Probably the two most important words in the U.S. oil biz lexicon.
We’ve predicted that oil and gasoline prices are going to go much lower in the long term, as the American shale oil reserves now starting to be tapped begin pumping out their bounty. Bernstein Research’s Bob Brackett disagrees. In a note to clients on Oct. 26 he argues that the shale will produce a lot, but that prices are not going to fall much, if at all, from their current level. He titled his note, “For Halloween, a Chart that Could Scare the Oil Bulls.” (Reproduced with Brackett’s permission above.)See also:
Brackett is referring not to oil price bulls, who think prices will stay high, but production bulls—those who think the world is headed into an age of oil surplus. He asserts that the production profile of shale oil is so idiosyncratic that wells produce 80% of their lifetime output in their first 20% of their lifetimes, and stop producing any oil about half of the way through—in other words, that their operators keep running them long after there’s any useful output.
Hence, in three years or so the US will produce about 10.5 million barrels a day, surpassing the current production of Saudi Arabia and Russia. But that volume, says Brackett, won’t be large enough to tip global markets. Brent benchmark oil will be about $110 a barrel, and starting around 2015 it will go higher. It will not drop into the $80s-a-barrel level, as others have forecast....MORE
Natural Gas: The Astounding Production Decline Rates of Shale Wells
I've mentioned we heard from landowners that their monthly royalty checks dropped 75% between month 1 and month 12 after completion. This is good news for gas bulls and good news for the well service companies who will be called in to re-frack the wells 4-5 times over their producing lives.Aug. 13
Not such good news for folks who want to see gas back under $2.00....
Bernstein on Bakken Decline Rates and Estimated Ultimate Recovery (CLR; EOG; KOG; NFX)
...The EUR's [estimated ultimate recovery] I've seen range from 300,000 to an EOG estimate of 750,000 bbls.
Harold Hamm of Continental has a 603,000 bbl/well estimate.
Because the North Dakota boom only really got going in 2006 nobody know for certain.