Straight Talk About 9000 Available O&G Leases

OK, what is the truth regarding oil and gas leases versus current production levels? I want to hear from you O&G folks what the real deal is? I keep hearing:
1. We are no longer energy independent, where in the last presidential term we were an energy exporter.
2. I do not feel that demand has gone up in the US in one year to justify the price/barrel of oil (right now) $128.
3. The White House press secretary claims there are 9000 leases unused.
4. ?? What question should I also be asking?

If my assumptions above are correct, then WHY IS OUR ENERGY PRICES SOARING? This is killing us, some more than others. Can someone that knows explain it to me like you would to a 5-year-old? NONE OF THIS makes common sense. If I'm hearing right, there shouldn't be a difference in current production from the last administration time period versus the current one. If this is correct, then what is really going on?

I want to keep this as apolitical as possible to keep this out of the bunker. The more that can read this, the better the understanding for all of us.

Maybe those 9000 unused leases are worthless and non productive parcels

That's part of what I'm asking of the THF expertise. Good start.

More than likely they are productive, but do they project a high enough production rate to be profitable long term. Might be able to make money at $120 per barrel, but at one point prices will normalize and then you've sunk a lot of money into a field that no longer pays for itself.

Demand has definitely increased compared to during COVID. More people driving, more people flying, etc.

Energy soaring has ABSOLUTELTY zero to do with US Oil & Gas production or producers.

It has 1,000,000% to do with extremely hostile policy from the Biden Admin and wallstreet speculation. Period. End of story.

They are trying to scapegoat the industry (as usual).

The majority of US production is profitable in the $50-65/bo range. A lot of Texas stuff even less.

Ask Biden why they won't re-open federal leases? (NM, WY, CO, and the Dakotas mainly). Politicians in DC have FLAT OUT made it clear that they will not do that - go buy an electric vehicle they say. They're prepared to pay $15-20 per gallon to "show Putin our resolve"....WHAT?

This is way way bigger than "Russia Russia Russia....." ...honestly it has very little to do with Russia - Russia is just the cover or excuse. This is a push to destroy the middle class by and through economic hostility to our own people.

The US was energy independent as little as two years ago. The day Biden took office he started signing EOs to end that.

I am in the O&G industry.

I sure don’t know but it was my assumption that they’re not economically viable as stated above.

Crude oil inventories are down 14%, over 71M/bbls less than last year, in spite of.....
Crude production up over 16% to 11.6M/bbls per day
Refineries have increased production drastically, up over 55%
Demand for gasoline up 7%, Diesel 17%
We have a war going on involving one of the world's largest energy providers. Wall St sees that as as potential supply disruption.

This in addition to what Cochise posted in which I'm in 100% agreement

I know what... let's empty out the reserves......

No way if you're talking about the Strategic Oil Reserves. Wouldn't make a bit of difference, then refilling them would cost Billions. Trump filled them to the top when it was cheap. Plus they are there for war time use.

That’s the answers the current administration keeps coming up with

Its all about cost of extraction. Offshore is the cheapest cost per gal. to extract.
The government can control flow by allowing imports and unnecessary compliance regulations on domestic.
It's pretty simple really, The private sector will slow flow to take advantage of current and future pricing in relation to their production costs. Currently number one thing to do to increase flow lower production costs, every business world off acceptable margin

Now second part when did Biden stop federal land/water production? when was it reversed? How long does it take to actually start producing oil once a lease is signed? Well over a year.

Essentially Biden purposely creates a backlog on federal leases and was trying to subsidize the lose of production with outside oil. Russia oil is a perfect example. Russia oil in use exploded under Biden. But its really nothing more then blood money.

Long story short Biden created no less then a two year delay in any new extraction on federal land. And that's assuming producers want to deal with his unneeded methane mandates

What has made the inventory go down below energy independence level? Were there any current leases that were pulled away since the beginning of last year? Not to my knowledge, so something still isn't adding up for me. Worst case, we should be able to maintain instead of going under like we're doing. The prior administration predicted it, but not why.

The major oil companies, the real power brokers like the current price oil.

Not really. Biden released 30 million bbl to us and 30 million bbl to others.

I see that BOBO, that is easy to understand. What I don't get is exactly what happened to cause the price to explode way beyond what I think it should be (pre covid). It's like a reactor got too cold, and the operator pulled all the control rods out, and now it is melting down and no one seems concerned to push the rods back in.

No, bad idea. Let's just unhead production, let's become energy independent again. As soon as we do OPEC will turn up supply to try to get oil prices below our profitably margins causing us to slow production. If our production costs are low enough, There will be a price settling that works out. We stay independent and oil field stays employees but the pump doesn't impeed on discretionary income

Not enough production to offset Or lower speculation quickly

sarcasm intended.

After I replied it hit me. I'm slow today

"I see that BOBO, that is easy to understand. What I don't get is exactly what happened to cause the price to explode way beyond what I think it should be (pre covid). It's like a reactor got too cold, and the operator pulled all the control rods out, and now it is melting down and no one seems concerned to push the rods back in."

When oil dived from $70 to $40 a barrel, I read it was all due to less than a 1% worldwide "glut". Really caught me off guard for that little to have caused that great of an effect. May well be something similar working in reverse.

According to the news, it is high risk to invest in projects if the Dems can just shut the project down next week. Look what happened to the Keystone Pipeline. There is no telling what that cost. Then Biden cancelled it.

There needs to be some kind of legislation that will give producers and investors confidence that they can stay in business once started.

Fox was just talking about major banks being woke and avoiding financing for fossil fuel projects. The Fox reporter said that every time Jen Psaki steps up to the podium she is twisting the facts (lying). As I type this our fool at the top is lying to the public on national TV.

It is unbelievable the grip the progressives have on this administration. Of all the legislators the progressives have to be a small minority. Hopefully the rest have their phones ringing off the hook to stand up against the "squad" and other progressives.

Also don't discount a Presidents ability to counter speculation in a speech high lighting that we are about to open unprecedented flood gates to end high prices, and how we are changing regulations to lower costs.. Unfortunately we get the opposite with Biden. It's all about creating more speculation and driving costs up. 150 oil makes green energy worth while....and maybe even self support from a cost/efficency stand point.

Everyone thinks everyone else just gets rich in the oil business.

It probably has the highest bankruptcy rate of any industry.

No one wants to invest in the O&G business because after the last big crashes wallstreet money flooded the O&G industry and there were new companies and joint ventures popping up hourly. All this money created this crazy market (from my side of the table I could see it) - ridiculous lease bonuses were being paid by private equity companies - areas that from a geology standpoint were just "meh" were getting $$$....so it comes time to drill and all the private equity companies were drilling just "meh" wells.....well - they didn't want their books to look bad on wallstreet...so what did they do to offset it? Drill more "meh" wells...and more meh wells..until most of them went bankrupt. That's why new investment isn't flooding O&G...most of the idiots got burned - and those that DID know what they were doing are already still in the game. My take on it at least.

No matter how you spin it, production has not dropped enough to justify $5.00/gal diesel in Tx. It has very little to do with supply and demand and everything to do with political policy.

RIGHT Big_Country01. My point exactly.

Cochise, BOBO, and DannyB, I have something to chew on now. It might still be dim, but the light is beginning to shine. I still haven't hit on my ultimate understanding point yet, but your posts help.

I would of never guessed it would go this high this quick. But there is no one at the top publicly trying to do anything about it either

This is from TX’s top moderate House Rhino. The former Seal is saying a lot with out saying much

And neither is he going to the border!

Let's be honest he doesn't even know he is Texas

Very true

Speaking as an old oil trader, the source of the large bounce in crude price is most likely the New York Mercantile Exchange. Had I been trading presently, when crude headed upward I’d have bought wet and futures just like most all the traders would have. All the computer driven trading systems would have you going long in futures. Where the hedge would be is a mystery though, but probably outer months on the Merc. Anyway, the Merc drove prices up hard and fast.

When I was trading, I had no care about where the price was, as long as I had value.

I need to discuss this with my youngest daughter, who is also a former oil trader, to see how she views the market and where it’s going and how far. She used to have her own company that sold market information and projections.

So, you ask, how does this work. Well, the Merc (thanks to guys like me) drive the price straight up, which includes prompt month crude and products, and outer months as well. Some of that buying is speculation and some is based on fear of being caught short (not enough crude to run the plant). A refiner buying crude will have to pay the price to get the crude to make the gas and diesel, and they pass the increase on to you. This particularly impacts the refiner/marketers that don’t have their own exploration supply, they are forced to buy at the high prices or shut down. This type action bids the market upwards rapidly. The refiners that have their own captive supply raise prices because they can.

This could all be corrected if the idiot in the White House allowed or influenced an increase in production. Just the knowledge that production was going to actually increase would cause the traders to ease their buying in the fear of being caught long in a falling market. At the moment, this is a market where you want to be long on supply. The moment that psychology changes, prices will fall as fast as they rose. Unfortunately, there isn’t any market info at present or on the horizon that would suggest that you don’t want to be “long”.

People say that it’s all supply/demand. Well, it’s more complicated than that. I always said that 3 things rule market price - fundamentals (true supply versus demand), technicals (what the computers say), and psychologicals (what the traders think). Right now, I think psychologicals are driving price.

Traders make a lot of money if they are good, but pay a price for it. Stress drove me finally to a different livelihood, on the advice of my doctor.

603 I think this is the lightbulb I've been looking for. Thank you.

that's why when pasky says restarting the xl pipeline won't do anything for prices she is dead wrong. it would have and immediate effect.

Cochise in his first post line two, got the process correct, politics are delivered to the American people. cause and effect...... Biden got ahold of the playbook from Obama and the Clintons.

We Americans have enough oil and gas under our feet and have the know how to produce it to make us energy independent and not dependent on another country but we are being held hostage by an administration that is hell bent on converting us to green energy. What has changed in the past year? The oil and gas is still there that hasn’t changed it seems obvious to me we are being played.

Be cause liberals would give up sovereignty for a prettier view. Our energy, our food, everything... Hi NAFTA

I think there is truth in what you believe. I think the reason for allowing gas prices to rise long term was to push us toward electric vehicles. Russia’s actions accelerated the price increase unexpectedly, but this just benefits the administration’s not so secret plan. However, the law of unexpected consequences just might come back and bite them on the butt. Even the liberals are unhappy with inflation and extreme fuel prices. If we get the House and Senate back, we can stop further damage, but whatever new rules they come up with will have to be signed by Mr Liberal Potato Head in the White House.

Unless a 2/3 majority shoves it where the sun dont shine.

But money can be made at $60 a barrel.

I am in the business of finding oil. Companies hire us to figure out where to drill. I have been doing this since 1994. 2019 was our best year ever. 2021 was our worst year ever. The phones still are not ringing like I would expect them to be with the current prices. Most people I talk to attribute the problems to be lack of capital. The money guys that funded all these projects gave up on oil and are putting their money elsewhere.

From what I heard today all of these are unexplored leases, so the 9000 comment is meaningless. One has to ask why haven't the leases been bid on already? That should tell the story.

And that's exactly what they did.

They are going to [censored] us on this deal is all that really needs to be said.

Remember when Bush said he was going to open Anwar and end the ban on off shore drilling in 2008? Oil was at 145 dollars a barrel and crashed to 35 by January 2009. Word can make a difference.

I can offer up my experience with federal OGL’s in New Mexico. I owned and operated several leases (some on fed, some on state and some on fee ground) before selling them off about 5 years ago. I still continue to participate in wells over there, but it’s too tedious from a regulatory perspective for a small guy like me to operate anymore.

Eddy/Lea/Chavez County (I’m only using these because that’s where my direct experience is)

1- Federal leases only need to be nominated, then recognized by the BLM, and sold in an auction style sale. They are 10 year term leases. Additionally, even if the whole section is federal lands, typically they won’t let you buy a section at a time (even if you nominate the whole section) They’ll break it into 1/4 or 1/2 sections. My guess is where the “90,000 unused leases) comes from is a combination of multiple “leases” inside a fed section, federal that were speculatively leases over the last 100 years and not drilled, leases with plugged wells and leases with dry holes. I can 100% promise you there aren’t 90,000 unused leases in “oil country” or in places where we could drill commercially viable wells.

2- The Current Administration and Fed Lands- when oil and gas operators saw Biden’s disastrous energy policy in the campaign speeches, then saw he had a real chance to win, they/we went to work permitting wells. They permitted 5+ years of inventory, because the statutes wouldn’t apply to leases with ongoing operations (permits included). When Biden’s crew got in, they went to work countering this move by shutting down infrastructure, gathering pipeline systems, SWD’s, fresh water sourcing are now almost impossible to get permitted from the state or fed. They also have jurisdiction over much of this on fee land through their required permitting process. This means basically you can’t drill/complete new wells in any place this infrastructure isn’t in place. What is in place is stressed, and there is more demand for its use than there is available capacity/supply.

It’s impossible to drill a well in Eddy or Lea counties (the prolific counties) without having state or fed direct influence, and we know how that influence is being thrown around.

Yelp it's that simple.

Very educational thread. Thanks all!

Lots of good info. Thanks to all.

This is the biggest issue with domestic production being slow to respond to higher prices. These huge horizontal wells are expensive to drill and it is a lot harder to get funding to do it than before. For public E&P's they are no longer rewarded for high growth projects, they are still being pushed by the market to stay within cash flows and reduce leverage. Oil prices are cyclical and the last couple bust cycles are still fresh in the memories of the investors and lenders who lost their rear ends from some of those highly leveraged players.

We are seeing increases in rigs, but its much more measured this time. Lots of fear from the markets about over leveraging to chase the boom only to have OPEC open up and crash prices again like Bobo pointed out.

When oil is found in new areas it must be moved to refineries. This administration is anti pipelines so the doubt of new ones being built contributes to the lack of new exploration.

Biden policies are encouraging lending institutions from providing money to oil companies.

Biden canceled ANWAR exploration, drilling on federal lands, and offshore drilling.

Raising taxes on oil companies, and threatening throwing oil executives in jail also has an effect.

Despite Biden’s words, his administration is doing everything it can to slow oil production.

they aren't trying to hide it either. they want america to feel pain at the pump.

Watch what they do, not what they say.

Unfortunately a vast majority will only listen to what is said.