Shale and depletion-what happens?

  • 1.  Shale and depletion-what happens?

    Posted 10-01-2019 10:25
    All, I have 30 + years in this industry as a geologist and Landman. Land work is in short supply and when the shales are pretty much poked to death and depleted, what are they gonna do then? It used to be the source. Now it's the source rock. Conventional might hang in there, but the low hanging fruit has been plucked. Like the bumper stickers used to say. "Would the last person to leave Midland turn out the lights? This was just posted to see other peoples sentiments on the O&G Biz today.

    Rutledge Deas
    Professional Land LLC
    Spring TX
    (281) 796-8066

  • 2.  RE: Shale and depletion-what happens?

    Posted 10-03-2019 15:05
    Edited by Hugh Elmore 10-04-2019 12:47

    Hugh Elmore
    Land Manager
    Interstate Explorations, LLC
    Houston TX
    (713) 308-4924

  • 3.  RE: Shale and depletion-what happens?

    Posted 10-03-2019 15:06
    I think for a while, it will be cyclical as always.  PE projects will run out of money and either sell at a loss or just shut down their operations when the fund comes due.  The wells that are holding acreage are going to decline rapidly, causing a significant drop in production and increase in prices.  Since most oil and gas leases today have CDC and pugh clauses, there will be open acreage to be had and enticing in the rising price environment.  That will cause an uptick in activity and I'm sure this go round, groups backing the new players will have newer, longer term business plans than just to buy and flip.  Even longer term though, you can only drink the milk shake for so long before you run out of shake.

    Cody Martin CPL
    Martin Land Management, LLC
    Beaumont TX
    (409) 548-1258

  • 4.  RE: Shale and depletion-what happens?

    Posted 10-07-2019 10:33
    The American producers will not be able to control prices. We have been our own worst enemy. Great for Technology, but we ain't OPEC. Cyclical is right, but it's getting tougher and tougher. The VC money is leaving and companies can't survive on cash flow, unless you are Exxon or a big major, but even they get heartburn. American Producers will never cut back. Too many bills to pay. TGIF

    Rutledge Deas
    Professional Land LLC
    Spring TX
    (281) 796-8066

  • 5.  RE: Shale and depletion-what happens?

    Posted 10-03-2019 15:07
    In 2005 T. Boone Pickens and others talked about "Peak Oil", insinuating there were no big oil discoveries to be made in the US.  Then came the Bakken, Three Forks, Permian, and other shale plays that now dominate US oil and make us oil independent.  There may be more plays out there, keep the faith and keep looking.


    Bill Thomas

  • 6.  RE: Shale and depletion-what happens?

    Posted 10-03-2019 15:09
    I think that the CEOs of the Shale Exploration Companies all received their MBA's from the same school -
    A mail in diploma from Sears Roebuck.

    Its dumb and dumber.  And you are absolutely right - what is the point in drilling up your resource and loosing money?
    The shareholders should start by firing the CEOs and Board of Directors.

    Any CEO and Board of a public or private company that thinks that drilling up a company resource and loosing money is a model for success needs to be out on the street looking for a job - as an employee !!!!

    The good news is that the investing public has finally caught on.  This should get better in time.

    John C. Sipple, Point Clear, Alabama

    John Sipple
    Southern Oil Exploration, Inc.
    Fairhope AL
    (251) 517-7362

  • 7.  RE: Shale and depletion-what happens?

    Posted 10-07-2019 10:32
    Well said. It's like beachfront property, GOD isn't making any more of it.

    Why would a Co. drill up these precious resources at a loss, while investors/shareholders lose value?

    They are very afraid the market's response to production decline. The old days of shale - grow your production at any and all costs - even if you lose money doing it.

    I think the market will forgive production decline if a Co operates within cashflow - especially if the Co is saving those valuable PUDs for a higher commodity price environment.

    Dominic Pallone
    Denver CO


  • 8.  RE: Shale and depletion-what happens?

    Posted 10-07-2019 10:34
    The Frio formation along the Gulf coast is a difficult formation with current technology, but it is very thick and has massive reserves, it is mostly minimally developed.

    The oil and gas on the West side of the Rockies is enormous, maybe the biggest in the world, also mostly undeveloped. One of the biggest wells in North America, for years, was in Nevada.

    My understanding is that both of those plays are difficult to develop based on their natural fractures, the natural fractures are difficult to detect, predict, and find. So the risk is that you drill a dry well right next to a pay dirt well, all because the fractures ran a certain way. The rock/shale itself is also less development friendly than currently developed plays, so those natural fractures play an out sized role in how good a well is.

    The working understanding in the industry is that America has at least several hundred years of oil and gas at current depletion rates.

    I think that eventually we will also see more solid case law on breaking up leases that are held by a single, minimally producing well. Obviously, the operator has an obligation to develop the land, a single <100BBL/mo well from 1945 holding a 5000 acre lease, eventually isn't going to fly, and land owners are going to want development enough to legally pursue it. It is also possible that PE could start funding these suits in exchange for a stake in the minerals or royalty, that would be wild to watch. When those leases start getting broken up, they will be replaced with more modern leases that will have sophisticated vertical and horizontal severances that will leave room for more reliable land work on a continual basis.

    I also think that we are seeing a shift from PE funded, smaller and medium sized independents to very large independents and majors. We will have to see how that impacts contract land work, the assumption is that it will have a negative impact. These companies have developed huge land databases over the years/decades and often don't require a lot of title work to lease up a given area. That is especially true in the Permian where some companies maintain county-wide or near county-wide title databases. With those databases, all they need is a small land tech team to input the new documents that get recorded on a daily basis.

    Marcus Brown, RPL CPLTA CNSA
    Independent Field Landman
    Brown Land Services, LLC

  • 9.  RE: Shale and depletion-what happens?

    Posted 10-07-2019 13:08
    I recently worked a Frio play in SE Texas. Disappointing for the Operator, so they left. The low hanging fruit is pretty much picked. All plays will become more expensive and technology challenged as we move on. Economics and infrastructure play a big role. You are seeing that in the Permian. $55.00 Oil is not gonna cut it, when wells cost 8-12 million apiece. Also, people should get used to a 3-1 ROI unlike 50-1 in the bygone years. Its easy to find Oil & Gas. It's tough to make money. No matter where you are. Not to mention all of the environmental folks. The big picture? It will continue to be gut wrenching siege to stay employed as a contract Landman. Love the optimism. Better have it in this business.