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MAGA will solve this problem.

By HEYYOU following x   2017 Dec 30, 12:33pm 237 views   1 comments   watch   sfw   quote     share    

"Thus, the U.S. E&P companies tapped into an additional $212 billion worth of funding over the last six years to produce uneconomical shale oil and gas. Now, this chart is an approximation based on the negative free cash flow (RED color) from the four top U.S. shale fields and the shale equity issuance (OLIVE color). So, how much money would these U.S. E&P companies need to make to pay back these funds?

Good question. If we assume that the U.S. shale oil companies will be able to produce another 10 billion barrels of oil, they would need to make $21 a barrel profit to pay back that $212 billion. However, they haven’t made any profits in at least the past six years, so why would they make any profits in the next six years?"

1   Feux Follets   ignore (0)   2018 Mar 18, 2:36am   ↑ like (0)   ↓ dislike (0)   quote        

However, they haven’t made any profits in at least the past six years, so why would they make any profits in the next six years?"

First the good news. U.S. Shale Drillers To Become Profitable For The First Time.

U.S. oil companies have stepped up their hedging for 2018 production, locking in sales at higher prices.

In the fourth quarter, U.S. producers increased the share of their 2018 output secured under hedges to 48 percent, up from just 30 percent in the third quarter, according to a Goldman Sachs note. “Hedging has moved from normal levels to above-normal levels, aided by an increase in oil futures (2018 WTI now $60),” the investment bank wrote. “This should allow many producers to grow, while spending within cash ?ow during 2018.”

Goldman says that drillers will incrementally add more hedges for this year, and they are just beginning to do so for 2019 production. About 9 percent of 2019 production is hedged at an average price of $58 per barrel.

The bank estimates that many shale companies will be able to balance their books with WTI at $56.50. Because WTI is currently trading just above $60, that suggests that many shale drillers could post positive cash flow this year, essentially for the first time.

More: https://oilprice.com/Energy/Crude-Oil/US-Shale-Drillers-To-Become-Profitable-For-The-First-Time.html

Now for the Not So Good News. U.S. Shale’s Dirty Secret

U.S. shale is surging, threatening to take even more market share away from OPEC. But the prospect of U.S. oil edging out barrels from the Middle East is not nearly as simple as it might seem.

Oil coming from the major shale plays in the U.S. is light and sweet, while a lot of oil coming from OPEC is medium or heavy, and often sour. A lot of refining capacity along the U.S. Gulf Coast, built up over years and decades, is equipped to handle heavier forms of oil. Before the shale revolution, refiners made their investments in downstream assets assuming the oil they would be using would come from places like Saudi Arabia and Venezuela.

Lighter shale oil is perfectly fine for making gasoline, but not the best for making diesel and jet fuel. Medium and heavy oil is needed for that.

But refiners have a tidal wave of light sweet oil on their hands, perhaps too much. The U.S. refining industry could max out its ability to swallow up light sweet oil from the shale patch, as the FT reports, particularly as U.S. shale drillers are expected to add upwards of 4 million barrels per day (mb/d) over the next five years.

Meanwhile, heavy crude production has waned as of late, with sharp declines in output in Venezuela and Mexico in the past few years. Shipments from Canada face a bottleneck because of fixed pipeline capacity. The result has been a somewhat tighter market for heavy oil, which refiners want to process into jet fuel and diesel.

In the years ahead, demand for gasoline could start to slow down as vehicles become more efficient and EVs start to gain more market share. Meanwhile, diesel demand has grown much faster, and will likely jump in 2020 as new regulations on dirty fuels from the International Maritime Organization take effect. That could force the shipping industry to switch from residual fuels to diesel, perhaps adding as much as 2 mb/d of demand for diesel, the FT reports.

In other words, volumes of lighter oil suited for gasoline production are soaring while production of medium and heavy oil used for diesel is flatter, even as diesel demand is poised to grow quickly. And refining capacity capable of handling light oil might not be up to the task.


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