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Friday, April 13, 2007 5:22:57 PM
I think that before we can decide if the business plan, whatever it is, is viable we're going to have to know what the average Net Revenue in the leases is.
If the figures bandied about at 55%-60% are correct then it may not be a profitable enterprise, irrespective of oil prices. Why?
Energy costs rise in relative lockstep. When oil gets too far ahead of coal on a BTU basis then coal ratchets up and coal is the LOWEST cost source of electrical power to pump the wells.
ALL OTHER COSTS rise as oil rises. Especially, service companies increase their rates very quickly in response to client's perceived ability to pay. Tubular good, pump jacks, etc., machine shop work, nearly everything has more than doubled recently. And these prices fall more slowly than oil when oil falls.
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