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“ How much time will it be over $30 before the shale producers start up again?” I work in this field, and the answer to your question is “instantaneously.” The

“ How much time will it be over $30 before the shale producers start up again?” I work in this field, and the answer to your question is “instantaneously.” The largest operators will not go out of business because they have sufficient exposure to non-shale assets; they will simply immediately drill the wells they had planned to drill when the crisis hit. Capital will rapidly find its way into the hands of the people with the expertise to drill and complete money-making wells. The oil industry is like one of those organisms that evolved to thrive in an intertidal zone, or in a region with random lengthy droughts. The industry knows how to shed or calcify all the parts of itself it doesn’t need in lean times and then rapidly redeploy those parts as soon as the environment changes, because this sort of thing happens over and over and over. Sometimes the thing the industry doesn’t need it and therefor sheds is “workers” and that’s a shame, but so it goes.

whatshisface 7y ago
To add to that, the wells they already have drilled are perfectly happy to sit around until someone goes out to frack them, and the wells they've already fracked are almost perfectly happy to sit around until someone produces them. The only investment that can't survive a year of unfavorable prices is the effort the business development guy put in to making phone calls.
- IkmoIkmo 7y ago
  To add to that, shale produces apparently hedged hard against price drops and are currently sitting on a big pile of money ready to be deployed.
bilbo0s 7y ago
This guy understands the energy business where oil is concerned. I'd only add that the above is also the reason that the Saudi gambit to put competitors out of business is highly unlikely to work. These competitors will just sit it out until favorable environments come back around. I'm not sure what the Saudis aim to achieve? But to achieve what people are speculating that they want to achieve, they need to have something else up their sleeves. Because a temporary low price barrage alone is not gonna do it. Maybe they are thinking about low prices forever? Not really sure. But they must have some kind of additional plans since they should definitely know everything everyone else in the industry knows.
- woobar 7y ago
  They want Russia to come back in line with OPEC. Russian economy depends on oil exports, and the low oil prices might force it back to table. See what happened to Russian currency when price went down.
  - bilbo0s 7y ago
    But they aren't going to achieve that on low prices alone. That's just reality. Coronavirus has placed Russia squarely in the driver's seat here. Saudi production surplus or no surplus is meaningless as Covid is depressing prices in any case. (And will continue to do so for the foreseeable future.) So what is the Saudi endgame? Keep prices low for an additional year after the global economy recovers from covid-19? (Which covid-19 recovery, in and of itself, could take a year?) It just doesn't make sense unless they have some other weapon in their arsenal here. Which they might? I just don't know what it is. (But if anyone does they could make a billion right now trading.)
dpflan 7y ago
Thanks for the biological analogy. Do you have other biological metaphors for other industries (or know of source(s))? Related: Biologically Inspired Design: > Center for Biologically Inspired Design at Georgia Tech: http://www.cbid.gatech.edu/ http://www.cbid.gatech.edu/
TooSmugToFail 7y ago
Two questions: — I thought US shale break-even is between $45 and $55, is that correct? — What's your opinion on how long until the debt starts imploding with the US shale producers? Cheers, S
- mordymoop 7y ago
  “US Shale” is many plays, each play having sweet spots, so breakeven is a range, not a fixed number. Some areas still look okay at $30 but not many. US shale producers have already started imploding, you can see it in the stock prices and the cessation of drilling.

whatshisface 7y ago

To add to that, the wells they already have drilled are perfectly happy to sit around until someone goes out to frack them, and the wells they've already fracked are almost perfectly happy to sit around until someone produces them. The only investment that can't survive a year of unfavorable prices is the effort the business development guy put in to making phone calls.

IkmoIkmo 7y ago
To add to that, shale produces apparently hedged hard against price drops and are currently sitting on a big pile of money ready to be deployed.

bilbo0s 7y ago

This guy understands the energy business where oil is concerned. I'd only add that the above is also the reason that the Saudi gambit to put competitors out of business is highly unlikely to work. These competitors will just sit it out until favorable environments come back around. I'm not sure what the Saudis aim to achieve? But to achieve what people are speculating that they want to achieve, they need to have something else up their sleeves. Because a temporary low price barrage alone is not gonna do it. Maybe they are thinking about low prices forever? Not really sure. But they must have some kind of additional plans since they should definitely know everything everyone else in the industry knows.

woobar 7y ago
They want Russia to come back in line with OPEC. Russian economy depends on oil exports, and the low oil prices might force it back to table. See what happened to Russian currency when price went down.
- bilbo0s 7y ago
  But they aren't going to achieve that on low prices alone. That's just reality. Coronavirus has placed Russia squarely in the driver's seat here. Saudi production surplus or no surplus is meaningless as Covid is depressing prices in any case. (And will continue to do so for the foreseeable future.) So what is the Saudi endgame? Keep prices low for an additional year after the global economy recovers from covid-19? (Which covid-19 recovery, in and of itself, could take a year?) It just doesn't make sense unless they have some other weapon in their arsenal here. Which they might? I just don't know what it is. (But if anyone does they could make a billion right now trading.)

dpflan 7y ago

Thanks for the biological analogy. Do you have other biological metaphors for other industries (or know of source(s))? Related: Biologically Inspired Design: > Center for Biologically Inspired Design at Georgia Tech: http://www.cbid.gatech.edu/ http://www.cbid.gatech.edu/

TooSmugToFail 7y ago

Two questions: — I thought US shale break-even is between $45 and $55, is that correct? — What's your opinion on how long until the debt starts imploding with the US shale producers? Cheers, S

mordymoop 7y ago
“US Shale” is many plays, each play having sweet spots, so breakeven is a range, not a fixed number. Some areas still look okay at $30 but not many. US shale producers have already started imploding, you can see it in the stock prices and the cessation of drilling.