Weekly Review

“I am now more convinced than ever that 2015 will see the peak in world crude oil production. I have very closely studied the charts of every producing nation and my prognosis is based on that study. I see many nations in steep decline and most every other nation peaking now, or in the last couple of years, or very near their peak today. These include the world’s three largest producers, Russia, Saudi Arabia and the USA.” 
 
–Ron Patterson, peakoilbarrel.com

“New scientific models supported by the British government’s Foreign Office show that if we don’t change course, in less than three decades industrial civilization will essentially collapse due to catastrophic food shortages, triggered by a combination of climate change, water scarcity, energy crisis, and political instability.” 
 
Nafeez Ahmed, investigative journalist

“The debt that fueled the US shale boom now threatens to be its undoing. Drillers’ debt ballooned to $235 billion at the end of the first quarter, a 16 percent increase in the past year, even as revenue shrank. The problem for shale drillers is that they’ve consistently spent money faster than they’ve made it, even when oil was $100 a barrel. The companies in the Bloomberg index spent $4.15 for every dollar earned selling oil and gas in the first quarter, up from $2.25 a year earlier, while pushing U.S. oil production to the highest in more than 30 years. 
 
“The question is, how long do they have that they can get away with this,” The companies with the lowest credit ratings “are in survival mode.”  
 
Thomas Watters, oil and gas credit analyst at Standard & Poor’s in New York

“We were on stage in a panel at an Oslo energy forum and we were pressed by people in the panel to talk about our views on climate and what our positions were…On stage, Ben [van Beurden, Shell CEO], Patrick [Pouyanne, Total CEO], Eldar [Saetre, Statoil CEO] and I said we should speak with a common voice – why don’t we do that? It came about as simple as that.”
 
–BP CEO Bob Dudley (Reuters, June 13)
 
CEOs of Eni and BG joined the initiative in the weeks that followed. The bosses of ExxonMobil and Chevron opted not to join the initiative, much to the ire of their European counterparts 

“This week, Georgetown University’s board voted to sell off its investments in coal, and Norway’s sovereign wealth fund, the largest pool of investment money in the world, announced it would do the same…Divestment won’t move Exxon Mobil directly — that’s impossible; the company is dug in, and someone else will simply buy the stock when it’s sold. But divestment will undercut the industry’s political power…Divestment is one tool to change the zeitgeist, so that the day arrives more quickly when the richest and most powerful can no longer mock renewable energy and play down climate change.”
 
–Bill McKibben, distinguished scholar at Middlebury College, founder of the group 350.org (in the Washington Post)

“From Capitol Hill to the Motor City, marble statehouses to mud strewn shale plays, lawmakers, policy wonks and industry leaders repeatedly invoke U.S. government energy forecasts to call for more drilling, more fracking and more nuclear plants. These predictions are made by the Energy Information Administration. They are ostensibly apolitical, certified with a federal seal of approval and are ripe fodder for the journalists, analysts and government agencies responsible for painting a picture of the country’s energy future. But in truth, some experts say, we’d have better luck calling Miss Cleo [than using EIA forecasts].” 
 
–Alan Newhauser, US News & World Report [Note: Miss Cleo is an American psychic]

“Multinationals like Halliburton, Schlumberger, and Weatherford have shed tens of thousands of skilled workers that have centuries of combined experience. If history is our guide – and it’s a good guide—most of these people will find employment in other industries and never return, even when the text message, “When can u come back to work?” flashes on their mobiles… To be sure, workforce and equipment can be built up again in the future, but it will take time and money. What wounded service company is likely to invest in new parts and hire back people unless they are convinced that activity is going to be sustained?” 
 
Peter Tertzakian – chief energy economist and managing director, ARC Financial

“Despite Europe’s desire to loosen its reliance on Russian gas, the shale revolution has turned out to be a dud. Difficult geological conditions, fierce environmental opposition, cumbersome regulations and a bloody war in Ukraine have conspired to quash investors’ enthusiasm and wear down their patience. The collapse of oil prices to less than $50 a barrel in March was the final straw because the cost of much of Europe’s gas, including Russian imports, is linked to crude.” 
 
Bloomberg News 5-12-15

“The large oil frackers have spent $80 billion more than they have received from selling oil. Wall Street greased those skids by underwriting debt and equity securities that allowed them to garner billions in fees. The banks are clearly incentivized to enable the frack addicts. What’s less obvious is whether investors are furnished a clear analysis of the returns these companies actually generate. 
 
“As oil prices rose, it seemed like the frackers should have been drowning in cash. But none of them generated excess cash flow, not even when oil was at $100 a barrel. In fact, the opposite was true. 
 
“Recently, oil prices have declined. Because the frackers have less revenue, they’ve been forced to cut Capex. Though they will continue to spend more dollars than they take in, production is no longer growing.  A business that burns cash and doesn’t grow isn’t worth anything. 
 
“On the $36 of revenues per BOE [barrel of oil equivalent], Pioneer [Pioneer Natural Resources] spends about $14 on field operating expenses and another $6 on corporate expenses. Subtract the historical $28 of Capex, and Pioneer loses $12 for every BOE it develops. That’s like using $50 bills to counterfeit $20s.” 
 
All of the above is from a recent presentation by David Einhorn, cofounder of Greenlight Capital

“The U.S. oil production decline has begun. It is not because of decreased rig count. It is because cash flow at current oil prices is too low to complete most wells being drilled…The decrease in well completions provides additional evidence that the true break-even price for tight oil plays is between $75 and $85 per barrel.” 
 
Art Berman, independent consulting geologist

“What’s happening is that we [drillers in the Marcellus shale] continue to get better and Continue Reading

Quote of the Week “Due to further degradation of the security situation in the vicinity Continue Reading