Guest “they don’t have a fracking clue” by David Middleton

Oil’s Sudden Rebound Is Exposing the Achilles’ Heel of Shale
By Rachel Adams-Heard, Kevin Crowley, and David Wethe
May 24, 2020

Oil prices have surged more than 75% in the U.S. this month. But don’t expect a quick rebound in supply from shale explorers.

The quick turnaround in oil markets is exposing the shale industry’s big weak spot: Lightning-fast production declines. Shale gushers turn to trickles so quickly that explorers must constantly drill new locations to sustain output.

[…]

“We just have no new drilling and these decline curves are going to catch up,” said Mark Rossano, founder and chief executive officer of private-equity firm C6 Capital Holdings LLC. “That hits really fast when you’re not looking at new production.”

[…]

Bloomberg

No schist Sherlock. Oil prices “surged” because production has been cut more quickly than expected. “Shale’s” decline rate is anything but an “Achilles’ Heel.” While some existing production has been shut in, most of it is economic when oil is over $20-30/bbl. If not for “shale’s”steep decline rate, it would be far more difficult to cut production quickly enough to cause oil prices to “surge.” If “shale” had slower decline rates like conventional oil reservoirs, EIA wouldn’t be forecasting production declines. EIA expects US tight/”shale” oil production to decline by nearly 200,000 bbl/d from May to June and a total decline of about 1.3 million bbl/d in 2020-2021.

Interestingly, EIA foresees no decline in Gulf of Mexico or Alaska production, as these play types aren’t as sensitive to short term price swings and have much slower decline rates.

EIA forecasts GOM production to remain relatively flat, averaging 1.9 million b/d in 2020 and 2021, nearly unchanged from its 2019 average. In addition, EIA expects no cancellation in announced GOM projects for 2020 and 2021. EIA forecasts that crude oil production from Alaska will remain at an average of 460,000 b/d in 2020 and that it will increase slightly in 2021.

EIA forecasts U.S. crude oil production to fall in 2020 and 2021

The Bloomberg article proceeded to get even dumber.

Shale explorers have been turning off rigs at a record pace because the oil rout has gutted cash flow needed to lease the machines and pay wages to crews. Going forward, management teams may be hesitant to rev the rigs back up again despite higher crude prices because of fears of flooding markets with oil once again and triggering yet another crash.

Bloomberg

• “Shale exploers”?
• “Turning off rigs”?
• “Rev the rigs back up again”?

WTF language is this? (Rhetorical question.)

“Shale” plays are resource plays, not exploration plays. Most “shale” reservoirs are the primary source rocks for conventional reservoirs within their respective basins. They were “discovered” many decades ago.

Drilling rigs aren’t power tools that can be turned off or revved up.

When prices make more wells economic to drill, they will get drilled, and production will start rising again.

Left unchecked by new drilling, oil production from U.S. shale fields probably would plummet by more than one-third this year to less than 5 million barrels a day, according to data firm ShaleProfile Analytics. That would drastically undercut U.S. influence in world energy markets and deal a major blow to President Donald Trump’s ability to wield crude as a geopolitical weapon.

Bloomberg

• “Left unchecked by new drilling”?

WTF language is this? Yes. I realize it’s English. However it is not the language of anyone with the slightest familiarity with the oil & gas industry.

• “oil production from U.S. shale fields probably would plummet by more than one-third this year to less than 5 million barrels a day, according to data firm ShaleProfile Analytics.”

Horst Schist! ShaleProfile Analytics’ model is for what would happen if the rig rate went Dean Wormer.

If the rig count went to zero-point-zero and stayed there, “shale” production would take a nose dive. The rig count isn’t likely to go to zero-point-zero and wouldn’t stay there very long, even if it did.

Such is America’s reliance on new drilling that 55% of the country’s shale production is from wells drilled in the past 14 months, according to ShaleProfile.

Bloomberg

Can you say “circular reasoning”? The idiots seem cluesss to the fact that they wrote this earlier in the article… “Lightning-fast production declines.” If the main source of recent US oil production growth came from plays with “lightning-fast production declines,” a big chunk of the “shale” production would, mathematically, have to come from recently drilled wells…

Which, mathematically, makes it relatively easy for US oil production to be ramped up or down fairly quickly in response to price swings… It’s the exact opposite of an “Achilles’ Heel.”