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I promised a while ago I would present an analysis on "Holding Production Flat" -- FANGs [threat] to shut everything down, when that's exactly what they should do motivated me... Modeling is done. The numbers are totally interesting.
Just running one large Permian producer. Sample of one.
at $30 WTI. Holding production flat for 18 months versus not drilling at all is an NPV of -92mm. All for optics.
Imagine telling someone, if you don't do anything, you will make $92mm dollars. Why then?
at $30 WTI. Holding production flat for 18 months versus not drilling at all is an NPV of -92mm. All for optics.
Imagine telling someone, if you don't do anything, you will make $92mm dollars. Why then?
Because the companies don't think you know what their base decline rates are. Well, for a tiny amount of money, the info is available.
Shale is SWING production, not "Hold Production Flat" production.
Shale is SWING production, not "Hold Production Flat" production.
I'll develop this into a presentation, but for now the key notion is "it costs stakeholders $92mm to make management look good"
Look the PDP decline rates are what they are. Every company has an economic convexity. When we invest in energy, we believe something about the commodity price and it's vol.
When you start to understand the moving parts, you see how the machine has value if used correctly.
When you start to understand the moving parts, you see how the machine has value if used correctly.
