Author Topic: U.S. Shale: A Quiet Ramp Up Begins  (Read 2830 times)

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Offline thackney

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U.S. Shale: A Quiet Ramp Up Begins
« on: January 03, 2017, 02:26:46 pm »
U.S. Shale: A Quiet Ramp Up Begins
http://www.realclearenergy.org/charticles/2016/12/30/us_shale_a_quiet_ramp_up_begins.html



One result of the bankruptcy wave that swept America's Oil Patch in 2016? Companies have had “to get really lean and mean,” according to Oil Price Information Service analyst Tom Kloza interviewed by USA Today.

"Now, many of the most efficient shale oil producers 'can make as much money' at $45 per barrel as they made when at $90 per barrel a few years ago, Kloza said, and 'they have been quietly ramping up their rigs' in recent weeks."

And, lo, evidence of the "quiet ramp up" arrives, as if on cue, in a North Dakota Fox affiliate report filed yesterday stating that "five oil companies are seeking...frack crews for 2017."

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Online Lando Lincoln

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #1 on: January 03, 2017, 03:13:00 pm »
My son decided he would get a degree in Industrial Processes from Bismarck State (North Dakota) which he completed a couple years ago.  He now is working in the oil patch of NoDak - he has a crash pad in Watford City and a condo in Bismarck.  He is pre-approved for a mortgage and is killing life.  He just glows and is so confident.  I couldn't be happier for him and the rancher gal he is very serious about.  His twin graduated Summa Cum Laude in Geological Engineering and Petroleum Sciences from SoDak School of Mines (Rapid City).  He has passed his FE exam and is working for an engineering firm in Illinois.  He will (I suspect) pursue the energy field once it rebounds a bit more. 

BTW... Bismarck State is one phenomenal trade school.  South Dakota School of Mines is a terrific engineering university.  My sons chose well.
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Online Lando Lincoln

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #2 on: January 03, 2017, 03:13:47 pm »
BTW @thackney - I really appreciate these articles.  Thank you.
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Online DCPatriot

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #3 on: January 03, 2017, 05:11:10 pm »
My son decided he would get a degree in Industrial Processes from Bismarck State (North Dakota) which he completed a couple years ago.  He now is working in the oil patch of NoDak - he has a crash pad in Watford City and a condo in Bismarck.  He is pre-approved for a mortgage and is killing life.  He just glows and is so confident.  I couldn't be happier for him and the rancher gal he is very serious about.  His twin graduated Summa Cum Laude in Geological Engineering and Petroleum Sciences from SoDak School of Mines (Rapid City).  He has passed his FE exam and is working for an engineering firm in Illinois.  He will (I suspect) pursue the energy field once it rebounds a bit more. 

BTW... Bismarck State is one phenomenal trade school.  South Dakota School of Mines is a terrific engineering university.  My sons chose well.

@Lando Lincoln

Am so thrilled to read that about your boys!      :beer:
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Online Lando Lincoln

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #4 on: January 03, 2017, 08:15:38 pm »
@Lando Lincoln

Am so thrilled to read that about your boys!      :beer:

Thanks DCP!  We live vicariously through our kids (at least some of us do).  It was great to see your comment!

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Offline IsailedawayfromFR

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #5 on: January 05, 2017, 01:46:52 am »
U.S. Shale: A Quiet Ramp Up Begins
http://www.realclearenergy.org/charticles/2016/12/30/us_shale_a_quiet_ramp_up_begins.html



One result of the bankruptcy wave that swept America's Oil Patch in 2016? Companies have had “to get really lean and mean,” according to Oil Price Information Service analyst Tom Kloza interviewed by USA Today.

"Now, many of the most efficient shale oil producers 'can make as much money' at $45 per barrel as they made when at $90 per barrel a few years ago, Kloza said, and 'they have been quietly ramping up their rigs' in recent weeks."

And, lo, evidence of the "quiet ramp up" arrives, as if on cue, in a North Dakota Fox affiliate report filed yesterday stating that "five oil companies are seeking...frack crews for 2017."
I have a real problem in believing that a company can make as much profit at $45/b then at 2X the price of a few years ago.
Technology has improved, no question, and the hammered service sector is not asking as much for their services, but both are not enough to make that much difference.

I suspect that companies are 'cherry-picking' locations as far fewer wells are getting drilled and completed.

Another way to say it: the average of wells now being drilled/completed are far higher now compared to the average of a few years ago.  I believe the greatly increased productivity of the recent wells are not just due to technology and lessened costs, it is also do to better geology.

@Smokin Joe - weigh in on the Bakken and educate the rest of us.
No punishment, in my opinion, is too great, for the man who can build his greatness upon his country's ruin~  George Washington

Offline IsailedawayfromFR

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #6 on: January 05, 2017, 01:51:31 am »
My son decided he would get a degree in Industrial Processes from Bismarck State (North Dakota) which he completed a couple years ago.  He now is working in the oil patch of NoDak - he has a crash pad in Watford City and a condo in Bismarck.  He is pre-approved for a mortgage and is killing life.  He just glows and is so confident.  I couldn't be happier for him and the rancher gal he is very serious about.  His twin graduated Summa Cum Laude in Geological Engineering and Petroleum Sciences from SoDak School of Mines (Rapid City).  He has passed his FE exam and is working for an engineering firm in Illinois.  He will (I suspect) pursue the energy field once it rebounds a bit more. 

BTW... Bismarck State is one phenomenal trade school.  South Dakota School of Mines is a terrific engineering university.  My sons chose well.
41 years in the oil business and now retired, it is the most interesting business I could have every asked for.  Lots of ups and downs.

The fact that your kids can make it while industry in general is down is testament to some good rearing to make success happen even in that environment.

You should be congratulating yourself, as those kids will only get better.
No punishment, in my opinion, is too great, for the man who can build his greatness upon his country's ruin~  George Washington

Online Lando Lincoln

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #7 on: January 05, 2017, 02:04:02 am »
41 years in the oil business and now retired, it is the most interesting business I could have every asked for.  Lots of ups and downs.

The fact that your kids can make it while industry in general is down is testament to some good rearing to make success happen even in that environment.

You should be congratulating yourself, as those kids will only get better.

Thank you.  They are old throw-back men that the University of Wisconsin is trying to emasculate.
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Offline mirraflake

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #8 on: January 05, 2017, 02:19:11 am »
We just resigned our gas lease today for 5 more years-same company same royalty payment and we have a rich contract.  Can't wait to get those royalty checks again. The RV parks with the gas workers was near empty 6 months ago and now they are near full.

I just rented an apartment to a manager of a gas company and they are bringing in 2000 workers by spring.

Offline thackney

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #9 on: January 05, 2017, 01:02:04 pm »
I have a real problem in believing that a company can make as much profit at $45/b then at 2X the price of a few years ago.  Technology has improved, no question, and the hammered service sector is not asking as much for their services, but both are not enough to make that much difference.

In the awl bidness, they can greatly reduce spending without greatly reducing immediate income.  It will impact future income, not investing today, but it does little to impact today's income.  So when the selling price per barrel drops in half, they can drop spending more than in half, and keep today's income comparable.  And just the opposite when prices high; spend it while you got it, to secure future income.

Quote
I suspect that companies are 'cherry-picking' locations as far fewer wells are getting drilled and completed.

Absolutely.  If you are going to drill/complete half or less the wells you did last year, you are only going to pursue the better ones.

Quote
Another way to say it: the average of wells now being drilled/completed are far higher now compared to the average of a few years ago.  I believe the greatly increased productivity of the recent wells are not just due to technology and lessened costs, it is also do to better geology.

This is also a great impact in the average breakeven cost.  If oil is $75 a barrel, they may produce plays that are nearly that price.  When oil drops down to $50, they take the higher cost locations out of the plan.

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Offline IsailedawayfromFR

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #10 on: January 05, 2017, 11:34:01 pm »
In the awl bidness, they can greatly reduce spending without greatly reducing immediate income.  It will impact future income, not investing today, but it does little to impact today's income.  So when the selling price per barrel drops in half, they can drop spending more than in half, and keep today's income comparable.  And just the opposite when prices high; spend it while you got it, to secure future income.

Absolutely.  If you are going to drill/complete half or less the wells you did last year, you are only going to pursue the better ones.

This is also a great impact in the average breakeven cost.  If oil is $75 a barrel, they may produce plays that are nearly that price.  When oil drops down to $50, they take the higher cost locations out of the plan.
I understand that.  The article seems to suggests that some companies have become so adept at drilling and completing shale wells that they can make as much money doing so when prices are halved.

Not so, there is no silver bullet here.  Some efficiencies and selective targeting are being done which improve the per well investments made but there are a lot less wells being made, and there is a growth cost associated with keeping it lean and mean.

Most of the unconventionals will still require some robust prices following the harvesting of the low-hanging fruit.
No punishment, in my opinion, is too great, for the man who can build his greatness upon his country's ruin~  George Washington

Offline Smokin Joe

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #11 on: January 06, 2017, 09:36:33 am »
I have a real problem in believing that a company can make as much profit at $45/b then at 2X the price of a few years ago.
Technology has improved, no question, and the hammered service sector is not asking as much for their services, but both are not enough to make that much difference.

I suspect that companies are 'cherry-picking' locations as far fewer wells are getting drilled and completed.

Another way to say it: the average of wells now being drilled/completed are far higher now compared to the average of a few years ago.  I believe the greatly increased productivity of the recent wells are not just due to technology and lessened costs, it is also do to better geology.

@Smokin Joe - weigh in on the Bakken and educate the rest of us.
Not much change evident in the Bakken, so far, but a slow increase in the number of rigs since Spetember (to 40 from 34). I expect the nest big thing will be the Permian Basin, and most of the new efforts will go there. While Bakken development will continue, I expect much of that will be in the hotspots until the price climbs, and then I expect the DUC wells to be completed and the DUC numbers to drop as drilling slowly increases.
One shot in the arm would be the completion of the Dakota Access Pipeline, but that is still embroiled in controversy ginned up by radical environmentalists and a tribe of snakes. (I have no general problems with Native peoples, my wife is Chippewa, but the bunch perpetrating the farce against the pipeline I have no use for.)
The effect of having the pipeline in operation would be that the expense of shipping oil to refineries would drop by as much as $5/bbl, which would have the same effect for producers as a price increase. Besides the weather and snow pack, having that project on hold effectively delays feeder pipeline projects which tie into the Dakota Access Pipeline.
I hope Mr. Trump does well at ordering some of this crap concluded, and that the industry will prevail in this situation.
The cost to not only the pipeline company, but to the State of ND, oil producers, unemployed workers, and royalty interest (mineral rights) owners has been tremendous, and will affect every landowner in the State when property taxes are due (oil money is used to offset the school portion of property taxes).
There is a great deal more info on this and other issues facing the industry at the NDIC website, here: https://www.dmr.nd.gov/oilgas/directorscut/directorscut-2016-12-13.pdf albeit a couple weeks old, it is still relevant.
How God must weep at humans' folly! Stand fast! God knows what he is doing!
Seventeen Techniques for Truth Suppression

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

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Offline Weird Tolkienish Figure

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #12 on: January 06, 2017, 10:04:35 am »
Fascinating  business. Way more interesting than IT IMO.


IT has it's moments I guess.

Offline Smokin Joe

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #13 on: January 06, 2017, 10:09:17 am »
Fascinating  business. Way more interesting than IT IMO.


IT has it's moments I guess.
There is a lot of IT involved, too, especially nowadays.
How God must weep at humans' folly! Stand fast! God knows what he is doing!
Seventeen Techniques for Truth Suppression

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

C S Lewis

Offline Weird Tolkienish Figure

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #14 on: January 06, 2017, 10:11:09 am »
There is a lot of IT involved, too, especially nowadays.


The IT revolution will require a lot of energy, something a lot of people forget. One way or the other it will be needed.

Offline Smokin Joe

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #15 on: January 06, 2017, 10:35:33 am »

The IT revolution will require a lot of energy, something a lot of people forget. One way or the other it will be needed.
When I started, we hand plotted data curves on velum and inked them in...

Last time  I was out on a well, we had ten computers in the command center alone, and the rig functions were monitored and to some degree controlled by computers. You could never decode MWD (survey tool) pulses without them. That data could be sent anywhere in the world in no time. I remember driving 70 miles to wake up the guy who had to come out to the rig (70 miles) to decide whether to test a formation, who would go back to town (70 miles), call his bosses, and drive back to the rig (70 miles) to deliver the 'word'.
Times have indeed changed. IT makes that change possible.
That's just one part of the industry, (getting the well drilled), which relies on computer placed orders, e-mail, and a host of computer assisted support mechanisms as well. Completions, well logging, production, pipeline transfers, monitoring, even truck dispatch all rely on computers (they're everywhere).
That is why drilling 10,000 ft. of directional and horizontal wellbore is now a week or shorter operation (not counting time to run and cement casing), instead of something that would take over two months.
How God must weep at humans' folly! Stand fast! God knows what he is doing!
Seventeen Techniques for Truth Suppression

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

C S Lewis

Offline IsailedawayfromFR

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #16 on: January 06, 2017, 02:10:44 pm »
Fascinating  business. Way more interesting than IT IMO.


IT has it's moments I guess.

Were you aware that the equivalent of Ct-Scans and MRIs are used in the oil industry?
Also, Gamma Rays and Electric logging readings like an electro-cardiogram too.

@Smokin Joe may know whether these devices came first from the oil industry or the medical field, but both use them.
No punishment, in my opinion, is too great, for the man who can build his greatness upon his country's ruin~  George Washington

Offline Smokin Joe

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #17 on: January 06, 2017, 11:00:13 pm »
Were you aware that the equivalent of Ct-Scans and MRIs are used in the oil industry?
Also, Gamma Rays and Electric logging readings like an electro-cardiogram too.

@Smokin Joe may know whether these devices came first from the oil industry or the medical field, but both use them.
I can't say when the first were used, because usually the offshore guys end up using the gee whiz stuff first. The first I saw of nuclear magnetic resonance logs (NUMAR was the company) was on a directional/horisontal well in 1991. The operator was having fits because his results on repeat sections (a way to check tool accuracy) were not repeating. We sat down, looked over the part of the log where he was having trouble and figured out the problem: fossils.

It was in a carbonate section (Limestone, mainly, some dolomite), the hole was at 45 degrees, and the tool centralizers (three prong) were not keeping the area investigated by the tool consistent. Think of a circle, but the center is shifted slightly on each pass, seeing a slightly different cylinder of rock. The fossil content would vary, giving different results for porosity and density. Interesting stuff. The technique works best in isotropic media (sandstone), at least in oil wells.
When someone can find a practical use for an information source, it is adapted readily. Borehole imaging logs use the equivalent of ultrasound to develop an image of the wellbore, and sonic logs use sound imaging as well. Either is good at detecting fractures in the rock or voids in the wellbore. Resistivity devices are used to measure the amount of electricity the fluids in rock will conduct (at differing distances from the wellbore), Neutron logs detect water or gas in porosity, and the list goes on, right down to fundamental measurements like caliper logs to determine the irregularities in the hole (or whether it is smooth sided), and spontaneous potential logs, which measure the small flow of electricity from shale to sandstone. Whole careers are developed around the design, development, and interpretation of the results from these devices, and a great deal of what we know of the subsurface (formation thickness, characteristics, and distribution) come from these logs and drilled samples/cores.
As an aside, the Bakken only is found in wellbores: it does not outcrop at the surface anywhere. The formation was named after the Farmer who owned the land where the first well that drilled through the Bakken Formation was drilled. The upper and lower shales (where both are present) are conspicuous on Gamma Ray logs (made with a tool which measures the natural radioactivity of the rock).
« Last Edit: January 06, 2017, 11:00:34 pm by Smokin Joe »
How God must weep at humans' folly! Stand fast! God knows what he is doing!
Seventeen Techniques for Truth Suppression

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

C S Lewis

Online Elderberry

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #18 on: January 06, 2017, 11:21:24 pm »


I suspect that companies are 'cherry-picking' locations as far fewer wells are getting drilled and completed.

Another way to say it: the average of wells now being drilled/completed are far higher now compared to the average of a few years ago.  I believe the greatly increased productivity of the recent wells are not just due to technology and lessened costs, it is also do to better geology.




Two years ago, my son, a MWD Engineer, experienced that Multi-Well pads were the norm. Then he was laid off for a year. Now last year, he experienced that only one or two wells were drilled per pad. That way, I believe, they are locking in more leases.

Offline Smokin Joe

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #19 on: January 06, 2017, 11:29:22 pm »

Two years ago, my son, a MWD Engineer, experienced that Multi-Well pads were the norm. Then he was laid off for a year. Now last year, he experienced that only one or two wells were drilled per pad. That way, I believe, they are locking in more leases.
That's correct. One producing well on the pad will hold the leases by production. In the Bakken/Three Forks wells, there are usually eight wells per pad, four in each formation, and there is another geological unit (the Pronghorn) which underlies the lower Bakken Shale and overlies the Three Forks which is present in a few areas which gives the option to drill even more wells. Eight to twelve wells would be normal fro a 1280 acre (two section) spacing, so if only one well is drilled and completed, that leaves room for many more development wells when the price goes back up.
How God must weep at humans' folly! Stand fast! God knows what he is doing!
Seventeen Techniques for Truth Suppression

Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.

C S Lewis

Offline IsailedawayfromFR

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #20 on: January 06, 2017, 11:46:57 pm »

Two years ago, my son, a MWD Engineer, experienced that Multi-Well pads were the norm. Then he was laid off for a year. Now last year, he experienced that only one or two wells were drilled per pad. That way, I believe, they are locking in more leases.

The fact he is back at work is a positive sign. 

Since the oil industry thrives on extraction and sale of its main products, oil and gas, and they are commodities, profitability of those companies involved are dependent upon commodity pricing.

Unfortunately means a lot of ups and downs.  I myself was laid off once after 27 years with an oil company, but after a short time was able to manage to find another job.

Hope he manages to hang in there, and to save up during the good times.
No punishment, in my opinion, is too great, for the man who can build his greatness upon his country's ruin~  George Washington

Online Elderberry

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #21 on: January 07, 2017, 12:44:43 am »
The fact he is back at work is a positive sign. 

Since the oil industry thrives on extraction and sale of its main products, oil and gas, and they are commodities, profitability of those companies involved are dependent upon commodity pricing.

Unfortunately means a lot of ups and downs.  I myself was laid off once after 27 years with an oil company, but after a short time was able to manage to find another job.

Hope he manages to hang in there, and to save up during the good times.

I hope so too. He's moved into the office and he's handling the hiring and managing of their field crews. He's hopped twice since he was laid off.

He's doing pretty good for not having a degree. I was not pleased when he Joined the Navy right out of High School. I guess since I had done that, it was fine for him to do it as well. Five of the wresting team all joined up. He went Nuke Machinist Mate. It seemed while he was in, every time I talked to him, he had a different plan for when he got out. Then just before he got out he was totally focused on oil and gas. He said his long term goal was to become a Directional Drilling Operator. I don't know if that's still his goal now. When he was being trained to be a MWD Engineer he had said he had bettered all of the degreed Petroleum Engineers in his class. It must be like when I worked at NASA. Individual expertise is more recognized than any sheepskin.

Offline IsailedawayfromFR

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Re: U.S. Shale: A Quiet Ramp Up Begins
« Reply #22 on: January 07, 2017, 01:54:55 pm »
I hope so too. He's moved into the office and he's handling the hiring and managing of their field crews. He's hopped twice since he was laid off.

He's doing pretty good for not having a degree. I was not pleased when he Joined the Navy right out of High School. I guess since I had done that, it was fine for him to do it as well. Five of the wresting team all joined up. He went Nuke Machinist Mate. It seemed while he was in, every time I talked to him, he had a different plan for when he got out. Then just before he got out he was totally focused on oil and gas. He said his long term goal was to become a Directional Drilling Operator. I don't know if that's still his goal now. When he was being trained to be a MWD Engineer he had said he had bettered all of the degreed Petroleum Engineers in his class. It must be like when I worked at NASA. Individual expertise is more recognized than any sheepskin.
Seems he is grounded and driven on his work.  If he keeps that energy level up, he should do fine.

I am a Petroleum Engineer and believe me, there is a whole lot of benefit derived from those who are on-the-ground.  A person who lives on a drilling rig has a lot of insight on how the real world works.
No punishment, in my opinion, is too great, for the man who can build his greatness upon his country's ruin~  George Washington