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Two in one day, you lucky or poor bastards. What value for $75 a year!
The headlines blare Exxon to buy shale pioneer, Pioneer. Now, being quite clever here, if the deal goes through that would officially mark the peak of shale, certainly it’d be the counter-revolution triumphant and the ancien regime back in charge.
You remember the Shale Revolution, right? Under the Obama, Trump and now Biden administrations, it added a significant amount of oil, though few outside the drilling companies and those selling the debt made lots of money. In the last few years, the revolution has sputtered, with growth in the shale patches crawling. The WSJ puts it, “The industry has shifted from the rapid growth it pursued for more than a decade to a mature business underpinned by fiscal restraint and hefty investor payouts” — funny stuff.
The Journal adds more insightfully,
“But producers are contending with dwindling drilling locations. Drilling for new oil discoveries has fallen out of favor with investors, leaving many companies with few options other than to acquire rivals to extend their runway.”
Lord, “extend their runway.”
Anyway, what’s happening with shale today is what was happening with oil everywhere before the revolution. All the old majors and plenty of the nationals were running out of places to drill, specifically to drill and keep oil in a price range, lets say under $100, that the corporate globalization scheme of the last decades, not to mention the American economy of the last 75 years could run on without sputtering.
A couple years ago, the Sauds established the high price of new oil saying they were going to spend $50 billion in next ten years to bring only a million new barrels to market, still to be seen if this can be done. But this deal would have Exxon paying $50 billion for 700 thousand barrels, that’s even more expensive oil.
Reuters coverage is unintentionally comical first saying, “Exxon produced about 620,000 boed (barrels of oil-equivalent per day) in the Permian basin in the second quarter, a record for the company. Still, this was dwarfed by Pioneer's output in the basin, which averaged 711,000 boed in the same period.”
90 thousand barrels more, “dwarfed?” Oyyyy. Well, let’s just say a combined 1.3 million is a little over 1% of global production. Total Exxon claimed “production in the fourth quarter 2022 was 3.8 million oil-equivalent barrels per day.” So, if you add another 700,000 that’s 4.5 million, which gives Exxon a little over 4% of total global production. Almost hard to call them Big Oil anymore, though hey, pumping four million barrels a day is still a quite lucrative business.
Returning to the problem of new oil supplies, Reuters writes,
“Acquiring Pioneer would give Exxon more established oil-producing land it can rely on to increase production when needed, rather than risk its cash on the development of unproven acreage.
"It makes complete sense," said Bill Smead, chief investment officer of Smead Capital Management, an investment firm which manages $5.2 billion in funds. "You replenish your reserves without poking holes in the ground."
Without poking holes in the ground, funny stuff, maybe we can start pulling it back out of the sky. How much of Pioneer’s acreage is proven will be determined. Oil desperation, like a riot, is an ugly thing.
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