I work for an energy company and all we are talking about is cutting budget which is normal for this price environment. Ive read some articles that said they expect this oil trend to continue well into 2016, so hopefully everyone can hang on for one more year.
-
Last edited by CollierAnderson; 10-21-2015, 08:13 AM. -
Agreed try to to the 10% rule. dont buy things unless its 10% of your total net worth for example if you have 100k in bank you should be driving a 10 k truck to be smart. money does what you tell it to doComment
-
Good advice for all (not just OF). We all know plenty of folks who do the opposite--$7k in the bank and drive (as compared to own) a $70K truck.Originally posted by freerange View Post
I loaded up on Key, Forbes ES and Linn several months ago and not much positive has happened since. Several of my friends in the Permian basin have been let go and others are hanging on at reduced salary/wages. I was in Midland at $12-$15 oil and it was UGLY. Keep your chins up and heads down!Comment
-
-
Interesting local article today.
Link to article here :
Editor’s note: An earlier version of this story contained an incorrect time frame in a quote from Dan Fine about when prices might dip into the $23 to $28 per barrel range. The quote has been corrected to show that projection for late 2017.
New Mexico’s oil and gas industry is bracing for another round of volatile ups and downs in crude prices that could push the market – and ultimately production in the southeastern part of the state – to its lowest point in more than a decade.
The industry has already been battered by steep price declines over the past year that cut the price of crude from more than a $100 a barrel in mid-2014 to about $44 now. That’s led to thousands of layoffs in New Mexico’s oil patch in the southeastern part of the state and, to a lesser extent, in the northwestern San Juan Basin.
But things may get a lot worse thanks to Iran, which is expected to aggressively ramp up its oil production next year as international sanctions are lifted following last summer’s deal designed to limit Iran’s ability to develop a nuclear weapon. Iran has enough oil reserves to rival Saudi Arabia on world markets and, as it begins to flood the West with new crude, prices are likely to crash to levels not seen since 2003, said Daniel Fine, associate director of the New Mexico Center for Energy Policy at the New Mexico Institute of Mining and Technology.
“Once Iran is able to export to western markets, it can rapidly move back to its full capacity, which in 1979 was 5.7 million barrels per day – second only to Saudi Arabia,” Fine said. “If Iran produces what it’s qualified to produce, world oil prices could drop back to the 2003 range of between $23 and $28 a barrel, which would have severe consequences for New Mexico. Harder times are coming.”
At $23 to $28 per barrel, New Mexico production would hit bottom, said Gregg Fulfer, Lea County Commission chair and owner of the Fulfer Oil and Cattle Co. in Jal.
“When Iran comes back on, we could easily see another $15 per barrel drop in price,” Fulfer said. “That will really hurt us. They’d be putting a lot more crude on an already over-supplied market and I think we’ll see our economy tank a lot more than today.”
Production still up – for now
Iran’s exports could tip the balance because U.S. and world oil production has not receded, despite the price crash, since last year. As of this summer, U.S. production remained at nearly 9.4 million barrels per day – a 32-year high that domestic producers reached for the first time last December, according to the U.S. Energy Information Administration. And, as of August, the Organization of Petroleum Exporting States was still producing nearly 1.3 million barrels per day more than its official ceiling of 30 million barrels, according to Platts, a global energy information service.
Pump jacks draw oil from wells in the Loco Hills oil fields between Artesia and Hobbs.
It’s that global overproduction – combined with sluggish economies, and declining demand in China, Europe and elsewhere – that triggered the price crash last fall. That, in turn, triggered a huge nationwide downturn in expansion of the industry, which for the past decade had been growing rapidly because of modern drilling technologies that opened up new, difficult-to-reach oil reserves in hard shale-rock formations.
Nationwide, active drilling rigs dropped from nearly 2,000 to below 1,000 early this year, with more than 100,000 people in the oil and gas industry losing their jobs.
In New Mexico, the rig count reached 41 in early October, down from about 100 in mid-2014. About 50 direct employees and at least 25 more service jobs are connected to each operating rig. After counting for additional layoffs among operators and other service-related companies in general, at least 6,000 people are estimated to have lost their jobs in New Mexico since prices began to crash, said Wally Drangmeister, vice president and director of communications for the New Mexico Oil and Gas Association.
Still, U.S. oil output has remained fairly steady because most operators have not shut active wells. Rather, they’ve cut back on new drilling.
Many large companies also hedged their operations with pre-signed contracts before the price crash that allowed them to continue earning more than $90 per barrel well into 2015.
And most companies have managed to significantly cut expenses by improving operating efficiencies. Operators in New Mexico’s Permian Basin in Lea, Eddy and Chaves counties have managed to cut costs by up to 50 percent, in good part because lower drilling activity has eased the burden on local infrastructure and freed up service companies,. That’s allowed operators to negotiate lower prices for services to get their product to market, said Raye Miller, president of Regeneration Energy Corp. in Artesia, a small, independent company.
“With the decline in activity, there’s a lot more competition among service providers, so costs have come down a good deal,” Miller said. “Many companies are seeing about a 20 percent reduction just in well costs compared to a year ago.”
Many are also still drilling wells and then holding off on completing them until prices come back up, Miller said. That keeps activity going while reducing expenses.
“At $43 or $44 a barrel, you can still get a return on investment for many wells in about two years, even with a $6 million investment to drill out,” Miller said. “But with other less productive wells, you can’t get a return for at least eight to 10 years at those prices, so companies are now carefully selecting the prospects that can still generate positive rates of return.”
In addition, developers are laying more pipeline and other infrastructure in preparation for the future, easing the bottleneck that during the boom years had driven up costs for local producers. As a result, companies in Southeast New Mexico are now getting full market price for West Texas Intermediate – the benchmark for domestically produced oil – instead of shaving off $10 to $12 per barrel because of losses in getting the oil to market, as was previously the case, Fulfer said.
As a result, output from New Mexico’s oil patch has actually increased this year. The state produced more than 95 million barrels of oil from January through August. That’s a 20 percent jump from the 76 million barrels produced in the same period in 2014, according to preliminary statistics from the state Oil Conservation Division.
Rough times coming
With a new round of price volatility setting in, production will likely begin to recede in 2016.
“We’ll see a significant retraction in output next year in New Mexico and nationwide,” Fine said. “By mid-to-late-2016, I expect New Mexico production to decline by at least 5 to 8 percent.”
The decline could be a lot steeper if prices do indeed fall into the $23-plus per barrel range.
“At that price, companies can still operate many existing wells, but they wouldn’t drill any new ones,” Miller said. “The rig count would drop at least to half of what it even is now.”
Industry analysts differ on how fast Iran can ramp up its output and on whether coming production declines in the U.S., and possibly OPEC nations, might offset the increase on world markets. But Fine – a former research associate at the Massachusetts Institute of Technology who participated in MIT’s World Oil Forum – said Iran could add up to 1.5 million barrels per day to world markets within two years.
“We could see a $23 to $28 per barrel price range by late 2017 that could last for an 18-20-month period or longer,” Fine said.
Oil prices already are down significantly since August, at one point dipping to $38 per barrel.
“It’s expectation in financial markets,” Fine said. “As soon as the (nuclear) treaty on Iran passed in Congress, prices immediately began to decline.”
Producers will have little recourse. Most of those contracts that locked in prices above $90 per barrel have expired and new hedge contracts are, at best, in the $60 to $62 range, Fine said.
Oil producers and industry associations are lobbying heavily for the federal government to lift the country’s ban on crude oil exports to boost markets and profits. But President Barack Obama will likely veto such legislation if passed by Congress.
And even if the ban were lifted, Brent crude – the international oil benchmark – is commanding only about $3 more per barrel today than West Texas Intermediate, offering little price advantage to domestic producers who might export their oil, Fine said. Moreover, eliminating the export ban could lead to even more market oversupply and further depress prices.
The good news is that producers are not pulling out of New Mexico as they did during past busts, Fulfer said. Most are digging in to await a price turnaround and they’ll be ready to ramp up production when market dynamics improve.
The bad news is, that could take awhile, since prices will need to climb at least above $60 per barrel before new drilling becomes profitable again.
“We really need about $65 per barrel for companies to go back to work,” Fulfer said. “With Iran coming back on the markets, I think everyone will sit back and wait for the world economy to come back. We need to see China and other countries show increasing demand and, until that happens, I don’t think we’ll see a lot of work happening in New MexicoComment
-
Nah I plan to also enjoy life while I'm young. You can have fun and not be broke without being so frugal you feel like a broke college kid eating ramen.Originally posted by freerange View PostComment
-
Hey Oilfield Guys!!
Originally posted by bphillips View Post
I agree. 100K a year is a lot of money and you should be able to enjoy a $30k vehicle a year on that. I know a lot of people that spend almost 50% and live a good comfortable life. Take 150K combined income and add two 35k vehicles that's almost 50%. That's $12,500 a month gross income and the payment is around $1300 a month. I do agree with keeping it around 10% of your gross income on your payments. It also depends on your other expenses of courseLast edited by Black Ice; 10-26-2015, 11:20 PM.Comment
-
I work for a small service company (maybe 300 employees) over in Scotland but am based in Houston. We got lucky and were told we are safe for 2015...but 2016 is soon approaching. Most of my work is overseas but man it sure is VERY slow for us as well. Hate to say it but some middle east drama wouldn't hurt...Comment
-
Still laying off where I work and no overtime really to be had. It's depressing.Comment
-
We are on our last decommissioning job out here in the Gulf. Good chance my barge will be at the dock when I come back for my next hitch and that will mean 8 hour days until March or April. Glad I have a job but that is a huge pay cut for 4 months. Hopefully we can pick up a few more jobs to get us through the end of the year.Comment
-
DIL sent me this, thought it might help some of you oil guys....
Comment
-
My company just took a 7.25% off our day rates today. Needing this price of oil to go back up but still thankful I have a job!Comment
-
Hey Oilfield Guys!!
Originally posted by TalonErickson7 View Post
I'm surprised that more companies aren't trying this rather than laying folks off. Glad you're still employed!Comment
-
Shoot I am 3rd party on a Seadrill rig and the guys that work for seadrill took a 20% pay cut!!Originally posted by ttubudd View PostComment
-
A lot of companies went this route first and still are having to lay people off. It is going to still get worse until it picks back up again.Originally posted by ttubudd View PostComment
Comment