re: There’s more oil and gas than ever — and the industry is tanking

quote:

---

I haven’t been impressed with the supposed 5% terminal decline in shale oil. Some of the wells are quite frankly god awful

---

Takes about ~180-200 months to reach this (5-6%) terminal decline (in the Marcellus anyway) and most shale wells have not been producing that long. The App basin is riddled with pipeline and surface constraints, so the wells that have been online even close to that long have usually been shut in for a time...will be interesting to see what the real terminal declines per basin shake out to be.

quote:

---

Takes about ~180-200 months to reach this (5-6%) terminal decline (in the Marcellus anyway) and most shale wells have not been producing that long. The App basin is riddled with pipeline and surface constraints, so the wells that have been online even close to that long have usually been shut in for a time...will be interesting to see what the real terminal declines per basin shake out to be.

---

I was talking about shale oil versus gas. Gas works at the right prices and the history of the Antrim in Michigan shows it can flow for a while at low volumes. I don't really believe the recovery slides 20 years out put out by RRC and the like, but if the wells are well past pay out and producing cash it seems somewhat immaterial. The key is good gas prices to get quick payouts then minimal maintenance to produce gas wells. We clearly don't have that natural gas price right now. It's harder to move oil molecules through shale and this clearly is seen in the results in the Permian, Eagleford, etc. Heavily drilled cores resulting in companies drilling worse acreage and the $50 oil price doesn't cut it. The density of Karnes County, TX Eagleford wells is almost mind numbing,

quote:

---

Here is the article

---

The video in that article shows maybe 10 or 12 students AT MOST protesting, and says 100 students (10 times the number of protesters) attendee the dinner.

So your whole post is based on a handful of students and ignores that far more students weren’t protesting and were participating in the dinner with Exxon.

quote:

---

Oh I fully believe students would protest against O&G, I'm simply saying I don't think in the end they will be prevented from hiring. There will be students that ultimately want to succeed.

---

Do you really believe top law students at Harvard are left in a position where it's Exxon or Morris Bart?

Yeah, I wouldn't invest on any of those hunches.

quote:

---

Decisions

---

This guy gets it.

quote:

---

You are looking at this backwards. You need to look who has the best reserves. That is clearly Saudi followed by Iraq and russia.

---

I never disparaged the reserves of these three. That is undoubtedly their strength. Just their ability to produce uninterrupted.

ETA: This isn’t some base investing guidance. I’m not advocating people to go buy up all the energy stock they can afford. I’m just making some big picture observations about where I see the market going eventually.

quote:

---

It might not be this year. Or next. But I’m bullish on American O&G coming back stronger than ever in the coming years.

---

Honestly, you’re whole post made more more bearish for a number of reasons:

A. You presented a list of unpredictable, uncontrollable events that are seem both absurd and plausible. All of that is just one big collection of risks, and a lot of downside risk at that.

The sector has already has already had historically low returns and high risk despite the broader market having the opposite. That’s resulted in a beta of 1.27 and an alpha of -13.91%. So the returns would have to increase significantly to make it worthwhile and all that you laid out would only increase the beta.

B. Although the relationship has diverged a bit lately, one of the major drivers of gains in the sector is the price of its commodities. And when those commodities rise it negatively impacts other sectors AND consumers who use these commodities.

C. As discussed earlier, this sector is not only being increasingly avoided by environmentally conscious consumers, but environmentally conscious investor, and this type of investing is becoming more popular.

D. Alternative options (e.g., electric cars, solar power, etc.) for this sector is becoming more and more popular, affordable, efficient, and most importantly, adopted by both consumers and companies. And there are an increasing number of companies developing and providing these options.

So risk-sensitive investors/consumers are going to care about A; price sensitive investors/consumers are going to care about B; environmentally sensitive investors/consumers are going to care about C; all 3 are going to be more likely to avoid the sector for these reasons; and D provides (for maybe the first time ever) a viable alternative for consumers/investors.

And personally I care more about avoiding risks and lowers prices but a little environmentally friendliness is a nice cherry on top. So you not only made me want to avoid the sector more than I did before, I now want to buy a Tesla (already did) and put some solar panels on my house (likely won’t though) than I did before.

Regardless, maybe it’s because the energy sector is so much more important to the region that most of the posters on here are from, but I just don’t see how people can he so bullish about the sector given all of the headwinds. I mean O&G is obviously going to still be necessary (since this has been a popular Strawman argument here), but I think its best days are likely to be in the past and most people are going to be happy about having some competing alternatives.

quote:

---

All the environmental points are moot, there’s just too much oil on the market.

---

It’s not moot when the alternatives are now here. And while the consumer side may take more time to change, the investing trend is gaining popularity even among institutional investment firms (Blackrock) AND unlike consumers (e.g., have a gas powered car), investors don’t have to participate in any sector and any other sector is an alternative, not just a director competitor.

quote:

---

you think some battery powered cars are dragging down the price? I

---

No I don’t think that as of now. But I’m saying that as they become more popular, that becomes more of a possibility.

And from an investment standpoint in a forward looking market, with more alternatives beyond just the sector to search for better and safer investments, I think this is much more of a current (or at least near-future) risk for the sector.

quote:

---

This is a simple issue of too much supply.

---

And this seems like a conundrum for the sector. On one hand, since a higher supply lowers prices, they make less, but consumers are content paying low prices.

On the other hand, lower supply would mean higher prices and they make more, but consumers are not so content paying higher prices.

With no viable alternatives, the consumer has (has) to deal with it and demand was pretty inelastic. But with more and more affordable alternatives, I think demand will become more elastic, which will then drive down prices again, and they make less again.

So I really think the sector is in bad place moving forward since elasticity is now greater risk for them as they can’t just rely on artificially lowering the supply and lowering it would less to the elasticity itself.

quote:

---

It’s not moot when the alternatives are now here.

---

What alternatives? As Hubert’s image pointed out, nuclear plateaued decades ago and renewables have been nearly the same, as well. Wind is highly regional and not a viable large-scale replacement. Solar is also highly regional and heavily subsidized. China and the U.S. make up ~75% of total solar cell production for precisely this reason. If it was just around the corner from taking over don’t you think production would be ramping up in more places?

Combined solar and wind don’t account for more than a couple percent of large-scale energy production. I’m sorry, but electric cars aren’t crushing the O&G market if they simply shifted the consumption down the line to the power plants.