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Title : Dueling Banjoes Comes To Mind -- April 6, 2018
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Dueling Banjoes Comes To Mind -- April 6, 2018

Crash? There's a very, very short summary of the Permian over at SeekingAlpha today but it articulates at least to some extent what I've been noticing for the past year. A reader comments on a SeekingAlpha article regarding the Permian:

• operations in the Permian Basin are like being on a tread mill; once drilling activity slows production will drop like a rock
• current production growth is limited due to the lack of transportation or the ability to flair NG from existing wells
• service costs are escalating at double-digit rates with the acreage cost in the prime areas running as high a $60,000 or more per net mineral acre it makes more sense to sell your acreage than to drill it. I've sold some in excess of $80,000 per net mineral which is just nuts 
• current pumping technology is not able to pump the oil from laterals that are running over 10,000 feet without constant breakdowns resulting in higher operating costs
• well communication has been a known problem is the Basin for a long time and is only getting a lot worse. It's a known fact that you can take a 30-year-old Spraberry well that is producing 1-2 Bbls per week and shut it in for an extended period of time and the well will recharge itself over time. It's one of the more permeable basins in the country [this one I'm not concerned about]

Those were the very same concerns we heard during the Bakken boom and the Bakken did just fine. The difference for me:

• Permian acreage trading for as much as $80,000 / acre
• during the early Bakken boom, WTI was selling for well over $100/bbl 

But this is the problem: because the Permian is getting so much more coverage than the Bakken ever did (except for the negative stories on fracking and pipelines), once we start hearing about operators failing in the Permian, it will have a snowball effect. It's easy to forget that not all operators survived in the Bakken either.

Operators that bought in late (XOM?) could be in trouble; operators that bought decades ago (COP) might do very, very well.

Disclaimer: this is not an investment site. Do not make any investment, financial, job, travel, or relationship decisions based on what you read here or what you think you might have read here.

The link also includes a nice graphic for those interested in the Concho - RMS Permian deal.

The comment posted above were in reply to a "Blue Quadrant Capital Management" article. In response to another comments, "Blue Quadrant" replied:

If you go to this site, you will see that wells completed in 2010 in the Bakken are still flowing .. in fact production from these wells is still at 20% of the initial production rate ...

The long production tail post the first few years of decline is actually quite a positive dynamic for shale companies It doesnt seem to be the same in the Permian though , as we can see wells that were completed in 2012 , although they are still flowing now, the production from these wells are only around 10% of the initial production rate ... whether this will change or not, or if it is due to more intensive early fracs in the Permian as opposed to the Bakken , or an entirely different geology, cannot say ...

This link (the same as above) has a very, very nice interactive chart regarding the Bakken. 

No, I'm not going to post Dueling Banjoes. I never cared for that song. Instead:

Dreamin', Johnny Burnette

https://ift.tt/2dZyQXu

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