I'm saddened by the general public, (50% of which have and IQ below average) believe the pres is the only influence on the gas prices. We enjoyed cheap gas with the pandemic because industry shut down and didn't need fuel leading to oversupply. Now we are in an era of increasing demand and well prices are going up. Then you have the public policies and the 2 pres adding to that. Be nice when putin looses his grip on power and gets his dirt nap.
My neighbor thought that when we went into iraq after the WMDs that didn't exist we owned the country's oil output and should have $2.29 gas for life. Maybe if we had not gone in to take out Sad Damn things would be better today with better response from OPEC about increasing production.
Then we have the previous drop in oil prices that caused thousands of wells in the US to be capped. I'll ask Lee for input on this, but the US required these closed wells be cemented...rendering them essentially dead. Why couldn't they just be capped and able to be put back into production without too much work when the price of oil went back up?
And then we had a pres that slowed moving to alt energy as he courted the coal vote. A good 60,000 jobs in coal vs the 3 million (end of 2020 and shrinking, 3.36M end of 2019. And we all know renewable energy jobs will grow.
I'm not saying we all need a battery car, had em as a kid, take too long to charge. But a thoughtful move to alt energy would leave enough liquid fuels for our cross country trips, pickup trucks and such. Problem is thoughtful...we don't have that in Congress right now we have two armies fighting each other from separated camps and no middle ground to be seen. Sad really.
We have 3 distinct leases....
Federal---- The Fed's own the minerals under these tracts. It can be public or private surface., A lot of split estate stuff in Wyo, private surface, fed minerals. It used to be we could file for a hardship shut in, file one sheet of paper and you could suspend operations for one year. Not now, you can shut em in for a bit but now they want to know what your plan is . And for each well shut in they up the plugging bond. If you shut em in for more than a few months, you will do an integrity test of the casing, meaning, run a packer on tubing and pressure up the casing. If it does not pass, fix it or plug it. In rare cases you can get a variance. If it does pass they'll give you up to a year. Fed royalty rate 12.5%
State ----- The minerals are owned by the state, usually state surface , rarely private surface. If you are requesting a long term shutin, 10.00 per foot of depth in bonding, for a 10,000 ft well, that's a 100K. That's about what it takes to plug one with no problems or special conditions such as multiple fresh water zones to isolate. The state also requires an integrity test of the casing in addition to the bond. So , many times on a marginal state well they will get plugged. The state can be real dickheads, moreso than the feds lately. A lot of younger folks in the state oil and gas commission than the BLM...getting infiltrated with tree huggers. Sate royalty rate 16.66 %
Private---- The mineral owner is private, the surface can be owned by the same entity or someone different. Private leases are administered by the state but operational aspects can be vastly different in terms and conditions. In most private leases you produce every 30 days or you have lost the lease, but there are often covenants to take payments in lieu of production. A lot of room for different ways to do things, and ya just don't know until lease negotiations are done or in our case reading the lease agreement before buying. A lot of times on private leases the yearly damages and access costs can be exorbitant, depending on the original lease agreement. A lot of times if it was a hot lease prospect with enormous potential the pot was sweetened with increased royalty rates or damages to get the mineral owner to lease. Royalty rate 12.5 to 22%
It used to be easy to shut wells in and weather a low price storm. And each well is unique as to its lease operating expenses. You can have a 50 bblopd well that loses money compared to a 5bbl well that makes money. That 50 bbl well could make 1000 bbls of water that has to go back in the ground so there's another well bore. The 5 bbl well could be one of those sweethearts that makes no water, high gravity sweet crude that keeps running for years with no breakdowns. And everything in between. Different operators can operate cheaper than others due to their overhead being less or more skilled and experienced at curing problem child wells. Nothing is set in stone and profit can be a very fluid target based on a lot of things beyond our control. What we are experiencing now is not really good for oil producers if it goes on too long. Demand destruction, increased costs for goods and services, sometimes ALOT more. A couple three months of 100 oil would be nice and go a long way to healing us up, but this price bump has an inflation component that is going to negate any enduring profit scenarios. On the roller coaster once again.
One thing that has got my attention is the fact that in all other runups like this the deducts would also rise. When oil was 100 back in 2014 the deduct for minnelusa was 45.00, green was 25.00. Today the deducts have been going down every month as the posted prices have been getting ridiculous. That tells me there is indeed a supply problem. Our deducts for March are 2.15 for green and 7.00 for black sour . And the deducts have gone down for 7 months in a row......
