WEDNESDAY EDITION

October 22nd, 2014

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Why It's Different This Time
Keith Schaefer  Oct 16  

Are you afraid of a big bag oil shock, Ferdinand?
Ferdinand E. Banks  Oct 14  

Oil, Nat Gas, Inflation, Deflation and Gold discussion w/ Rick Rule
Market Sanity  Oct 03  

Oil Market Update
Clive Maund  Oct 01  

Energy Economics: A Modern First Course
Ferdinand E. Banks  Sep 30  

»» more editorials in the archives

market data


Ux U3O8 Price (Uranium)Oct 20th, 2014
$35.65 Unch www.uxc.com

»View Commitment of Traders.

expert analysis & newsletter briefs

Ur-Energy Inc.

"As far as the U.S. in-situ recovery (ISR) startups go, we recommend Ur-Energy Inc. . .production at Lost Creek in Wyoming has gone well in year one. Wellfields are performing nicely at the lower end of our cost curve at $20/lb. Due to current uranium prices, production was tapered back to accommodate selling exclusively into long-term contracts. Thus the operation is largely insensitive to price movements, as the company sells its uranium for more than $60/lb. Management is pretty excited about its Shirley Basin project. This is a recent acquisition from Areva S.A. that should have even higher grades and better properties suitable to ISR mining." (10/16/14) - The Energy Report Interview with David Talbot

Fission Uranium Corp.

"Among the Athabasca explorers, our top pick is Fission Uranium Corp. . .the Patterson Lake South (PLS) deposit is a potentially world-class discovery. It's shallow, high-grade, continuous, remains open in essentially all directions, and it's a basement-hosted deposit. We believe the project hosts about 80 Mlb at about 1.6% U3O8, but with increased cutoff grades, its average grade rises dramatically without shedding that many pounds. At less than a buck per share trading, Fission seems like a no-brainer. The stock hasn't been at this level since August 2013, and the company's added perhaps 40 Mlb to its deposits since then. Fission's also started contemplating mining scenarios. It significantly derisked the project, plus all 61 of its summer drill holes were successful at PLS. The company cannot miss. It's likely that many investors are waiting for an initial resource, which is due by year-end 2014. " (10/16/14) - The Energy Report Interview with David Talbot

Ur-Energy Inc.

"As far as the U.S. in-situ recovery (ISR) startups go, we recommend Ur-Energy Inc. . .production at Lost Creek in Wyoming has gone well in year one. Wellfields are performing nicely at the lower end of our cost curve at $20/lb. Due to current uranium prices, production was tapered back to accommodate selling exclusively into long-term contracts. Thus the operation is largely insensitive to price movements, as the company sells its uranium for more than $60/lb. Management is pretty excited about its Shirley Basin project. This is a recent acquisition from Areva S.A. that should have even higher grades and better properties suitable to ISR mining." (10/16/14) - The Energy Report Interview with David Talbot

Fission Uranium Corp.

"Among the Athabasca explorers, our top pick is Fission Uranium Corp. . .the Patterson Lake South (PLS) deposit is a potentially world-class discovery. It's shallow, high-grade, continuous, remains open in essentially all directions, and it's a basement-hosted deposit. We believe the project hosts about 80 Mlb at about 1.6% U3O8, but with increased cutoff grades, its average grade rises dramatically without shedding that many pounds. At less than a buck per share trading, Fission seems like a no-brainer. The stock hasn't been at this level since August 2013, and the company's added perhaps 40 Mlb to its deposits since then. Fission's also started contemplating mining scenarios. It significantly derisked the project, plus all 61 of its summer drill holes were successful at PLS. The company cannot miss. It's likely that many investors are waiting for an initial resource, which is due by year-end 2014. " (10/16/14) - The Energy Report Interview with David Talbot

Energy Fuels Inc.

"In a rising uranium price environment, I suggest a few producers, including Energy Fuels Inc. . .Energy Fuels has a Buy rating, high risk, with a $14/share target. Operations feed into its White Mesa Mill in Utah, which is the only fully licensed and operational U.S. uranium mill, and it's licensed for 8 Mlb of production per year. Energy Fuels is essentially 100% hedged, with sales of 800 Klb this year, opting only to sell into contracts. Most recently, sales were almost double those of spot prices. The company has some excellent contracts. Several operations remain on standby, or construction has been halted. Higher prices are required to unlock its vast pipeline, which includes projects in Wyoming and New Mexico, plus existing mines in Colorado, Utah and Arizona, which could lead to more than 45 Mlb of production company-wide. That would provide great leverage for this company." (10/16/14) - The Energy Report Interview with David Talbot


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from the publisher
  Robert J. Moriarty

Welcome to 321energy.



Low Oil Prices Hurting U.S. Shale Operations


By Nick Cunningham
admin@Oilprice.com
http://oilprice.com/
October 22nd, 2014

Slumping oil prices are putting pressure on U.S. drillers.

The number of active rigs drilling for oil and gas fell by their most in two months, according to the latest data from oil services firm Baker Hughes. There were 19 oil rigs that were removed from operation as of Oct. 17, compared to the prior week. There are now 1,590 active oil rigs, the lowest level in six weeks.

"Unless there's a significant reversal in oil prices, we're going to see continued declines in the rig count, especially those drilling for oil," James Williams, president of WTRG Economics, told Fuel Fix in an interview. "We could easily see the oil rig count down 100 by the end of the year, or more."

Baker Hughes CEO Martin Craighead predicted that U.S. drilling companies could begin to seriously start removing rigs from operation if prices drop to around $75 per barrel. Some of the more expensive shale regions will not be profitable at current prices. For example, the pricey Tuscaloosa shale in Louisiana breaks even at about $92 per barrel.

But that also reflects the high costs of starting up a nascent shale region.

Much of the shale basins that are principally responsible for America's oil production will not feel the effects of low prices as quickly as many are predicting.

Better-known shale formations, such as the Eagle Ford in South Texas, can break even at much lower prices. That's because exploration companies have become familiar with the geology and fine-tuned drilling techniques to specific areas.

Productivity gains have allowed drillers to extract more oil for each rig it has in operation. For example, in North Dakota's prolific Bakken formation, an average rig is producing over 530 barrels per day from a new well in October. Less than two years ago, that figure sat at around 300 barrels per day. Extracting more barrels from the same operation improves the economics of drilling, which means shale producers are not as vulnerable to lower prices as they used to be.

Another factor that could insulate U.S. oil production is that companies also factor in sunk costs. That is, if they have already poured in millions of dollars into purchasing land leases and securing permits, throwing in a little extra money to drill the prospect is probably the rational thing to do even at current prices. It is only projects in their infancy that may not be economically feasible.

This should delay the drop in rig count, and delay the drop in overall U.S. oil production. As the Wall Street Journal notes, given these assumptions, U.S. oil production in the Eagle Ford, Bakken, and Permian could actually break even at just $60 per barrel.

Much rides on the decision making of officials in Saudi Arabia. Although exact calculations vary, the world's only swing producer needs oil prices between $83 and $93 per barrel for its budget to break even. But that may not be as important of a metric as it appears. Saudi Arabia has an enormous stash of foreign exchange, and could run deficits for quite a while without too many problems. With average costs of oil production from wells in the Middle East sitting at only $25 per barrel, the Saudis can clearly wait out U.S. shale if they really want to.

But it may actually be Canada's oil sands that end up being the first victim, the Wall Street Journal reports. Mining, processing, and pumping heavy oil sands from remote positions in Canada are much more costly than conventional oil and even shale oil in the U.S. While short-term operating costs are only around $40 per barrel, new projects need prices well above $90 per barrel to be in the money.

Rig counts are starting to drop, but due to the long lead time for most oil projects, it could be a while before production begins to decline in a significant way. What happens next will be largely determined by the outcome of the next OPEC meeting in Vienna on Nov. 27, where all eyes will be on Saudi Arabia.


By Nick Cunningham
admin@Oilprice.com
http://oilprice.com/
October 22nd, 2014



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