ROTH Capital’s John White Pumps the Permian for Profit

The Energy Report: John, what are the main influences on oil prices today?

John White: We don’t believe what we are seeing with the oil price drop is a case of decreasing demand; what we have here is oversupply.

To give you some historical context, for the first hundred years of the oil and gas business, the industry drilled vertical well bores into what we call conventional reservoirs. Around 2000, advancements in horizontal drilling technology and fracture completion technology allowed the industry to complete strong wells in the shale formations, called unconventional formations.

The improvements in efficiency and productivity have led to an increase of about 3 million barrels a day (3 MMbbl/d) of U.S. oil production, off a base of about 6 MMbbl/d. In the last three years it’s been about 1 MMbbl/d each year. That’s 3 MMbbl/d the U.S. does not need to import from overseas oil producers, so you have more oil on the market. The market realized there was this surplus midway through 2014, and prices reacted to the downside.

TER: How are international developments, like a new king in Saudi Arabia and conflicts in Libya and the Middle East, affecting the West Texas Intermediate (WTI) price?

JW: The international oil price is what we call the Brent oil price, and the U.S. domestic price is the WTI price. International geopolitical events affect both oil prices, but tend to affect Brent more.

“The development of oil and gas mineral rights has been governed by the state authority. If there is a legal battle, the municipalities do not have precedent on their side.”

We are focused on the fundamentals of supply and demand, so we don’t have any extraordinary insights into the political dynamics within the Organization of the Petroleum Exporting Countries (OPEC). We try to stick with the numbers, …read more

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