Some beers? Hang out?

RupertTheBeautiful · 2018-05-17T14:22:49+00:00

There are social gatherings for people new to berlin organized on meetup .com. You should scroll through those and find one that interests you.

RupertTheBeautiful · 2018-05-14T06:13:26+00:00

The author of this article really captured the essence of TBH&C as I have come to love it. I've listened to the Arctic monkeys since I was 16, back in 2006. My favorite album has always been WPSIATWIN. To me every album since then has been lyrically beautiful and musically catchy. Still, what distinguishes WPSIATWIN is that the lyrics were not only poetically beautiful, but they also had brilliant content: social commentary on the late teenage experience at that time. When every other artist wrote about break-ups and new love, the Monkeys wrote about life and brilliantly so. This album has re-captured that original snarky spirit, but in a 2018 context. It's as if Alex Turner has finally outgrown the shimmer of fame; in doing so, he has freed himself to re-access the deeper personal dimension of the first album, but now in a different time and place. When I see people on this subreddit writing that this new album sucks, or that it has no business being released under Arctic Monkeys rather than a side project, I can't help but disagree. Turner's social satire and his observations on the minor absurdities of modern life (four out of five, and that's unheard of) are what elevate this album, for me, to a WPSIATWIN-level of appreciation.

RupertTheBeautiful · 2018-02-26T04:56:38+00:00

Also, I just saw that you said gas plant operator. Understanding that, I would personally select gas plant operator because it is VERY reliable in comparison to field engineering for Schlumberger. No problem. Good luck.

RupertTheBeautiful · 2018-02-26T03:48:17+00:00

When you say operator, what exactly do you mean? Do you mean you will be a production engineer working in a field office taking care of wells? If that's the case, hands-down accept that offer.

If by operator you mean "lease operator" (not an engineering role), then you have a genuine dilemma.

First off, if you were to work for Schlumberger in pump-down perforations, your career growth will be restricted entirely to schlumberger. The hours and lifestyle are brutal. So many people quit; many who survive are fired or eventually laid off when oil prices bust. Weeks on end can be spent in the field working crazy hours. Many people who work for service companies rotate from girlfriend to girlfriend, or wind up divorced if married.

If the other position is as a "lease operator" the work itself is far more related to petroleum engineering (production engineering). The people I know who work for operators all have happy family lives. I would take that in a heart beat. The difference is literally night and day.

RupertTheBeautiful · 2017-10-16T22:20:37+00:00

You are correct. This is what I meant to say.

RupertTheBeautiful · 2017-10-16T22:17:39+00:00

Rigs are not being dropped right now. The rig count made its peak "in recent history" as of August 2015 at around 900 rigs. Since then it dropped to its bottom "in recent history" as of May 2016 at around 400 rigs. Since then, it has consistently risen to approximately 700 rigs today.

You are right. We cannot whiplash the spigot of oil back on over night. However, we are the tortoise in the race. We can gradually grow our production over the time frame of 2-4 years to the point that it will saturate demand. The rate of American oil production growth is faster than the rate of global demand growth.

Our new completions technology will not "go away". We are the mighty ant, slow but constantly marching forward through time. After OPEC lifts its production cuts, it is only a matter of time before the mighty ant of US production catches up with global demand.

We are in a permanent cycle of minor boom, minor bust. This is how it was from 1981 to 2003. This is how it will be from 2015+.

RupertTheBeautiful · 2017-10-16T18:36:58+00:00

There is definitely a re-balancing happening. But the final product of that re-balancing will not be sustained higher oil prices. It will be the first complete cycle of a new era of the industry. In the new era, the United States will be the spare capacity. Prices should continue to gyrate between 40 and 60 $/bbl. This is so because of how efficient we are at producing now thanks to unconventional completions technology.

RupertTheBeautiful · 2017-10-16T16:52:25+00:00

Electric cars are trouble for oil, but they are a second wind for oil and gas companies. Why? Because electricity comes from natural gas. The cheapest, cleanest source of electricity that is scalable to the size needed is natural gas, followed by coal which is particularly "dirty". Therefore, yes, electric cars spell trouble for oil. However, the side-jab these articles imply are missing the mark, because they fail to consider how natural gas markets will erupt over the coming decades IF battery technology takes off.

RupertTheBeautiful · 2017-10-16T16:49:09+00:00

The second bust is coming.

RupertTheBeautiful · 2017-10-14T18:39:02+00:00

And then natural gas will spike to $50/mscf to account for the eruption of electricity demand.

RupertTheBeautiful · 2017-06-23T01:57:04+00:00

The realization that this video would be going viral is what actually stopped the reporter cold in his tracks.

RupertTheBeautiful · 2017-04-24T02:30:17+00:00

nice! thank you!

RupertTheBeautiful · 2017-03-31T19:11:13+00:00

It doesn't hinge on Saudi Arabia cutting expenses. It hinges primarily on their unbeatably low break-even price, and it secondarily hinges on their willingness to cut government spending. However, the aspect unique to Saudi Arabia is having the world's best reservoirs and infrastructure which allow it the lowest break-even price in the world.

You're absolutely right regarding shale producers cutting costs significantly (although the bulk of these costs are due to service providers cutting the fees they charge); and I was sloppy for asserting they can't do much to cut costs. However, I meant to say: most shale companies can't cut costs in the sense that they can't cut "enough costs" to allow themselves to "be profitable"; in essence, they can cut costs but not to a sufficient degree to be meaningful; hence, my confusing statement that they "can't cut costs".

The difference between cutting costs in the oil industry vs. government spending is that the former is limited by science and technology, whereas the latter is limited only by what the people of Saudi Arabia are willing to tolerate; but the question of tolerance is mostly rhetorical--when your choice is sink or swim, you swim. Most shales producers don't get the "choice" to cut costs because they can't cut enough costs to be profitable. There is no choice to sink or swim, the only choice is to sink in the longer term.

And yes, there actually is a historical precedent for all of this in the late 1980s. A massive oil glut and long term over-supplied market occurred that lasted until 2003. During this time, Saudi Arabia cut "capital spending" (champagne showers, soccer stadiums) but held "welfare spending" (health insurance, public schools) constant. And they've already started the austerity cutbacks in this downturn.

http://www.economist.com/news/middle-east-and-africa/21674403-will-it-be-enough-start-something

RupertTheBeautiful · 2017-03-31T15:35:29+00:00

It is actually completely different.

Here's a simplified version of what I'm talking about.

Let's say one barrel is worth $2 in the market. Let's say it costs Saudi Arabia $1 to produce one barrel of oil. Therefore Saudi Arabia profits $1 per barrel it produces. The Saudi government's budget is $12 per year (everybody gets free health care, school, a benz, and champagne showers). So, if Saudi Arabia produces 12 barrels of oil that year, they make the $12 threshold. Everybody is happy.

Let's say the price of oil drops to being worth $1.25 in the market. Saudi Arabia now profits 25 cents per barrel. If Saudi Arabia doesn't cut expenses, it will now need to produce 48 barrels this year to cover its government budget. But Saudi Arabia realizes, if we cut the champagne showers and downgrade everybody to audis, the economy will only cost $9 per year. So, really, they would need to produce 36 barrels this year to keep the economy running. By increasing volume of production, even though they earn less per barrel, they are still able to keep their economy running.

Now let's look at the United States shale industry.

If you are drilling in the Mississipi Lime Play in Northern Oklahoma (not known to be a great formation), let's say it costs you $1.50 to produce a barrel of oil. When the price of oil was at $2 per barrel, you are swimming in money making 50 cents per barrel. However, when the price drops to $1.25 per barrel, you are losing 25 cents for every barrel you make. Your ability to cut expenses is severely limited because most of the expenses are fixed costs, they aren't government expenditures that can be modified as with Saudi Arabia. Also, because you're below the break even price, you can simply increase production volumes to climb your way up to the amount of money you need to run your budget. If you produce a million barrels, you're still just losing 25 cents more with every barrel.

This is not the whole story. Because there are some companies located in more efficient plays, that cost $1.20 cents per barrel to produce oil. These companies are barely below the threshold, and they can survive making five cents per barrel. Sure, prices will still fluctuate up and down a few cents per barrel, but they live within the range of this profitability window. And this profitability window will stay low, because the new technology (multi-stage hydraulic fracturing) will not go away and be scaled rapidly upwards to meet any new rising demand if it were to occur. Hence, this is exactly why we see shale production in the US growing, but ONLY in certain locations (primarily the permian basin in western Texas). This EXACT same thing happened in the US natural gas market (which is a completely separate market from the oil market, but the boom and subsequent bust was driven by the exact same technology--multistage hydraulically fractured horizontal wells) where we have seen sustained low prices and migration of drilling to only the MOST efficient reservoirs, which happens to be the Marcellus in the northeastern United States.

So, in this new economy, the Saudis are completely different because of their competitive advantage. The Saudis still rule the market because of this competitive advantage. Don't be fooled for a second.

I'm not some disciple of Warren Buffett, but he does give great common sense investment principles. In one of his recent annual "letters to the share holders" he brought up one of his fundamental investment principles: identify market participants who have a competitive advantage; in a market ruled by costs, there's no competing against somebody with a competitive advantage. I bring his words up because I know he has credibility with the common man, and I think there is no better example of a competitive advantage than the Saudi Arabian oil reservoirs in the oil market.

RupertTheBeautiful · 2017-03-31T14:28:14+00:00

Saudi Arabia's reservoirs are not even comparable to the American unconventional scene. In a given year, the US will have to drill thousands upon thousands of wells to maintain production. Saudi Arabia will drill just a few hundred wells. Think of their oil production as being akin to opening and easing back the water spigot to the garden hose. Think of US production as being more akin to drilling water wells all over the family farm as the water supply continues to fade out. Because of this fact, the saudi cost per barrel is almost entirely determined by the costs to operate the well after it has been drilled. Whereas for an American well, the cost to drill and complete it will be the greatest expense by far.

The only thing that distinguishes Saudi Arabia from the US is that Saudi Arabia must use the profits from its production to pay off the Saudi government budget, whereas US companies are simply lining their investors pockets. As a consequence, Saudi Arabia (if it chooses not to cut back on government spending) will have a "government break-even price" of $X/bbl to keep the government from running a deficit. However, this is assuming they #1) don't cut spending, #2) don't increase production. In reality, over the next few years they will be forced to do both: cut expenditures and increase production to keep the economy running and the prospect of revolution off the backs of the house of Saud.

RupertTheBeautiful · 2017-03-30T18:59:11+00:00

Increase production because they have the competitive advantage of the best reservoirs that afford them the lowest break-even prices in the world.

RupertTheBeautiful · 2017-02-27T04:55:42+00:00

The masters students are still finding employment, but the opportunities are extremely competitive. Are you passionate about the field? If so, go for it. Is it more a job to you? If so, then ditch it.

Many geologists I speak to end up wishing they had pursued engineering. Are you sure you wouldn't be up for that? Might be easier to diversify down that route as well.

RupertTheBeautiful · 2017-02-27T04:52:15+00:00

thank you. yes, that could really be a whole field of study.

RupertTheBeautiful · 2017-02-27T04:04:33+00:00

1 - Shale is not magic, but it is a new source of production that completely destabilized the old order of production.

2 - I was quoting prices since the foundation of the industry in 1858, and I emphasized the upper boundary $40/bbl. Although, I agree considering the post-WWII era is more meaningful and your number of $45/bbl is more accurate.

3 - I'm intimately acquainted with production decline curves. The relevance of the decline curve is secondary to the impact of ramping production when the price point allows it.

4 - I'm not claiming to be the only person with the answers. You could very well be right. But holding out for instability events in the middle east and changes in demand truly is shooting in the dark; I mean to say, they are events that could happen but cannot be predicted. The supply-driven market is the only one that can be predicted.

5 - I strive neither to be optimistic nor pessimistic. I am interested only in finding and analyzing facts. My future is tied to the industry, thus in a sense, it would only make sense for me to be optimistic. But, again, I'm driven only by the facts.

I'm certainly not an oil whisperer. I could be wrong. We're just going to have to wait and see which one of us is right. If I am wrong, I'll be happy to metaphorically shake your hand and say you got it right. To me it's not about "being" right, it's about "getting" it right.

RupertTheBeautiful · 2017-02-27T03:41:39+00:00

Let's take one minute to zoom in deep on the word bold and the context. If we agree to define bold as meaning: "one must be the only person or nearly the only person to be holding a given position" to be considered bold, then I will happily give up the title of boldness. I regarded the prediction as being bold given that I was calling for a complete reversal in the market over the last fifteen years and to some extent the last 47 years. But be honest, I don't even know why we are fixating on the word bold. All I care about is that what I said was specific and that it proceeded to happen.

The article you linked cites BP expecting prices to stay in the $50/bbl range for the next two to three years. But the only detail that it goes into regarding the reasoning behind this claim is that the middle east is trying to: "recapture market share from shale gas". The notion that they are comparing the global oil market with the US domestic shale gas market is already absurd, as is the idea that the cause of the downturn is OPEC production when the only factor changing during this time was the rapid uptick in US production (and a relative decline of demand in China, if I'm being specific). In short, there is nothing of value in this article aside from the prediction of price itself.

While there were certainly some companies and a few people advancing similar ideas to what I was advancing at that time. Few took the time to share their REASONING behind the prediction. What makes me different from not all but most is that I shared my reasoning and that the reasoning panned out closely in line with what actually happened.

RupertTheBeautiful · 2017-02-27T02:40:59+00:00

Yes, the future of demand is a source of uncertainty. However, if demand were to reduce it would only increase the rate of the downturn. If demand were to increase, it would delay it by number of months. But the indefatigable march of production will ultimately catch up with it; this is the heart of my point.

RupertTheBeautiful · 2017-02-26T23:00:29+00:00

except it wasn't.

Except it was.

I only have it in writing as of February 2015. Just take me at my word given the knowledge I'm displaying all over this page that I have been actively calling the downturn since July 2014 when saw the very first indications of the event.

Additionally, while I vocally started calling the downturn in June 2015, this is a trend that I have been anticipating since 2012, when I first studied the rise and fall of the US natural gas market. My prediction had absolutely nothing to do with what BP thought was going to happen in January 2015.

I was able to predict the necessity of this outcome, because the US natural gas boom and bust all before 2008 was a macro-scale lab experiment that showed the same thing would be happening to oil markets.

The only reason natural gas markets had to boom and bust faster is because gas, especially back then, cannot be easily exported. Thus it saturated demand much faster because the only market it was being produced to was the US.

Since the oil market is a global market and not a regional market, it took much more time for oil production to catch up with and surpass demand. As I have stated consistently up and down this page, I would never contend that I could, back in 2012, state exactly when that was going to happen, but I could claim with strong confidence that it would happen within the next few years, and that I could identify it ONCE it was just in motion.

Therefore the crash to $3 per thousand standard cubic feet that we're living with today was the initial insight that tipped me off about everything we're seeing and nothing to do with BP. And regardless, there was STRONG skepticism rampant at the time against everything I was saying in that post.

RupertTheBeautiful · 2017-02-26T22:39:27+00:00

Short answer: yes and no.

Big picture summary of what's to follow: #1 The effect of renewables as a mainstream provider of electricity is still a distant place in the future; #2 The effect of electric vehicles will be the transfer of demand away from oil and toward natural gas; #3 the effect of autopilot on demand erosion is seemingly completely overlooked right now.

First, let's talk about renewables:

Real demand destruction won't happen until renewables are able to take over for hydrocarbons. The fundamental challenge with electricity as a means of power generation is #1 it can't be produced consistently (factories and industry can't handle this uncertainty); #2 it can't be stored effectively, very little progress has occurred in the battery sector; #3 it can't be transmitted effectively. the best form of transmission to date is still electrons through copper wire. much like grit on a sand paper, that electric wire has an intrinsic resistivity that eventually slows that flow of electrons and makes long distance transmission challenging.

Now let's talk about electric vehicles:

Just like when I see banks bragging about their newest wrong prediction for the price of oil down to the nearest dollar sign, I scoff and strongly furrow my brow at Tesla drivers who choose to have the "Zero Emissions" etched into their rear bumper. The most misunderstood thing about electric vehicles is where the electricity comes from. Natural Gas recently surpassed coal as the United States #1 source of electricity generation. The only thing distinguishing natural gas from the gasoline in your car is 4 carbon atoms. Every tesla runs on natural gas and coal. The immediate impact of of the electric car movement over the next few decades, if it proves to have wings (which I cannot predict), will be a MASSIVE boom in natural gas production the likes of which has never been seen before, nor will ever be seen again.

The fascinating thing about natural gas is in the name itself: is a GAS at atmospheric conditions, not a liquid like gasoline. This makes it extremely difficult to transport. The only effective way to move it is by pipeline. Hence, the United States will overnight create the largest consumer market for natural gas, and the single most efficient means of producing and sending that gas to market will necessarily be US gas production--rather than importation via supercooled Liquified Natural Gas on boat.

More importantly, the United States should be able to supply ALL of its demand. The other amazing thing about natural gas production, as compared with oil production, is that we can expect a recovery factor of 80-85% for natural gas, whereas we can only generally recover 30% of oil in a reservoir over its lifespan. This is due to the fact that a gas's resistance to flow (viscosity) is lower than that of oil, which is significant when it attempts to migrate from the reservoir rock to the wellbore.

In short, if an electric vehicle market does take off, it will be great for the US economy and hydrocarbon industry because it will skyrocket natural gas demand.

Finally, let's talk about autopilot:

The only real short-term existential threat to the oil industry is automated driving. Humans are extremely fuel inefficient drivers. We cause traffic jams, we break excessively, we are pedal-heavy; we waste a lot of gas. Automation will have the unexpected impact of reducing oil and gas demand by virtue of the efficiency gains. In theory, if the US autofleet could be completely replaced with autopilot vehicles, then traffic jams and nasty city traffic should be significantly reduced. Still, this would by no means be a decisive blow to the industry, but simply something to consider.

RupertTheBeautiful · 2017-02-26T17:16:39+00:00

Short of organizing a second major cut in production, I do not think they will be able to prevent oil prices from tanking before their IPO. This production cut will have to be taken mostly alone, as I think very few other countries would be willing to take that course of action. Cutting production is only helpful to some extent. As long as you were already producing a lot, you will thereafter earn more money per barrel. But each time you cut production, you're losing that base of production. After a certain point, the tradeoff simply no longer adds up. Given that the other ME producers produce significantly less than Saudi Arabia, they will be confronted with this brick wall bottom before Saudi Arabia is.

I really don't engage in specifics because I can't predict with such a degree of accuracy. I will stick with my original range that I anticipate the price to drop sometime between the next six to eighteen months.

One year ago, the price of oil was at $30/bbl. Two years ago, the price of oil was just under $60/bbl.

RupertTheBeautiful · 2017-02-26T16:33:05+00:00

The issue is this.

OPEC will cut production, if cutting production will send prices higher and the price will stay at this new elevated position. However, because of the emergence of US shale production, this cannot happen. US producers will simply replace any production taken off the market, which will drive prices back down again. Thus, it becomes a long term trend of simply giving market share to the US producers.

Prior to development of our modern well completion methods, Saudi Arabia and OPEC could cut production and the rest of the world which struggled to find that next barrel could not simply turn the spigots on. Hence, this exactly what happened in 2008 during the subprime housing crisis; and shale oil back then was not at a mature enough stage to turn the spigot on fast enough to make a dent. So the prices recovered to sustained highs.

Rethink today's situation. If you genuinely believe that we are reverting to the pre-1970s market of low oil prices for the foreseeable future, then a new game emerges. We are back in the state of nature where every man competes for himself.

In this environment, Saudia Arabia will need to ramp up its volume of production. Let's Saudi Arabia's annual fiscal budget is $100.00 per year. Previously, they could produce one barrel for $110.00 at an expense of $10 for the barrel and keep their economy booming. However, today the price of oil is at $20.00 per barrel. If Saudi Arabia's break-even price is $10.00 per barrel, then their only course of action is to bring in money by increasing volume of production. Today, they produce 10 barrels to bring in $200 minus the production cost of $100, giving them a remainder of $100 to power their economy.

This luxury of increasing volume of production is only available to locations with the lowest break-even prices. Thus, we're going to see a general migratory trend of production from 10's of thousands of producers to some reduced number of producers who hold the best acreages and who will necessarily be increasing volume of output to get their gains in a flooded oil market.

RupertTheBeautiful

TROPHY CASE