re: OPEC agrees to production cut

You have no idea what it takes to get fuel at the pump

Time to slap this bitch back on the F250:


And this one for the wife's BMW:

I've worked on the production side of oil for the last ten years. One string of tools for one well can reach in upwards of hundreds of thousands of dollars. That's material cost and labor. That's only one part of the many steps.

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So when Apple makes a ton of money, that's fine. When an Oil and Gas company makes money because there is a production shortage, that's greed?

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Yep. And production is measured in barrels while pollution is measured in gallons. It's the oil patch, Hoss, and it ain't never gonna change.

LINK

Based upon $100/barrel.

In a simple illustration, let’s assume an oil company is paying $100 for a barrel (42 gallons) of basic crude oil. Their cost for a gallon will be about $2.38. At a gasoline-pump price of $4.00 per gallon, 44 cents has to pay for taxes and 20 cents for distribution and marketing expenses. This leaves $3.36 for the oil companies. Out of that total they have to pay for the cost of the gallon of crude oil itself which was $2.38 and also the 40 cents to refine it into gasoline. This leaves $0.58 profit per gallon of gasoline. As noted, however, depending on which report one looks at, this profit-margin can range anywhere between an estimated 30 to 60 cents per gallon.

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One string of tools for one well can reach in upwards of hundreds of thousands of dollars

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You're lowballing. In this down market, one set of tools in my area of expertise may run a customer 1.25 MM. And that's lower end in a down market. And it's only primary, not including backup. They always send backup. At those prices, we aren't making much profit once you include material/manufacturing costs, engineering customization, facilities, employees to support, etc.. and I would only be one small aspect in the grand scheme of things. It gets expensive to operate these Deepwater rigs (where all the new oil is). People say over 50 dollars a barrel is robbing the public, but truth is operators aren't making much money at all.

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Truck Nuts

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Jesus, all this time I thought there was some wheel lug nut thing going on with La. I just now realized what you all have been talking about.

I don't know. I don't work in oil and gas

We can talk about costs of getting oil from the ground to the refineries where most of the upstream companies are paid. I'll put a reasonable cost for a productive part of west Texas as an example in terms of $/bbl.

Well costs are about $10/bbl to drill, complete and tie in.
Taxes and royalties to owners make up about 25% of revenue, so in a $50 world, $12.5/bbl.
Transportation and processing costs usually run around $2/bbl.
Operating costs are usually around $7/bbl.
So assuming you have no overhead, that's about $20/bbl left over.
Well we aren't in a $50 world and wells typically don't pay out for 5 years, so after discounting cash flows by a standard 10% annually, you are essentially not making any money. Add in the burden of $28/bbl at some points this year, most companies selling to the free market were losing money with each barrel produced.
It's not as simple as putting a damn hole in the ground and producing. It's ridiculous when people claim oil and gas makes a ton of money when most companies haven't shown positive free cash flow in over 2 years.