A Million Barrels Per Day of U.S. Crude Production May Shut in Under $30

Fascinating topic. Stripper wells, old, legacy, wells that have seen better days, litter the oil rich parts of the United States. Some of these wells produce just a few barrels per day; but it adds up when you take into account the hundreds of thousands of rigs out there. If the price of WTI goes under $30, most of these little fuckers are operating without profit and might opt to shut in.

Stripper wells are wells nearing the end of their lives that each produce very low volumes of 15 b/d or less. Collectively, they account for a surprisingly large amount of output — as much as 1 million b/d of crude from about 410,000 oil wells, or about 11% of the US’ total oil production of around 9.1 million b/d, according to the National Stripper Well Association website.

“The low $30s/b is about it,” as far as the economic threshold, Mike Cantrell, chairman of the Oklahoma City-based National Stripper Well Association, said. “We’re not making any money … at below $30.”

In general, stripper wells operate on a basic program where the expenses include electricity to run the pump jacks and artificial lift to help oil flow better out of the well, as well as anti-corrosion chemicals, insurance, repairs and hired labor unless the owner does the day-to-day work.

“Some [wells] are actually economic” right now, Cantrell said. “Just as long as your revenue exceeds your expenses, you can keep going.”
He and others say all stripper wells are not necessarily at risk even at current low prices. Because the economics of each well are so different, and have such mixed variables, they will not necessarily go under, they say.

And sometimes the wells keep pumping oil for other reasons. Cantrell said a friend who operates stripper wells and whose company has “a lot” of leverage, is forced to keep his wells going.

“He said, ‘I have no choice, I have to keep their revenue going whether I like it or not because the banker wants to see the production’,” Cantrell said.
Other wells may continue to operate at breakeven because shutting them down costs even more.

“Let’s say you get down to a point where you’re breaking even or a little negative. If I shut the well down, I have to submit it to abandonment,” which incurs expenses and a required regulatory process, energy economist James Williams, who founded and runs energy consultancy WTRG Economics, said.
“Sometimes there is a limit on how long you can go without producing a well before you’re required to go through official abandonment procedures,” Williams said. “So it may be best to keep it going for awhile until oil prices go back up.”

“The role of stripper wells will be greatly diminished going forward until such time we see commodity prices bounce back,” Sheridan said. Stripper wells “are kind of America’s reserve supply,” he added.

I haven’t heard anyone talk about this yet; once crude breaks $30, look for a spate of headlines discussing this topic. Stupid, dumb shit stripper wells getting shut in because the banker said it wasn’t viable anymore. This could lead to a long term recovery in crude. A washing out of the excess is always good for an injured market.

Of course it will. Truth be told, when was the last time The House of Saud gave two shits about what the other members had to say? They’ve been driving the oil price into the dirt, because of the fact that Aramco has 10x the proven crude reserves than Exxon Mobile. They have staying power.

When Aramco ipo’s, and if they include the upstream business, we might very well see OPEC nations leave the union. It’s a huge crock of shit. It’s just a matter of formality now, which will soon end once The House of Saud whores its oil business to the world during desperate times.

A lot of Debbie Downers out there, talking about end of days scenarios. “The Fly” is here to cheer you up now, for the sake of the week end. First I beat you unmercifully with bad news, then I assuage your fears by showing you this (no Large Marge).

YTD gains

WMT +5.5%
TWX +11.7%
STZ +4.4%
ABX +15%
GG +8%
CRI +4.8%
JCP +8%
SPF +8%
FLIR +8.6%
GNC +5%
PLCE +11%

There. Feel better? I know I do, knowing the grandmother’s are back to coupon cutting over at JCP and babies still need pajamas from CRI and how barbarous vagrants are still partaking in vagrant forms for alcoholism thru STZ.

Words cannot express the sheer disbelief that I’ve witnessed when discussing the topic of 4 Fed rate hikes into the teeth of a cataclysmic decline. It’s literally like throwing gasoline onto a fire.

After the worst start for stocks in the history of the stock market, Janet Yellen’s Fed thought it was a good idea to march Fed Williams out there to tell everyone to fuck off and to eat the 4 rate hikes.

Eat the hikes.

The market is used to having its way with the Fed. Clearly, Yellen and her board of governors give zero fucks about the market. That could be a good thing, or bad. One thing is for certain: there are no Federal Reserve bids in the market, not by this Fed. If the worst start ever for stocks can’t bend them to the market’s will, nothing can.

Fuck yeah. The jobs report was of the blockbuster varietal. I can feel the sting of the energetic high fives at the Federal Reserve right now, as they suck each other’s cocks over “calling it”, getting it right about rates.

Granted, most of the new jobs are at Wendy’s and floor scrubbers at Amazon fulfillment centers; but they’re jobs nonetheless. Quit trying to urinate inside my 40 ounce of malted liquor.

This is what we do know: the economy isn’t collapsing just yet. Maybe all of those oil jobs were meaningless rabble and the entire state of Texas stupid and without purpose? Maybe our new manifest destiny is to serve the elite, their food and illicit drugs via apps? Maybe Frederick Wilson was right all along; Etsy really is a great company and Apple is a piece of shit?

So many questions, so few answers.

Toss away your China related fears, right into the Freddie Kruger boiler room furnace and REJOICE the splendor of 292,000 NEW jobs added to the economy, during the month of December.

Bring on the rate hikes. Let’s get this party started.

Congrats to Janet Yellen and her staff of catamites.

Miners are people too.

Look at the shares of RIO, VALE, FCX and BHP; it’s representative of what has taken place in this once proud, gigantic Chinese dependent industry.

“It’s terrible, there are no two ways about it,” said Paul Gait, a mining analyst at Sanford C. Bernstein Ltd. in London. “A lot of people were hoping at the start of 2016 to see at least some stabilization in the commodity performance in these stocks. Essentially people were looking to close the consensus short that has characterized 2015. This has clearly not happened.”

Enough can’t be said about the debilitating effects of this Chinese slowdown. Aside from miners, mining related stocks like JOY and CAT are feeling the burn too. These companies, like the oils, are saddled with massive amounts of debt. It’s like everyone got really fucking stupid 10 years ago, levered up their businesses to sell a bunch of shit to one customer.

No one thought about “what if this customer dies?”

Well, the customer is fucking dying and now you’re fucked too.

Happy bankruptcy filings.

Another Petro-nation finds itself in a bind, stuck with massive amounts of cash and nowhere to invest it. The Vikings in Norway are permitted to invest up to 60% of the fund into equities. Thus far, they’ve done a real shitty job, as the fund only gets an annual return of 4%.

Perhaps they should subscribe to Exodus?

Norway is looking for ways to boost returns that have barely reached a net real return goal of 4 percent amid low interest rates. The country is also facing shrinking income from oil and gas production, which feeds the fund, amid a collapse in crude prices. The Conservative-led government is already studying whether to allow the fund to invest in unlisted infrastructure and raising its allocation in real estate.

Norway’s central bank, which manages the fund for the Finance Ministry, has called for an increased allocation in equities. Still, that’s not necessarily what the new committee will propose even if it does advise the government to change the fund’s mandate, Mork said.

Predictable Returns

“I don’t have any presumption that it should be an increase if there should be a change,” he said in a phone interview. The expected 4 percent return is “supposed to cover public expenses for public services, which authorities want to be delivered regularly and predictably over time, without big fluctuations. If the fund takes big risks, the fund’s value will fluctuate and the 4 percent figure will also fluctuate.”

I think tossing more money into stocks is a great idea. After all, what could go wrong?

We are the envy of the world, with $20 trillion in debt and a limitless credit line, thanks to currency reserve status. On the other hand, cash rich nations like Saudi Arabia ($600 bill) and China ($3.3 trill) appear to be burning cash at an alarming rate, causing people to question their policies, just a little.

The drop in the nation’s foreign reserves over 2015 was the first since 1992, ending a 22-year ascent that began under former top leader Deng Xiaoping in an effort to keep a floor under the tumbling yuan. They fell by $108 billion in December alone.

“Where is the line in the sand, and what happens when we get there?,” said Charlene Chu, the former Fitch Ratings Ltd. analyst known for her warnings over China’s debt risks and now a partner of Autonomous Research Asia Ltd. “China’s large hoard of foreign reserves gives the country considerable power and influence globally, and I would think they would want to protect that. If there is such a line in the sand, it is very possible we hit it in 2016.”

China burned through $500 bill last year. At that burn rate, they’ll be in the streets, destitute, in exactly 6 years. More than that, however, many of their investments are illiquid and the hard line in the sand, according to analysts, is $2 trillion. They have $1.25 trillion in U.S. Treasuries and the rest is tied up in complete shit.

Should their cash dwindle into the 2’s, they might be greeted with a sundry of credit downgrades, thrusting the great counterfeit giant into a whole new world of pain and misery.

Well, well, well: what do we have here? Bloomberg just reported from a source who declined to be identified that Chinese controlled state funds were sopping up shares of large cap stocks to create a facade, a fiction of sorts, to make their damned markets trade up.

Chinese policy makers used purchases by government-linked funds to prop up shares over the summer as the CSI 300 plunged 43 percent from its June high. State funds probably spent $236 billion on equities in the three months through August, according to Goldman Sachs Group Inc. The China Securities Regulatory Commission didn’t immediately respond to a faxed request for comment.

Bear in mind, the United Steaks have been rumored to partake in a little wanton manipulation for years. The New World Order, in conjunction with the Grande Recursive Order of the Knights of the Lambda Calculus, alongside The Order of the Cinncinatus, The Holland Society of NYC– and a sundry of other private, well meaning organizations–have a desire to keep equity prices aloft. There is little to gain from a crash scenario playing out. Therefore, take out your best top hats and canes and prepare to enter the markets, using a Martingale strategy to take back your winnings.

A rally is coming and when it does, it’s going to rip the faces clean off the clowns–down to the skeletons– who closed out the day heavily short into the hole.

NOTE: If you’ve noticed, we’ve really stepped up our video content game. Please subscribe to our Youtube Channel and bang on your neighbors door to tell them to do the same. Any time of night is acceptable.

There’s a lot of shit being spewed across the internets. Men more fit for prison than financial news, wearing black hair nets, discussing the day’s events with a dark sense of perversion–wish-casting for equities to plunge lower. These are the sort of people, if elected President, I’d immediately kill. For the greater good of the nation and its legacy, I’d immediately declare heinous acts of murder to be thrusted upon the bearshitter class.

I realize I’ve been reporting on a lot of negative events. “The Fly” is a man of the people. I give them what they want, not what I think they want.

Let’s discuss facts and seasonality and precedent. Yes it’s true, stocks have never quite been fucked like this during the first week of January. But, lucky for us, its been fucked plenty of times during the entire month of January. So let’s look at some of the really bad years– when January went down 4% or more to look for clues of what to expect in February.

SPY performance

2000: -4.87%
next month: -7.1%

Okay, that really sucked. Let’s look at another one, shall we?

2008: -4.83%
next month: -2.19%

Ouch. I’m feeling lucky. The next one will be better. I just know it.

2009: -8.34%
next month: -11.21%

Holy fucking shit. We’re doomed.

2014: -5.19%
next month: +4.28%

Ah, see, it’s not all fire and brimstone. Let’s hope for a repeat of 2014. In summary, down 5% in a month led to two collapses, one -2% month and one strong month. Sounds like fun.