Eagle Ford Dec 2013 DeclineThe U.S. and Global financial system is being kept alive by a highly leveraged paper system.  The Fed’s recent announcement of a $10 billion taper has had the anticipated impact on the precious metals and bond market.
Even though I thought the Fed would never taper, the end result will be the same.  As I have mentioned several times, Energy drives the markets… not Finance. 
The so-called U.S. Shale Revolution is the only thing that is holding off the collapse of the global markets as it has brought on more oil supply (only temporarily), desperately needed by the world.
Unfortunately, it looks like the “Illusion of Sustainability” in shale oil production took a BIG HIT, as the forecasted decline rate at the Eagle Ford Shale Field increased double-digits in just one month.

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From the SRSRocco Report:

Eagle Ford Dec 2013 Decline

Eagle Ford Jan 2014 Decline

According to the EIA – U.S. Energy Information Agency, the daily decline rate in the Eagle Ford Shale Oil Field is forecasted to decline from 83,000 bd (barrels a day) in Dec 2013, to 91,000 bd in Jan 2014.  This is an (10%) 8,000 bd decline in just one month.

If we look at the two next charts we can see the change in Net Oil Production from the Eagle Ford:

Eagle Ford Dec 2013 Net Production

Eagle Ford Jan 2014 Net Production

In the first graph, the companies drilling in the Eagle Ford added 116,000 bd of new production in Dec and if you subtract the daily decline rate of 83,000 bd, there was a net new amount for the month of 33,000 bd of production.

Even though these companies are forecasted to bring on 120,000 bd of new production in Jan 2014, their daily decline rate has increased to 91,000 bd, which gives the Eagle Ford a net new production for Jan at 29,000 bd — down 4,000 bd compared to the previous month even though production increased by 4,000 bd.

What we have here is a classic example of the DEATH OF OIL PRODUCTION by an ever-increasing decline rate.  As I noted in a previous article, the Eagle Ford has been averaging a 24,000 bd decline rate a year for the past 3 years.   However, it has increased 8,000 bd in just one month!

If we go back to the first month the EIA stated these statistics, Nov 2013, we can see the overall impact:

Eagle Ford Nov 2013 Decline

Eagle Ford Nov 2013 Net Production

Here we can see that in Nov 2013, the daily decline rate at the Eagle Ford was only 81,000 bd.  New production during Nov 2013 was 105,000 bd and minus the 81,000 bd of declines, we had a net production of 24,000 bd for the month.

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If the companies in the Eagle Ford produced the same 105,000 bd in Jan as they did in Nov, they would have only had a net production of 14,000 bd.  But as we can see, they were able to ramp up new production in Jan to 120,000 bd to get that net amount of 29,000 bd.

The daily decline rate will continue to increase and it looks like it will surpass the 107,000 bd three-year average trend by the end of 2014 by a far margin.  If the Eagle Ford hits a decline rate of 115,000-120,000 by the end of 2014, it will have to produce a great deal more if it wants to continue to add net new production.

At some point in time, the “Drilling Treadmill” will not be able to keep up with the huge declines and production at the Eagle Ford & Bakken.

The United States has no PLAN B after the Great Shale Hype Peaks and declines.

  1. We are discovering new oil fields and technology is allowing us to recover oil from old oil fields.  The global oil reserves are increasing every year even with increased production.  The sky is not falling and peak oil is a myth.

    • You just go on believing that.
       
      Better yet, go buy a new Hummer just to show us.

      BTW, if you’re going to make generalized comments like that, show us some data like SRSRocco. Otherwise, your comments really don’t mean squat.

    • FOLKS,

      The situation in the global oil industry is far worse than even I have written about.  However, I have recently come across data that makes the THREAT of PEAK OIL pale in comparison.

      I plan on putting out the information in a Report at the beginning of the NEW YEAR.

      This is by far the most DIRE INFORMATION I will be writing about.

      steve

  2. @Doc,
    Went to purchase a bag of your 90% Junk Silver you advertised at 1.49 over spot.  I see that spot is currently 19.31; however, you are selling the silver at “Current Silver Price: $ 19.46″ plus premium.  It appears that your website does not update gold and silver prices when the Asian Market opens.  Is that correct?

    • @hromano1030 -we utilize live market feeds.  At retail, bullion sells at the Ask price, which is typically .10 higher than the spot bid price.  I am showing Kitco currently is also exactly at 19.46 ask for silver:

      MARKET IS OPEN
      (Will close in 18 hrs. 11 mins.)
        Metals Date Time (EST) Bid Ask Change from NY Close
      Gold Charts  GOLD 12/22/2013 23:04 1202.30 1203.30

      -1.20

      -0.10%

      Silver Charts  SILVER 12/22/2013 23:04 19.36 19.46

      -0.06

      -0.31%

      Hope this helps!
      Thanks!
      -Doc

    • ANY oil can be used in a diesel, and I am exploring using rendered animal fat (bacon grease). 
      Used motor oil, vegetable oils, (peanut oil was what diesels were originally built to run on!) 

  3. paying $3,16 for regular this weekend, these lower prices won’t last.  Just as soon the oil spigot is shut down, maybe with a major mid east conflict or reduced supplies, we wont keep seeing those low prices.  I think it’s largely political at this point,  The anti petro president knows that he has to allow the oil to keep flowing from our supplies which making it hard for the Saudis to sell oil here.  $5 gasoline would be a great hardship on the American consumersn ands driver.  So, as long as this shale oil flows we can enjoy lower prices but I don’t think that will last.  As China’s demands for oil continue to ramp, the supply chain will constrict.  If shale continues to decline in volume, oil prices will rise, or so it seems to me. 
    When a commodity that is extremely political gets caught up in supply issues, that usually does not end well.

    • Hey @AGXIIK , with this beauty as my current daily driver, I am hoping the lower gas prices will stick around for a little bit longer.
       
      (Just as I am hoping the lower PM prices will also stick around for a little bit longer!)

  4. Hawk   we stock silver, gold, food, ammo, guns and other essentials.  Idiots in Stockton CA flash mob riot over getting a pair of Air Jordans.  I hear those cook up really nice on the Barbie. 
    I’m all ears on your 2014 report Steve. Any hints as to its contents? Maybe we can prestock based on that.

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