Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Jacob Snyder who wrote (202201)	8/26/2021 10:07:43 PM
From: Salt'n'Peppa	1 Recommendation Recommended By roguedolphin Respond to of 206223

Yup, higher oil prices (and thus higher gasoline prices) are all but baked in to our near future. Any spare production capacity held back by OPEC+ will be quickly gobbled up as the world gets back to "normal", since nobody seems to be spending much on exploration. All the talk of an electric car "now" is just talk. It will take years, as others here have said, Consume oil now or go hungry, don't get to work, don't go on vacation and bake or freeze, depending on your location. Suncor has been taking it on the chin lately, mostly due to an unplanned maintenance shutdown. The stock is down sharply and is a ripe cherry for any discerning portfolio. The dividend is solid and growth potential is huge 6 months out. All IMHO, of course. Trudeau, the selfie king, could still mess it all up for us.

To: Jacob Snyder who wrote (202201)	8/28/2021 11:45:09 AM
From: robert b furman	2 Recommendations Recommended By CusterInvestor Winfastorlose Respond to of 206223

Hi Jacob, I agree with your general statement. I would add some insight to that however. As an example XOM announced reduced Capex for their Permian shale ownings. The reduced expenditure did NOT reflect less drilling activity. More drilling was accomplished but at greatly reduced costs. XOM has n fact slightly boosted it Permian production 21 vs 2020. The overall Dollars and their reduced levels overstate the level of drilling that is actually being done. I do not know how to tie it together, but there also has been a reduction of the uncompleted wells that have been drilled. The expenditures to complete the drilled wells may be a bit of high picking the most productive investments with the fastest return, NOT SURE. For the smaller E&P's who do ont have the scale to make Capex work as hard as it possibly can, a reduced Capex will definitely result in less production and higher crude prices. I suspect this will make the bigger players much more profitable and continue a roll up of the smaller player in a longer term view. Just supposing on that idea. Full disclosure I'm long CVX and XOM. I like their plastics and chemicals. Plastics for XOM had their best Q in history. Bob

To: Jacob Snyder who wrote (202201)	8/28/2021 12:23:40 PM
From: robert b furman	3 Recommendations Recommended By dvdw© Jacob Snyder Winfastorlose Respond to of 206223

Hi Jacob, I found that article. These folks seem to have their finger on the Permians activity: First appeared in 2Q letter August 5, 2021 2021 shale production has held up better than we expected. At the end of last year, we predicted shale production would experience sustained sequential declines unless activity increased dramatically. Since then, shale production has largely been flat, continuing a trend that began last August. While the shales have not been able to grow, they have been able to arrest their declines better than we anticipated. Shale’s resilience is explained entirely by increased activity. As oil prices have moved sharply higher, shale producers have increased their completion levels, mostly in the Permian. Monthly shale completions increased from 600 at the end of 2020 to nearly 818 by June 2021, an increase of 35%. Adjusting our neural network for the increased completions explains all the discrepancy. The completions came mostly from so-called DUCs or wells that were drilled but uncompleted. During last summer’s dislocation, companies chose to continue drilling when contractually obligated but opted to defer completing wells to reduce capital expenditures. As the crisis passed and oil prices moved higher, the companies rushed to bring the backlog online. The DUC inventory fell by 1,500 wells or 20% over the first half of the year to its lowest level since 2018. While DUC activity rebounded, drilling activity has been much slower to respond. As you can see, there is a very tight relationship between oil prices and the rig count. Given the recent rally in crude, the rig count would normally have increased to between 800 and 1,000 operating rigs. Instead, the rig count remains below 400 — a level more strongly associated with $30 oil than $75. We believe companies have been slow to put rigs back to work because they lack high quality Tier 1 drilling inventory. As we have discussed in these letters, our neural network tells us the E&P companies have been high grading their inventory for years and have now largely developed their best areas. Whereas in previous cycles, the companies would have had enough economic drilling opportunities at today’s oil price to sustain an 800 rig count, today it is impossible to sustain half that activity. If we are correct, then production risks falling again once the DUC inventory normalizes. Using the most recent activity levels, we now believe shale production will remain mostly flat throughout the rest of the year. As a result, year-on-year shale production will not decline by 650,000 b/d as previous modeled, but instead fall by 400,000 b/d. Instead of falling sequentially by ~60,000 b/d per month as previously expected in the second half, we now believe shale production will be mostly flat from the June 2021 rate of 7.7 m b/d. As we mentioned, when you forecast the future, you are bound to get some things right and other things wrong. High prices have encouraged companies to complete their DUC inventory and in turn that has allowed shale production to arrest its declines better than we originally anticipated. However, the lack of rebound in the rig count is certainly telling. Moreover, it is worth noting that even with the recent increase in activity, every basin other than the Permian is now in sustained sequential decline — something we predicted last year. We continue to believe the best days of the shales are now behind them. There will always be a certain degree of volatility in the monthly numbers, however, we do not expect production to ever grow again the way it has in the past. The only material source of non-OPEC growth over the past decade is likely gone. To read more on this subject, we encourage you to download the full commentary, available below. Hope that helps. Bob