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Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: Ed Ajootian who wrote (189670)	3/15/2015 9:48:59 PM
From: JimisJim	3 Recommendations Recommended By dvdw© isopatch Michael Young Read Replies (2) \| Respond to of 206098

Ed, OK... just thought your post was making a bullish case that I just don't see... yet... and as I said, if demand is the #1 driver, then production -- which your post focused on -- is easily the #2 driver for the price of oil... I think we both agree that with sluggish demand for the foreseeable future, a very significant production drop will have to make the difference in the price of oil... but again, I just don't see production dropping as fast as the bulls are claiming it will because -- as we saw with ng -- it's just too easy and relatively quick to bring production back online with the vast advances in drilling, tech, etc... To carry that ng analogy further, we saw a lot of stories about ng-directed rig counts dropping like rocks a couple years ago, but every time the ng price bumped even a little, ng production came right back despite the rig counts, etc -- we have had a 2% above normal HDD winter on average for the nation, but ng production continues to climb!!! And also consider that many ng-centric companies (e.g., MHR, ECA, etc.) tried to become oily instead of gassy which didn't help the supply side of the equation, but they did it to try to shed the curse of the ever-growing ng production environment. I think we'll see a similar pattern with oil where any time the price of oil bumps over the next 12 mos or longer, production will tamp it back down. And for both ng and oil, rig counts need to be broken down into more meaningful data as today's high spec rigs, pad drilling, etc. mean that -- at least mathematically -- one new high spec rig can do the work of 8 or more older conventional rigs... so beware that some total rig count number may not be as meaningful as the percentage of those rigs that are higher spec vs. lower/older/conventional rigs... I'd wager that many of the land rigs leaving the market would have, sooner or later, left the field anyway because they can't compete -- or in some cases even make the sort of holes/wells in tight/shale formations required... sort of like in the offshore market, most of the rigs/platforms being stacked are the older, less capable ones... the industry on land and offshore has evolved enormously in the past 30 years... when oil was above $100, there was work even for the most decrepit rigs, but at today's prices there's no demand for the inefficient older rigs.