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Post by looter on Aug 4, 2011 8:04:19 GMT -5
It's always fun to talk about energy. I don't have anything particular to say about the subject other than we are so forked and nothing or nobody is gonna change that.
Earlier this year on Agweb I posted that I expected oil to fall to $50 by year's end. The only thing that could prevent that would be a currency thing IMHO. I really don't see how oil is gonna be under $200/ barrel in a couple years however, so it will be interesting how deep the buying op becomes.
I might post some articles here later, but feel free to just let this thread die an ugly death if the topic bores you.
Thanks!
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Post by ses on Aug 4, 2011 8:21:54 GMT -5
I strongly encourage everybody to jump right in here and start asking questions about oil. You'll not only learn something but every time looter posts you get to see that avatar of his.
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Post by linsal on Aug 4, 2011 8:23:02 GMT -5
Looter---Plz post yer articles...I enjoy reading them. It gives me something to think about....
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BKN
Hired Hand
Posts: 209
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Post by BKN on Aug 4, 2011 10:06:50 GMT -5
One good thing... if oil goes down, there will be more money to spend on food. ;D
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Post by sandbox on Aug 4, 2011 14:55:25 GMT -5
Looter is the research genius on this stuff.
But I couldn't help but notice this the other day....
A warning for shale gas investors By Steve Hargreaves @cnnmoney August 3, 2011: 5:22 AM ET
NEW YORK (CNNMoney) -- Recent reports of an investigation by the Securities and Exchange Commission into whether shale gas companies are overstating their gas reserves highlights the challenges investors face in navigating this emerging sector.
Last week a research note from the investment management firm Robert W. Baird, citing industry lawyers, said the SEC is looking into whether shale gas companies may be overestimating the amount of natural gas they hold beneath the ground.
The investigation is most likely politically motivated and not entirely unwelcome, the note said, sparked by congressional calls for SEC action following a scathing report in the New York Times questioning the reserves held by some shale gas firms.
"We view it as appropriate and expected for the SEC to evaluate compliance with new regulations if compliance is publicly questioned," Christine Tezak, an energy and environmental policy analyst at Baird, wrote in the note. "A regulatory investigation may provide a clearer investment horizon than a 'trial' in the press."
The SEC would not confirm or deny if an investigation is underway.
Extracting natural gas from shale is a relatively new phenomenon. It's been made possible in just the last few years thanks to advances in drilling technology and the broader use of hydraulic fracturing. Known as fracking, it's a controversial process that injects water, sand and chemicals deep into the ground to crack the shale rock and unleash the gas. The process has sparked concern over its effects on the water.
The fracking public relations mess Gas from the Northeast's Marcellus shale, Texas's Barnett Shale and Arkansas' Fayettville Shale, among others, promises vast amounts of cleaner-burning fuel for the nation's energy use for decades to come. Its also caused the share price of firms involved in the space to surge over the last few years.
But it may be hard for the SEC, the companies themselves, and investors in general to determine just how much gas these firms hold in the ground - a key metric in determining the stock price for any energy company.
"The history of these wells is so limited," said Neal Dingmann, a Houston-based analyst at investment bank SunTrust Robinson Humphrey. "It's going to be a very touchy call to determine what you can book on these reserves."
Dingmann said it's not uncommon for a shale gas well to see its production fall 70% in the first year. He said the hope is that they then continue to produce gas at the much slower but steadier rate over the next several decades. But until several decades pass, no one will really know for sure.
Most analysts, including Dingmann, believe there is lots of gas there. So do the biggest names in the energy businesses. Exxon Mobil (XOM, Fortune 500) would not have paid $40 billion for shale gas producer XTO last year if it thought the company was spinning a yarn when it came to its reserves.
Interest in shale gas by other oil majors like BP (BP) and Chevron (CVX, Fortune 500) continues, with the smaller shale firms like Chesapeake (CHK, Fortune 500), Range (RRC), Devon (DVN, Fortune 500) and EOG (EOG, Fortune 500) the periodic subject of takeover talk.
But the Times isn't the only one to question the viability of this resource.
Petroleum geologist and noted oil-supply skeptic Arthur Berman has been arguing for years that shale gas estimates are overstated by at least 100%.
"Shale gas in the U.S. is an important and permanent feature of supply," Berman wrote on his blog earlier this week. "But it will not fulfill mainstream expectations of either supply or cost."
Retail investors should at least be aware of the debate.
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Post by sandbox on Aug 4, 2011 14:56:17 GMT -5
Hope this is OK on the forums. We used to post a lot of articles and discuss at length on agweb.
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Post by linsal on Aug 4, 2011 15:34:49 GMT -5
Hope this is OK on the forums. We used to post a lot of articles and discuss at length on agweb. I'm sure it should be just fine. I'll add that I read "somewhere" that the natural gas obtained by fracking are much less than conventional methods. Gas companies which applied conventional models are being whacked by reality. Obtainable natural gas is going to decrease much faster than previously thought. When I read that article, I thought immediately of Looter and some of his comments in his previous life. I wish I could remember where I read that stuff....
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Post by Hobbyfarmer on Aug 4, 2011 18:42:27 GMT -5
Market Pulse Archives
Aug. 4, 2011, 2:42 p.m. EDT
Oil drops 5.8% to settle at lowest since FebruaryStories You Might Like
•U.S. stocks fall hard as economy weighs By Claudia Assis SAN FRANCISCO (MarketWatch) -- Crude-oil futures settled at their lowest since mid February as a selloff for equities cast a pall on prospects for oil demand as investors fear a recession more than ever. Crude for September delivery /quotes/zigman/2075827 CL1U -0.37% declined $5.30, or 5.8%, to $86.63 a barrel on the New York Mercantile Exchange, the lowest settlement for a most-active oil contract since mid-February. The day also marked oil's biggest one-day drop since early May.
************************************************************ Wish I knew how low it is headed and when to lay in the fall fuel needs.
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Post by sandbox on Aug 4, 2011 18:49:29 GMT -5
Looter,
DLT (Drunken Lodger Theory) question.
Did RBOB double year over year and help trigger the current pullback in equitieis markets?
Kinda lost track but I didn't think it quite made it.
If you don't know the DLT you would get a kick out of hearing Looter explain it.
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Post by looter on Aug 4, 2011 22:08:25 GMT -5
Looter, DLT (Drunken Lodger Theory) question. Did RBOB double year over year and help trigger the current pullback in equitieis markets? Kinda lost track but I didn't think it quite made it. If you don't know the DLT you would get a kick out of hearing Looter explain it. Yes. RBOB indeed doubled YOY. According to DLT, the price of both oil and equities must collapse after the double. Examples; 1) Feb 1957, world oil price went to $3/barrel, up from $1.50 a year earlier on the Suez Crisis. Equities crashed in July. 2) Oct 1973 global oil price spikes to $13 overnight. Equities crash in Dec 1973. 3) March 1979 oil doubles YOY on Iran unrest.. Equities crash in June. 4) Aug 1990 oil doubles YOY on first Gulf War. Stocks crash in Oct 1990. 5) June 2000 oil doubles YOY, stock market crashes big time Oct 2000. 6) July 2008 oil doubles YOY. Sept 2008 stocks crash. 7) April 2011 RBOB doubles YOY. The crash hits ?? Generally when equities crash, the world suddenly needs a lot less oil, so oil also crashes in tandem. I will do my best to explain how DLT works, and why I think it will completely rule every aspect of our lives for the rest of time. I believe the oscillations will become ever more violent. It might hafta wait just a bit. One more thing in the meantime, the only post-war recession that wasn't preceded by a YOY double in oil was the Sept 11 terror attack. Conversely, every single time oil ever fell by half in price YOY, a boom hit equities.
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Post by thirsty on Aug 4, 2011 22:29:59 GMT -5
Looter, you ignorant slut, peak oil has been cancelled. There's a thousand fold more hydrocarbons just lying around on the surface of Titan, one of Saturn's moons, than all hydrocarbons that ever exsisted on earth. Obviously you never got that memo, otherwise you would be out flipping miami condo's and shopping for a new Gulfstream 650. Don't say I didn't warn ya....
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Post by sillinoisfarmer on Aug 4, 2011 22:32:50 GMT -5
OBG: This has to be one of the most interesting/educational tables that I have ever seen reproduced in one place. Point 7 is the one that all of us are watching/waiting for and if your theory holds up we could be in for one rough ride to the bottom.
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Post by looter on Aug 4, 2011 23:18:49 GMT -5
OBG: This has to be one of the most interesting/educational tables that I have ever seen reproduced in one place. Point 7 is the one that all of us are watching/waiting for and if your theory holds up we could be in for one rough ride to the bottom. Awwww shucks... Ok, so being as how I can't sleep, let's do the whole DLT thing. The global economy is a Drunk who lives in the attic of a lodge with steep gables. In the beginning he started at the eve on one side of the lodge. His only goal in life is to go to the eve on the other side of the lodge. The roof of the lodge is the average daily oil flow. It went from zero in 1856 to 75 mbpd in 2005, and is slowly descending back downward again. As the drunken lodger moves along his journey he finds at first that he can rise up and stretch his legs a bit. The first time he bumped his head was at the Suez Crisis. At that time global oil flows were still rising, so he didn't wack his head too hard. He bumps his head a few times in the 1970s, but nothing that took him out for long, cuz the roof was sloping up. His melon sorta glanced off the blow. In 2005 he reached the apex. He stumbled forward until Shazaam!! He smacks his head against the first falling global net export slope in history. Down goes our lodger. Evidently this guy is the Italian Stallion and Mickey in his corner is Ben Bernanke. After some stimuli, the drunk ambled back to his feet and continues his inexorable journey to the eve in front of him. With 50% of all the oil in the world coming from 50% of oil fields (the youngest of which is from the class of 1954), the new drilling can not keep up with natural decline in existing production. Hence less oil each year, hence the the need for the drunken lodger to duck each year. According to Drunken Lodger Theory, this whole debt crisis thing would not have happened without the Arab Spring. (Doesn't that "Day of Rage" all the Muslims were doing last March seem forever ago?) When 1.5 mbpd of oil production fell before the Lodger, he bumped his head. IMHO, we are seeing the brunt of it now. I view the global economy as a desktop computer on a dimmer switch. Turn down the dimmer a bit and suddenly its lights out. When $100 tanks of gas show up on the Visa statement, that magnetic strip loses its magic and the price suddenly matters. Last Spring when oil prices were stealing headlines, the Fed had to take note. According to DLT, deflation will rule, commodities/equities will collapse, and the govt will intervene. Then the Drunk will rise back up and hit his head again. Only this time the average daily oil flow rate will be even less than before. As we go forward, the volatility should in theory grow infinitely wilder. P.S. Somebody needs to message Grainbelt2 over at Agweb n tell him where everybody is at. P.S.S. Sandman, tomorrow I hope to get to a laptop where I can dissect your post above if I may.
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Post by ses on Aug 5, 2011 6:10:45 GMT -5
Looter, you ignorant slut, peak oil has been cancelled. There's a thousand fold more hydrocarbons just lying around on the surface of Titan, one of Saturn's moons, than all hydrocarbons that ever exsisted on earth. Obviously you never got that memo, otherwise you would be out flipping miami condo's and shopping for a new Gulfstream 650. Don't say I didn't warn ya.... Good to see you over here Thirsty. If we had a couple more guys we would have all of the brains from AgWeb posting here.
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Post by looter on Aug 5, 2011 7:30:53 GMT -5
EROEI (Energy Return on Energy Investment) and profits are eventually joined at the hip. When asked why they are losing money the big shale gas players blame the low gas prices they created. This is always a paragraph or two down from their statements on how astute they are at hedging, and how they are still enjoying 2008 prices thanks to their hedges. So even with 2008 prices they are losing money.
The whole shale gas thing is proving to be a gigantic fraud as more data on well life is collected.
This comment below came from Jeffrey Brown, a personal friend of mine in the business;
Chesapeake paid $185 million for the 18,000 acre DFW Airport lease in the Barnett Shale Play, and they predicted that they would be producing 250 MMCFPD by the end of 2011, with an EUR upper end estimate of one TCFE (including some allocation for liquids) from the lease.
Production peaked in October, 2009 at 77 MMCFPD (from 93 wells), and they were down to 32 MMCFPD in May, 2011. What is interesting is that the decline rate accelerated in the first five months of 2011.
The overall annualized decline rate from October, 2009 to May, 2011 was 55%/year.
From October, 2009 to December, 2010 the annualized decline rate was 46%/year.
From December, 2010 to May, 2011 the annualized decline rate accelerated to 81%/year.
In any case, at the 55%/year decline rate, the DFW Airport Lease would be down to 23 MMCFPD in December, 2011, versus Chesapeake's projection of 250 MMCFPD.
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