We're back baby

Like we never left?

Taylor Wright
February 03, 2025

Hey, long time no see.

Barrel Hub is still cranking along.

We were pretty busy for 2024 (hence the lack of writing on this platform).

But I wanted to get back in touch with you on a regular cadence again, so here we are.

Every week, our analysts process hundreds of thousands of Texas oil transactions to identify premium pricing opportunities.

Every Monday morning, you get a clear, actionable data showing exactly how to find better prices for your production.

Chart School

For this comeback segment, I’m going to do an off the cuff ‘research report’.

I don’t have an agenda for this exploration outside of exploring some numbers and ideas that are common in my interactions with current and potential partners at Barrel Hub.

Let’s get started.

Price Formulas

For this exercise, I’m going to pick a random producer.

The first chart we’ll be looking at shows pricing formula delta over time.

Pricing formula delta measures the difference between a theoretical perfect price for a barrel (based on the quality, location, and time of production) vs the real price received.

For this exercise, I used the standard pricing formulas (email me if you want the calculations).

The majority of producers are somewhere between $0 (good) and $-10 (bad).

The more negative we get, the worse.

This metric gives us an easy way to measure how ‘good’ a producer is at getting optimal pricing.

This producer is roughly competitive with the market average.

Which doesn’t tell us a whole lot.

So we’ll take a look at the other parts of the distribution.

This is interesting - our producer was mostly flat before getting the same delta knockdown around 2024-08.

Could be some additional data cleaning needed or could be something legitimate to look into.

Worth noting either way.

Some more helpful context - better producers didn’t experience the same blow to their delta in 2024-08.

Again, could be anomalous or could be something real to look into.

Let’s break out their pricing formula delta by a couple counties to see if anything pops out.

Okay cool - there’s some high quality transactions going on but it is interesting that there’s such a symmetric separation between the transaction clusters in Ward (data doesn’t often present itself in such nice ways outside of textbooks).

If I were to dig deeper into this, I’d want to check out if there is some variable or set of variables causing a set of transactions to routinely be priced lower.

For the next chart, let’s do a simple exercise.

We can clearly see that this producer has some good pricing and some bad pricing.

But what kind of $$ opportunity is in play here?

In other words, if we were able to improve those worse transactions to a better $/bbl, how much revenue would that generate?

Spoiler - most Barrel Hub partners make multiples of their annual subscription cost.

I’m using a simple assumption here:

For each producer transaction, we identify another transaction with similar attributes (volume, location, time, quality) and a better price.

We then assume that our producer got that better price.

The below chart shows the monthly sum of those better prices.

I’ve had worse months.

Last but not least, let’s get an idea of the A&D opportunities available to us.

Since we can see everyone’s transactions, we can find who is getting consistently bad pricing (big opportunity) and then generate a simulation of their potential annual upside improvement with a better purchaser.

For this hit and run analysis, I randomly selected a better price.

Not a bad year’s work, if I do say so myself.

The above took me about 30 minutes to do - so I’ll let you ponder the opportunities that could be found with a few hours.

If you want a full report done for your production company (or a potential acquisition), let me know at [email protected] (it won’t be free).

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