2014 Cline Shale Predictions

Ok, so 2013 is in the books and by any measure it was a great year for the Cline Shale formation.  In the second half of 2013 exploration really started to heat up and by the 4^th quarter the big players were leapfrogging each other in their ability to produce better and better wells.  Though some people act like the Cline Shale formation is still really questionable, I tend to think its got some momentum behind it right now.  If you disagree, I would point you to this post where I aggregated some of the highlights from last year, most notable among them the fact that Pioneer Natural Resources’ Cline well in Andrews county broke the record for 24-hour initial production in the Midland Basin.

So what’s in store for 2014, and will the Cline development begin to affect the northern and eastern counties in the play like Scurry, Nolan, and Fisher?  Here are a few of my thoughts:

1. I think oil prices wont hinder production in 2014.

At this early stage in the life of the Cline formation the price of oil is extremely important.  Drilling is slower and more expensive in this phase so well costs are high, thus operators need a high price for their product to recoup these costs.  Lately, there seems to be a lot of concern that falling oil prices will squelch the boom.  It is inevitable.  We produce more, there’s a glut of supply, and prices fall.  But I have yet to hear of a compelling theory for why prices will fall supported by actual facts.  However, what I have seen is this report by Goldman Sachs that basically concludes that oil prices wont stray significantly from their current level.  I’m inclined to believe Goldman’s report, though a part of me does share the concern for lower oil prices. They’re definitely coming, but I think they’ll hold off longer than conventional wisdom dictates.

2. The Mayor of Sweetwater sees big things coming in 2014.

At the Shale Show last October, Mayor Greg Worthem was quoted saying “the boom will come in 2014.”  Don’t get me wrong, I know politicians have a tendency to say really stupid things, especially when it appears to be in their political interest, but I don’t think this statement was made in ignorance.  Sweetwater and other communities in the eastern Permian Basin have been ramping up for an oil boom for a while now, and their political leaders have taken a very active role in preparing for it.  I tend to think Mayor Worthem has had conversations with drilling experts that lead him to make such a statement.

3.  There will be surprises.

It was quite a shock when Pioneer Natural Resources announced their record breaking well, but what was even more shocking was its location.  It was drilled 50 miles west of any other Cline wells.  This well was actually BAD news for the communities to the east hoping for a lift from the big E&P companies because it extends the play away from them.  Mayor Worthem made his big prediction a month before the Andrews well came online.  It may be that he would have been right until news that Andrews county is prospective at Cline depths too.  Also who knows which county will be the next to show promising results.  Recently I learned Laredo Petroleum is drilling in Hale County, which is 100+ miles north of Andrews county. Check this out.

4.  The eastern counties/communities may already be in a boom.

Check out this article I read a few months ago about roads in Nolan County deteriorating from heavy truck use.

This post came about because a reader sent me an email through clineshalesite.com where I occasionally write.  If you ever want ask me a question or interact in some way you can get ahold of me through that website, or email me directly at emailmattz@gmail.com.  I live in Midland and love engaging with people interested in West Texas oil.