Gasguy, I agree with you. And, put another way, something I’ve been saying for a long time (probably more than most want to hear), the simple answer is that the “fraccer attack” just failed to recognize or accept that when you really and truthfully take into account the full capital cost of producing and delivering a barrel of oil to the reffing market, much higher actual net back revenues are required.
IMO, all along (regardless of the powerpoint “promises”) a price much closer to $85 or even more was and is required to deliver appropriate ROCE returns for the risk involved. The race to prove who had the lowest break even revenue requirements was a fools errand.
These guys are not in business to break even. Their motivation should be to achieve a return that is sufficient to cover not only suitable economic returns, but returns that also cover the full business, and pricing risk involved.
Truth is - they didn’t come close. As I have mentioned previously, even their financial math had flaws that skewed their presented returns.
Fact is - the entire energy industry, whether it was the misguided battles amongst the frackers to produce the lowest break evens or the crazy pricing and exporting by OPEC to gain market share. Always worrying about market share - what a joke.
Result is - the W/W energy industry has unintentionally provided a decade or more of overly cheap energy. They’ve kidded themselves and beat themselves to the brink. Meanwhile, the tech sector has picked up this “unexpected” gift and run with it foot loose and fancy free. While sometimes developing solutions looking for a problem, they truly used this cheap energy to develop unimaginable new products and systems.
Problem is - what is the consequence of providing this cheap energy for so long. Energy is the forgotten oxygen of the economy. Can the economy perform well at the prices needed to generate the kind of returns mentioned above?
And, the QUESTION is - When the opportunity begins to present itself this time, will all our investment choices meet it with PowerPoint propaganda or will they wait for conditions that will provide attractive, sustainable, strong pricing that will generate the kind of long term gains we’ve been waiting for, and the industry desperately needs.
Unlike most, I am looking for higher prices in our future than the board. The timing of such pricing, I’m not so sure of. My reasoning is simply that supply and demand are both moving in a bullish direction (which means there moving towards each other fairly rapidly and very discreetly), and both have every basis to continue moving.
With the analytical fog surrounding the EIA, IEA, and even the exporters and traders in the physical market, I am convinced that supply and demand will overshoot in their efforts/direction to correct this market. IMO, this will provide the long term market conditions that we’ve been waiting for.
The right conditions for our market are coming.
How will our companies manage it?