Low oil prices could spur shale deals

Houston Chronicle ^ | January 1, 2015 | Collin Eaton

[thackney]

Cheap oil could set off a wave of corporate fire sales over the next two years if oil prices remain low, investors and financial experts says, putting a patchwork of oil wells from Texas to North Dakota in the hands of bigger, richer players.

A number of small independent oil firms may have to hand over the keys to oil-pumping assets or their entire companies if they can't pay back billions in risky debt that has fueled hydraulic fracturing and a big gain in U.S. tight-oil output over the past few years.

Oil prices, experts say, would need to stabilize at low levels for a few months to kick-start the series of mergers and acquisitions.

The $200 billion poured into speculative shale energy bonds, as well as hundreds of billions in high-risk leveraged loans, will cut into the level at which those firms can make money on cheaper oil, as estimates of the industry's so-called breakeven points in U.S. shale plays assume oil-company balance sheets are blank slates, without significant debt obligations, said Praveen Kumar, a finance professor at the University of Houston.

"The problem is a lot of the smaller companies have aggressively taken on debt," Kumar said. "They're in a real bind because in the last few years they took a bet on $90 oil. Some of them, I think, aren't viable at $70 a barrel."

That doesn't mean the growth in U.S. oil production will slow down any time soon – and if it doesn't slow, that could continue to weigh on oil prices. Even if some smaller firms default on their debt or can no longer pump capital into drilling, their oil wells will likely find their way to other companies or private equity firms, one way or the other.

...production may not throttle down quickly:...

[txgirl4Bush]

Cant read “more” as it is for subscribers ..

[thackney]

Put the title in an internet search. This almost always provides a link to the full content.

https://www.google.com/search?q=Low+oil+prices+could+spur+shale+deals&oq=Low+oil+prices+could+spur+shale+deals&aqs=chrome..69i57j69i61l2j69i60.962971j0j9&sourceid=chrome&es_sm=122&ie=UTF-8

[dennisw]

Lets see if ChiCom oil companies try to scoop up some of these shale deals to steal the _made_in_USA_ fracking technology

[txgirl4Bush]

thanks! -— http://www.houstonchronicle.com/business/energy/article/Low-oil-prices-could-spur-shale-deals-5989165.php?t=915724288bf1bd0534&cmpid=twitter-premium

[thackney]

International firms have been taking hydraulic fracturing to other countries, including China, for a while.

U.S. fracking giant goes to China
http://business.financialpost.com/2014/06/11/u-s-fracking-giant-goes-to-china/?__lsa=1b80-29a4

Start-of-the-art American fracking technology is coming to China’s vast shale deposits as a result of a joint venture between FTS International and Sinopec announced on Tuesday.

SinoFTS, as the joint venture will be called, marks an important milestone on the road to exporting the North American shale revolution around the world.

FTSI, formerly known as Frac Tech, was one of the first providers more than a decade ago of hydraulic fracturing equipment and services in the Texas Barnett shale, the first shale basin to be developed in the United States.

Since then, the company has grown into the largest supplier of well completion services in U.S. shale formations, including pressure pumping, wireline logging and water management.

FTSI has started to export its expertise around the world through a series of strategic alliances. Since 2012, it has concluded joint ventures with local partners in Brazil as well as Saudi Arabia and Oman.
Other specialist shale drilling and fracking firms are also taking their first steps overseas.

[bert]

The companies of which you speak will be Chicaps, not Chicoms

“The old order changeth, yielding place to the new”

[dennisw]

Thanks!!! China would never permit one of its companies (state owned or not) to engage in such partnerships AKA technology transfers.

In the real world free traitorism is a one way street

[dennisw]

ChiCaps are geese that fly in formation behind the ChiCom state owned enterprises. They follow and obey the leading edge geese

[thackney]

The expectation of a 6-decade old technology being a secret, especially when used by a multitude of international firms, is not realistic.

[Eric in the Ozarks]

And, they nearly alway overpay.

[thackney]

Providing expertise in higher risk areas is almost always more expensive than at “home”.

[Smokin' Joe]

"Despite lower drilling permit submissions, lower rig counts and lower well completions, we are not yet convinced that a decline in production growth is imminent," the analysts wrote.

When the existing permits wells have been drilled or expired, there will be a slump in production, as soon as the frack backlog is caught up.

Why?

Because no permits means no drilling (better not drill a well without one).

Once those horizontal wells are fracced and go on line, the normal processes of depletion will occur, and production will slow--if only by the margin of 50-70% of the new producing wells' output over the first year. (Actually, wells which had gone on line within the past two years will be experiencing the steepest part of their depletion curves as well).

To say that production will continue to increase in the face of decreased permitting may not be entirely correct. There will be a continuation as wells awaiting frac services go on line, and as those wells permitted are drilled, but if permitting (and drilling new wells) falls below what is needed to replace the depletion, the net production will decrease, not continue to increase.

[Eric in the Ozarks]

Ask Bridgestone Tire...

[thackney]

Absolutely. Production growth is going to slow, an slow noticeably. Total production dropping will depend on how low and how long this lasts.

[thackney]

Ask Bridgestone Tire...

I don’t know the story

[dennisw]

The expectation of a 6-decade old technology being a secret, especially when used by a multitude of international firms, is not realistic.

This new field has leaders and laggards. All depends on whose fracking technology ChiComs acquire/steal via joint ventures and acquisitions.

 

 

China’s Purchase of U.S. Fracking Company will give it Advanced Technology

By John Daly | Thu, 01 November 2012 00:17 | 2

Benefit From the Latest Energy Trends and Investment Opportunities before the mainstream media and investing public are aware they even exist. The Free Oilprice.com Energy Intelligence Report gives you this and much more. Click here to find out more.

As the U.S. ramps up to its presidential election, both Republican candidate Mitt Romney and incumbent President Barack Obama have increasingly made a “get tough” approach with China a part of their campaign platforms.

On 25 October, in front of a rapturous audience, Romney told supporters in Ohio, “Look, we can compete with any nation in the world so long as we’re playing on a level playing field. And I’m going to make sure China doesn’t cheat.”

President Obama, during his third debate with Romney on 22 October said, “With respect to China, China is both an adversary, but also a potential partner in the international community if it’s following the rules. So my attitude coming into office was that we are going to insist that China plays by the same rules as everybody else.”

But one item the pair apparently agree upon is that Chinese investment in most American industries is a good thing, so it should come as no surprise that on 26 October
China’s Lanzhou Haimo Technologies Co. announced that its subsidiary Haimo Oil & Gas LLC will buy a 14.29-percent stake in Houston-based Carrizo Oil & Gas's Niobrara shale oil and gas assets in Colorado for $27.5 million.

Under the terms of the deal, Lanzhou Haimo Technologies Co. will acquire roughly 6,000 acres, or about 210 square miles, of territory located primarily in Colorado’s Weld and Adams counties in as well as associated infrastructure, including oil and gas wells, according to a statement filed to the Shanghai Stock Exchange. Carrizo, which holds approximately 60,000 acres in the Niobrara basin, currently produces 1,850 barrels per day (bpd).

 

[thackney]

International well completion companies have been working in China for some time now. Hydraulic Fracturing, horizontal steerable drilling, and other modern oilfield technologies are used around the world.

http://www.scmp.com/business/commodities/article/1239289/halliburton-eyes-opportunities-chinas-shale-gas-industry

http://fuelfix.com/blog/2014/07/11/halliburton-bolsters-chinas-fracking-through-partnership/

http://www.slb.com/contact_us/geographical/mea/chg.aspx

http://www.slb.com/news/press_releases/2013/2013_0703_reservoir_laboratory_chengdu_china_pr.aspx

http://www.reuters.com/article/2014/05/21/sinopec-weatherford-idUSL3N0O720M20140521

http://www.weatherford.com/AboutWeatherford/InvestorRelations/NewsReleases/NewsViewer/NewsArticle.htm?IrNewsID=1933171

http://www.bakerhughes.com/news-and-media/press-center/press-releases/baker-hughes-awarded-horizontal-well-completion-contract-for-china-gas-field

http://www.bloomberg.com/news/2013-03-21/honghua-seeks-china-shale-gas-asset-expansion-with-baker-hughes.html

[Eric in the Ozarks]

In the 1970s, Firestone was broke, had just recalled thousands of Firestone 500 tires and had no new products in the pipeline. Strikes by various United Rubber Workers locals pushed Firestone's industrial tire division (big loaders, tractors) to the point of being an unreliable supplier.

Pirelli of Italy took notice and made a bid for all the stock. Shortly after, Birdgestone’s owner countered with a higher bid. Pirelli countered, bringing another, higher bid from Japan.

Finally, Bridgestone offered something near $80 per share for all Firestone stock and concluded the takeover. It took about 40 years for the investment to pay positive dividends.

[bestintxas]

this is not an accurate depiction of long term trends for Bakken production.

Having estimated reserves for years there, research has been done in older Bakken wells drilled 20+ years ago. Although not horizontal, they gave indicators of decline rates to expect over the long term as the formation is the same.

Those are very gentle at 5-6%, not the 10% used in the graph.

Means after a few years of producing, the production rates of wells will be low but the decline rates will be negligible and almost flat.