Oil Prices Don’t Support New Drilling

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Video Transcription edited for grammar. We disavow any errors unless they make us look better or smarter

Michael Tanner: [00:00:00] And so most people when they talk about break even oil prices, they’re using half cycle economics, which from my world of finance is a big no-no because everything’s full cycle. I don’t get, you know, I can make something look good in a spreadsheet, but at the end of the day, the bank account. Does not lie. Okay. And so basically what RiceDed has done is estimated the all in corporate cash flow WTI breakeven for a new well in US oil. Basically these, these are the metrics. This is the lowest number for an all in well that you’re going to need. What’s going on everybody. [00:00:41][41.8]

Michael Tanner: [00:00:42] Welcome in to the Wednesday, April 16th, 2025 edition of the daily energy newsbeat standup here are today’s top headlines. First up free calculator launches for ship owners to navigate IMO new green deal. This one’s unbelievable. Next up a great, great piece from my friends over at rice dad, lower oil prices threaten Permian basin growth. I will then quickly jump over and cover what has happened in the oil and gas markets. As always, I am Michael Tanner. Stu is out on assignment today, so I am sitting here rocking a solo show. Let’s go ahead and kick it off. [00:01:18][36.5]

Michael Tanner: [00:01:19] All right, free calculator launched for ship owners to navigate IMO’s new green deal. I’m gonna go ahead and read Stu’s publisher note he would appreciate if I did. And while guidance in less pollution is a great thing, there is this belief that you can tap ship owners into using battery powered ships, and that just won’t make sense as the energy transitions happen. First, we are not in an energy transition as after trillions of dollars spent on renewable energy, they have only added to the mix, not reduce fossil fuel use. Nuclear is the only real net power solution for big ships and that is not possible under the current structure. So a free calculator is kind of funny for ship owners to use to find out how much to increase their shipping rates and pass on to the consumers of the global UN cabal. And other globalists will have a slush fund to put in their projects. If you don’t know what this article is about, I will say, but I had to get Stu’s publisher note in there. Basically what happens is, is the IMO, which is the International Maritime Organization, has basically implemented a new net. Zero framework, which is basically set a bunch of different emissions targets, the low end, the high end, and all in between that basically say, if you go over those emissions, you’re going to have to start paying a penalty, buy carbon credits, or use credits purchased earlier in that year. And that starts in 2028. So what the people in Singapore, the Global Center for Maritime Decarbonization had to work overtime this weekend and actually developed a free cost and compliance calculator that allows you to help. Contextualize exactly how these penalties are going to hurt you, and as Stu said in his publisher mode. How much they need to increase shipping costs so they can pass it off to consumers and line these globalist pockets with cash. It’s pretty unbelievable. Again, it’s these non-governmental organizations that we’ve seen with Doge have come in unbelievable about what they’re doing. This is another example of you’ve got this organization who doesn’t really have any power, has some power, but only the power that we perceive it has, and they say, hey, here’s what it is. If you exceed the lower target, you’d have to pay $100 annually for every ton of CO2. And then if you fall below the weaker target, you might have to be up to 380 for every tone on that level. So pretty unbelievable on that note. And, you know, basically the way you can do it is buy credits or get lower carbon fuels, which is unbelievable. You know, it’s, I mean, it it’s pretty unbelievable. You can go check out in the link in the article on how to view that calculator. It’s kind of funny that we’ve got to put in calculators and figure out how much these things are going to cost so we can line these globalist pockets. Unbelievable. [00:03:57][158.2]

Michael Tanner: [00:03:58] Let’s jump over to the next one. Lower oil prices threaten Permian Basin growth. This is a great, great piece for my friends over at Rice. I think, you know, everybody is asking the question, OK, with this whole drill baby drill. Our company’s actually going to drill and not just our company is going to drill, but at what price are they going to drill and hire? And everybody has their own own idea and some people use half cycle economics, some people’s use full cycle and for those wondering half cycle is just the cost of the well itself. Full cycles including the road you had to build to go get there, the tank battery that you had to throw up and all the corporate engineering time that you had to spend to get into that. And so most people, when they talk about breakeven oil prices, they’re using half cycle economics, which from my world of finance is a big no-no because everything’s full cycle. I don’t get, you know, I can make something look good in a spreadsheet, but at the end of the day, the bank account does not lie. Okay. And so basically what RiceDed has done is estimated the all in corporate cash flow WTI breakevn for a new well in US oil. Basically these, these are the metrics. This is the lowest number for an all in well that you’re going to need. And I think something interesting that they did is they, and let’s, so let’s just work through it here. Can we throw up this chart here on the screen? All in corporate cashflow, W2I breakeven places for a US shale oil place. You’ve got well head break even your half cycle economics, $32 and 50 cents. Overhead. Now we’re adding in a few more of that, what we would call full cycle stuff. $14.60. All right. So now we’re at, you know, $56. Okay. Or $46. Add in PV 18. We got a discount. And one of the reasons why they do PV 18 is they talk about in this article about their, the shift from Shell 3.0 to Shell 4.0 is really this idea of higher hurdle rates that are applied to new activity. Meaning the historical kind of 10% discount rate probably is more like 18. That adds another $4.50 barrel. When you include these public oil and gas companies, provide a dividend. You break that dividend down. It’s about $8.50 to cover debt service. It’s $2.92. All that being is the all in breakeven cost is $62 at 50 cents and what are we trading at today? We are trading at $61.37. So the all-in breakevenue cost is higher than what I’m trading at now. So what that tells you is this, everybody who’s running a rig is okay losing money. Now, this is a broad generalization. This doesn’t apply to everybody, but if you are drilling a well in US shale oil plays, you need to be cognizant of this short. There are- and- and what somebody like me on the finance side would say, we should expect a drop in US oil production in 2025. And if we don’t, that means people are just drilling wells for the fun of it. And okay, maybe you have a rig contract, maybe you half to drill this next four-well pad, but keeping a continuous rig running in this environment is kind of incredible. And this is a great piece, highly recommend everybody go ahead and read this via Ristad. [00:07:07][189.3]

Michael Tanner: [00:07:08] Let’s jump over though and quickly talk oil and gas prices before we do that. Let’s go ahead and pay the bills. As always, thank you for checking us out here on the world’s greatest website, www.energynewsbeat.com. Stu and the team do a tremendous job making sure that website stays up to speed, everything you need to know to be the tip of the spear when it comes to the energy and the oil and gas business. Let’s ahead and hit that description below for all links to the timestamps, links to the articles. Go ahead and check us out on Substack, the energy newsbeat.substack.com, the best place. For you to go ahead and stay in contact with the show. It’s a great way to support the show as well. If you wanna go ahead and subscribe for paid subscription, we’d really appreciate that. And then also friends of the show and sponsor, Reese Energy Consulting, guys, check them out for all your natural gas, NGL and midstream needs. That’s ReeseEnergyConsulting.com. We love them. Check them out. Tell them that you heard about them through Energy Newsbeat. And finally, guys if, you know, now I just talked about US shale oil and gas can’t, shouldn’t be drilling there. There are plays that are non-shale plays that you can drill and make money. So if you want to become Billy Bob Thornton, you want to buy in at a great time in the oil and gas business to get away from shale oil into conventional vertical drilling. We have an awesome, awesome project that we are partnering up with on. I highly recommend going to investinoil.energynewsbeat.com. We can send you all the info on how the strategies of investing in oil and gas will work in low oil price environment, will work and high oil price environment, and all that in between. And most importantly, you can save on your 2025 taxes. You can get a little bit of a small dividend and you can become Billy Bob Thornton from Landman. [00:08:43][95.4]

Michael Tanner: [00:08:44] So let’s jump over here. Markets, you know, early on in the day, basically flat and record this about 1 p.m. Here on the 15th. You know, S&P 500, basically flat. NASDAQ, basically, flat. Two and 10-year yields down a little. 3.8 and 4.3 for the yields there. Dollar index about up about half a percentage point. Bitcoin basically flat, 84,700. Crude oil. WTI down about two-tenths of a percentage point or about $0.17, $61.36. Brent oil up about a half a percentage points, $64.75. Natural gas basically flat up about $1.11 or about three-quarters of about three tenths of percentage point, $3.33 and our XOP E&P securities contract is basically flat at $107.44. In terms of what we’re seeing in the markets today, we did see the IEA slash oil demand forecast both for this year and next mainly due to tariffs. And what they say is an incoming recession. We’ll kind of read you the high numbers here. OK, they don’t really say. They basically have dropped it by, basically, they’ve now slowed it. So if you look at the numbers here, they’ve actually slowed it by their slowest rate in five years, again, to mainly off the back of the economic growth coming out of that. UBS came out and said, we might actually see Brent trading at 40 to 60 over the next coming months, which is unbelievable. That’s kind of the risk downside scenario. Absolutely unbelievable. I mean, guys, it’s, you think it’s Armageddon out there. It’s not, but it kind of is. I’ve been having a lot of conversation with, with about a great hour long conversation with a former colleague of mine. And the sentiment is actually is not terrible. You know, I think, you know, if you’re a larger shale oil and gas company, I think there’s, there’s a little cause for pause from the, you know, the rice dad chart that we just showed, but also I think you know there are, there are other ways to get around it. I think the conventional players are doing very well right now. If your, you know, if your expertise is vertical drilling, I think you’re doing really well right now. [00:10:37][112.3]

Michael Tanner: [00:10:37] So all this stuff, I think makes for a, a very interesting, you know very interesting next couple of months, but we will be with you all the way guys with that. I’m going to go ahead and let you get out of here on a quick solo day. Appreciate you guys checking us out here on the world’s greatest podcast. Check us out on www.energynewsnewbeat.com for Stuart Turley, I’m Michael Tanner. We’ll see you tomorrow folks. [00:10:37][0.0][633.6]

The post Oil Prices Don’t Support New Drilling appeared first on Energy News Beat.

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