Saudi Arabia to U.S. Oilmen: Cut Costs or Exit the Business
www.bloomberg.com/news/articles/2016-02-23/saudi-arabia-to-u-s-oilmen-cut-costs-or-get-out-of-business?cmpid=yhoo.headline
3 replies (most recent on top)
the majors will buy up all the bankrupt independent's assets for pennies on the dollar
Great article. Chevron has abandoned peer comparisons in shale. We no longer bench marks and share. Why? Because cause our costs are magnitudes higher compared to the aversge. That is why at Midcon we have 15 NOJV rigs and 5 company run rigs. Also the output of these wells in general have increased 4 fold over 5 years. Chevron efficency/output is about the same. Industry gains more ground daily. That is why we, me and my colleagues see Chevron outsourcing this work. Saudi Arabia is going to loose this war and so are we as employees. West Texas shale oil has become uber cheap to produce on average $21-$22 a barrel at the moment. So at the current price it is profitable on margin. BUT, most of the independents are carrying large debt, cheap interest rates and over valuation of assets led to free money. The bankruptcy will flow as they can't even pay interest at those margins. BUT that being said efficency is increasing and will continue to drop brake even point that Saudis can't live with. We will be long laid off but I just don't see prices riding with the new shale supply able to produce within a few months. No large billion dollar investments. A few million and you have a well.
John Watson to Saudi Arabia: $100 oil is here to stay. Suck my big fat dividend.