Sunday, December 14, 2014

And It Begins: US Stripper Well Operators Eye Closures Amid Low Oil Price

Analysts examining the effect of the oil price’s precipitous decline on companies should spare a thought for stripper well operators, the mom-and-pop businesses that coax the last trickles of crude from long-ago drilled holes., reports FT.

Although tiny in isolation — the average stripper well yields less than 2 b/d — there are more than 400,000 such wells in the US supplying about 11 per cent of US oil production. They produced 700,000 barrels per day in 2012, the latest year for which data are available — as much as the Opec member Qatar, according to data from the Interstate Oil & Gas Compact Commission.

More from FT:
Now, with the price of US crude below $60 per barrel — down 46 per cent from levels six months ago — some operators plan to idle their stripper wells...
Melvin Moran, whose company owns stripper wells in Oklahoma, said it costs thousands of dollars a year to keep one pumping.
“A lot of the wells we operate are not going to be viable at this price,” Mr Moran said. “I’m not talking about drilling, but just getting the oil from below the ground to the surface of the ground.”
Mark Thomas has two companies that operate 100 stripper wells in Arkansas state with total production of 300 b/d. “Some of those will be shut in, probably within 90 days,” he said last week.

 


3 comments:

  1. This shakeout is probably a net positive for the industry long term because it forces the most inefficient businesses to close and puts their capital goods up for sale to more efficient firms.

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  2. Isn't capitalism great? If the cost of producing your product is higher than the price you are able to sell you product for your enterprise is a net destroyer of value. Those enterprises should go out of business.

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  3. The only thing that is sure in life is change; the energy industry is changing and all in all that's a very good thing. Combustion based power is over. We are in the midst of huge shift. Either learn to flow with it, or be an angry old man.

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