Author Topic: Future strategy to survive discovering 1 out of every 20 bbls of oil we now use.  (Read 167171 times)

jimjam

  • Newbie
  • *
  • Posts: 49
Cale Smith's update on his Tarpon fund (concentrated in oil and gas):
https://www.youtube.com/watch?v=GXIJUjToFLg


tombgrt

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1879


Uccmal

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3685
One thing really bothers me with Cale Smith and other super bullish forecasters. 

What happens if there is a recession of some significance?  High oil prices, and rising interest rates will start to put a drag on the general economy. 

GARP tending toward value

tombgrt

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1879
You can't predict a recession either. So big losses before we actually see anything in the economic data.

I disagree with oil prices being a likely drag on the general economy. Adjusted for inflation, we would need $100 to be at previous $100 level and that wasn't really an issue before.

I'm more worried about China's debt bubble and general recession risks.

SharperDingaan

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2802
One thing really bothers me with Cale Smith and other super bullish forecasters. 

What happens if there is a recession of some significance?  High oil prices, and rising interest rates will start to put a drag on the general economy.

Most of the bullish case rests on a compounding declining global supply.
The further out the likelihood of a recession is, the less of an bearish impact there is - as it is offset against multiple years of net depletion and facility decay (Venezuela, Nigeria, etc.). The risk is that material amounts of capital that would have gone into the long-term off-shore fields goes into short-cycle shale instead - rapidly increasing supply.

SD
 

SafetyinNumbers

  • Sr. Member
  • ****
  • Posts: 340
Curious what people think of this move by Altura (ATU.V) to sell about half its production and reinvest the proceeds in its Leduc-Woodbend play?

http://docs.wixstatic.com/ugd/d63ee4_071049f621cb41039e97c07d747e4503.pdf

Top 5 positions: ELF IAM GCM.NT/GCM PIF EFR.DB

Zorrofan

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 624
One thing really bothers me with Cale Smith and other super bullish forecasters. 

What happens if there is a recession of some significance?  High oil prices, and rising interest rates will start to put a drag on the general economy.

Most of the bullish case rests on a compounding declining global supply.
The further out the likelihood of a recession is, the less of an bearish impact there is - as it is offset against multiple years of net depletion and facility decay (Venezuela, Nigeria, etc.). The risk is that material amounts of capital that would have gone into the long-term off-shore fields goes into short-cycle shale instead - rapidly increasing supply.

SD
 

SD,

I agree with you that there could be a rush into shale if oil did surge to $100 (or $80 or whatever) but then you run into capacity constraints - not enough crews, pipelines etc. And at some point given the high initial decline rates for shale you have to reach a level of production where the declines are so large you need a tremendous amount of drilling just to maintain production.  I just don't see shale as the savior everyone thinks it will be. Or am I missing something?

cheers
Zorro

SharperDingaan

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2802
Agreed the limiting factor on shale is take-away capacity & drill crew availability. However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit.

Venezuelan & Nigerian crude also hasn't gone away, and the crimal element isn't going to be paying for depreciation or depletion. They will be getting market price less just the cost of bribes and bullets  - under the table, & not showing on anyones forecasts.

SD
 



Cardboard

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 2558
"However there's a lot of unfilled capacity in the pipe and the lighter grade of shale will also displace the heavier grades in the pipe, allowing rapid and high incremental supply to drive price down quite a bit."

Huh? Pipelines out of the Permian are already full and all light grade. They are now desperate and shipping excess via trucks. Truckers are hard to get by and freight costs are up 10-15%. Permian discount is now close to WCS-WTI!

Pipelines out of Canada full also and Gulf coast refineries need the heavier grades. A diesel crisis is starting to develop.

Cardboard