Our mid-year review! Last January (Ep96) Richard and John made some predictions for 2019. So, how are they doing? In this episode, the guys talk crude price volatility, Weatherford, and average frac sand per well.
While the average breakeven price is often cited for understanding which plays are most profitable, the range of breakeven prices within a play is less often reported. Richard and John discuss how the range of breakeven prices from high to low is useful for understanding how much activity might rise or fall as price expectations move up or down.
As the dialogue between investors and operators has moved from “growth” to “capital discipline” to “free cash flow”, the term “maintenance capex” has begun to appear. Richard and John discuss what a maintenance capex strategy would mean for drilling and completion activity at a time when initial productivity (IP) seems poised to decline.
As a group, ROE for publicly-traded US operators rose to a five-year high in Q4 2018, as production increased and cost per barrel held steady. But the overall results were skewed by the good performance of the largest operators, as smaller firms remain under pressure to cut spending. Richard and John discuss how the financial health of US operators resembles the problems faced by the EU in stimulating its economy.
Richard and John discuss why “leading edge” completion designs appear to be stabilizing, while proppant use per lateral foot is still on the rise. Learn why the trends aren’t tethered.
A listener’s question leads into a discussion of the seasonality of global oil demand and other types of oilfield activity.
Both the broader macro-economic situation (global oil demand growth, US shale output, Iranian sanctions, etc.) and spot oil prices are beginning to resemble conditions as of the mid-2018. Will oil prices repeat the Q4 2018 price drop? Richard and John discuss factors they believe will be key for oil prices going forward. Also, as oilfield M&A heats up, Richard and John contrast and compare the oil service supply chains of Oxy and Anadarko.
This week, Richard and John discuss how either rising oil prices or higher well costs will test operators’ new-found spending discipline moving forward.
Richard and John discuss possible winners and losers from Chevron’s just-announced acquisition of Anadarko as well as operational and cost information from Saudi Aramco’s recent bond offering.
The combination of ever-higher gas output with ever-lower gas prices leaves many gas producers experiencing “profitless prosperity”, but Richard and John discuss what rising gas production means in terms of growth opportunities for the gas compression sector.