Victory For Saudi Arabia, North Dakota’s Largest Oil Producer Suspends All Fracking
Yesterday, during his debate during CERAWeek in Houston, Saudi oil apportion Ali al-Naimi finished it categorically transparent that Saudi Arabia would not cut production, instead observant that it is high-cost producers that would need to possibly “lower costs, steal money or liquidate” adding that there is “no need for cuts as extrinsic tub will get out of a market.” He was right.
Today his wish is solemnly entrance loyal after news that North Dakota’s largest producer, Whiting Petroleum, would postpone all fracking, and that Continental Resources has effectively finished a same after stating that it no longer has any fracking crews operative in a Bakken shale.
As Reuters reports, Whiting pronounced it would “suspend all fracking and spend 80 percent reduction this year, a biggest cutback to date by a vital U.S. shale association reacting to a thrust in wanton prices.”
It was also acknowledgment that a Saudi devise to put high-cost producers on ice is working, if usually temporarily.
After shifting 5.6% to $3.72, Whiting batch jumped 8% to over $4 per share in after-hours trade as investors cheered a preference to safety capital, even if it means generating distant reduction revenue.
Whiting’s cut is one of a largest so distant this year in an appetite attention crippled by oil prices during 10-year lows. The cuts will have a large impact in North Dakota, where Whiting is a largest producer.
The Denver-based association pronounced it would stop fracking and completing wells as of Apr 1. Most of a $500 million bill will be spent to mothball drilling and fracking operations in a initial half of a year. After June, Whiting pronounced it skeleton to spend usually $160 million, mostly on maintenance.
Rival producers Hess Corp and Continental Resources Inc have also slashed their budgets for a year, yet conjunction has cut as many as Whiting.
As remarkable above, during a gain report, Continental pronounced that in 2016, a Bakken drilling module will continue to concentration on high rate-of-return areas in McKenzie and Mountrail counties, targeting wells with an normal EUR of 900,000 Boe per well. Based on a aloft EUR and a reduce targeted finished good cost of $6.7 million per well, a Company expects collateral potency to boost 17% and anticipating cost to diminution 15% in 2016.
Given a skeleton to defer many Bakken completions in 2016, Continental expects to boost a Bakken DUC register to approximately 195 sum operated DUCs during year-end 2016. However, Continental also pronounced that while a Company now has 4 operated drilling rigs in a North Dakota Bakken and skeleton to say this turn by year end, it remarkable that it now has no fracking crews deployed in a Bakken, that led some, including Bloomberg to believe, that Continental too has halted Bakken shale fracking.
One thing is certain: a cuts will drag down prolongation and expected resonate in a economy of North Dakota, a second-largest U.S. oil producing state after Texas, that now pumps 1.1 million barrels per day. It means that after a 250,000 oil workers already laid off (according to Credit Suisse estimates), tens of thousands of new pinkish slips to rarely paid workers are about to be handed out.
And another thing: as of this moment, Saudi’s oil apportion is holding a feat path in his Lamborghini – after all his devise to pull a cost of oil so low that extrinsic oil producers have no choice though to mothball prolongation is starting to bear fruit.
There is only one problem. Whiting Chief Executive Officer Jim Volker pronounced that “we trust this regressive plan should assistance us to say a liquidity position and leave us good positioned to gain on a miscarry in oil prices.”
In other words, a impulse oil prices miscarry even modestly, and according to many a new breakeven shale prices are as low during $40-$50/barrel, a Whitings and Continentals will immediately resume production, forcing Saudi Arabia to go behind to block one, boosting supply even higher, and repeat a whole sham from scratch.
And so on.
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