WTI crude oil to hit $70 in 2018?? above?

[guywhofishes]

ha ha ha

good answers guys - I saw that graph and thought "wow - oil hasn't like being where it is now" - but also realize that's no predictor that the histogram won't start to build in there around $60 and end up being Gaussian bell-shaped curve centered right at $60

so I made my post whilst snickering that it would generate some interesting banter and WTF?s

sorry - I feel devious today

 

[Kurtr]

that makes me feel better i thought i was missing some thing that really stood out

 

[guywhofishes]

sorry - one of those "burn this ##### down just for fun" days - ha ha

 

[tikkalover]

You :;:stirthepotyou!!!! ;:;rofl

 

[eyexer]

break even dollar figure is just a farce. it isn't taking into account the reduced costs of bringing a well to fruition currently. and a whole host of other things.

 

[Davy Crockett]

break even dollar figure is just a farce. it isn't taking into account the reduced costs of bringing a well to fruition currently. and a whole host of other things.

Haha , Reminds me of the old oilfield saying , Don't tell em what you got , Tell em what they wanna hear.

 

[tikkalover]

FYI, gas in Minot went up another 10 cents today to $2.69. That's a 20 cent jump in a week.

 

[Velva_zv21]

FYI, gas in Minot went up another 10 cents today to $2.69. That's a 20 cent jump in a week.

That's good..... let's get it up there again

 

[Davy Crockett]

$ 80 oil and $ 1.99 per gallon gas would be just right.

 

[Allen]

break even dollar figure is just a farce. it isn't taking into account the reduced costs of bringing a well to fruition currently. and a whole host of other things.

Since most oil companies operating in ND have a line of credit with the banks in order to drill a well, I don't think I'd call it a farce. The banks have made the companies sharpen their pencils a bit over the past couple of years. Hence the increased hedging of oil prices with companies like Oasis, Whiting, etc. EOG is one of the few in the state that are operating within cash flow. The crappy part for companies that are having to finance their wells is that 1.) new tax law is going to limit their deducting of interest on the operating loans, and 2.) companies like EOG are going to make bank if the price of oil continues to rise.

Last I checked, the companies that are hedging their production are doing so in the mid to lower 50's for the second half of 2018.

What the above means overall to me is that companies are convincing bankers that there's a comfortable profit to be made in the lower $50 range. Otherwise the banks wouldn't be giving them the cash to drill new wells. The crappy part though is that companies that have to excessively hedge their future production are going to miss out, big time, on $80 oil. I guess market experts refer to this as backwardation.

 

[eyexer]

Since most oil companies operating in ND have a line of credit with the banks in order to drill a well, I don't think I'd call it a farce. The banks have made the companies sharpen their pencils a bit over the past couple of years. Hence the increased hedging of oil prices with companies like Oasis, Whiting, etc. EOG is one of the few in the state that are operating within cash flow. The crappy part for companies that are having to finance their wells is that 1.) new tax law is going to limit their deducting of interest on the operating loans, and 2.) companies like EOG are going to make bank if the price of oil continues to rise.

Last I checked, the companies that are hedging their production are doing so in the mid to lower 50's for the second half of 2018.

What the above means overall to me is that companies are convincing bankers that there's a comfortable profit to be made in the lower $50 range. Otherwise the banks wouldn't be giving them the cash to drill new wells. The crappy part though is that companies that have to excessively hedge their future production are going to miss out, big time, on $80 oil. I guess market experts refer to this as backwardation.

The company I work for just hedged their oil at $62.50. You'd be amazed how much of this is not going through banks. Companies are partnering with other companies on a huge number of wells. For instance we partner with XTO, Hess, etc. etc. on many wells. We also partner with a pile of individual investors on wells. There are also a pile of people that have the mineral rights and have numerous producing wells that are coming in as shareholders in a well. Some are in up to 25% participation on wells they own the mineral rights on.

 

[Davy Crockett]

Are these long term hedges ? Sometimes a bird in the hand is better than two in the bush.

 

[eyexer]

Are these long term hedges ? Sometimes a bird in the hand is better than two in the bush.

No idea how long they are. I would guess a year. They will often times hedge at different prices. And the percentage hedged is all over the map with different companies. Most people don't know that oil companies very frequently participate/partner with other oil companies on wells. And that dictates a lot of what happens after the drilling is done also.

 

[Allen]

Yes, we know they partner on wells, although that is not quite the terminology used. There are generally operator, and non-operator interests in a given well. The operator is usually the one with the larger share of the spacing unit. That is the entity that gets to make all the decisions, the others are just expected to cut a check for their share of the expenses.

And that is especially true of mineral rights owners who refuse to sign a lease, they will eventually get force pooled into the well as a non-operated interest. Generally since they don't have the $$$ to pay for their share of the upfront expenses on the well (drilling, frac'ing, etc) they get their oil revenue withheld by the operator until the well is paid for, after which their expenses are deducted from oil revenue.

You said they just now hedged for $62.50, which month(s) of what year? At this point I'd think they are generally hedging for the very last part of 2018 or into 2019. Some operators are hedging all the way out into 2020 already.

 

[eyexer]

Yes, we know they partner on wells, although that is not quite the terminology used. There are generally operator, and non-operator interests in a given well. The operator is usually the one with the larger share of the spacing unit. That is the entity that gets to make all the decisions, the others are just expected to cut a check for their share of the expenses.

And that is especially true of mineral rights owners who refuse to sign a lease, they will eventually get force pooled into the well as a non-operated interest. Generally since they don't have the $$$ to pay for their share of the upfront expenses on the well (drilling, frac'ing, etc) they get their oil revenue withheld by the operator until the well is paid for, after which their expenses are deducted from oil revenue.

You said they just now hedged for $62.50, which month(s) of what year? At this point I'd think they are generally hedging for the very last part of 2018 or into 2019. Some operators are hedging all the way out into 2020 already.

I believe they hedged through 2019 but I can say that with certainty. And it's only a percentage not all the oil. Which I'm sure you know

 

[3Roosters]

FYI here. WTI pricing last 4-5 yrs. Something to ponder.

 

[Allen]

I believe they hedged through 2019 but I can say that with certainty. And it's only a percentage not all the oil. Which I'm sure you know

Yep, rates of hedging tends to be near nil for companies that are using free cash flow to finance wells, and almost 100% for those that have to finance pretty much everything. Companies like Whiting and Oasis are around 40-60% hedged from what I've read.

I would think with the backwardation in hedges (future locked in pricing being lower than today's spot price) that most companies are only hedging what they have to in order to get/keep their financing from the banks. I'd also have to think that they are starting to get better pricing (in the $60+ range) as they go out into 2019. But there's still a hell of a lot of oil that's currently hedged for this year at $50-55.

Generally, this is all in their investor relation presentations and stuff. I find it interesting reading.

- - - Updated - - -

Note: While the DAPL has helped, there's still between $6 and $8 a barrel difference between WTI and ND sweet crude. For as high of quality as Bakken oil is, it sure gets beaten down by the transportation costs.

 

[eyexer]

we were told yesterday the price difference going through the DAPL is dropping. I believe it is $4 for us right now. The refineries love this oil and are willing to pay for it.

 

[Sum1]

The lower the better. I like cheap gas.

 

[guywhofishes]

hey - what’s going on here? why plunging last couple days?