Sunny, And I find drilling fascinating, but find it very hard to stand up on the rotary table with the floor wet with water and slippery drilling muds, and the whole rotary table shaking as the drill string turns- I never ceased to be amazed at the physical strength of the men and women who work on rigs....
Major Oil's forecast (which are usually about 50% right,ha!) still use a $15/bbl benchmark for long term intermediate grade crude prices, but generally can be decently profitable down to $11/bbl oil. The genie of capitalism is "out of the bag" in the late 1990's.
Too much of the world's economy is turning to free market planning and raising economic growth rates. That will require energy, and fuels split from oil- gasoline, kerosene, jet fuel, diesel fuel, bunker fuel, and heating oil, plastic products derived from oil such as polyethylene, polyester, and polypropylene, drug derivatives (sulfa-based drugs), and the numerous petrochemical products such as benzene and toluene, etc., that go into paints, solvents, glues, adhesives, and petroleum wax products for women's cosmetics.
You are right. As to land-based rigs which are less expensive, energy companies can "turn on a dime" now and either order or stack rigs quickly. Offshore, you are subject to limited lease terms which force more orderly drilling schedules in shallow water, and long-term planning in deeper water.
And also remember that integrated oil companies both benefit and lose from lower oil prices. The E&P side of the business loses money when prices drop; however the refiners' profit margins rise. it's not a perfect setoff, but it's not a complete disaster for an integrated company if crude if prices drop....
So in summary I agree- if prices stay in the $15/bbl range, it's business as usual; $13/bbl range then some pain, at $11/bbl a moderate amount of pain.... And land drillers roughly hurt first(caveat check what basin a land driller is active in- some basins drill on and on and never halt for price fluctuations); then shallow water drillers, and then deepwater drillers, and then equipment and service companies....
But if it's any consolation, major oil has been through the 1986 drill of falling prices, has rearranged its collective house, and feels much more comfortable in handling crude oil price drops now....
Sincerely,
Doug F. |
