Lousy Shale Economics: Financial Troubles Continue At ExxonMobil

Unfortunately, the RED QUEEN (rapid shale oil decline) never sleeps.According to the most recent data by Shaleprofile.com, if no new wells were added in 2018, overall production would have declined by 44% in just one year.That’s nearly one million barrels per day of oil production, vaporized:

The chart shows each year of FIRST FLOW by the different colors.By the end of 2017, production reached 2.12 million barrels per day (mbd) and fell to 1.19 mbd by the end of 2018.You will notice that as each year goes by, the decline rate becomes more severe, or drops at a much steeper angle.Thus, the companies producing shale oil in the Permian will have to drill more wells and spend even more money to increase production.I believe once we see the full year of 2019 Permian oil production, the annual decline will be higher than 44% for 2017.

The rapid decline rate that plagues the U.S. shale oil industry has HOODWINKED the market and investors.I still receive emails from individuals suggesting that the breakeven for U.S. shale is now $30-$40 a barrel.Good grief.If that was true, then why did the largest major oil company in the United States report a lousy $96 million of earnings in its U.S. oil and gas sector? That’s correct… $96 million of profit after producing and selling 55 million barrels of oil at a realized price of $53.30 per barrel in Q1 2019.

And, as I mentioned in the previous article linked above, Exxon is now spending nearly three times the amount of CAPEX for each barrel produced than it did in 2006 when the oil price was about the same:

In 2006, ExxonMobil spent $16.46 worth of CAPEX on each barrel it produced in its U.S. oil and gas sector versus the $46.58 in Q1 2019.  Of course, the company spent more money on CAPEX per barrel when oil was over $100 a barrel from 2011-2014, but we must compare apples to apples.Exxon could afford to invest more CAPEX when oil prices were double what they are today.Even if we compare Exxon’s International Upstream CAPEX per barrel, it has only increased by approximately $4 since 2006.

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