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Modestus - the White House is apparently calling for deferring of taxes for US airlines/Cruise companies and hence they've gone up. Until the CV news settles, there will be lots of volatility. CV - please go away. Plus, Russia is certainly now out to kill shale. Attempt 2 - maybe there will be better luck this time around.

This fall may just shaft the likes of TLW over big time too - with their debt levels, they have no hope in hell if Brent is around these levels for 6 months.

YOY - if you read the economic data out of the US like the Jobs number today, you'd wonder why on earth Dow futures are down 900 today, but the market, unlike the Numpty, is not focused on backward looking numbers like jobs. It's focused on all the hits in the upcoming economic data like lower travel, lower discretionary spending, and how that'll impact the US economy, and the world by extension. There will be some dire data coming out in the next few months. It's figuring out how long this CV fear lasts that will give us the answer to this rather difficult question about when to buy or sell. Right now, I think it's overshooting on the downside and is pricing in a sharp slowdown for a quarter or two - not quite a recession yet. THat's my take.

Flipping Russians - squeezing shale now.

https://twitter.com/DailyFXTeam/status/1235876687990214657

Chaps - we don't need to worry about the debt repayment in 2021 at this time. Where the SP goes is a different question and if a CV induced short recession is forthcoming, then there will be some short/medium term pain for us along with half the shale patch being wiped out too. Majors are also cutting rigs/spending in the shale patch with these prices. That sets up a 2021 recovery for Brent and we'll do fine with RCF repayments. I can't say where the SP goes near term - lower if a recession hits and will be higher if we skirt it - both are possible outcomes and depends on how worse consumer confidence gets to from here.

Don't get rankled by NH's constant BS - if you can't help yourself from responding, put him on filter. Saves us from way too much gibberish on this thread.

PMO's BOEPD is worth significantly less in revenues vis-a-vis Enquest. I know where I'd rather be invested.

The Zama 'reservoir split' is still being played out between Talos and Pemex, and until that's resolved, I'd think that no buyers would be forthcoming. Couple that with Brent in the 50s, you can pretty muck kiss goodbye to any sale prospects at this time.

Russia is really out to screw the shalers.

https://twitter.com/DailyFXTeam/status/1235246286934364161

Shalers were up 3 -4% and now many/most are negative with a drop in WTI/Brent..

Crude build smaller than expected. Products drew more than expected. All bullish. Production 'supposedly' hit an all-time high last week at 13.1 mmbbls/day. However, knowing the STEO has been incorrect (higher) for December by circa 130 kbopd, it won't be a surprise if the actuals are a bit lower. Below are STEO projections for 2020 and you can see there's not much of a move up for the rest of the year. Maybe they could even fall with these lower prices.

GL

Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec


12.91 13.01 13.22 13.26 13.27 13.27 13.21 13.15 13.14 13.20 13.11 13.28 13.29

Biden will certainly be against the ludicrous amount of gas flaring that's now permitted by Donnie's admin that in fact pushes up oil/gas production even more. Put regulations on the volumes of gas flaring, oil production will naturally tempered down anyway.

Oil markets and Dow only started moving up after Biden starting winning last night with Virginia at midnight UK time and continued with the additional southern states. Dow futures were down down 200 points (now up 400) before the Virginia results came in and oil was down too (now up 1.%). Biden is now the presumptive nominee and is obviously a better bet for markets than Sanders. I'm sure that papers will make it out to be that OPEC cuts are the difference, but Biden played a more important part in today'a rise thus far - else the oil markets should've risen yesterday . It's great that Socialism would indeed be refuted in America and Biden is back to being the front-runner, even after all of Donnie's attempts to link Ukraine to Biden.

Covid is not flu, but containment does work. That seems to be the summary here.

https://www.cnbc.com/2020/03/03/who-says-coronavirus-death-rate-is-3point4percent-globally-higher-than-previously-thought.html?__source=twitter%7Cmain

Doubt it. The shalers debt is mostly fixed interest bonds and it maybe reduces interest on their credit facilities, and that component isn't the game changer for them.

For us, it reduces interest costs on the credit facility PLUS OZ Load PLUS the PIK. That's $425 plus say $145 Mill OZ + $125 mill PIK - about $3.5 mill annualised interest savings..

Things may not indeed be looking too good in their recent data feedback...Supportive for the market now though.

Cheers, Modestus. I couldn't see the article, but the headline says it all. TBH, if the pummeling they've had over the past few weeks (no, months) is a tiny sign, they should be cutting back on drilling big time. Shale wells take about 9 to 12 months from drill start to production coming online, and I'd like to see serious cuts announced in the coming months to curb 2021 production rates. Then OPEC + will be back in control. Fingers crossed.

Morning Hitman,

It does look like the market is now baking in a mill bbls/day cut. I'm hopeful just as long as the CV news doesn't get worse.

https://uk.reuters.com/article/uk-oil-opec-lukoil/opecs-oil-cut-proposal-enough-to-push-prices-back-to-60-bbl-russias-lukoil-idUKKBN20Q0YW?il=0

Yes, I did. I do have minor positions in Devon and Centennial, and I can't help but notice. CDEV is a speculative play, whilst I thought DVN was more stable than what I've found out in the past 4 weeks - even with a 2.5% dividend yield. ;-) Wall Street just isn't buying their story yet.

At least Enquest is moving up nicely today, along with other UK based oilers. Good for us.

I'd love to see those kind of moves this week, Hitman. But, IMO, that's not going to happen till there's more visibility on the demand side (i.e. the CV headlines moderate and China demand comes back with the factories coming back online). There's now a million bbls/day OPEC+ cut factored in and that can't really be a market mover in the near-term, IMO. I'd love to be pleasantly surprised though and we'd all love to see Brent move up even more from these levels. We're well hedged for Q1 and even if Brent hangs around the mid-50s till the end of the month and forces the shale sector's hand to cut capex, that's a very good outcome for us.

I'm convinced that should shalers grow a pair and announce capex cuts, their stock prices will move up. However, they probably don't know what it feels like to have even one, let alone a pair.

Romaron - $40 for many years is not a scenario that'll happen - US production will fall below 10 mmbbls/day at that price point and yes, half of shale will be dead and shortages will follow, pushing up oil prices. Dow's just had the all-time biggest point move up for circa 1,300 points (5.1 % up). It's a good technical sign, but I'm not convinced it's all-clear for the market. Certainly airlines struggled and oil stocks didn't fare as well as the index did, and that's pointing to CV fears still lingering in the market. I agree that we're in a good shape vis-a-vis other NS producers and we can still throw off FCF at $50 Brent. However, we'd all love to see some leveling off in the CV cases and that'll be trigger for higher Brent and oil shares.

It's a given that the US markets led the worldwide sell-off last week. It's as if the markets there finally woke up to fact that there's serious economic disruptions in China (Both MFG and Non-MFG PMIs for Feb were below levels recorded after the 2008 financial crisis) and are now pricing in some kind of a slow-down in the US. Their markets were very frothy with stretched P/E multiples and hence the sell-off was warranted. The hope for oil is that NOPEC /OPEC cut at least a million bbls this week and at least keep Brent around these levels till the virus threat diminishes. AT some point (soon), the markets will have COVID fatigue and will start ignoring bad news, unless there are large scale economic disruptions in the US - this isn't the base case for many forecasters. However, there's always the fear of the unknown in the market. Dow futures are 600 points down now, no doubt driven by the news out of Italy and France today. As long as the US doesn't get as 'bad', markets will come back.

GL...

Hi Hitman - I really wouldn't agree with the assessment that 'Credit markets are virtually shut for shale companies'. HIgh quality names can still refi debt, albeit up in the 7 to 8% area, rather than the 5 % range they were paying for their 2020/21 maturities. I know a couple of shalers (MUR is one) that refinanced in the past 3 months. However, if you look at the oil companies with weaker credit ratings (Junk Bonds) like CHK or WLL, they're screwed as their bonds are trading at 50 to 70 cents to the dollar FV. However, it's probably fair to say that 75% of publicly traded shale companies can't raise debt and no hope in hell of raising equity. Pretty much all of these struggling companies are plugging the gap between cash from ops and capex by drawing down from their bank credit facilities, and not having to tap the bond markets. The banks semi-annual credit limit evaluation in autumn last year did bring down limits for a few companies as seen below. Laredo is currently in trouble, and so is Oasis and Whiting. With these oil prices, credit facilities will be down even more in the Spring round now.

Decreased Borrowing Bases:
COMPANIES (IN MILLIONS) SPRING 2019 FALL 2019 % DROP
Rivera Resources (RVRA) $230 $90 60.9%
Unit Corp. (UNT) $425 $275 35.2%
Laredo Petroleum Inc. (LPI) $1,300 $1,000 23%
Oasis Petroleum Inc. (OAS) $1,600 $1,300 18.8%
Amplify Energy Corp. (AMPY) $530 $450 15%
Extraction Oil & Gas Inc. (XOG) $1,100 $950 13.6%
Ultra Petroleum Corp. (UPLC) $1,300 $1,175 9.6%
Whiting Petroleum Corp. (WLL) $2,250 $2,050 8.8%

However, the reality is until we see larger scale capex cuts, production will NOT come down. With the levels of Capex that the shalers have announced in the past 2-3 weeks (if I'm generous, it's an average of 10% capex cuts) and the consequent projected production levels for 2020 with that capex, production is moderately increasing over 2019. The notion that shale production will decrease in 2020 is misguided. If WTI hangs around lower for a bit longer then capex will be cut more and that'll take down production, but there's no evidence of these cuts at this time.

Correction - Down from 12.86 in November - good for 85 kbopd lower rate in December..