OPEC, for some quiet moments..

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Exxon Mobil Corp. and Chevron Corp., the biggest U.S. energy producers, hunkered down for a prolonged stretch of weak prices after posting their worst quarterly performances in several years. Exxon reported its lowest profit since 2009 as crude prices fell twice as fast as the world’s largest crude producer by market value could slash expenses. Chevron recorded its lowest profit in more than 12 years after the market rout forced $2.6 billion in asset writedowns and related charges.

Dark times ahead as oil slump lingers

But while there may be no end in sight for the industry’s dilemma, there may be a silver lining for producers, especially those using the downturn to hone drilling techniques, like hydraulic fracturing, to reinforce their output and profits later. Among those who see such positive signs for drillers is Bill White, the chairman of Houston operations for Lazard, the global investment bank, and a former three-term mayor of the Texas metropolis. “Most of the shale oil and gas is produced from a relatively small percentage of the shale wells and a fairly small percentage of the fracks in each well,” White said in an interview. “When the industry learns to drill more wells like the best wells and to make more fracks productive, you will see a vastly greater amount of oil and gas produced in the United States at the same total cost.”

Amid oil downturn, silver lining for shale producers?

The World Bank approved $700 million in investment guarantees for an offshore gas project in Ghana that will help the country address electricity shortages. It includes a $500 million payment guarantee from the bank’s International Development Association for gas purchases by the state-run Ghana National Petroleum Corp., the World Bank said in an e-mailed statement from Washington on Thursday. The remainder of the support is protection from the International Bank for Reconstruction and Development for private financing.

$700 million invested in Ghana offshore gas project

Saudi Arabian Oil Co. started injecting carbon dioxide to try and boost extraction rates from the world’s biggest oil field as the company steps up plans to recover more crude from its deposits. Saudi Aramco, as the company is known, already started injection and will put 40 million cubic ft of CO2 into the Uthmaniyah area south of the Ghawar field, it said Thursday in an Arabic statement on its website. About 40% of what’s injected will be stored in the field.

Saudi Aramco testing C02 to get more oil from giant Ghawar field

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More good news from the PV front reaffirms that financing is not a problem. On July 14, Deutsche Bank put out a report stating, “YieldCo vehicles [are] publicly traded companies created for the purpose of owning operating assets that will predictably produce cash flow. This predictable cash flow primarily comes from long-term contracts. Not all income investors are aware of this asset class, but according to [analyst Vishal] Shah, ‘The YieldCo phenomenon is global, growth rates are likely to be much faster than MLPs and size of the market is likely to be much larger than the oil and gas sector’."

Why Bigger Is No Longer Better In Energy | OilPrice.com

The world’s biggest oil companies are painting a grim picture of the future and speculators are listening. Hedge funds reduced bullish bets to the lowest level in five years as oil capped the worst month since the financial crisis. The net-long position in West Texas Intermediate contracted 7% in the seven days ended July 28, U.S. Commodity Futures Trading Commission data show.

Oil CEOs’ grim outlook rubs off on speculators fleeing market

North Carolina (Bloomberg) -- U.S. crude may temporarily rise above the global benchmark Brent next year as Middle East output expands while the nation’s supply boom fades, according to Bank of America Corp. West Texas Intermediate futures, which have been at a discount to Brent for most of the past five years, may need to strengthen to attract imports as U.S. output falters, the bank said in a report dated July 31. Output from the Bakken and Eagle Ford shale oil formations is “rolling over in response to lower prices,” Iran plans to expand exports following last month’s nuclear accord and other OPEC members are also raising production, the bank said.

U.S. oil seen trading above global prices next year in BofA view

The Monthly Energy Review and the Petroleum Supply Monthly have US production peaking, so far, in March and April. The Petroleum Supply Weekly has US production peaking in June. In the chart above I have averaged the Petroleum Supply Weekly into monthly data. All data is in thousand barrels per day,

US Oil Production Finally Starting to Decline - Peak Oil BarrelPeak Oil Barrel

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Oil has fallen to a six-month low, and hopes of a quick rebound are fading as demand heads into an autumn swoon. Brent crude tumbled below $50 on Monday for the first time since January. Gasoline fell the most in almost three years.

Oil’s drop below $50 may be just the start as demand swoons

Following the supply of a further 100,000 tonnes of East Siberian Pacific Ocean (ESPO) crude to the Chinese market in July, total volumes of ESPO crude exports by Gazprom Neft since the commencement of supplies have now reached 10 million tonnes. Payment for all ESPO crude supplies despatched by Gazprom Neft to China throughout 2015 have been made in Chinese currency: negotiations with purchasers on potential payment in rubles are ongoing.

Gazprom Neft’s exports of Siberian crude reach 10 million tonnes

Meanwhile, an industry which by simple math cannot generate free cash flow (FCF) on $100 oil is disintegrating before our eyes, with millions affected by the fallout. Targeting individuals has become a regular theme in the media but now it appears to have moved to certain industries. Below demonstrates that even on $100 oil shale isn’t self-sustainable on a FCF basis, never mind $50 oil.

Top 6 Myths Driving Oil Prices Down | OilPrice.com

LNG prices in Asia are linked to oil prices; when oil prices were high Asian economies were forced to pay exorbitant prices for their imported gas. In the case of Japan where the Fukushima incident led to the shutdown of 54 nuclear reactors, at one point LNG prices reached almost $20 per one million British thermal units (mmbtu). During that time the North American fracking revolution unleashed a huge amount of gas into the market, creating a fantastic opportunity for the U.S. gas industry to capture the arbitrage between Asian and North American prices and export daily billions of cubic feet to foreign destinations. So promising was the LNG play that a 2014 report by Citi Group projected that the U.S. would become the world’s leading LNG exporter by as early as 2020. But ironically the same fracking miracle that flooded the North American market with surplus natural gas also led to a spike in oil production and contributed to the fall in global oil prices. Since oil and gas prices are linked the collapse in oil prices led to an even sharper decline in LNG prices. LNG spot prices in Asia have recently fallen below $7/mmbtu, a level nearly one third of last year’s peak. While at the well head U.S. gas price –below $3/mmbtu – is among the cheapest in the world, when slapped with liquefaction and tolling costs the price could reach $9/mmbtu, no longer competitive in many markets including Asia.

U.S. Gas Exports: The Pipe Dream | RealClearEnergy

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Bechtel has been selected by Delfin LNG, a wholly owned subsidiary of Fairwood Peninsula Energy Corporation, to perform front-end engineering and design (FEED) for the first U.S.-based floating liquefied natural gas (FLNG) vessel to go into service at Port Delfin. Port Delfin is a proposed deepwater port and floating LNG facility that will be located approximately 50 miles off the coastline of Cameron Parish, Louisiana. Delfin LNG's project will be the first offshore floating natural gas liquefaction facility in the U.S. Upon the final investment decision, Bechtel is expected to design, build and commission the FLNG vessel.

Bechtel wins FEED contract for first FLNG facility in U.S.

Iranian Minister of Petroleum Bijan Zangeneh says Iran is planning to open a new chapter in cooperation with the French energy giant, Total, for the development of Iranian oil fields. Speaking to reports on the sidelines of a Wednesday meeting with visiting French Foreign Minister Laurent Fabius, Zangeneh discussed the highlights of the meeting.

Iran planning for investment from France’s Total

The main conclusion from our trip that was broadly shared by participants is that the fundamentals of the Russian energy companies remain among the strongest in the global energy universe. Attractive growth opportunities exist, along with government support through tax reforms. In addition, cash flow generation and dividend coverage is much stronger than for global peers. However, our discussions with investors suggest that many remain concerned over corporate governance and guarantees of minority shareholder rights.

Russian energy and the Kremlin discount, charted | FT Alphaville

The growing acceptance that oil prices could stay lower for longer will kick off a fresh round of cuts in spending and workforces for the oil industry. “It’s a monumental challenge to offset the impact of a 50% drop in oil price,” Fadel Gheit, an analyst with Oppenheimer & Co., told the WSJ. “The priorities have shifted completely. The priority now is to discontinue budget spending. The priority is to live within your means. Forget about growth. They are now in survival mode.”

Global Oil Supply More Fragile Than You Think - Yahoo Finance

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After years of languishing in a shale-induced coma, the U.S. natural gas market is waking up. Seasonal price swings will intensify as the country begins shipping liquefied natural gas cargoes to Asia and Europe later this year, said Bank of America Corp., RBC Capital Markets LLC and Wood Mackenzie Ltd. While that’s good news for traders yearning for volatility, it could be bad news for consumers.

Gas awakening from U.S. shale slumber as LNG shipments near

The American Petroleum Institute (API) is to work with the Environmental Protection Agency (EPA) to improve the agency’s new voluntary program on methane emissions but has cautioned against duplicative regulations on oil and gas operations. “Even as oil and natural gas production has risen dramatically, methane emissions have fallen, thanks to industry leadership and investment in new technologies,” said API Senior Director of Regulatory and Scientific Affairs Howard Feldman. “Methane is the primary component of natural gas, and emissions will continue to fall as operators innovate and find new ways to capture and deliver more of it to meet consumer demands.

API: Methane emissions are falling under existing regulations

All told, Arctic waters cover about 13 percent of the world’s undiscovered petroleum, or enough to supply the U.S. for more than a decade, according to government estimates.... With the global population rising from 7 billion to more than 9 billion by 2050 and total energy demand nearly doubling, “hydrocarbons are going to be needed for an awfully long time,” Pickard says. “That’s where Alaska fits into the picture.”

Inside Shell’s Extreme Plan to Drill for Oil in the Arctic - Bloomberg Business

Many cut drilling costs by as much as 30 percent, fired thousands of workers, and renegotiated contracts with oilfield service companies. “That postponed the day of reckoning,” says Carl Tricoli, co-founder of private equity firm Denham Capital Management. But it’s not clear what’s left to cut. The futures contracts and other swaps and options they bought last year as insurance against falling prices are beginning to expire. During the first quarter, U.S. producers earned $3.7 billion from these hedges, crucial revenue for companies that often outspend their cash flow.

Oil Prices: Shale Producers Face Reality - Bloomberg Business

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In the past, large integrated oil companies — like BP and Exxon Mobil — and state-owned oil companies have owned the more efficient, low-cost production while smaller oil companies faced higher barriers to entry. In the past, drilling oil necessarily required huge investments in platforms and equipment; massive balance sheets or state backing were virtually required to get into the market. But with lower-cost fracking technology, this has changed.

The new structure of the oil market - Business Insider

In a note to clients this week, analysts at Credit Suisse noted that ConocoPhillips and Total have both said the cost of production for US shale will fall 30%, and that 80% of shale oil produced will make financial sense to produce with prices below $60 a barrel at the end of this year.

The new structure of the oil market - Business Insider

A report from the Saudi central bank suggests while non-OPEC producers are not losing in the price war, more patience is needed from OPEC producers. But the effort to hurt other producers may be backfiring: Saudi Arabia is facing huge budget deficits this year due to low oil prices—the government has started dipping into its reserves and the deficit for 2015 is expected to be 20 percent of gross domestic product. Analysts say U.S. oil producers need to cut production by 500,000 barrels a day to bring supply levels down to boost prices.

Oil Prices Are Near Six-Year Lows Amid Supply Glut - The Atlantic

From Chevron Corp. to Royal Dutch Shell Plc, producers are firing thousands of workers and canceling investments to defend their dividends. Cutbacks across the industry total $180 billion so far this year, the most since the oil crash of 1986, according to Rystad Energy AS, an Oslo-based energy consultant.

To Please Investors, Big Oil Makes Deepest Cuts in a Generation - Bloomberg Business

[Putncalls]

Thanks for this thread STP. The cost of US shale oil at 60$ is a common figure. The banks know the cost of production for US companies. 60$ WTI plus some profit implies Brent around ~70+/-. My math says that's a good number for Papau LNG. Is it not?

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Thanks Put. Yes, I think they would be able to live with $70 oil, although it also depends a bit whether the offtakes will be the traditionally oil based pricing types. Something is got to give there, IMHO because at $70 oil, not many LNG projects will be profitable.

I argued three months ago that Saudi Arabia was shooting itself in the foot and there is little that happened since that has made me change my mind. Some argue that shale is all a credit infused bubble. Well, perhaps, but it could also be the case that rather than killing it, the Saudi's have actually made it more cost effective and resilient.

Given the steep decline rates of existing wells and the halving of rigs, one would expect production levels to have started declining more seriously by now, bit of a surprise, at least for me. The rest of the year will tell.

[MartiniStocks9756]

Utica Shale production up, drilling down More natural gas is flowing from the Utica Shale, even as companies drill fewer wells and struggle to sell their gas in a glutted market. The shale boom has the country awash in cheap natural gas, and the Appalachian Basin comprising Ohio, Pennsylvania and West Virginia is drowning in it. Shane Hoover CantonRep.com staff writer Follow @@shooverREP Posted Aug. 9, 2015 at 8:00 AM CANTON More natural gas is flowing from the Utica Shale, even as companies drill fewer wells and struggle to sell their gas in a glutted market. The shale boom has the country awash in cheap natural gas, and the Appalachian Basin comprising Ohio, Pennsylvania and West Virginia is drowning in it. Benchmark natural-gas prices dropped from a high around $6 per 1,000 cubic feet in February 2014 to a low of $2.68 in April 2015, according to Standard & Poor’s Ratings Services. S&P forecasts prices to stay below $4 per 1,000 cubic feet for the next several years as production exceeds demand. Natural gas from the Marcellus and Utica shale plays has pushed prices even lower in the Appalachian Basin. After costs are factored in, companies might get around $1 per 1,000 cubic feet. The pace of Utica drilling has fallen as a result. Ohio had 59 rigs operating in December. As of Aug. 1, it had 20 rigs. GROWING PLAY So why is natural-gas production growing? Because the Utica is a new play, said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. Drillers have been exploring the Utica since 2010, and the region remains one of the smallest natural-gas plays in terms of production. The U.S. Energy Information Administration says the Utica will produce 2.7 billion cubic feet per day in August. By comparison, the Marcellus will produce 16.5 billion cubic feet per day. But the Utica is the only region EIA projects to increase natural-gas production in August. Average per-well production is expected to grow by 186,000 cubic feet per day. As a new play, the Utica has a significant backlog of wells that continue to come online, Bennett said. Also, companies have to drill wells to hold the acreage they have leased. When they do, they are drilling the most productive wells they can. And some companies have a contractual obligations with pipeline owners to ship a set amount of natural gas. “A lot of these guys aren’t drilling wells because they want to, they’re drilling wells because they have to,” Bennett said. CASH FLOW Chesapeake Energy and Gulfport Energy have the most Utica wells of any companies in Ohio. Both drillers have increased production this year while their balance sheets have fallen into the red. Chesapeake’s Utica production increased 13 percent between the first and second quarters. The company started voluntarily curtailing production in July. Gulfport’s Utica production grew 16 percent from the first quarter to the second quarter, and the company forecasts a 27 percent jump in the third quarter. Building reserves and increasing production helps a company attract investors, and productive wells keep money coming in, said G. Allen Brooks, managing director of PPHB, a Houston-based energy investment firm.

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Utica Shale production up, drilling down More natural gas is flowing from the Utica Shale, even as companies drill fewer wells and struggle to sell their gas in a glutted market. The shale boom has the country awash in cheap natural gas, and the Appalachian Basin comprising Ohio, Pennsylvania and West Virginia is drowning in it. Shane Hoover CantonRep.com staff writer Follow @@shooverREP Posted Aug. 9, 2015 at 8:00 AM CANTON More natural gas is flowing from the Utica Shale, even as companies drill fewer wells and struggle to sell their gas in a glutted market. The shale boom has the country awash in cheap natural gas, and the Appalachian Basin comprising Ohio, Pennsylvania and West Virginia is drowning in it. Benchmark natural-gas prices dropped from a high around $6 per 1,000 cubic feet in February 2014 to a low of $2.68 in April 2015, according to Standard & Poor’s Ratings Services. S&P forecasts prices to stay below $4 per 1,000 cubic feet for the next several years as production exceeds demand. Natural gas from the Marcellus and Utica shale plays has pushed prices even lower in the Appalachian Basin. After costs are factored in, companies might get around $1 per 1,000 cubic feet. The pace of Utica drilling has fallen as a result. Ohio had 59 rigs operating in December. As of Aug. 1, it had 20 rigs. GROWING PLAY So why is natural-gas production growing? Because the Utica is a new play, said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. Drillers have been exploring the Utica since 2010, and the region remains one of the smallest natural-gas plays in terms of production. The U.S. Energy Information Administration says the Utica will produce 2.7 billion cubic feet per day in August. By comparison, the Marcellus will produce 16.5 billion cubic feet per day. But the Utica is the only region EIA projects to increase natural-gas production in August. Average per-well production is expected to grow by 186,000 cubic feet per day. As a new play, the Utica has a significant backlog of wells that continue to come online, Bennett said. Also, companies have to drill wells to hold the acreage they have leased. When they do, they are drilling the most productive wells they can. And some companies have a contractual obligations with pipeline owners to ship a set amount of natural gas. “A lot of these guys aren’t drilling wells because they want to, they’re drilling wells because they have to,” Bennett said. CASH FLOW Chesapeake Energy and Gulfport Energy have the most Utica wells of any companies in Ohio. Both drillers have increased production this year while their balance sheets have fallen into the red. Chesapeake’s Utica production increased 13 percent between the first and second quarters. The company started voluntarily curtailing production in July. Gulfport’s Utica production grew 16 percent from the first quarter to the second quarter, and the company forecasts a 27 percent jump in the third quarter. Building reserves and increasing production helps a company attract investors, and productive wells keep money coming in, said G. Allen Brooks, managing director of PPHB, a Houston-based energy investment firm.

It looks like the oil market adjustment has to come from expensive conventional oil (deep ocean, arctic, tarsand, etc.) and perhaps a face volte of OPEC (I don't expect that anytime soon, but this isn't doing them any good, that's for sure). The first is already happening with some $160B in cancelled projects, but that will take time to work through, and shale output might still decline as well