NE - Noble Corporation

[dyow]

He makes a great point when he says that E&P companies are in the business of maintaining or increasing reserves. It's wild how in a down market people forget little things like this.

 

Many on here have used shale oil as a reason not to invest here. I would like for someone to show me where there is a shale driller in operation that has made tons of cash.

 

Compare to offshore, where you can have a project that, while it costs more up front to get going, once you do get going, you only have 3-4% depletion each year. You can sit back for a long long time and make far more than you can with shale.

 

 

I agree that is an important point, E&Ps are more concerned with maintaining reserves than actually making a profit.  And they will eventually turn to offshore to maintain production. 

 

Somebody showed a presentation (can't remember where i saw it) for the last cycle when oil was at $100 and the net full cycle cash flows for E&Ps was actually negative!.......these guys did not make money at $100, which is crazy really. 

 

From what i have read so far on the break even costs for offshore, that seems to be true.  The upfront costs are high but the break even cost is not the highest over the full life of the project.

 

 

[PullTheTrigger]

LEAPS are def an interesting idea.

 

Thinking through the supply decline scenario:

 

Currently we are at 96Mbod production. Lets say 20M of that is offshore. If we assume that existing fields decline at 5% annually, we see the following (assuming no new production):

 

2016: 20M

2017: 19M

2018: 18.1M

2019: 17.2M

2020: 16.3M

 

So in 4 years daily production is down close to 4Mbod, this with no investment in new production. However, my bet is that there is new deepsea production coming online from recent drilling, so the total doesn't decline as much.

 

I haven't had enough time to do a deep-dive, but maybe a combo of our thoughts can hash out something nice. The fact that these stocks are at new lows is definitely enticing.

 

Just starting to look at Noble.

 

Does this type of article scare you at all?

 

http://www.star-telegram.com/news/business/article114931993.html

 

In a troubled oil world, the Permian Basin is the gift that keeps on giving.

 

One portion of the giant field, known as the Wolfcamp formation, was found to hold 20 billion barrels of oil trapped in four layers of shale beneath West Texas. That’s almost three times larger than North Dakota’s Bakken play and the single largest U.S. unconventional crude accumulation ever assessed, according to the U.S. Geological Survey. At current prices, that oil is worth almost $900 billion.

 

The estimate lends credence to the assertion from Pioneer Natural Resources CEO Scott Sheffield that the Permian’s shale could hold as much as 75 billion barrels, making it second only to Saudi Arabia’s Ghawar field. Irving-based Pioneer has been increasing its production targets all year as drilling in the Wolfcamp produced bigger gushers than the company’s engineers and geologists forecast.

 

“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” Walter Guidroz, coordinator for the geological survey’s energy resources program, said in the statement.

 

Read more here: http://www.star-telegram.com/news/business/article114931993.html#storylink=cpy

 

 

[SharperDingaan]

Wolfcamp has been known about for a very long time. There is also abiotic oil, and methyl hydrates.

But they are not an issue until someone drills/extracts from them.

 

The cheapest 'new' oil field is an existing field going to secondary production; production wise, this is mostly the ME fields. The next 'cheapest' is an existing field benefiting from tech improvements; to most folks this means shale - in NA it's actually the oil sands (the 2nd largest deposit in the world after the ME). Today they are land-locked, but it's a lot cheaper and more reliable to build pipelines on land, than it is to set up offshore.

 

At $US60/bbl, offshore supply is going to be met from the most efficient existing offshore production, it's going to be the big boys only, and its going to be about meeting base reserve depletion from this cheap but 'long term' production. In the electricity business you try to supply much of your base load from steady nuclear production, in the oil business; its from offshore production. But unlike electricity we can put the energy into a boat, & get it from A to B without the 'line loss'.

 

It's hard to imagine how upwards of 1/3 of the entire offshore industry doesn't get scrapped/abandoned within the next 1-2 years. With only 1 in 4 rigs working right now, even a 100% improvement over current levels - still leaves 1/2 the 'fleet' at risk. Even if 1/3 of this 'at risk' block can be 'saved' - that still leaves a 1/3 of the entire 'fleet' scrapped. Write-offs, and big ones.

 

Nothing really changes.

 

SD

 

 

 

 

 

 

   

[PullTheTrigger]

Thank you SD.