AuthorTopic: Fracker Debt Bubble  (Read 113741 times)

Offline RE

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Another one bites the dust...twice!

HTF does this work?   ???   :icon_scratch:

RE

http://oilprice.com/Energy/Energy-General/US-Oil-Company-Sets-New-Record-with-Second-Bankruptcy-in-One-Year.html

U.S. Oil Company Sets New Record: Headed For Second Bankruptcy in One Year


For the second time in less than a year, oil services provider Hercules Offshore is heading for Chapter 11 bankruptcy protection by entering a restructuring support agreement (RSA). The Wall Street Journal writes that ''In a prepackaged bankruptcy, companies line up creditor support for their debt-payment plans before seeking chapter 11 protection, allowing them a speedier—and cheaper—trip through bankruptcy.

Last August, Hercules filed for Chapter 11 protection—the first time. At the time, the company showed US$13 billion in debt and just over US$546 million in assets, trying to restructure with a new US$450-million credit line.

Related: Clinton Chasing Votes With Fracking U-Turn

It resurfaced from this bankruptcy only in November, but the perpetual low oil price environment led to a slump in exploration investment and project cancellations.

Under the new Chapter 11 filing, Hercules is selling assets to pay off investors. The company has reportedly agreed to transfer the right to buy the Hercules Highlander jack-up rig to a subsidiary of Maersk Drilling for US$196 million.

The company said that its international units will not be included in the Chapter 11 filing, but will be part of the sale process.

In just the first four months of 2016 there were double the the number of energy company bankruptcies than in all of 2015. The total secured and unsecured defaults rose to $34 billion, double the $17 billion total for all of 2015. In 2015, 42 oil companies filed for bankruptcy.

In April this year, 27 North American oil and gas companies filed for bankruptcy—11 of them filing under Chapter 11, according to a Haynes and Boone report. Some 69 North American oil and gas producers have filed for various forces of bankruptcy.

More than one-third of public oil companies globally face bankruptcy, according to a new Deloitte report that paints a fairly gloomy picture of the U.S. shale patch as it struggles to survive under mountains of debt.
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Offline agelbert

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Re: Fracker Debt Bubble
« Reply #436 on: May 27, 2016, 04:08:06 PM »
Another one bites the dust...twice!

HTF does this work?   ???   :icon_scratch:

RE

http://oilprice.com/Energy/Energy-General/US-Oil-Company-Sets-New-Record-with-Second-Bankruptcy-in-One-Year.html

U.S. Oil Company Sets New Record: Headed For Second Bankruptcy in One Year


For the second time in less than a year, oil services provider Hercules Offshore is heading for Chapter 11 bankruptcy protection by entering a restructuring support agreement (RSA). The Wall Street Journal writes that ''In a prepackaged bankruptcy, companies line up creditor support for their debt-payment plans before seeking chapter 11 protection, allowing them a speedier—and cheaper—trip through bankruptcy.

Last August, Hercules filed for Chapter 11 protection—the first time. At the time, the company showed US$13 billion in debt and just over US$546 million in assets, trying to restructure with a new US$450-million credit line.

Related: Clinton Chasing Votes With Fracking U-Turn

It resurfaced from this bankruptcy only in November, but the perpetual low oil price environment led to a slump in exploration investment and project cancellations.

Under the new Chapter 11 filing, Hercules is selling assets to pay off investors. The company has reportedly agreed to transfer the right to buy the Hercules Highlander jack-up rig to a subsidiary of Maersk Drilling for US$196 million.

The company said that its international units will not be included in the Chapter 11 filing, but will be part of the sale process.

In just the first four months of 2016 there were double the the number of energy company bankruptcies than in all of 2015. The total secured and unsecured defaults rose to $34 billion, double the $17 billion total for all of 2015. In 2015, 42 oil companies filed for bankruptcy.

In April this year, 27 North American oil and gas companies filed for bankruptcy—11 of them filing under Chapter 11, according to a Haynes and Boone report. Some 69 North American oil and gas producers have filed for various forces of bankruptcy.

More than one-third of public oil companies globally face bankruptcy, according to a new Deloitte report that paints a fairly gloomy picture of the U.S. shale patch as it struggles to survive under mountains of debt.

Chapter 11 is a corporate welfare queen bailout mechanism, ESPECIALLY if the corporation is a fossil fuel corporation.

WHY? Because the "restructuring" of the corporate finances are figured by trustees in Fossil Fuel FRIENDLY Bankruptcy courts (mostly in TEXAS) that, in virtually ALL of the fossil fuel Chapter 11 proceedings last year, PROJECTED $60 per barrel prices in 2016.

It didn't happen. HOWEVAH, the oil pigs got away with operating WITHOUT paying their main creditors based on projected earnings happy talk BULLSHIT that the Bankruptcy Courts swallowed hook, line and (bought and paid for) sinker.

When ANY other corporate enterprise, such as a retailer or, dare I say, a Renewable Energy product manufacturer  ;), goes into Chapter 11, they do not get this totally irresponsible, irrational and corrupt court protection and help.

We hear wailing and gnashing of teeth about Renewable Energy "scams and boondoggles" and all that "subsidy" money waste" and "giant scam taxpayer loans" for Renewable energy (statistically insignificant compared with fossil fuel subsidy and taxpayer loan swag), BUT NOT A PEEP about how fossil fuel corporations, that should have gone the way of the dodo bird, are still there.

The fact is that there is no way that ANY of these oil pigs can make money, even with their subsidy swag (along with the hidden pollution "externalized costs" subsidy swag) at less than around $60 a barrel. And THAT is why the Bankruptcy courts push the BULLSHIT that they will be "profitable again", because, uh, the price of crude will soon exceed $60 a barrel...

The HELL of it is, they may be right! 

But NOT because of supply and demand. NO SIR! It will be because of GAMED SPECULATION in the commodities trading of oil and gas futures, just like happened around 2003. ANY study of that period confirms the FACT that there was NO "lack of supply" to justify the price shocks.

At present the recent 80% rise in per barrel prices was ALL SMOKE AND MIRRORS.

The fact that a one billion barrel oil basin has just been discovered and announced ACCESSIBLE to current drilling technology off the Falklands SHOULD, in a sane world, spell the DOOM of any oil pig that requires $60 a barrel to survive.

But as long as we have bought and paid for bankruptcy courts in Texas, and the government backed gamed commodities trading CRAP, the WELFARE QUEEN babying of oil and gas corporations will continue. :emthdown: :emthdown: :emthdown:

 

« Last Edit: May 27, 2016, 04:35:43 PM by agelbert »
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Offline Palloy

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Re: Fracker Debt Bubble
« Reply #437 on: May 27, 2016, 05:52:44 PM »
I agree with the bit about it being a fake bankruptcy, because none of the parties involved actually want the company to stop pumping.  But I doubt the judge has much to do with it if all parties agree the price will go up, so the judge is NOT NECESSARILY corrupt - he just rubber-stamps the new deal.

And I agree that FF corps get huge direct and indirect subsidies, as do corps in other fields of opportunity which you want to ignore.

And I agree that it would be surprising if oil wasn't gamed by speculators in the same way that all other commodities are.  When the current price is settled by a "free market" auction system, it will have much bigger variability than a centrally planned system would have.  The world production data obviously takes time to become available, if ever, so EIA/IEA historical data are largely estimates, and future predictions are just guesses, made to appeal to their masters - capitalist governments and energy corporations.



But claiming the importance of the Falkland Islands' 1 billion barrels of oil 300 miles offshore in the Southern Ocean, in a place which the UN has ruled belongs to Argentina and NOT the UK, is ludicrous.  Is the 1 billion barrels the P90 figure or the P10 figure?  The small 2010 find has taken 6 years to bring on-stream, and there will be no urgency in starting new development work costing tens of billions of dollars.  Whenever development starts, it will have to be permanently guarded by the Royal Navy, operating 8,000 miles from home, for over 20 years.

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Offline RE

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Big Energy Pays For States to Ban Residents From Banning Fracking
« Reply #438 on: September 01, 2016, 12:25:04 AM »
https://www.occupycorporatism.com/big-energy-pays-for-states-to-ban-residents-from-banning-fracking/

Big Energy Pays For States to Ban Residents From Banning Fracking


29 Aug, 2016 by Susanne Posel

Susanne Posel ,Chief Editor Occupy Corporatism | Media Spokesperson, HEALTH MAX Group


Anti-fracking measures proposed in Colorado will not appear on the ballot for residents to vote on after they failed to garner the voter support necessary.

One of the measures “would have required new wells to be at least 2,500 feet from homes and schools” while the other would have provided local governments with the ability “to restrict or ban energy development”.

The proposals required 98,492 signatures, but supporters fell just short of the signatures needed. Ryan Hughes , president of Localized Strategies and leader of the signature petitions, said they might ask the Colorado Secretary of State to review disallowed signatures.

The Colorado Secretary of State claimed that the petitions “contained potential forgeries”; including three signatures provided “by a circulator named Sdeed Merghani”.

The petitioners said they “filed more than [the necessary] amount”.

Industry response to this failure resulted in energy corporation’s stocks getting a sudden spike on the stock market.

Journalist Jeff Daniels explained : “Synergy Resources gained nearly 4 percent on the day, while Bill Barrett Corp. rose more than 4 percent. Also, PDC Energy and Noble Energy climbed 2 percent and about 1.8 percent respectively.”

In states where oil and natural gas is a profitable export, there has been a trend by capitol governments to prevent residents from banning fracking.

Last year, Texas Governor Gregg Abbot made it illegal for residents of any city in the state to ban hydraulic fracturing (fracking) practices with the signing of House Bill 40 .

Abbott claimed the ban on the fracking ban does “profound job of helping to protect private property rights,” ensuring that “those who own their own property will not have the heavy hand of local government deprive them of their rights. HB 40 strikes a meaningful and correct balance between local control and preserving the state’s authority to ensure that regulations are even-handed and do not hamper job creation.”

The oil and gas industry has contributed $1,519,469 to Abbott, helping to win his place as governor of Texas, which has turned out to be a sound investment.

Ed Longanecker, president of the Texas Independent Producers & Royalty Owners Association (TIPROA) called HB 40 a “balanced approach that protects the ability of municipalities to reasonably regulate surface activity related to oil and gas development, while offering the regulatory certainty necessary for our industry operations.”

HB 40 helps fracking corporations by presetting a “four-part test for allowing cities to regulate drilling operations above ground, such as emergency response, noise and setbacks. But the law says those controls must be ‘economically reasonable’ and can’t hinder or prohibit the work of a ‘prudent operator’.”

The false-security clause in the bill refers to a “safe harbor” provision that actually protects fracking efforts for 5 years because they are “considered commercially reasonable”.

Cities such as Fort Worth have more than 2,000 active gas producing wells and more development is expected without hindrances from residents.

In order to prevent Denton residents from enacting their ban on fracking, the Texas Oil and Gas Association (TOGA) and the Texas General Land Officer (TGLO) filed injunctions against the municipality.

Those lawsuits are expected to be rescinded.

Perhaps not surprising, the authors of this bill have direct ties to the oil and gas industry.

State Representative Drew Darby currently “ receives income from Leclair Operating, a petroleum company in Abilene, and has assets in Kachina Pipeline Inc. valued at more than $25,000.”

The Texans for Public Justice explained State Representative Jim Keffer “who heads the House Energy Resources Committee, holds an interest in the Emerald Royalty Fund, which specializes in mineral rights. His broad stock portfolio includes shares in more than a dozen oil and gas companies, according to a 2011 filing with the Texas Ethics Commission. He received nearly $73,000 in the 2011-12 election cycle from the industry.”

House Representative Phil King has received an estimated $35,000 from oil and gas industry corporations, and sits on the House Energy Resources Committee.

House Representative Senfronia Thompson has received $23,750 from the energy and natural resources industry. Oil and gas gave Thompson $5,750.

House Representative Rene Oliveira was given $69,600 from the energy and natural resources industry in 2012 alone.
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Offline Palloy2

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Re: Fracker Debt Bubble
« Reply #439 on: July 22, 2017, 05:30:14 PM »
http://www.zerohedge.com/news/2017-07-22/i-have-taken-closer-look-data-eia-why-horseman-global-aggressively-shorting-shale
"I Have Taken A Closer Look At The Data From EIA...": Why Horseman Global Is Aggressively Shorting Shale
Tyler Durden
Jul 22, 2017

Having staged a dramatic reversal at the end of 2016, when the world's formerly most bearish hedge fund - it was net short over 100% in late 2016, which in turn led to a -24% return last year...

... rerisked, turning flat in just a few months, Horseman Global - now short developed markets and long emerging markets, and having lost 8.31% through the end of June - is once again dipping its toes in shorting stocks in general, and shale producers in particular. And, in Russell Clark's latest letter, the Horseman CIO explains why.



From Horseman Capital Management's July Monthly Newsleter

    Your fund made 85bps net last month. Gains came from FX book and long book.

     

    The big returns in fund management for me always come from finding some perceived wisdom, in which the market so completely believes that its fundamentals are never questioned. Theoretically this should not happen that often, but in my experience, it’s a constant feature of the market. Once you have built a business around an economic proposition you have no financial incentive to question it.

     

    The Japan bubble was built on the view that Japanese corporate culture was inherently superior. The Asian financial crisis had its genesis in the view that Asian corporates borrowing in US dollars was risk free. The dot com bubble in the view that all tech stocks would prosper. The financial crisis was built on the view that US house prices could never see a nationwide fall. The European crisis was built on the assumption that all European government bonds were of equal value. And the recent commodity crash was built on the assumption that Chinese consumption and low interest rates made commodities safe.

     

    Having grown up, and spent my entire investing career in periods of bubble inflation and deflation, I am constantly minded to look for where the market is deceiving itself, and then positioning the fund to benefit from the process of realisation. Many years ago, I could see that the commodity bubble was ending, and Chinese growth was peaking. This meant that commodities would be weaker and inflation lower, making a short commodities, long bond position very effective. It was a great strategy, but its effectiveness ended early last year.

     

    The good news is that new market delusion is now apparent to me. When I moved long emerging markets, and short developed markets, the one commodity I could not give detailed bullish reasons for was oil. Unlike most other commodities, the oil industry, in the form of US shale drillers has continued to receive investment flows throughout the entire downturn.

     

    I had shorted shale producers and the related MLP stocks before, and I knew there was something wrong with the industry, but I failed to find the trigger for the US shale industry to fail. And like most other investors I was continually swayed by the statements from the US shale drillers that they have managed to cut breakeven prices even further. However, I have taken a closer look at the data from EIA and from the company presentations. The rising decline rates of major US shale basins, and the increasing incidents of frac hits (also a cause of rising decline rates) have convinced me that US shale producers are not only losing competitiveness against other oil drillers, but they will find it hard to make money. If US rates continue to stay low, then it is possible that the high yield markets may continue to supply these drillers with capital, but I think that this is unlikely. More likely is that at some point debt investors start to worry that they will not get their capital back and cut lending to the industry. Even a small reduction in capital, would likely lead to a steep fall in US oil production. If new drilling stopped today, daily US oil production would fall by 350 thousand barrels a day over the

    next month (Source: EIA).

     

    What I also find extraordinary, is that it seems to me shale drilling is a very unprofitable industry, and becoming more so. And yet, many businesses in the US have expended large amounts of capital on the basis that US oil will always be cheap and plentiful. I am thinking of pipelines, refineries, LNG exporters, chemical plants to name the most obvious. Even more amazing is that other oil sources have become more cost competitive but have been starved of resources. If US oil production declines, the rest of the world will struggle to increase output. An oil squeeze looks more likely to me. A broader commodity squeeze also looks likely to me.

In the latest letter's sector allocation, Clark also added the following section providing a more detailed explanation why he has boosted his shale short to 15.5%:

    We are negative on the US shale sector, during the month we increased the short exposure to oil exploration and MLPs to about 15.5%. Conventional oil wells typically produce in 3 stages: the start-up rising production stage lasts 2 to 3 years, it is followed by a plateau stage which lasts another 2-3 years and a long declining stage, during which production declines at rates of 1% to 10% per year. These wells generally produce over 15 to 30 years (Source: Planete energies).

     

    In contrast, production from unconventional / shale wells peaks within a few months after it starts and decreases by about 75% after one year and by about 85% after two years (Source Permian basin, Goldman Sachs). This means that, in order to keep producing, shale producers need to constantly drill new wells.

     

    Shale drilling is characterised by drilling horizontally into the layers of rock where hydrocarbons lie. Then hydraulic fracturing which consists of pumping a mixture of water, proppant (sand) and chemicals into the rock at high pressure, allows hydrocarbons to be extracted out to the head of the well.

     

     

    Since 2016, as oil prices rallied, the number of rigs in the Permian basin, which is currently the most sought after drilling area in the US, rose from about 150 to almost 400. Furthermore, operations have moved into a high intensity phase as wells are drilled closer together, average lateral lengths increased over 80% from 2,687 ft in early 2012 to 4,875 ft in 2016 and the average volume of proppant per lateral foot more has than doubled (Source: Stratas Advisors).

     

    Intensive drilling is causing a problem called ‘frac-hits’, which are cross-well interferences. These happen when fracking pressure is accidently transferred to adjacent wells that have less pressure integrity. As a result a failure of pressure control occurs, which reduces production flow. In the worst cases, pressure losses can result in a total loss of production that never returns. According to a senior reservoir engineer at CNOOC Nexen, frac-hits have now become a top concern, they can affect several wells on a pad along with those on nearby pads (Sources: Journal of Petroleum Technology).

     

    A former engineer for Southwestern Energy said that frac-hits are very difficult to predict, the best way to respond is with trial and error and experimenting with well spacing and frac sizes to find the optimal combination.

     

    In May Range Resources reported that it was forced to shut wells in order to minimise the impact of frac-hits. This month Abbraxas Petroleum said it will be shutting in several high-volume wells for about a month (Source: Upstream).

     

    In the Permian basin new well production per rig continued to decline in June, from 617 barrels per day down to 602. In the meantime, legacy oil production, which is a function of the number of wells, depletion rates and production outages such as frac hits, is continuing to rise. (Source: EIA)

In light of the above growing short bet on shale, this is how Clark is positioned:

    The analysis leads me to be potentially bearish on bonds, bearish on US shale drillers, but bullish on commodities. Over the month, we have added to US shale shorts, while also selling our US housebuilder longs. We continue to build our US consumer shorts, where the combination of higher oil prices and higher interest rates should devastate an industry already dealing with oversupply and the entry of Amazon into ever more areas. The combination of long mining and short shale drillers has the nice effect of reducing volatility, but ultimately offering high returns. The combination of portfolio changes has taken us back to a net short of over 40%. I find market action is supporting my thesis, and the research and analysis is compelling. Your fund remains short developed markets, long emerging markets.

While we will have more to say on this, Clark may be on to something: as the following chart from Goldman shows, the number of horizontal rigs funded by public junk bond issuance has not changed in the past 3 months. Is the funding market about to cool dramatically on US shale, and if so, just how high will oil surge?

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Offline UnhingedBecauseLucid

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Re: Fracker Debt Bubble
« Reply #440 on: September 30, 2017, 04:48:33 PM »
Since this is my first post on the forum, might as well use this opportunity to reprimand RE for his insufficient Doomertainement provision.

Case in point : the latest A. Berman USGS conference video would have been a great source of conversation and chuckles for all the Diners --- You should have posted it with some of your thoughts RE !!!

https://youtu.be/xtEZY59EthU

Berman is always entertaining ! We have so little occasions to gut laugh RE, how DARE YOU rob us of such a rare delight ?!
http://www.doomsteaddiner.net/forum/Smileys/dd1/WTF.gif
How dare you !?

Well, my job is done here,... If we ever meet, you'll owe me a Fukitol and a cigarette, and we'll call it even...
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Offline RE

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Re: Fracker Debt Bubble
« Reply #441 on: September 30, 2017, 07:06:01 PM »
Since this is my first post on the forum, might as well use this opportunity to reprimand RE for his insufficient Doomertainement provision.

Case in point : the latest A. Berman USGS conference video would have been a great source of conversation and chuckles for all the Diners --- You should have posted it with some of your thoughts RE !!!

https://youtu.be/xtEZY59EthU

Berman is always entertaining ! We have so little occasions to gut laugh RE, how DARE YOU rob us of such a rare delight ?!
http://www.doomsteaddiner.net/forum/Smileys/dd1/WTF.gif
How dare you !?

Well, my job is done here,... If we ever meet, you'll owe me a Fukitol and a cigarette, and we'll call it even...

:hi: to the Diner from Lurkerville UBL.  :icon_sunny:

It takes at least 1000 Posts to get a Fukitol & Cigarette. :P

RE
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This one is going nowhere for a while.

RE

http://www.latimes.com/local/lanow/la-me-california-offshore-drilling-20180106-story.html

Trump's plan to open California coastal waters to new oil and gas drilling probably won't go very far


Oil companies may have trouble justifying the cost of new offshore developments at a time when hydraulic fracturing on land is cheaper. Above, rigs in the Santa Barbara Channel in March 2015. (Al Seib / Los Angeles Times)

Bettina Boxall and Tony BarbozaContact Reporters

Jan 6, 2018

There are two things working against the Trump administration’s proposal to open up California coastal waters to new oil and gas drilling: state regulators and simple economics.

California has powerful legal tools to head off new offshore development, and the price of oil offers little incentive to the energy industry to pursue expensive drilling projects next to a hostile state.

“I don’t think there’s any reasonable chance that there will be any leasing or drilling along the coast,” said Ralph Faust, former general counsel for the California Coastal Commission. “This just seems like grandstanding” by the Trump administration.

The Interior Department on Thursday released plans to open vast areas off the Atlantic and Pacific coasts to new oil and gas exploration and drilling through a five-year leasing program that would begin in 2019.

But there are myriad obstacles opponents can throw in front of the proposal, not to mention questions about whether the oil industry has much of an interest in California’s offshore reserves at a time when domestic oil production is at its highest level in decades.
California offshore drilling could be expanded for the first time since 1984 under federal leasing proposal

Under the plan, the federal government would offer 47 leases in U.S. waters on the outer continental shelf, including two each off the Northern, Central and Southern California coasts and one off Washington and Oregon.

The governors of all three states issued a joint statement Thursday saying they would do whatever it takes to block new leasing off their shores, which include some of the nation’s most pristine coastlines.

The first hurdle for the Trump plan is a period of public comment and an extensive environmental review under federal law, which opponents can use to challenge the proposal as ecologically harmful.

In California, the state coastal commission also has the authority to review activities in federal waters to ensure they are consistent with the state’s coastal management plans.

“The commission has extremely broad and very powerful authority to say ‘no’ to federal actions that would harm the coast of California and harm coastal waters,” said Steve Mashuda, an attorney at Earthjustice, a nonprofit environmental law organization.

The commission is ready to use it.

“Nothing galvanizes bi-partisan resistance in California like the threat of more offshore oil drilling,” coastal commission Chairwoman Dayna Bochco said in a statement. “We’ve fought similar efforts before, and we will fight them again.”

While the U.S. Secretary of Commerce could override a commission finding that new oil drilling violated the state’s management plan, federal courts have tended to side with states in such contests.
Trump has big plans for offshore oil development. But will it ever happen?

And California has another weapon: State Lands Commission jurisdiction over tidelands and waters that extend roughly three miles offshore.

That gives the commission the ability to stop the construction of pipelines that are the most economical way of transporting oil and gas from offshore rigs to land.

“In some ways that is an even more formidable tool that the state of California and like-minded local governments can utilize to deny approval of things like oil terminals and pipelines crossing state sovereign tidelands,” said Richard Frank, director of the California Environmental Law & Policy Center at UC Davis.

There are 23 oil platforms in federal waters off California and four in state waters — near Santa Barbara County, Huntington Beach and Seal Beach. There are also four artificial islands used as drilling platforms off Long Beach and one off Rincon Beach in Ventura County.

But images of oil-drenched sea birds and fouled beaches during the massive 1969 Santa Barbara oil spill soured the state on offshore oil development. There have been no new federal leases off California since 1984.

Moreover, uncertainty over prices makes costly new drilling projects in California’s deep offshore waters difficult to justify financially compared with cheaper hydraulic fracturing operations on land.
Gov. Jerry Brown: Trump's plan to expand offshore drilling is 'reckless, short-sighted'

Oil is trading at about $60 a barrel — roughly the price that would make an offshore project profitable, said Peter Maniloff, an economist at Colorado School of Mines who studies the oil and gas industry.

But “you want to be confident that prices will remain that high before undertaking a very large investment to drill an offshore well,” Maniloff said. “And it’s hard to be confident of that because fracking has driven prices down.”

“This announcement is not a game changer for the oil industry or for California,” he added. “I would not expect substantial drilling or production off California.”

Michael Livermore, an environmental law professor at the University of Virginia, said that “based entirely on the Department of Interior’s own analysis, drilling off the coast of California is a terrible idea.”

He cited a section of the leasing proposal that found waters off Central California did not meet the government threshold for benefits exceeding the costs of oil drilling. “Waiting in the region could provide greater value to society than leasing in the 2019–2024 Program,” according to the report.

Livermore also questioned whether any company would be willing to risk the public backlash were there to be a spill in such closely watched waters.

David Hackett, an oil industry expert and president of Stillwater Associates, an Irvine-based transportation energy consulting firm, supports more oil development off the California’s coast.

But given fierce state and local opposition, he doubts new oil rigs will start popping up in the Pacific.

“Even if California was supportive, it would take a decade for production to begin,” he said.
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🛢️ Permian Oil Boom Threatens To Overtax Electrical Grid
« Reply #443 on: April 09, 2018, 12:03:52 AM »
So now, more debt to string wire for MOAR electiricty to keep pumping the Permian.  That will end well.  ::)

RE

https://oilprice.com/Latest-Energy-News/World-News/Permian-Oil-Boom-Threatens-To-Overtax-Electrical-Grid.html

Permian Oil Boom Threatens To Overtax Electrical Grid
By Tsvetana Paraskova - Apr 06, 2018, 3:00 PM CDT Transmission Lines Texas


The shale boom in the Permian where companies are intensively drilling while keeping costs low has led to an unprecedented electricity demand in West Texas, straining the grid as local utilities try to keep up with demand.

In the 2.0 shale boom in the Permian, companies are replacing the expensive diesel-powered and natural gas-powered generators for powering compressors with a cheaper option— hooking up to the grid, the Houston Chronicle reports.

This shift among oil companies to use more electricity from the grid is catapulting electricity demand to unprecedented highs, straining the grid and threatening its reliability because of potential overload.

Three utilities—Oncor, Texas-New Mexico Power, and AEP Texas—serve most of the areas close to the Permian. Power demand in and around the hottest U.S. shale play is expected to rise to 1,000 megawatts by 2022, up from just 22 megawatts in 2010, according to Houston Chronicle.

“To say that this is load growth like we have not experienced before is kind of an understatement,” Jeff Billo, senior manager of transmission planning at the Electric Reliability Council of Texas (ERCOT), which oversees 90 percent of the state’s grid, told the Houston Chronicle.

“There is not an area in ERCOT that has seen that kind of load growth before. That is unheard of,” Billo added.

Related: Does Conoco Know Something That Its Competition Doesn’t?

The utilities are seeking fast-tracked approvals of projects to build new transmission lines and are upgrading existing lines and substations.

Oncor requests from regulators to fast-track two projects worth an estimated US$223.6 million. Oncor will invest most of its annual US$1.7-billion budget on transmission upgrades on West Texas, as it expects electricity demand in the Permian to triple over the next five years, spokesman Geoff Bailey told the Houston Chronicle.

Texas-New Mexico Power, with some 20,000 customers in West Texas, has started to upgrade lines and substations as its demand jumped to nearly 250 MW in 2017 from 96 MW in 2014, spokesman Eric Paul told the Houston Chronicle.

By Tsvetana Paraskova for Oilprice.com
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🛢️ How US Oil Booms & Busts Hit Industrial Production
« Reply #444 on: November 19, 2018, 01:23:17 AM »
https://wolfstreet.com/2018/11/16/how-the-us-oil-gas-boom-fuels-industrial-production/

How US Oil Booms & Busts Hit Industrial Production
by Wolf Richter • Nov 16, 2018 • 17 Comments   
Fueled by cheap money and by dashed hopes of high oil prices.

Industrial production in October rose 4.1% from a year ago, the Fed Board of Governors reported this morning. This was in the upper portion of the range since 2010. It was powered in part by the blistering oil & gas production boom that followed the Oil Bust of 2015 and 2016.

This chart shows the percent change in industrial production from the same month a year earlier. The red bars – industrial production falling year-over-year – coincide with the recession in the goods-based economy, the transportation recession, and the Oil Bust:


As part of the overall index, manufacturing rose 2.7% from a year ago, utilities 1.7%, and mining, which includes oil & gas extraction, jumped 13.1%. Oil & gas extraction on its own soared 16.5% from a year ago.

On a monthly basis oil & gas extraction edged down a smidgen over the past two months from a spikey record in August, when it had soared 22.9% year-over-year.

The chart below shows the Industrial Production sub-index for crude oil and natural gas extraction. Note the brief effects of Hurricane Katrina when production along the Gulf Coast was shut down, the Financial Crisis when everything came to a standstill, the subsequent fracking boom, the oil bust in 2015 and 2016, and then the renewed boom. Since the trough of the oil bust in September 2016, the index has surged 31.5%:


It has been a wild ride in the oil & gas sector. At the end of 2008 – following the Lehman Moment – everything came to a halt for a couple of months, but then activity rebounded. Starting in 2011, the fracking boom, fueled by waves of new money trying to find a place to go, took off. At the time, oil prices (WTI) ranged from $75 to $113 a barrel. But in July 2014, oil prices began to dive, and in 2015, the oil bust hit production. At the end of 2016, the oil and gas boom took off again. This chart shows the year-over-year percentage change. Note the 22.9% spike in August:


The oil and gas boom is economically important not only in the oil patch but in the broader US economy, with high-paying jobs in the oil field, transportation, manufacturing, specialized services, and high-tech. An oil boom requires equipment of all kinds; it fires up manufacturing; pipelines have to be built; all this equipment has to be transported, triggering a transportation boom, and the like. It usually leads to a construction boom as well, with all the secondary effects.

The US has been the largest natural gas producer in the world for several years. In August 2018, at least for that month, the US became the largest crude oil producer in the world. For better or worse, this sector has become a powerful player in the US economy. It’s fueled by cheap money and by hopes of high oil prices. Alas, the cheap money is evaporating, and hopes of high oil prices have taken a serious beating in November. Boom and bust, always. Hence the old rule in the business: Never drill with your own money.

Mortgage rates are climbing faster than the 10-year Treasury yield. Read…  Mortgage Rates May Hit 6% Sooner, as Fed Sheds Mortgage-Backed Securities, But What Will that Do to Housing Bubble 2? 
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FEDS TO SELL EVEN MORE PUBLIC LAND FOR FRACKING NEAR SACRED PARK
« Reply #445 on: February 07, 2019, 11:14:57 AM »

January 31, 2019

Lorraine Chow, EcoWatch
Waking Times

The U.S. Bureau of Land Management (BLM) is pushing ahead with the sale of oil and gas leases on land outside of Chaco Culture National Historical Park and other sites revered by Native American tribes, The Associated Press reported.

The latest listing—which quietly appeared on the BLM website not long after the government reopened after the shutdown—comes about a year after then-Interior Secretary Ryan Zinke postponed a lease sale in the Greater Chaco Region in response to intense public pressure over cultural and environmental concerns.

BLM will open a protest period for comments from Feb. 11 through Feb. 20 for a sale scheduled for March 28, according to the agency’s notice. More than 50 parcels in New Mexico and Oklahoma will be on the auction block.


https://www.wakingtimes.com/2019/01/31/feds-to-sell-even-more-public-land-for-fracking-near-sacred-park/
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🛢️ Megadeal Triggers M&A Spree In The Permian
« Reply #446 on: April 16, 2019, 01:26:44 AM »
Nothing like a few LBOs to really rack up the debt!

RE

https://oilprice.com/Energy/Energy-General/Megadeal-Triggers-MA-Spree-In-The-Permian.html

Megadeal Triggers M&A Spree In The Permian
By Nick Cunningham - Apr 15, 2019, 6:00 PM CDT


Late last week, Chevron announced its decision to takeover Anadarko Petroleum for $33 billion, a deal that could mark a watershed moment for the Permian basin and the U.S. shale industry as a whole.

The deal is widely seen as potentially the beginning of a massive round of consolidation in the shale industry. Already, the Permian basin has rapidly shifted in favor of the largest oil companies, with ExxonMobil, BP and Chevron betting their futures on West Texas and New Mexico. Exxon expects to produce 1 million barrels per day (mb/d) from the Permian by 2024, while Chevron had announced plans to produce 900,000 bpd by the same date.

The acquisition of Anadarko grows Chevron’s position in the Permian, while also adding offshore and LNG projects to the oil major’s portfolio. Chevron’s total production will jump almost to parity with Shell and ExxonMobil, rising to 3.6 mb/d after incorporating Anadarko. “We have always considered Anadarko as having the best positioned acreage in the sweetest spot of the Permian Delaware basin,” said Per Magnus Nysveen, head of research at consultant Rystad Energy. “Combining these shale assets with Chevron’s strong legacy position in the same area, we will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader.”

In fact, while Chevron’s prior goal was to produce 900,000 bpd in the Permian within five years, it may now be able to achieve 1.6 mb/d after taking over Anadarko, according to Rystad, pushing it far ahead of Exxon.

Even as the majors scale up operations in the Permian, small- and medium-sized shale drillers have run into trouble, weighed down by an inability to turn a profit, pressure from shareholders, and more recently, the onset of stiff competition from the majors. Meanwhile, shale wells have run into production problems, with well interference, depletion, and a worsening gas-to-oil ratio hitting the bottom line. Even very large oil companies, such as Anadarko, are not immune.

If smaller companies can’t do the job, then perhaps many of them will fold and turn over the keys to the majors. The largest oil companies, such as Exxon and Chevron, have certain advantages that their smaller peers do not: they can spread out costs, operate at very large scales, and make investments with long time horizons. “Companies are starting to take a much longer view and develop these assets like a megaproject with a complex supply chain and significant spending in concentrated areas,” Noah Barrett, an energy analyst at Janus Henderson Investors, told the Wall Street Journal. “That amount of capital and logistical intensity will play well into the strengths of larger companies.”

Analysts say that Chevron’s acquisition of Anadarko could spark more M&A activity. “If you have large acreage positions like Pioneer and Concho, or lesser but more contiguous positions like Parsley Energy, and you’re a pure-play Permian producer, there’s no doubt that you are on the radar screen for these majors,” said Rob Thummel, portfolio manager at Tortoise Capital Advisors, according to Reuters. Reuters notes that other shale companies saw their share prices jump after the Chevron-Anadarko announcement, a sign that investors see the odds of acquisition rising. Pioneer Natural Resources, Concho Resources and Parsley Energy rose on the news. So did large oil companies with offshore positions, such as Hess and Noble Energy.

“Chevron’s deal for Anadarko escalates the race with Exxon Mobil for the Permian,” said Fernando Valle and Jonathan Mardini, analysts with Bloomberg Intelligence.

The deal marks the end of an era of sorts in the Permian. The days of hardscrabble mom-and-pop shale drillers arguably ended years ago, but the Chevron-Anadarko deal portends the end of the drilling frenzy for medium and even large oil companies. In a few short years, the Permian could be defined, if not exclusively, then perhaps predominantly, by the oil majors. The majors were late to the game, but they are set to ultimately dominate the largest shale basin on the planet.

By Nick Cunningham of Oilprice.com
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🛢️ Canadian Oil Driller Abruptly Shuts Down, Abandons 4,700 Wells
« Reply #447 on: May 03, 2019, 12:00:04 AM »
https://oilprice.com/Latest-Energy-News/World-News/Canadian-Oil-Driller-Abruptly-Shuts-Down-Abandons-4700-Wells.html

Canadian Oil Driller Abruptly Shuts Down, Abandons 4,700 Wells
By Irina Slav - May 02, 2019, 11:00 AM CDT


A junior Canadian gas E&P company has shut down abruptly, leaving as many as 4,700 wells behind, CBC reports, quoting the Alberta Energy Regulator, which said it had sent Trident Exploration Corp. an order to manage its wells, to which the company did not respond.

Trident closed two days ago and announced it would not be returning any money to shareholders or holders of unsecured bonds, adding it had well abandonment and reclamation liabilities of US$244.78 million (C$329 million) to deal with.

According to the Alberta Energy Regulator, these 4,700 wells add to more than 3,000 abandoned wells in Canada’s oil heartland that are currently awaiting remediation. The regulator also said it had been working with the company to smooth its exit from the industry and had ordered it to decommission the wells or transfer them to another company. Trident failed to comply with the order, the AER said.

"Trident does not have the funds to operate its infrastructure or enter into creditor protection. As a result, they have decided to walk away, leaving more than 4,400 licensed sites, many of them active, without an operator," the watchdog told CBC.

Data from the Alberta Energy Regulator says there are some 170,000 abandoned wells in the province, most of these sealed and taken out of service or reclaimed. The number represents more than a third of the total well count in Alberta, with the watchdog noting in its overview on the topic that even their abandonment, the wells remain the responsibility of the company that owns them.

Two years ago, think tank C. D. Howe warned Alberta was facing a well cleanup and reclamation bill of US$5.95 billion (C$8 billion) and needed to change the way it made companies take financial charge of the abandonment and reclamation of their wells. Since then, this figure has grown.

By Irina Slav for Oilprice.com
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🛢️ The Permian Basin Is Chock Full Of Potential Takeover Targets
« Reply #448 on: May 03, 2019, 12:29:54 AM »
https://www.forbes.com/sites/davidblackmon/2019/05/02/the-permian-basin-is-chock-full-of-potential-takeover-targets/#31b425454992

May 2, 2019, 07:36am
The Permian Basin Is Chock Full Of Potential Takeover Targets
David Blackmon


Midland, Texas skyline. Thanks to the oil boom taking place in the Permian Basin, Midland is the fastest-growing city in the nation. Getty

With its April 26 announcement that it has an agreement-in-principle for the sale of its last remaining assets in the Eagle Ford Shale, Pioneer Natural Resources is on the verge of fulfilling its objective, announced in February 2018, of attaining a new status as a pure Permian Basin play. Whether intentional or not, the company has also just made itself a more attractive takeover target for bigger companies looking to increase their holdings in the world's hottest oil field.

A map of Permian acreage owned by each major operator, provided by the folks at industry solutions firm DrillingInfo, can be seen at this link. It shows that Pioneer's assets are concentrated in the Midland Basin, which makes up the Eastern half of the greater Permian region. While the Midland Basin is not currently considered as attractive as acreage in the Delaware Basin in the Western half of the Permian region, potential suitors will look on Pioneer's big swath of concentrated acreage with great favor.

The ownership of highly-contiguous tracts of land allows operators to take advantage of all manner of economies of scale, fully-access the underground resource with the drilling of fewer wells, and also allows for much more efficient distribution of water used in operations and frac jobs via surface pipes rather than in hundreds of tanker trucks. Companies whose own current acreage adjoins to Pioneer's holdings would be able to take even more advantage of such efficiencies. As we can see on the map, major operators with significant existing acreage adjacent to Pioneer's include ExxonMobil and Chevron .

Another aspect of being a single-play producer that would make Pioneer an attractive target is that its status would make the job of integrating its assets and organization into those of a new acquiring company much simpler than doing the same with a global operator and LNG export company like Anadarko . Should Chevron lose out in its bid for Anadarko, would it shift focus to Pioneer? It certainly seems possible, given these efficiencies.

As speculation grows that the industry is moving into a period of rapid consolidation that is highly-centered on the Permian, it is an interesting exercise to look at other relationships between companies with highly-contiguous holdings in the region. While obviously not determinative in and of itself, this is an attribute that acquiring companies are always looking for when evaluating potential deals.

One relationship that really jumps out from the DrillingInfo map are the respective holdings of Chevron and Apache Corporation. The field personnel of these two companies must literally be tripping over one another going in and out of cafes and convenience stores all across this South Carolina-sized region.

That relationship is especially apparent in the Delaware Basin, but exists in various parts of the Midland Basin and Southeast New Mexico, the other part of the play that has heated up in the past year.  Apache is, like Anadarko, a complex company with holdings in multiple states, the Gulf of Mexico, the North Sea and Egypt, so integration following a merger would be a big challenge. But its Alpine High resource, combined with its other holdings throughout the region, would seem to make it an attractive candidate for Chevron, should its play for Anadarko ultimately fall through.

EOG Resources EOG +0%, another of the largest independent producers, owns acreage that bumps up against both Chevron and Oxy in various parts of the play. Its acreage interplay with Oxy's in Southeast New Mexico is especially striking. Noble Energy is another large independent with holdings that are contiguous with both Oxy and Chevron in the Delaware Basin.

Then there are the other pure Permian play companies like Diamondback Energy FANG +0%, Parsley Energy and Concho Resources CXO +0%. The contiguous nature of Parsley's acreage to that of ExxonMobil is undeniable. The two companies bump up next to one another in various areas throughout the heart of the Midland Basin, and in the center of the Delaware Basin.

Diamondback, a company that has rapidly grown its Permian holdings to almost 200,000 acres in recent years, holds several large tracts of acreage that are highly-contiguous with both ExxonMobil and Chevron in the Delaware Basin. The fact that Diamondback also owns smaller tracts scattered throughout the Midland Basin that aren't closely-contiguous with each other or with potential suitors could reduce its attractiveness as a takeover target, but this is all very high-quality, high-value acreage that would become an attractive asset on any company's balance sheet.

Concho is another company that owns several large acreage tracts along with myriad smaller tracts scattered throughout the Permian region. Two of its larger tracts - one in the Midland Basin, one in the Delaware Basin - lie adjacent to Oxy acreage, and a similar relationship between those two companies exists with many of Concho's smaller tracts throughout Southeast New Mexico.

If you want to think about a really big deal, note that ExxonMobil and Oxy hold positions that are highly-contiguous with one another all across the region, especially in Southeast New Mexico.

Again, nothing in this exercise is definitive. There is no question that Anadarko's highly-concentrated leasehold of a vast swath of the prolific Delaware Basin is a major factor that makes it such a desirable takeover target for multiple companies who own adjoining acreage, but it is just one of many factors that go into the contemplation, negotiation and execution of any merger deal.

Having said that, the ability to take advantage of the economies of scale and efficiencies offered by combining large, continuous tracts of land is a great starting point for any deal, one that makes some of those other factors easier to digest. Plus, if we're going to engage in speculation, it's good to do so from a starting point based in real data, rather than rumor and gossip.

 
Follow me on Twitter at @GDBlackmon
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🛢️ Debunking The Oil Industry Cash Flow Myth
« Reply #449 on: May 12, 2019, 01:13:14 AM »
Nothing like Creative Bookkeeping and Endless Debt to show a "profit".  ::)

RE

https://oilprice.com/Energy/Energy-General/Debunking-The-Oil-Industry-Cash-Flow-Myth.html

Debunking The Oil Industry Cash Flow Myth
By Robert Rapier - May 11, 2019, 12:00 PM CDT


One of the refrains I often hear about the oil industry — particularly on those focused-on shale and tight oil — is that it collectively doesn’t make any money. There have been many stories over the past few years about the ongoing negative free cash flow (FCF) problem among the shale producers.

It is true that in recent years oil companies have collectively outspent their revenues. But two important issues are often overlooked in the stories about negative cash flow.

First is the question of the reason cash flow is negative. To better understand this, let’s talk about what cash flow actually represents.

What is Free Cash Flow?

FCF measures cash generated by a company in excess of its spending, including capital expenditures. There are some differences between how different analysts measure FCF, but I use the levered FCF definition from the S&P Global Market Intelligence database.

This number is calculated by starting from net income, adding back depreciation and amortization (because those non-cash costs relate to historical expenditures), adjusting for impairments to oil and gas properties (those non-cash impairments are applied against net income but not cash flow) and then subtracting interest paid, changes in working capital and capex.

This is a more accurate and comprehensive definition of cash flow than the one used by many, which is simply cash generated from operations minus capital expenditures.

The Reasons for Negative Cash Flow

It is true that capital expenditures are the main reason that FCF went deeply negative for so many companies in recent years. When oil prices were $100 a barrel, oil companies invested every penny they could get their hands on into producing more oil. There were no guarantees of how long the high prices would last, but it’s understandable why they were plowing all their cash back into their business.

When oil prices plunged in 2014, many companies were caught off guard. Some were extremely leveraged and went bankrupt. All of them had to slash spending. And that leads to the second point that is frequently overlooked.

Oil companies aren’t all operated in the same way. Some operate recklessly and with excessive leverage, while others are much more conservative. That is reflected in the individual results of these companies.

Negative FCF, No Problem

Some companies go for years without generating positive FCF. Diamondback Energy, for example is one of the largest pure shale/tight oil producers. They went public in 2012 and have never generated positive FCF. But that hasn’t posed a problem, as their debt/EBITDA ratio is at a manageable 2.5.
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Further, Diamondback shares have risen by 470 percent since the company’s 2012 initial public offering — nearly five times the return of the S&P 500. Thus, despite years of negative FCF, Diamondback’s stock market performance leaves most of its peers in the dust.
Related: STEO: Brent To Average $70 This Year

Also consider Anadarko, which Chevron and Occidental are aggressively competing to acquire. In the past ten years, they have only generated FCF three times. But the company is viewed as an extremely attractive asset.

The King of Cash Flow

Then there’s ConocoPhillips, which is active in the Eagle Ford, Bakken and Permian Basin. In recent years, COP has been the king of cash flow among the pure oil and gas producers.

In the past ten years, ConocoPhillips has generated positive FCF seven times. They took a hit like most other producers in 2015, but the company responded with significant belt-tightening. The firm slashed its dividend, cut capital spending, and sold a number of assets. The result has been a steady improvement in the company’s cash flow.

In 2017 and 2018, ConocoPhillips generated $7.3 billion and $6.3 billion of FCF, respectively. The number fell in 2018 due to the divestment of assets. To put these numbers in perspective, only one other publicly traded oil and gas producer — Canadian Natural Resources — recorded more than $1 billion of FCF in either of those years.

Among the ten largest oil and gas producers half have pretty consistently generated positive FCF since coming out of the 2014-2015 downturn. Joining ConocoPhillips in this group are EOG Resources, Canadian Natural Resources, Continental Resources, and Apache.

I would add that all of the integrated supermajors have generated positive FCF over the past two years. Royal Dutch Shell generated a whopping $21.1 billion in FCF in 2018 after generating $10 billion in 2017. In total, the five supermajors generated $66 billion of FCF in 2018.

Conclusion: Huge Improvements Since 2014

To put it all in perspective, there are still a number of oil companies that are outspending their revenues. But, there are also many companies that are consistently in the black, and the overall industry has made huge strides in recent years.

Consider that in 2013, and with oil prices at $100 a barrel, the Top 20 oil and gas companies produced negative $10.9 billion in FCF. In 2014, that deficit ballooned to $-33.3 billion, but it has improved each year since. In 2018, and with an average West Texas Intermediate price that was $35 a barrel less than in 2013 — those same companies generated $384 million in FCF. Thus, in the past four years these companies have shown an improvement in FCF of nearly $34 billion.

As I explain to people, it’s not that the oil industry can’t generate positive FCF. It certainly can. But many companies choose to aggressively reinvest in their business, at the expense of FCF. That philosophy has waned since the 2014 downturn, but it remains to be seen whether producers can maintain spending discipline as oil prices rise.

By Robert Rapier
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