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December 2014 SEE Monthly Brief
Is the Permian a Bargain Basin Yet?

Proprietary, Starks Energy Economics

The dramatic decline in oil prices during the last few weeks has left some investors in shock and others looking for bargains. Moreover, the head of OPEC, Abdalla Salem el-Badri, says no oil price target has been set. At this time, oil prices continue to fall. The current West Texas Intermediate (WTI) price of $56 per barrel is a decline of nearly half from its high. The severe pullback in prices caused by excess supply stings oil producing companies and separates them based on the strength of their balance sheets.

Most companies in the U.S. and overseas were already announcing lower capital expenditures for next year. The low oil price will force further contractions. However, wells will not shut in: those are already producing will continue to do so, which means U.S. supply will not contract immediately.

One of the lowest-cost U.S. oil regions is the Permian in West Texas and eastern New Mexico. This month's article and spreadsheet is an analysis of public companies with significant operations in the Permian. The graph below shows dollar-per-barrel WTI prices.

Dollar-per-barrel WTI prices

Proprietary, Starks Energy Economics Subscribers

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           Copyright 2014, Starks Energy Economics, LLC. This information is confidential and is intended only for the individual named. This information may not be disclosed, copied or disseminated, in whole or in part, without the prior written permission of Starks Energy Economics, LLC. This communication is based on information which Starks Energy Economics, LLC believes is reliable. However, Starks Energy Economics, LLC does not represent or warrant its accuracy. This communication should not be considered as an offer or solicitation to buy or sell any securities.

           I, Laura Starks, do hereby certify that, to the best of my knowledge, the views and opinions in this research report accurately reflect my personal views about the companies and their securities as of the date of this report. These viewpoints and opinions may be subject to change without notice and Starks Energy Economics, LLC will not be responsible for any consequences associated with reliance on any statement or opinion contained in this communication. No Starks Energy Economics, LLC consultant or analyst has nor will receive direct or indirect compensation in return for expressing specific recommendations or viewpoints in this report. Analysts or consultants with Starks Energy Economics, LLC are long Approach Resources and Diamondback stock.

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