Thread regarding Occidental Petroleum Corp. layoffs

Oil saturation was inflated to keep drainage area small...

Graduate level chemical, mechanical, and electrical engineers have been traditionally hired for reservoir engineering assignments because of their highly developed analytical and numerical skills. These are not easy curriculums in college. Where some companies fail is in hiring a whole army of BS engineers straight out of school and then not giving them proper training. Some companies have formal training (or used to) to expose new hires to a variety of disciplines and assignments, not only to check them out in the first year but to round them out. That is a good system.

Oxy hired aeronautical, NASA engineers, Biomedical, Chemical, Pharmaceutical people and arm-force veterans and gave them the title of Reservoir Engineers. With the typical training of swim or sink, unrealistic deadlines, and pressure from their boss to deliver results, those people had to come up with forecasts not knowing what they were doing. Reserves processes was audited, not the number itself. Middle managers didn’t know either because they were facilities or drilling engineers, or didn’t care. They were navigating a don’t rock my boat culture. Now you see the results.

EURs of 900MMBOE that PXD was claiming a few years ago was indeed a big lie. Oxy never got to that point but Apache mafia came to reign over us and was stretching the Oil Saturation out of a reasonable range. Every company that participated in the core based Corelab consortium seemed to avoid the core truth because it didn’t fit their unrealistic expectation of inflating reserves. On top of that sone of the well tests had so much water it was hard to account for the little oil cut, so ended up reporting more oil!

Any RE’s on here that want to discuss drainage areas? I don’t care which basin, they’re all larger than any executive will admit.

There are so many free resources to fact-check O&G company claims. Shalepeofile is my favorite, many dashboards are free. Any investor not using this is a fool.

Shale plays are a house of cards, those of us working them the last 10 years all know that.

Guess what? Production isn’t limited to a “zone” and fracs go a lot further than what your gofer model suggests.

Only companies that got in early and CHEAP will see 2021.

TLDR

"A Ponzi scheme is a form of fraud that lures investors and pays profits to earlier investors with funds from more recent investors. The scheme leads victims to believe that profits are coming from product sales or other means, and they remain unaware that other investors are the source of funds."

"Lures investors" - Investors being the 2030+yr bond holders with a bet on oil prices

"pays profits to earlier investors" - Some of this goes to the C-suite (which is disgusting) but that's relatively a small amount. The majority should pay down near term maturities so that you can continue to play the game. Or you can decide to kick the can down the road by hiring Moelis to help with refinancing. Either way, the game continues.

Any RE should know that a 30 year forecast is not realistic. Tell me about a horizontal shale well of 2010 vintage or earlier that is still online and the OPEX makes sense to keep it online at $50 oil (forget about $30 oil)...it just ain't happening.

The truth of it is that the declines on these shale wells are so steep, that you have to keep drilling to maintain production. VH even talked about %25 YoY base declines....that's your FCF declining. You have to take a high percentage of that "FCF" and throw it back to the drilling rig to appease to the street and after that CAPEX is applied - you're expected to pay down debt, interest, G&A, and return something to shareholders - all of which we're trying to find ways to not do those things...this is a joke.

Anyway, investors are starting to figure this out which is why $hitco stonk prices will never be back to what they were when investors didn't understand how it works.