Shale Jobs are in the Permian on the downswing

Shale jobs are fewer and fewer as the industry tightens its belt. Originally published by the Houston Chronicle:

Looks like we drilled our way out of another boom. Until prices return to $70/barrel, it’s going to be very slow going.

Its a very weird deal. I think this is just a correction and not a bust…but…

In the biggest US oil production boom in 80 years, US E&P companies aren’t making any money because wells are too expensive (at $53 WTI). The vast majority of the expense of the wells is going to service providers like SLB, HAL, sand providers, water sources, etc. The service providers are all going broke. Think about that. Wells are too expensive. Most of the people getting that money actually need to charge MORE for their company to make money. That’s not a story that makes one feel great about the future.

So what the heck is going on? All of the capital is going to whom? Individual employees? Too may CDL drivers making $150k a year? Engineers getting $300k a year to look at type curves and surf the net? Hookers and blow?

The WTI price is still basically what it was from late 2014-mid 2017 when the Permian HZ drilling gathered most of its steam. Sure, the high $60s average from late 2017 to late 2018 got everyone spending like a drunken sailor, and that is now getting reeled in by tighter capital and Wall Street disdain for the sector performance, but really, this should work at $50-$55 WTI. Yeah, perhaps it isn’t working enough to pay the DD&A burden of sketchy acquisitions made at peak WTI pricing (hi COG!).

But for now, it’s amazing to see virtually all of the rigs on the fringes of the play (Delaware, for example) just disappear.


NMoilboy- But… that is the truth. Too many folks bought the sizzle but don’t like their steak. I didn’t panic at $18.00 oil & $0.50 nat gas. Nor did I spend like the drunken sailor with $140.00 oil & $15.00 nat gas. Well maybe just a little. As for bust or downturn? That’s like the difference between a recession & a depression. It’s a recession when your neighbor losses his job but it’s a depression when you lose yours. Time will tell.

Resource Booms and the Macroeconomy: The Case of U.S. Shale Oil

As long as extensive and expensive drilling and completion operations are ongoing to “maintain production” it is impossible for an oilfield to be profitable.

The Permian Basin contains thousands of wells that have been producing since the 50’s and 60’s. Those are the wells that are making money.