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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Elmer who wrote (26482)	7/26/1998 5:10:00 PM
From: Mike from La.	Respond to of 95453

Elmer, I did mean deletion, I had said depreciation, as you correctly pointed out. My main point was this though. According to the excerpt I posted, 15% of US oil production is from marginal wells that have been, or are in the process of being shut in, most permanently. US production is around 6.5MBD, which means almost 1 million barrels per day has, or is, removed from production from these shut in wells. If you assume the same rate of marginal wells for all of non-OPEC production, 15% of 44 million per day, you get a shut in of 6.6 million barrels per day. To be conservative, let's say the number is half that, 3.3 million barrels per day. That is an amount that is greater than the entire OPEC cutback. There is no way that I'm aware to confirm how many wells are actually being shut down because they are no longer economical to operate. The latest production figures are from 1997. I don't know of any source of more current information. That may be why no one is looking at it. In none of the current projections, analyses, etc, have I seen any mention of the shut-ins. All they look at are the OPEC production figures. But I do believe the amount being taken out of production is a large amount, and whatever that amount is, it will have the same impact on prices it would have if OPEC had done it, it reduces supply. I can't believe that something like that could be overlooked, but I sure don't see any evidence that anyone is counting it. The depeletion rate is in addition to the shut-ins. Which brings us up to some real big numbers. If anyone has any information on this, especially something that confirms, or addresses the amount of oil being removed from production I would appreciate your thoughts. On the two rig increase in the Gulf, would it be too optimistic to speculate that oil companies have started putting more rigs under contract, not because oil prices have actually risen yet, but because they are now becoming certain enough that prices will rise that they want to get rigs while they can. Still a shortage if prices do recover. Too early to tell yet, just something to watch. Mike