Incitec Pivot Ltd T.IPL

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[splurge]

I agree with what you are saying. I think the general view and many of us included was that US shale would collapse due to the high decline rates. They were wrong and we were wrong. So here we are and what do they do now. I have read that the Saudis have been expanding a and building a tremendous amount of refining capacity which will make the potentially quite dominant in that area.
Maybe in a low price environment they will do the same thing and try and compete against the US and Rotterdam markets over time. In a low price environment with the oil in your back yard and being the lowest cost producer they can make a margin eventually.
For the next six month though, I do not know how this will play out. The Permian is the basin to watch I think to see if productivity rates decline or stop going up. Secondly, rigs need to drop by another 75 or so in that basin. The best operators are showning impressive numbers. But how pervasive these type of well are I am suspicious. For example in a Dec presentation Pioneer showed an average of 28 Wolcamp wells with IP 1900 boes/d in the Permian. After 30 days about 1200 boes/d it looked like on the graph. So and average of 1550 boes/d perhaps. Some of this is gas though so maybe 80% oil my guess so maybe 1200 b/d oil.  But the EIA in their latest monthly productivity report indicates the average rig produces 412 barrels per month of oil. So these prolific Wolfcamp wells must be few in relation to what is being drilled. (Tell me if I am making sense)
There are 212 rigs in the Permian. The productivity has been going up but has stalled as we got to 400 b/d per rig. Rig productivity declined one month in November which is unheard of but rose a bit after.
To average 412 b/d there must be a lot of small wells uneconomic at $30 being drilled if Pioneer and few others are drilling these Wolfcamp type wells. I think the Permian will tank in terms of number of rigs if prices hover around $30 another quarter. What happens to legacy decline rates and productivity per rig as more less efficient rigs down while they drill the wells I mentioned is uncertain to me. We need to lose 20 rigs a month for a while to get the Permian into a good decline imo.
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