Pioneer Natural Resources CEO warns independent oil companies could go bankrupt if production continues amid coronavirus
Scott Sheffield, Pioneer Natural Resources CEO, joins ‘Fast Money’ to discuss the plunge of crude oil and the ongoing price war between Russia and Saudi Arabia. Sheffield also warns Trump could lose energy states if he doesn’t help the independent oil companies who are facing opposition from big energy companies like Marathon and Exxon to reduce production as the coronavirus pandemic continues.At 3:36 on the vid Mr Sheffield makes the rather startling statement that of the 74 publicly traded independent oil & gas producers, only 10 will survive.
And the headline story from OilPrice, March 29:
Russia’s Plan To Bankrupt U.S. Shale Could Send Oil To $60
As soon as U.S. shale leaves the market, prices will rebound and could reach $60 a barrel, Rosneft’s Igor Sechin said recently. As fate would have it, in what many would have until recently considered an impossible scenario, a lot of U.S. shale might do just that. Breakeven prices for U.S. shale basins range between $39 and $48 a barrel, according to data compiled by Reuters. Meanwhile, West Texas Intermediate (WIT) is trading below $25 a barrel and has been for over a week now.
The SCOOP/STACK play in Oklahoma has the highest average breakeven price at $48 a barrel. Surprisingly, the Permian is not the lowest-cost play but the second-lowest, at $40. The lowest-cost basin, on average, is the Delaware Basin, also in Texas.
On the face of it, these averages give no cause for optimism to an industry hit hard and fast by a perfect storm of radically lower demand and a sharp increase in supply. However, it’s worth noting the figures above are averages. They cover a range of breakeven costs that last year, according to the Dallas Fed, featured breakeven prices of as little as $23 a barrel in the Permian. In all fairness, these figures were reported last year. Since then, the lowest may have gone up or, in some locations, down.
Surviving the crisis seems to be a combination of luck with acreage, Wright’s Law, and size. The problem is that luck eventually runs out as does the oil from fracked wells—faster to start producing than conventional ones and faster to deplete—and that Wright’s Law does not hold to $0. Experience in performing an activity can only go as fast as improving productivity and efficiency....MUCH MORE
What about size?
The bigger the size of a company, the more room it has to cut operating costs (the day-to-day expenses related to running any business). Companies can trim these costs by asking suppliers to lower their prices, which some shale players have already done, asking for a sizeable discount, too--some as much as 25 percent....
WTI down $1.36 (6.32%) at $20.15
Brent down $2.27 (9.11%) at $22.66
Yesterday:
Oil: Big Trader Vitol CEO Says Demand Is Down 15-20 Million Barrels Per Day
