It happened when “Newzee1” posted a New York Times story on Reddit’s r/Oil channel as a “gift article,” meaning anyone could read it without an NYT subscription.
The NYT article: “Why is the Oil Industry Booming?”
Newzee1 shared it on July 17 and got ratioed--social-media speak for receiving more comments than likes—with 56 net upvotes by July 21 and 70 comments.
“What boom?” replied Nystrom19. “WTI is at $80—nowhere near the all-time high. Many other commodities have been near or are currently at all-time highs the past 12 months.”
EntrepreneurFunny469 wrote, “I consider it a boom when I work for three years uninterrupted.”
“Haha. Yeah, that’s how rough the industry had been historically,” Nystrom19 replied.
The August-delivery contract for WTI was $80 on CMEGroup July 22, up from a prompt-month contract of $20 in the spring of 2020.
The oil-stock index, XOI, which dates back to 1983, is at an all-time high, according to the NYSE. The index on July 22 was $2,035, up from the $564 in October 2020 that was as low as in December 2003.
The components are all integrated E&Ps, multi-national independent E&Ps and refiners, though. None is an onshore U.S.-focused independent.
Misleading ‘breakevens’
DoomScroll81 noted that higher WTI prices haven’t worked out well for the oil business. “The last time we hit $120 a barrel and $8 an Mcf was in the naughty aughties.”
I3luntI3rigade noted “there was a tiny one in 2012-‘13,” which actually continued into the summer of 2014 to more than $100 until OPEC tried to flush out U.S. producers by not cutting back to accommodate U.S. supply growth.
WTI tanked to less than $30 by early 2016.
OSUjeff97 wrote that “$70 to $90 [WTI] is pretty damn good when your breakevens are in the $40s. And it’s a lot more sustainable than those huge spikes above $100 that lead to demand destruction and political pressure.
“I’ll take a long stretch of $70-$90 versus a ‘boom’ up to $120 followed by the inevitable crash.”
But Nystrom19 replied that “breakevens” are “kind of misleading because depletion is real and capex is necessary.”
Also, there is a lot of natural gas in the revenue stream. “Natgas pricing is in the dumpster—as bad as it gets. Labor and equipment costs have ballooned also.”
Healthy_Article_2237 added, “Everything costs more and the quality of wells being drilled has gone down because, sadly, we drilled a lot of our best stuff in years when the price was down.”
OzarksExplorer wrote that the rig count is down by 91 from a year ago. “Boom?”
RDJobsit replied, “Because 40 rigs are doing now what 100 rigs used to do.”
‘Nothing’s booming’
DoomScroll81 wrote, “Nothing’s booming in my corner of the world—the upstream/exploration side of the business. Sure, if you’re a rig hand or a pumper in the Midland or Delaware basins, you’re working harder than a one-armed paper hanger.”
But the industry is more than the Permian Basin, he added. “From where I’m sitting and the phone calls I get all day, I know more out-of-work geologists, engineers and landmen than I can shake a stick at.
“Money for new projects is impossible to find. I’ve got a stack of amazing drilling projects with stupid good ROI’s [returns on investments]. I’m talking 5x to 10x returns in the freaking Permian that I can’t get anyone to even look at.”
The ROI’s are based on $50 WTI flat and $2 natgas.
“Fifteen years ago, I would have been beating off private equity management teams and family offices … for these exact same projects. Now, all the money wants to talk about [is] carbon sequestration and hydrogen. [Face with rolling eyes emoji.]
“No one wants to get their hands or their money ‘dirty’ with oil and gas anymore.
“Just because the [profanity] M&A spreadsheet jockeys that work for Exxon [Mobil], Chevron [Corp.] and Oxy [Occidental Petroleum]—you know, the ones who only know how to overpay for other people’s declining reserves—are doing great, that doesn’t mean those of us who do the actual work in this business are doing okay.”
He concluded, “Booming? My [profanity]. [Face with rolling eyes emoji.]”
Later, he explained that he didn’t join the comments to troll. Rather, “I just had a rough day preceded by a countless number of other rough days with private equity [profanity] and needed to vent.”
AndyWfu86 replied, “As a retired spreadsheet jockey for one of those three [mentioned E&Ps], I feel attacked. [Face with tears of joy emoji].”