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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsOil’s $5 Trillion Permian Boom Threatened by $70 Crude
By Joe Carroll and Edward Klump - Oct 25, 2013
Bryan Sheffield, a third-generation oil wildcatter in Texass Permian Basin, knows what hell do if crude drops to $80 a barrel: shut down half his drilling rigs and go on a takeover hunt for weaker rivals.
Sheffield is among producers whove together invested $150 billion in the Permian since 2010 seeking their piece of an oil trove estimated to be worth as much as $5 trillion. As the money pours in, risks are mounting of a bust as analysts including Marshall Adkins of Raymond James & Associates Inc. forecast crude is heading down to $70 a barrel next year, a price that would slow drilling in the most expensive U.S. shale formation.
While traditional wells have been drilled in the Permian since the 1920s, shale producers have become giddy over the potential of the regions vast overlapping layers of oil-soaked shale rock. Pioneer Natural Resources Co. (PXD) estimated the remaining yield at the equivalent of 50 billion barrels, more than any field on Earth except Saudi Arabias Ghawar. The varied geology, though, makes it more costly to explore and develop.
Thats the double-edged sword, said Benjamin Shattuck, an analyst at Wood Mackenzie Ltd. in Houston. Multiple oil zones layered one atop another provide ample potential for riches, but you also have to be a knowledgeable and good operator in order to drill economic wells out there.
If oil drops another 18 percent to $80 a barrel, wells in some parts of the Permian that sprawls beneath Texas and New Mexico will become money-losers, said Tim Rezvan, an analyst at Sterne Agee & Leach Inc. in New York.
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http://www.bloomberg.com/news/2013-10-24/oil-s-5-trillion-permian-boom-threatened-by-70-crude.html
TexasTowelie
(112,252 posts)He thinks that he is guaranteed the same hefty checks each month without realizing that production slows when the wells age and that if the price falls then the wells will be capped. He isn't the sharpest tool in the shed...
Purveyor
(29,876 posts)wti dropped to $18bbl.
What a gloomy, dire atmosphere that was to work in.
Paladin
(28,266 posts)leftyohiolib
(5,917 posts)Paladin
(28,266 posts)That was the popular bumper sticker in Texas, Oklahoma and other energy-producing states during the last big crash. Some things never change---here we are in a bigger oil boom than ever before, and some industry people think it will last forever. And it never, ever does.