX front-month WTI closed at $47.93/b, down $2.11 or 4%.
Concho said its $2 billion capital budget for 2015 has allotted $1.8 billion for drilling and completions. That includes $1.3 billion for the Delaware sub-basin in the western Permian, Conchoās major sphere of operations, and $300 million for the Midland sub-basin further east. Another $200 million will go to the New Mexico Shelf, an older area largely north of the Delaware where the company has both a horizontal and vertical program in the Yeso formation.
Swaps cover almost half of 2015 oil production
Analysts noted the company took advantage of tighter Permian differentials by adding more oil basis swaps. The swaps now cover almost half of Conchoās 2015 oil production at $88/b, a $3.44/b discount to WTI Cushing, Hanold noted.
Assuming a $60/b WTI strip in 2015, the $2 billion capital budget āequates to a modest cash flow outspend of $400 million, which isnāt an issue given Conchoās strong balance sheet,ā Wells Fargo analyst Dave Tameron said.
āRelative to the industry and its oilier peers, we believe the 15-20% growth target for a $400 million outspend will stack up very favorably.ā
That leaves the companyās balance sheet in āpristine condition,ā Global Hunter Securities analyst Mike Kelly said in a Tuesday. But āthe downside of the shrunken budget is that growth and capital efficiency can get hit.ā Later ā Buzz
I wonder where BHP stands in all of this?? Lease runs out Feb. 1, 2015
Iād be really interested to know what happens with expiring leases in the next few months. If anyone is willing to share, TIA! Ours with Clayton Williams doesnāt expire for 13 months and so there is time for things to turn around. But CW is often mentioned in articles as one of the companies with a fair amount of debt so a moderate turnaround may not be enough for them. On a side note, Iāve read many articles over the last couple of months about Saudi Arabiaās possible motivations for not lowering output. Quite a few people have speculated their actions are aimed at our fracking industry - but many others maintain it is just a side benefit of other motivations. But the Saudis lowered their per-barrel price for the US a couple of days ago so that seems pretty targeted.
The price collapse may well end up hurting DH and I in two big ways, if it doesnāt end pretty quickly. Not only will we miss out on possible wells, but since we live in an oil area, our house price is likely to collapse as well. Weād hoped to sell and move to Florida to help my brother take care of mom - but those plans may well be out the window. Of course, we bought this place at a true fire-sale price 25 years ago during another oil bust so we have no reason for complaint! And I canāt blame Saudi Arabia. Why should they be the ones to cut production? Weāre the new kids on the block with the expensive-to-make lemonade.
Liz, loved your post. Are you just making lemonade out of lemons? Or are you saying weāll see oil manufactured directly from lemons?
From Pacific Northwest National Laboratories over a year ago:
http://www.forbes.com/sites/christopherhelman/2013/12/23/green-oil-ā¦
LOL Iām banking on lemon oil - takes about 330 lemons to make 5 ounces of oil, according to the internets. Iām planning on saving my pennies to buy a lemon grove in Florida. Can you imagine all the superhighways smelling sweet as a lemon? 
Goldman Sachs got behind Solazyme for example (SZYM):
http://www.goldmansachs.com/our-firm/progress/solazyme/video.html?cā¦
Could these be a hedge for mineral interest owners, being the basis for the future of oil and gas once underground stores are tapped? If Goldmanās right, perhaps so.
You got me. Iāll Pledge never to tangle with you again Liz. (0: Retreating with what I have left, and staying relevant to the forum after a welcome aside, one thing we can agree on at least until the next presidential election, is that the oil majors are in a convergence era / global choke point in which outside political-economic forces and geologic chance (the context) are forcing them to consolidate and lean-up. Yet here they are, with so much cash, and banks, with so much cash invested in them, with an opportunity to follow the wisdom of Goldman Sachs and invest in oil and gas technologies that preserve current propertiesā value and guarantee their own industrial future via timely adaptation. Entropy means those who adapt and overcome flourish.
I think the US should abandon the defense treaty with the Saudies.
Paul ā supposedly BHP has sold much of their Reeves propoerties to Silverbackā¦ but not their northermost holdings around Orla. Sorry I have no better description than that.
I believe youāre in H&GN BLK 4 SEC 31, ~7.0 miles NW of Pecos, correct? Later ā Buzz
More help please- what are the records called in reeves county where they record oil & gas leases? it land records, lease records, deed records ???
any help will be greatly appreciatedā¦
thanks in advance
John- Recorded in the deed records of the County Clerkās office. However, most companies record Memorandums of the lease, and not the actual lease. The Memorandum is a brief summary of the lease with few details. The actual name of the volumes the County Clerk uses may be different than ādeed recordsā. It may be Real Property Records or something else. There is no standardized naming system, and clerks have often changed the names of the volumes over time. However, if you show up and ask the clerks, they will know what you are talking about.
thank you Wade ( once again ) - I am going to be out there to look for an older lease and my understanding is the clerks in Reeves county are very very busy - lines out the doors to look at the books and file.
Noticed something interesting in the RRC system this month. Our operator has been BHP for months, but the report now is found under a Silverback Operating. Anyone else out there with BHP noticing this? October royalty check came from BHP/Petrohawk.
As usual, you are correct Buzz. I suppose I will wait and see who the royalty check comes from.
Fred,
Your lease was most likely included in the sale to Silverback.
Hi, Mark. I was wondering if you could look up API #475-36858, which is BLK 34, Sec 98 in Ward County? And I apologize ahead of time for posting this in the Reeves County section! Thanks. Linton
My property at AB-4061 Blk C-18, Sec 4 PSL is coming up for lease next Sept. I wonder what will happen to it and if BHP will renew; they renewed last time, so maybe they will want to keep on their resource list.
Any thoughts?
Love this blog, and happy new year to everyone.
r / Fred