Member Info for epiphany121

GOM is one of the lower cost producers in the US. Of course, Numpty needs Texas shalers to be alive and kicking (November elections), at the expense of the others.

This was the headline..

https://twitter.com/economics/status/1245607275894468614

It's more because China is buying for their strategic reserves. October Futures aren't quite moving that much though..

https://www.bloomberg.com/news/articles/2020-04-01/asia-stocks-set-to-drop-as-economic-worries-mount-markets-wrap?srnd=premium-europe

P - here's a take from GS that Shale survivors will be the winners in the long term, admittedly after WTI goes into the 40s. Until the EPA clamps down on gas flaring in the interest of higher oil production, shalers will come back just as soon as WTI gets into the 40s. And EPA won't do it until a Democratic administration is in the White House. All roads to a higher oil price in the longer term lead to Trump being voted out in November. I sure hope that happens for our portfolio's sake..

https://www.worldoil.com/news/2020/4/1/goldman-sachs-sees-shale-ultimately-victorious-in-the-oil-war

Yeah, I suppose this outcome is better than receiving puny cents on their debt dollars via a fire-sale of assets at these WTI levels.

News that they've chosen chapter 11 bankruptcy, however the debt holders are just choosing to go down the Equity route. The $2.2 bill debt was swapped for 97% of the new company and its BAU for their operations. I can't believe that their debt holders would fall in line, but that's the reality. Production continues as 'normal' - they're resilient lot these shalers. And the debt holders are backing them up in this case. Their hope would be that WLL's cash from ops would be more than their capex and that these debt holders will eventually be rewarded by capital appreciation when the tide turns. I wonder who these idiots are?

And cheekily, WLL drew down on their $650 mill credit facility yesterday, apparently.

https://www.forexlive.com/news/!/former-shale-star-whiting-petroleum-files-for-bankruptcy-20200401

PYU - you need to understand that Enquest isn't tied to WTI's performance or it's current spot price of $20, which is what you're quoting. Firstly, Enquest's pricing is tied to Brent and that's in massive contango (along with WTI admittedly). Look ahead in the futures curve and Brent futures just 4 months ahead are trading above $35/bbl. Near term, there'll be more pain for spot prices in WTI/Brent though - how much pain is what the market is discounting based on the news cycle.

Talk of US production eventually dropping by 4 to 5 mmbbls/day, but the stronger shale operators will slowly but surely come back after oil gets above $50. 2 mmbbls/day drop this year, hopefully down to 11 mmbbls/day. Scott Sheffield of Pioneer suggested in a CNBC interview yesterday that the Majors don't want to cut production in the shale patch to force the small players ti bankruptcy and eventually get hold of these assets. He reckoned maybe 10 out of the current listed shale players would survive by 2021.

https://finance.yahoo.com/news/rocks-don-t-bankrupt-experts-110023685.html

Boris - the consummate slacker.... ;-)

BT - there are severe market dislocations at this time, in multiple sectors of the economy, and it is only to be expected that investors sell first and ask questions later. I initially expected Covid to not have much of a global economic impact, but realised early on in March that we're heading off a cliff and that's been the case thus far. It's not a surprise that oil and other affected sectors (Restaurants/Malls/Retail/Leisure/Travel among others) have taken a major blow in their share prices, indiscriminate you may say.

This will blow over though in a quarter or so, and demand will come back. Oil will see supply also coming off, leading to a slow recovery through this year. Survivors will be rewarded and I expect Enquest to be one, even if oil and Enquest's SP fall more from these levels in the near term.

GL..

Cheers, Hitman. Yes, just saw that and this bodes well for Brent in Q3 after the demand shock wears off...

It'll be a rough next few weeks for Brent as mass shut-downs are still in place. Imagine circa 5 mmbbls/day consumption down in India alone for 3 weeks. I said Q3 realistically when we can expect Brent to have a rally after Covid related shut-downs are pulled back and the stimulus effects from various governments kick in. This isn't really a supply issue at this time as demand has fallen off a cliff and will be slow to recover. Arguably, a supply response is warranted and may yet happen, but won't be enough to counteract the demand plunge in the coming weeks.

I'm more optimistic looking out to Q3 and beyond.

Not really, Chilts. The gap between LSFO and HSFO pricing has shrunk dramatically since January and any sizeable Kraken premium isn't really be happening at this time.

The comments from the E&P companies are telling..

https://www.dallasfed.org/research/surveys/des/2020/2001.aspx#tab-comments

The Q1 Dallas Fed Survey is simply the Epitome of misery for the Shalers. Another quarter of patience and we'll be good after that.

https://www.dallasfed.org/research/surveys/des/2020/2001.aspx

Icelandic researchers have identified circa 40 strains/mutations of the CV. God only knows how each of these strains impact the respiratory system - maybe this strain was less virulent.

Mod - With regards to the production not dropping as quickly in 2015, there are a few factors that drove this.

1. Many shalers could still produce and get some revenues as cost of production was still above the cost of extraction per barrel in the Permian/Bakken. The price of oil wasn't in the 20s for a long enough time.
2. There was still some hedging that they could that meant they get away with still producing - this is the case this time around too
3. Unlike in 2016, there is now a combination of excess production PLUS an economic whammy from Covid stopping large swathes of the economy.

This is why you're seeing large capex cuts as the outlook in 2020 is looking bleak, certainly into Q3. OPEC+ cuts won't help until the economic shutdowns are reversed, as demand is a bigger issue now than supply. It's good to see Frac spreads drop alongside rig drops and the US could be 2 mmbbls/day PLUS lower than now, at end of 2021.

Best case oil may bounce a little in Q3, and by a decent amount if OPEC+ also cut big. Let's see.

Squif - Very likely indeed. That is what I inferred when I read the OU note last night. I'm not sure if OZ could've dropped that much so quickly and hence an early repayment of the April 2021 installment of $65 mill is a likely scenario, with the drop in both cash balances as well as net debt.

I'm unsure how Brent price will play out in the coming weeks with demand dropping off quickly this quarter and the next, at the very least. Q3 is a reasonable timeframe for a compromise between all parties and for barrels to come off the market from OPEC+ and the Shale idiots.

SFA = Secured Financial Arrangement/Agreement. The facility is secured by Enquest assets.

ECB Stimulus €750 billion stimulus announced and WTI is up more than 3 bucks after hours.