Monday, April 20, 2020

What Just Happened?

The phone was buzzing today!  The oil industry just had its 9/11 moment with much more likely to come. Many traders had been stating that today could happen as the oil contracts approached their expiration point.  The experts can explain what happened much better than I can. I've provided a link below to a good thorough explanation.

Many don't realize that the industry had major issues prior to the Saudi/Russia price war and the coronavirus.  Fifty dollars per barrel was going to be a problem due to our massive debt load.  My prior posts cover that topic in detail. 

Well beyond our industry, we have an interesting road ahead where "debt and derivatives" will cause much chaos.  I call them the "Two D's".  The world's financial system is now very complex and when people use the term "complex instruments", be worried.  Watch the movie "The Big Short" tonight to refresh your memory of what can go wrong when the derivatives "canoe" tips.

Be safe.  Be smart.  Be kind.  Be patient.  Stay healthy.

Friday, April 17, 2020

Marathon Crowell #2 - Update

I wish I had some encouraging news on the Louisiana Austin Chalk.  A recent test has been released on SONRIS.  On March 24, the well produced 1007 bopd, 7083 mcfgd, and 13127 bwpd.  The water is extremely high which was my concern for this area.  The water/oil ratio is exactly the same that the field has produced historically.  The oil and gas rates are similar to some of the better offset wells.  The question I have at this point is "what impact did the frac have?".  More data in the months ahead will tell us more.  Let's hope for a positive change.  We need it!

Source: SONRIS

"We'll know a lot more in 90 days about rates, pressure, decline, and water."

"This region of the play in Louisiana illustrates much lower resistivities than seen in the prolific trend of Texas and the LA-EAST in Louisiana.  One reason for that could be higher water saturations in the chalk reservoir.  The field historically produced 13.6 barrels of water to every barrel of oil.  That's an extremely high water ratio.  Disposing of water is expensive and impacts the overall economics. One of the risk factors is that a large-proppant frac could increase the water volumes."

"At these production rates, it's impossible to have positive economics at these DHC/CC costs.  At $1.82/mcf gas, natural gas is a tough place to be.  The gas-oil ratio is much higher than the wells on strike.  The API gravity at 52 is quite a bit higher than the adjacent well to the north (47).  The water cut, as forecasted, is very high.  This will be important to observe over the months to come."