It was recently announced that Jeffery Hildebrand's (A Houston Texas Native I might add) Hilcorp Energy Co. is acquiring an assortment of older Alaskan wells and pipelines from BP Plc for ~5.6 Billion dollars. BP held these assets for ~60 years, but as momentum has increased for shale oil production methods in the Permian Basin "big oil" has shifted their focus away from some of their more "traditional" production methods. The biggest concern from investors appears to be the high decline rate found in shale based wells. Some statistics indicate that these well can lose up to 70% of production in the first year of operation, meaning there is a constant re-investment that must be made to find and drill new wells. Comparatively, conventional wells are cited as losing as little as 5% annually.Thus far I have cast a very "sour" (excuse my pun...) view of shale plays, but they appear to have had a very beneficial effect on the market volatility and should lead to more stable prices long term. The reduction of costs to drill new wells coupled with the speed at which new wells can be brought online makes it easier for these wells to at least break even (if not profit) in the $50-$60 per barrel range.It has been a long time coming, but I am happy to announce that the bottleneck in the Permian is on its way to being alleviated. It was announced mid-August that a second pipeline from the basin came online and the crude EPIC Midstream would be accepted by Moda Midstream in Ingleside Texas. The supply picture aside, the one major concern for price stability moving forward will be worldwide demand. Fears of recession in certain countries will influence pricing. Retail sales and employment figures stateside still look good, but a few economists and analysts have noted that we may have already entered a manufacturing contraction.P.S.A For those who may live or know those who live in Florida. Hurricane Dorian has changed course and is speculated to make direct landfall in the Sunshine state with no obstructions along the way thus increasing the potential for devastating conditions. Everyone please be prepared and stay safe.
