Friday Snippets

September 22, 2017

Oklahoma STACK development still in first inning, energy executives say

There’s been some home runs with monster oil wells coming online, but development in Oklahoma’s STACK formation is still very much in the first inning, executives said Thursday at the DUG MidContinent conference in Oklahoma City.

Newfield drilled is first STACK horizontal well in 2012. The company now gets two-thirds of its production and spends 80 percent of its capital in Oklahoma’s Anadarko Basin, which includes its holdings in the STACK. Newfield has grown its STACK acreage to 350,000 net acres.

Credit: Paul Monies | NEWSOK | September 22, 2017 | Read Full Story Here: http://bit.ly/2ywSiE6

Report By Oil Group Suggests Hundreds of Vertical Wells Damaged By Bigger Horizontal Wells

A report from members of the Oklahoma Energy Producers Alliance suggests horizontal drilling and fracking has economically damaged at least 450 older vertical wells in Kingfisher County alone.

The report by the group of oil and gas producers — which formed during the 2017 Legislative Session in opposition to other industry groups over gross production taxes and long-lateral drilling bills — suggests so-called “well bashing” is widespread “and that damage has cost producers and royalty owners throughout the state,” The Oklahoman‘s Adam Wilmoth reports:

— “I believe nearly every vertical well in Kingfisher County will be negatively impacted by horizontal frack jobs at some point,” OEPA founder Mike Cantrell said. “We’re just trying to get people to get fair value for their property up front before the damage is done.”

The study shows that 80 percent of the affected vertical wells are outside the well unit boundaries, meaning royalty owners from the damaged wells do not benefit from the new horizontal wells.

Horizontal operators say the OEPA is overstating the number of damaged wells, and that royalty owners benefit from highly productive horizontal wells.

A.J. Ferate, vice president of regulatory affairs at the Oklahoma Independent Petroleum Association, says horizontal operators often “try to address potential damage to vertical wells before operations begin, but vertical operators are unwilling to negotiate,” the paper reports:

–“Particularly in Kingfisher County, larger companies drilling horizontal wells are offering ahead of time that if they bash a well, they’ll give concessions or pay damages or give them a part of the well,” he said. “Many times they try to buy the well ahead of time, but in many instances they have been told ‘no.’”

The Oklahoma Corporation Commission requires operators to report structurally damaged wells, but the state’s oil and gas regulator is also asking operators to report economically damage possibly linked to horizontal wells, Wilmoth reports.

–So far, the commission has investigated and verified 20 cases of damage to vertical wells because of nearby horizontal wells. Most of those wells had environmental damage, Skinner said.

–The commission also has another 55 wells pending or undergoing review. The commission has created a form for operators to report environmental or economic damage from nearby horizontal wells.

Credit: JOE WERTZ | StateImpact | September 20, 2017 | Read Full Story Here: http://n.pr/2yqX7Pn

Recent Earthquakes Likely Aftershocks In Oklahoma

Recent rumblings in two cities likely are aftershocks, not signals of stronger earthquakes to come, said state and federal scientists.

However, researchers and regulators said they keep a close eye on Cushing and the surrounding area, in part because the nation’s largest crude storage hub is there. They’re also concerned about potential cumulative damage to structures from previous quakes.

A magnitude 5 quake struck Cushing in November, and there have been 27 aftershocks since then, according to the Oklahoma Geological Survey. Six of those aftershocks were magnitude 3 or stronger, three of which have happened in the last two weeks. A magnitude 4.2 hit Stroud July 14, about 20 miles south of Cushing. Six aftershocks have hit Stroud since then, including a magnitude 3.9 recorded Saturday.

Many of Oklahoma’s earthquakes have been linked to wastewater disposal from oil and gas activity. But proving causation is difficult, in part because the state has so many wastewater wells and so many temblors. Proving causation is also difficult because there’s a lag between injection time and measured earthquakes.

Oil and gas regulators have placed restrictions on disposal wells, which researchers said likely contributed to the declining earthquake rate statewide in 2016 and in 2017. Reduced oil and gas production also likely contributed.

Credit: NEWS9 | September 20, 2017 | Read Full Story Here: http://bit.ly/2ysZ3Xr

Factoid:  The Troll A platform, installed in 1996 offshore Norway, is the world’s biggest structure ever moved by mankind. It weighs 656,000 tonnes and the base is built from concrete. It is 472 meters high (1545’) overall, which is slightly shorter than the One World Trade Center, which is the tallest building in the Western Hemisphere. That building, including its spire, reaches a total height of 1,776 feet (541 m).

EIA & API REPORT SUMMARY

US crude oil stocks increased by 4.6 MMBbl last week. Gasoline and distillate stocks decreased by 2.1 MMBbl and 5.7 MMBbl respectively. Yesterday afternoon, API had reported a crude oil build of 1.4 MMBbl, alongside gasoline and distillate withdrawals of 5.1 MMBbl and 6.1 MMBbl respectively. Analysts were expecting a larger crude build of 2.4 MMBbl. Gasoline storage is now below the 2015 level. Distillate storage is now below the five-year average.The most important number to keep an eye on, total petroleum inventories, posted a sizeable withdrawal of 6.6 MMBbl.

Heading into this week, the consensus was expecting material crude builds to take place. The thinking was that U.S. crude imports would jump as the Gulf Coast import facilities get back to normal, but that’s not what happened. U.S. crude imports rose to 7.368 million b/d from 6.48 million b/d last week, or an increase of 888k b/d. In addition, the adjustment factor once again came in at -352k b/d and accounted for -2.464 million bbls

Overall, this EIA oil storage report was bullish. With product storage now below the five-year average, crude storage will follow suit. U.S. crude exports will also skyrocket, helping push crude storage lower.

Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:

Sunoco Inc. — $46.75

Oklahoma Sour:

Sunoco Inc. — $34.75

WTI crude above $50 per barrel for 1st time in months

US oil ended Wednesday’s trading session above $50 per barrel for the first time since July, driven by refinery restarts and soaring global oil demand. West Texas Intermediate crude for October delivery rose 93 cents during the day to close at $50.41 per barrel, the highest level since May 24.

On Thursday, Oil prices settled nearly flat on the eve of a meeting of major oil-producing countries in Vienna to discuss whether they will extend production limits that have helped reduce the global crude glut.

Thursday’s U.S. crude futures dipped 14 cents, or 0.3 percent, to settle at $50.55 a barrel. Brent crude futures rose 14 cents, or 0.3 percent, to end at $56.43 a barrel.

Ministers from the Organisation of the Petroleum Exporting Countries, Russia and other producers meet on Friday. They will discuss a possible extension of 1.8 million barrels per day (bpd) of supply cuts to support prices and will consider monitoring exports to assess compliance.

While many analysts expect extension of the deal beyond next March, many also said prices have risen high enough to tempt countries to boost production beyond agreed levels.

NAT GAS NEWS

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 97 billion cubic feet for the week ended Sept. 15. Analysts and traders expected inventories to grow by 89 billion cubic feet, according to Dow Jones. Total stocks now stand at 3.408 trillion cubic feet, down 136 billion cubic feet from a year ago, but 67 billion cubic feet above the five-year average, the government said.

October natural gas NGV17, closed Thursday at $2.946 per million British thermal units.

DUG Midcontinent: Oklahoma Governor Touts New Law Allowing Longer Laterals

Oklahoma Governor Mary Fallin told oil and gas producers at the DUG Midcontinent conference on Sept. 20 that efforts to reduce workers compensation costs, train suitable workers for the industry and changes to laws governing lateral well lengths are paying off.

Earlier this year, Fallin signed a bill allowing longer laterals in all geological formations in the state, not just shale. The new law allows for laterals in any target reservoir.

Fallin said the state is seeing the results.

“If you go into the areas where the Scoop and Stack is, you will see a lot of traffic, a lot of companies coming in, a lot of companies waiting for the right moment to when they [can] begin drilling,” she said.

The governor noted that during the oil bust about 75% of rigs were mothballed due to low commodity prices.

Oklahoma E&Ps are operating about 130 rigs in September up from an average of 66 rigs in September 2016, according to Baker Hughes Inc., a GE company (NYSE: BHGE).

However, the state is still averaging nearly 40% fewer rigs than it did just before the downturn. In September 2014, the state averaged 214 rigs. “The rigs are going back up,” Fallin said.

She also said Oklahoma is seeing new jobs, new investment and talk of further investments.

The state has reduced workers compensation costs by 40% in the past several years and prepared students for oil and gas jobs by emphasizing training in math and science.

Fallin said that with the Oklahoma Energy Jobs Act, which extends laterals in non-shale areas, non-shale areas will open up to more investment.

Credit: Darren Barbee | Digital News Group Hart Energy| September 20, 2017 | Read Full Story Here: http://bit.ly/2yr6oXs

Remember when: 1892

Edward L. Doheny drilled Los Angeles’s first well in 1892, and five years later there were twenty-five hundred wells and two hundred oil companies in the area. When Standard entered California in 1900, seven integrated oil companies already flourished there. The Union Oil Company was the most important of these.

Halcón Agrees To Sell Remaining Williston Assets For $110 Million

Halcón Resources Corp. (NYSE: HK) said Sept. 20 it will sell its remaining Williston Basin assets in two, separate transactions worth a total of $110 million—beating analyst expectations.

For about $104 million cash, Halcón agreed to shed the rest of its nonoperated assets in the Williston Basin to a private company. Also, Halcón said it separately closed a roughly $6 million cash sale in August of additional nonoperated Williston assets to a different party.

The company’s objective through the divestment process is to transform into a pure play Delaware Basin focused company.

During a period of less than nine months, the company disposed nearly 2,000 wellbores across its assets and received total cash proceeds of more than $2bn.

Engaged in the acquisition, production, exploration and development of onshore oil and natural gas properties in the US, the company has more than 41,500 net acres in the core of the Delaware Basin.

Closing Thought: Live in such a way that you would not be ashamed to sell your parrot to the town gossip. ~Will Rogers.

Friday Snippets

Opinion: US should rethink non-energy policy to strengthen energy boomTo realize the full potential of the US energy boom, President Donald Trump should reconsider some of his non-energy policies that threaten to hurt the boom, such as the withdrawal from the Trans-Pacific Partnership, NAFTA renegotiation and exit from the Paris climate deal, writes Harvard Kennedy School professor Meghan O’Sullivan. America’s energy abundance is much more than an economic growth driver and job-creation machine as the hydraulic fracturing revolution has helped the nation become less dependent on foreign energy, revolutionized energy markets, weakened US competitors and empowered consumers, O’Sullivan writes.

New firm aims to address surging wastewater production across US shale fields

Former fund manager David Capobianco has recently launched WaterBridge Resources, a water-management company that aims to build pipelines to meet the soaring demand for wastewater disposal solutions across US shale fields and then clean and recycle the wastewater for future use. On average, wells pump seven barrels of water for each barrel of oil, but Capobianco says a network of water pipelines can help bring the cost of wastewater disposal to about $1 per barrel, down from a range of $1.50 to $2.50 per barrel currently in Texas.

Energy secretary wants to save SPR

The US needs the Strategic Petroleum Reserve to safeguard the nation’s consumers and energy infrastructure from natural disasters such as Hurricanes Harvey and Irma, Energy Secretary Rick Perry said at a news conference. Perry expressed his disapproval of President Donald Trump’s proposal to sell half of the reserve but said he hopes that Harvey and Irma will serve as a reminder of the SPR’s importance.

Trump administration presses ahead with efforts to open ANWR to drilling

The Trump administration is taking steps toward opening the Arctic National Wildlife Refuge to drilling for the first time in three decades, according to an Aug. 11 memo from US Fish and Wildlife Service Acting Director James Kurth. In the memo, Kurth orders the agency’s regional director for Alaska to eliminate restrictions on a rule that permitted exploratory drilling in the ANWR between 1984 and 1986, a move that would enable companies to submit new exploratory plans.

Environmentalists sue to prevent fracking in Nevada

The Sierra Club and the Center for Biological Diversity have filed a lawsuit against the Bureau of Land Management to stop the agency from opening federal land in Nevada to oil and natural gas drilling. The environmental groups want a judge to revoke the drilling leases BLM sold in June on the grounds that the bureau didn’t properly consider the potential effects of hydraulic fracturing.

Port Arthur, Texas, refiners to resume fuel shipments on Colonial Pipeline

Colonial Pipeline announced Monday that refiners in Port Arthur, Texas, could resume fuel flows into Colonial’s lines using their own pumps since the Port Arthur injection point will likely undergo repairs until the end of the month. Colonial Pipeline’s system has sustained damage due to flooding caused by Hurricane Harvey and is operating at reduced flow rates.

Resolute Energy divests Utah assets

 

Resolute Energy has agreed to sell its enhanced oil recovery assets in Utah’s Aneth Field to Elk Petroleum for $160 million in cash and up to $35 million in contingency payments. The sale is part of Resolute’s strategy to become a pure-play Delaware Basin operator.

US Gulf Coast refineries roar back to life after Harvey

Three weeks after Hurricane Harvey, the US Gulf Coast refining complex is gradually recovering, with 15 out of 20 affected refineries having nearly fully resumed operations, according to IHS Markit. Some 1 million barrels of refining capacity remains offline, but “steady progress appears to have been made, and the four refineries in active restart may very well be operating normally by this weekend,” IHS added.

US shale drillers to boost oil output in October

The Energy Information Administration expects US shale production to increase for the 10th consecutive month in October, climbing by nearly 79,000 barrels per day to 6.1 million barrels per day. The Permian Basin will post gains of nearly 55,000 barrels per day to 2.6 million barrels per day, output from the Bakken Shale will jump by 7,900 barrels per day to 1.06 million barrels per day, while the Eagle Ford Shale in Texas will record a 9,000 barrel-per-day decline.

Haynesville Shale drilling activity gains momentum

Natural gas production in the Haynesville Shale has reached the highest level since mid-2013, with sample production in the first two weeks of September up almost 35% from the same period a year ago to more than 3.5 billion cubic feet per day, according to Platts Analytics. The rig count in the shale play has more than tripled in the past 12 months to 44 units, and drilling activity in the region has plenty of room to expand amid surging US shale gas exports.

Analysis: US oil, gas industry to become more stable in spite of hurricanes

US oil and natural gas markets will shrug off the impacts of Hurricanes Harvey and Irma soon and move further along the path to stability and possibly modest growth this year and next, predicts energy analyst David Blackmon. The factors driving stability include surging global demand, OPEC’s limits on exports and the internal budgeting processes within mid-sized to large US producers, which suggest little-changed rig counts and levels of drilling activity for the rest of the year.

Oryx unveils plans for new Permian crude pipeline

Oryx Midstream Services plans to construct a 220-mile crude pipeline system in the Permian Basin with a transportation capacity of 400,000 barrels per day. The network will run from Carlsbad, N.M., to Crane and Midland, Texas, and is expected to be in full service by the end of 2018.

Haynesville Shale drilling activity gains momentum

Natural gas production in the Haynesville Shale has reached the highest level since mid-2013, with sample production in the first two weeks of September up almost 35% from the same period a year ago to more than 3.5 billion cubic feet per day, according to Platts Analytics. The rig count in the shale play has more than tripled in the past 12 months to 44 units, and drilling activity in the region has plenty of room to expand amid surging US shale gas exports.

Wood Mackenzie: Without innovation, Permian production could peak by 2021

 

 

September 15, 2017

IOG Capital to participate in Eagle Ford, Merge, Arkoma-Woodford drilling programs

IOG Capital LP announced today three new development drilling programs located in the Eagle Ford, the Merge portion of the STACK play, and the Arkoma-Woodford, respectively. These three new projects are anticipated to require up to $130 million of gross capital. These projects will be conducted through IOG’s newly formed affiliate, IOG Resources LLC (IOGR).

IOGR’s first joint development agreement was established in July 2017 with Woodlands, Texas based Earthstone Energy Inc. IOGR and ESTE will initially partner on the development of 11 Eagle Ford wells located in Gonzales County, Texas in 2017. IOGR has the potential to participate in up to 15 additional wells in the project.

IOGR’s second joint development program closed in August 2017 with an Oklahoma City based private family operator. This new development program in the Merge calls for up to 18 wells to be funded in Canadian County, OK.

The third development program closed at the end of August 2017 with Oklahoma City based Red Mountain Energy (RME). IOGR and RME will jointly fund up to 20 wells targeting the Woodford in the Arkoma Basin.

The new investments in the Merge and Arkoma-Woodford have increased IOG and its affiliates’ total acreage position in Oklahoma to over 17,000 net acres with over 80% of the position concentrated in the STACK (Dewey, Major, Kingfisher, and Blaine Counties, Oklahoma) and the Merge (Canadian County, Oklahoma). IOG now has a diversified portfolio of assets including investments in the Permian, Eagle Ford, Bakken, Marcellus, and Arkoma-Woodford areas.

Texas Frac Sand In Demand

Millions of pounds of sand are pumped down each shale well in the hydraulic fracturing process, and while Wisconsin Northern White is still dominant, it is now used in only two-thirds of US fracs. That’s a lot of displaced market share, sources told Mergermarket. Regional Texas sand mines have become an attraction as companies bank on “Permian headlines” and a diversity of sand types.

Tens of new mines are starting up in Texas and surrounding states, with sand that varies in quality but is closer and logistically simpler to procure. Vista Sand, Preferred Sands, Unimin, Black Mountain, Hi-Crush Partners, US Silica and Alpine Silica are some private and public companies with Permian Basin mines slated to be producing by the first quarter of 2018.

Those operators plan to bring at least 40 million tons of new sand supply online by the end of next year. But in an uncertain oil price environment with constantly changing demand dynamics, sources told Mergermarket they believe that at least some of the new entrants will become acquisition targets.

Credit: Hana Askren | Forbes | September 14, 2017 | Read Full Story Here: http://bit.ly/2xCPmsu

Factoid: Geology 101 – Pinch-out Traps

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This week brings an end to our Geology 101 series and in this final example we look at “Pinch-out Traps”.

Anticline, fault, and salt-dome traps are created by the arrangement of the rock layers, and are called structural traps. Stratigraphic traps are created by variations within the rock layers themselves. A pinch-out is a common type of stratigraphic trap. Pinch-out traps are often formed from old stream beds, where a lens-shaped region of permeable sand becomes trapped within less permeable shales and siltstones.

Anticline. Fault. Salt Dome. Pinchout. Unconformity. American Petroleum Institute, 1986.

EIA & API REPORT SUMMARY

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories increased by 5.9 million barrels last week, maintaining a total U.S. commercial crude inventory of 468.2 million barrels. The commercial crude inventory remains in the upper half of the average range for this time of year.

Tuesday evening the American Petroleum Institute (API) reported that crude inventories rose by 6.2 million barrels in the week ending September 8. API also reported gasoline supplies fell by 7.9 million barrels and distillate inventories fell by 1.8 barrels. For the same period, analysts surveyed by The Wall Street Journal had consensus estimates for an increase of 3.7 million barrels in crude inventories, a decrease of 3 million barrels in gasoline inventories and a drop of 1.3 million barrels in distillate stockpiles.

Total gasoline inventories fell by 8.4 million barrels last week, according to the EIA, and remain near the upper limit of the five-year average range. U.S. refineries produced about 9.5 million barrels of gasoline a day last week, down about 1.1 million barrels compared to the prior week.

Total motor gasoline supplied (the agency’s proxy for demand) averaged over 9.9 million barrels a day for the past four weeks, up by about 400,000 barrels a day compared with the prior week.
In a report published Monday, the EIA said that gross inputs to Gulf Coast refineries fell by 34% (3.2 million barrels a day) week over week in the week ending September 1. That is the largest drop since 2008. Refinery utilization fell from 96% to 63%.

The refinery shutdowns curtailed production of refined products, but it was not the only factor contributing to higher pump prices in that week. The Colonial pipeline that carries 2.5 million barrels of refined products per day from the Gulf Coast to the East Coast operated only intermittently during Hurricane Harvey, forcing a drawdown of 2.2 million barrels in East Coast gasoline inventories.

Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $46.25
Oklahoma Sour:
Sunoco Inc. — $34.25

US crude jumps to more than 6-week closing high of $49.89, as demand-driven rally continues

Oil prices rose on Thursday, a day after the International Energy Agency forecast the market would continue to tighten as fuel demand increased.

U.S. West Texas Intermdediate crude hit a intra-day, nearly four-month high at $50.50 a barrel. The contract ended Thursday’s trade up 59 cents, or 1.2 percent, at $49.89. WTI popped above its 200-day moving average level on an intraday basis for the first time since Aug. 10.

Benchmark Brent crude topped out at $55.99, the highest level since in five months. It was up 46 cents at $55.62 a barrel by 1:57 p.m. The contract remained in technically overbought territory for a second day in a row.

On Wednesday, the IEA raised its estimate of 2017 world oil demand growth to 1.6 million barrels per day (bpd) from 1.5 million bpd.

The agency said a global oil glut was shrinking thanks to strong European and U.S. demand, as well as production declines in OPEC and non-OPEC countries.

“The IEA revising up its 2017 global oil demand growth forecast, together with persistent weakness in the U.S. dollar index, has prompted bullish sentiment in the oil market,” said Abhishek Kumar, Senior Energy Analyst at Interfax Energy’s Global Gas Analytics in London.

NAT GAS NEWS

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 91 billion cubic feet for the week ending September 8. Analysts were expecting a storage injection of between 72 billion and 83 billion cubic feet. The five-year average for the week is an injection of 63 billion cubic feet, and last year’s storage injection for the week totaled 62 billion cubic feet. Natural gas inventories rose by 65 billion cubic feet in the week ending September 1.

Natural gas futures for October closed Thursday at $3.07 per million BTUs. The highest close for the previous past five trading days was registered Wednesday at $3.06. The 52-week range for natural gas is $2.80 to $3.62. One year ago the price for a million BTUs was around $3.04.

 

Pipeline Protest Groups Sued, Potential $1 Billion Damages

Claiming damages that could approach $1 billion, Texas-based Energy Transfer Partners (ETP) has sued Greenpeace and other protest groups in federal court in North Dakota.

Energy Partners is the company that is building the controversial Dakota Access Pipeline, which goes through Dakota Indian land where it crosses the Missouri River and was the locus of months of occupation and protest last winter. The company alleges that the groups interfered with its business, facilitated terrorism, incited violence, and violated racketeering and defamation laws,” according to an article in Insurance Journal. ETP alleges that construction disruptions alone have cost the company at least $300 million, and it is requesting triple damages.

Credit: Today’s General Counsel | September 11, 2017 | Read Full Story Here: http://bit.ly/2xCUgWk

 

Remember when: 1951

The Anglo Persian (now Iranian) Oil Company is nationalized by the Iranian government, leading to a coup backed by the US and Britain to restore the power of the Shah (king). The coup was carried out by the U.S. administration of Dwight D. Eisenhower in a covert action advocated by Secretary of State John Foster Dulles, and implemented under the supervision of his brother Allen Dulles, the Director of Central Intelligence. The coup was organized by the United States’ CIA and the United Kingdom’s MI6, two spy agencies that aided royalists and royalist elements of the Iranian army.

 

US shale oil and gas investors are on a ‘road to ruin,’ warns renowned short-seller Jim Chanos – Harold Hamm Fires Back

– Renowned short-seller Jim Chanos is betting against a number of U.S. shale oil and gas drillers.
– Chanos says Wall Street is overly focused on certain valuation metrics, which hide problems with the fundamental business model in the American oil patch.
– Investors are taking for granted accounting methods that will create problems for drillers in the future, Chanos said.

Jim Chanos’ Kynikos Associates is betting against a number of U.S. shale oil and gas stocks, saying Wall Street analysis of the sector is deeply flawed.

“In our view, people have been looking at this industry through the rose-colored glasses of Wall Street, and this is the inherent problem with the North American shale business,” he said.

Chanos, who foresaw the spectacular downfall of disgraced energy titan Enron, is known for scrutinizing accounting methods and spotting trouble on the horizon. He explained why Kynikos is shorting Continental Resources during a broader presentation on the U.S. shale oil and gas industry at CNBC and Institutional Investor’s Delivering Alpha Conference on Tuesday.

Investors are overvaluing shares of Continental and other shale drillers by focusing too narrowly on certain metrics and taking for granted dubious accounting, Chanos said. He warned that their capital spending would eat up almost all of their earnings leaving them with little cash to service their debt.

Continental Resources Chairman and CEO Harold Hamm on Thursday fired back at Jim Chanos after he revealed he is betting that shares of Hamm’s Oklahoma-based drilling company will fall.

Hamm speculated that Chanos — who is known for shorting stocks, or betting that their price will decline — got caught on the wrong side of the trade and is trying to mitigate the damage by talking down shale oil drillers.

Company executives are held to a higher standard of honesty by the Securities and Exchange Commission than short-sellers like Chanos, Hamm claimed.

“For anyone to even put forth the suggestion that we haven’t had great expansion and wealth creation in this industry with horizontal drilling and all the technology that’s come about the last 10 years, I mean, it’s totally ridiculous for anybody to make those types of statements,” Hamm said.

Credit: Tom DiChristopher | CNBC | September 14, 2017 |

Closing Thought: The reason people find it so hard to be happy is that they always see the past better than it was, the present worse than it is, and the future less resolved than it will be – Marcel Pagnol.

Friday Snippets

US allows foreign fuel shipments to ease shortages during Irma

The federal government on Friday issued a Jones Act waiver that allows foreign-flagged tankers to ship fuel between US coasts in a move designed to offer hurricane-stricken states relief from fuel shortages. The waiver expires in a week.

Bill Barrett sees higher-than-expected production for the year

US shale producer Bill Barrett has lifted its 2017 oil production guidance by 4% from its initial estimate to a range between 6.4 million and 6.6 million barrels of oil equivalent in the wake of better results from its Colorado drilling program. “We remain encouraged by the early results of our enhanced completions in the Denver-Julesburg basin, which combined with faster drilling and completion cycle time allows us to deliver a higher growth profile,” Bill Barrett President and CEO Scot Woodall said.

 

Schlumberger enters exploration, production part of oil industry

Oilfield services company Schlumberger is investing in oil and natural gas projects to give itself a role in decisions on drilling and reduce competition for service contracts. Other companies are considering a similar approach, which increases risk but eliminates the need to bid for some jobs.

 

Colonial Pipeline to operate at reduced capacity

Colonial Pipeline, the biggest US fuel pipeline, will likely move fuel through its Port Arthur, Texas, pumping facility at reduced rates starting this Friday, while a full restart is expected by the end of the month. This means the Southeast and East Coast regions will face reduced fuel supplies for some time even as refineries resume operations.

 

Energy MLP Oasis Midstream Launches $150M IPO

Oasis Midstream Partners LP, a master limited partnership formed to operate energy assets in the Williston Basin owned by Oasis Petroleum Inc., on Monday launched an estimated $150 million initial public offering intended to support its parent company’s expansion.

 

US crude inventories expected to swell in wake of Harvey, Irma

The refining outages caused by Hurricanes Harvey and Irma could result in as many as 43 million barrels of crude being added to US oil stockpiles this month, according to Goldman Sachs. Additionally, US oil demand could decline by 900,000 barrels per day this month and by 300,000 barrels per day in October.

 

BP presses ahead with plans to spin off US midstream assets

British oil major BP on Monday filed for an initial public offering of its US midstream business, BP Midstream Partners, which will be organized as a master limited partnership and include BP’s Gulf Coast and Midwest pipeline, processing and storage assets. BP plans to launch the IPO on the New York Stock Exchange by the end of the year, aiming to raise up to $100 million.

 

Samson Resources to begin drilling in Wyo.’s Green River Basin

Six months after emerging from bankruptcy protection, Samson Resources is ready to launch its drilling program in Wyoming’s Green River Basin, which will include drilling five wells in Sweetwater County. Samson anticipates production of 3.7 billion cubic feet equivalent per well at a cost of $2.9 million per well, with the first sales expected in the first quarter of 2018.

 

EIA revises down US crude production forecast for 2017, 2018

The Energy Information Administration slashed its 2017 US oil production forecast by 100,000 barrels per day to an average of 9.25 million barrels per day and lowered its 2018 estimate by 70,000 barrels per day to 9.84 million barrels per day. Despite the downward revision, US crude production is still expected to climb to an all-time high next year, breaking the previous 9.6-million-barrel-per-day record set in 1970.

Santa Fe Midstream expanding gas midstream infrastructure in Permian Basin

Santa Fe Midstream last month kicked off construction of a natural gas gathering, treatment and processing system in the San Andres play of the Permian Basin, with the initial gas facilities slated to come online by the second quarter of 2018. Construction on a crude gathering system in the region is also underway, the company said.

Sabinal Energy acquires Permian Basin assets from Chevron

Chevron has sold an asset package consisting of about 66,500 Permian Basin acres with production of roughly 7,500 barrels of oil equivalent per day to Sabinal Energy, a startup backed by Kayne Private Energy Income Fund, for an undisclosed amount. The sale is part of Chevron’s plan to divest between 150,000 and 200,000 net acres in the Permian Basin in 2017 and 2018.

Judge Trims Tribe’s Suit Over Okla. Fracking Approvals

An Oklahoma federal judge on Thursday trimmed a slew of claims from the Pawnee Nation of Oklahoma’s lawsuit alleging the federal government approved oil and gas leases and fracking permits on the tribe’s land without properly considering their environmental impacts.

September 8, 2017

Oil markets move little with industry in grip of Caribbean hurricanes

Reuters reports that oil prices were little changed early today as the international petroleum industry remains in the grip of Caribbean hurricanes which have pummelled the region for the last two weeks.

“The oil market was little changed, as the recovery from Hurricane Harvey stalled at the same time that Hurricane Irma threatened to disrupt the sector in Florida,” ANZ bank said.

Hurricane Harvey hit the US Gulf coast two weeks ago, knocking as much as a quarter of the country’s huge refinery industry, as a result of which demand for crude oil – refining’s lifeblood – fell sharply.

As of Thursday, about 3.8 million barrels of daily US refining capacity, or about 20 per cent, was still shut.

The US Energy Information Administration (EIA) said on Thursday that refinery utilisation rates slumped 16.9 per centage points to 79.7 per cent last week, the lowest rate since 2010.

That left a lot of crude unused, with commercial US inventories rising 4.6 million barrels last week, to 462.35 million barrels.

However, US oil production also hit, with weekly output down from 9.5 million bpd to 8.8 million bpd.

Port and refinery closures along the Gulf coast and harsh sea conditions in the Caribbean have also impacted shipping.

“Imports (of oil) to the US Gulf Coast fell to levels not seen since the 1990s,” ANZ said.

Traders said it would take weeks for the US petroleum industry to return to full capacity, and that under the current conditions it was difficult to identify fundamental market trends.

“The data for this week and next will be taken with a grain of salt as the underlying trend will be obscured by the effects of the hurricane,” said William O’Loughlin, investment analyst at Rivkin Securities.

Even as the oil industry continues to grapple with the fallout from Harvey, a much bigger Hurricane was lashing the Caribbean islands and heading for the United States.

Hurricane Irma, which has become one of the biggest storms ever measured, early on Friday was over the Dominican Republic and Haiti, heading for Cuba and the Bahamas. It was predicted to hit Florida on Sunday or Monday.

The US National Hurricane Center (NHC) said that Irma was still a Category 5 Hurricane, with wind speeds of 175 miles per hours (280 km/h).


Factoid: Geology 101 – Salt Dome Traps

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This weeks example is the “Salt Dome Trap”. When masses of salt form deep underground, heat and pressure cause them to bulge upward in domes. The rising domes force the overlying rock layers aside. As they do so, they can cut across layers of permeable rock, blocking the path of any migrating oil and creating an oil trap.

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EIA & API REPORT SUMMARY

U.S. Oil Stockpiles Jump One Week After Hurricane Harvey

The American Petroleum Institute (API) reported a build of 2.791 million barrels in United States crude oil inventories, compared to analyst expectations of a build of 4.022 million barrels for the week ending September 1.

Gasoline inventories fell by 2.544 million barrels for the week ending September 1, against a larger expected draw of 5.0 million barrels.

That US crude oil inventories would build in the wake of Hurricane Harvey was largely anticipated, with some saying as much as 40-60 million barrels could be added to inventory while shuttered refineries struggle to come back online.

Despite this week’s crude oil inventory build, over the last ten weeks, according to the API, crude oil inventories in the United States have shed almost 50 million barrels.

Meanwhile, on Thursday data from the U.S. Energy Information Administration showed that domestic crude supplies climbed by 4.6 million barrels for the week ended Sept. 1. That’s larger than the forecast for a rise of 2.7 million barrels by analysts surveyed by S&P Global Platts.

The build in crude inventories comes from an expected 3.3 million barrel-per-day decrease in refinery inputs during the week as refiners operated at 79.9% of their operable capacity. Hurricane Harvey at one point is said to have impacted a fifth of U.S. refinery capacity in the Gulf Coast, the nation’s refining hub.

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Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $45.50
Oklahoma Sour:
Sunoco Inc. — $33.50

U.S. oil prices slip with Harvey to blame for 1st U.S. crude-supply rise in 10 weeks

U.S. oil prices closed lower Thursday after the U.S. government reported the first climb for domestic crude inventories in 10 weeks, of U.S. stocks data, as Gulf storm Harvey caused refinery shutdowns in Texas, reducing demand for the commodity.

Gasoline futures eased back for a fourth-straight session, despite a hefty weekly drop in U.S. stockpiles, with refinery capacity improving as floodwaters from the storm recede.

October West Texas Intermediate crude CLV7, fell 7 cents, settling at $49.09 a barrel on the New York Mercantile Exchange. After settling Wednesday at its highest since Aug. 9, it’s still trading around 3.8% higher for the week.

November Brent crude LCOX7, meanwhile edged up by 29 cents to $54.49 a barrel on ICE Futures Europe, finishing at its highest finish since April 18.

 

NAT GAS NEWS

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 65 billion cubic feet for the week ended Sept. 1. That matched the average forecast of analysts surveyed by S&P Global Platts. Total stocks now stand at 3.220 trillion cubic feet, down 212 billion cubic feet from a year ago, but 15 billion cubic feet above the five-year average, the government said.

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Gasoline Supplies Quickly Recovering in Texas Following Hurricane Harvey

Gasoline supplies in Texas are reported to be recovering quickly following Hurricane Harvey.
Texas Railroad Commissioner Ryan Sitton told the Associated Press this week any shortages that exist this week will be handled quickly. He also blamed the shortages on hoarding and panic buying by motorists.

Sitton reported pipelines are all operational again and supply truck companies are working overtime to move gasoline from the terminals to gas stations.

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Remember when: 2006

Chevron’s Jack 2 deepwater discovery in the Gulf of Mexico is believed to be the biggest discovery in the United States since the discovery of Prudhoe Bay.

 

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Williams Reports No Major Damage from Hurricane Harvey

Tulsa’s Williams Partners says its operations in the Gulf Coast area suffered no major damage from Hurricane Harvey.

The company announced Wednesday that the majority of its operations required to handle offshore production have been inspected and are “ready for service.” Some some production remains shut-in pending a pre-start test and the restart of the third-party operated Quintana Crude Oil Terminal.

The company reports some offshore production is starting to come back online. Its Transco system expects offshore production to resume in the next few days.

Transco has also not reported any operational issues but assessments are still underway. So far, the company has not reported any significant facility damage.

The gathering systems of Williams Partners in the Gulf Coast area are also ready for service and the company expects third-party producers to resume flow into the systems in the next day or so.
Williams also says it is focusing on the need of its employees who were affected by the storm. Many are being supported through the company’s emergency disaster relief fund.

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Closing Thought: “Sometimes the questions are complicated and the answers are simple.”
― Dr. Seuss

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Friday Snippets

Texas Justices Will Review Retained Acreage Split

After initially declining to hear two cases that raised the issue, the Texas Supreme Court on Friday agreed to review an alleged split among lower appellate courts about how to define the amount of property that can be released under “retained acreage” clauses in mineral leases.

Higher prices give boost to US gas production

Gross US natural gas output rebounded in June after months of lagging behind year-earlier levels, increasing 1% from May to 81.4 billion cubic feet per day, according to the Energy Information Administration. Louisiana posted the biggest growth in June — up 7.2% from May to nearly 5.7 billion cubic feet per day, while gross gas production in Texas increased 0.4% month-on-month to 21.9 billion cubic feet per day, although it was down 2.8% from a year earlier.

Harvey sets back US fracking activity

The flooding caused by Hurricane Harvey could defer up to 10% of US hydraulic fracturing activity, mainly in the Eagle Ford Shale, according to Raymond James & Associates analyst Marshall Adkins. “Given that much of oil and gas activity occurs in areas only accessible via dirt roads, the heavy rainfall usually makes the movement of trucks and supplies much more difficult,” Adkins said.

Energy Dept. OKs release of more oil from SPR

The Energy Department on Sept. 1, authorized the release of 3.5 million barrels of oil from the Strategic Petroleum Reserve, in addition to the 1 million barrels of oil approved for release the previous day, in an effort to mitigate storm Harvey’s effects on energy supplies. Marathon Petroleum will get 3 million barrels of SPR oil, while Valero Energy will receive 500,000 barrels.

Energy deal-making activity remains strong despite Harvey

US energy-sector mergers and acquisitions will likely slow down over the next month in the wake of storm Harvey, but bankers expect the impact to be temporary and foresee a rebound in deals as Houston recovers. So far this year, the oil and natural gas industry has seen nearly $97 billion worth of deals, up more than 41% from the same time last year, according to Bloomberg data.

US to become net oil exporter within 6 years, PIRA says

The US is seen becoming a net oil exporter by 2023, with net oil exports seen hitting 3.3 million barrels per day in 2031, according to PIRA Energy Group analysts. PIRA expects the US to import 4.4 million barrels per day of oil this year, down from a 2005 peak of 12.5 million barrels per day.

Fla. at risk of fuel shortages as Hurricane Irma looms

Floridians are bracing for fuel shortages as Hurricane Irma prepares to make landfall, with up to 600 gas stations in metropolitan areas of Florida reporting fuel outages on Wednesday, according to GasBuddy.com. Truckers may need to haul fuel from Georgia, Alabama, South Carolina and even Texas to ease the shortages in Florida, which has also been hit by the shutdown of terminals, pipelines and refineries along the Texas coast in the wake of Hurricane Harvey.

Hurricane Irma prompts evacuations at BP’s Thunder Horse platform

BP has begun evacuating non-essential personnel from its Thunder Horse platform and West Vela drilling rig in the Gulf of Mexico in preparation for Hurricane Irma. BP has not curbed any production yet but said it was prepared to do so if needed.

Bakken operators drilling increasingly efficient wells

The estimated ultimate recovery of the best wells drilled in the Bakken Shale has been gradually improving over the past six years, according to an analysis conducted by EnerCom Analytics. EURs climbed from 1.68 million barrels of oil equivalent in the case of the best 2012 well to a record of more than 4.5 million barrels of oil equivalent recovered by the best well drilled so far in 2017.

Bill Barrett sees higher-than-expected production for the year

US shale producer Bill Barrett has lifted its 2017 oil production guidance by 4% from its initial estimate to a range between 6.4 million and 6.6 million barrels of oil equivalent in the wake of better results from its Colorado drilling program. “We remain encouraged by the early results of our enhanced completions in the Denver-Julesburg basin, which combined with faster drilling and completion cycle time allows us to deliver a higher growth profile,” Bill Barrett President and CEO Scot Woodall said

September 1, 2017

Harvey Fallout Continues

Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralyzed at least 4.4 million barrels per day (MMbbl/d) of refining capacity, according to company reports and Reuters estimates. Texas is home to 5.6 million barrels per day of refining capacity, and neighboring Louisiana has 3.3 million bpd.

Analysts at Goldman Sachs and Stifel said they expected U.S. infrastructure outages to last several months but said it was difficult to estimate the exact damage.

The storm has led to some of the biggest disruptions to U.S. energy infrastructure; yet it has failed to boost crude prices. The U.S. Department of Energy (DOE) reported that six refineries in the Corpus Christi area, seven in Houston/Galveston and two in Beaumont and Port Arthur are shut down and five others were operating at reduced rates.

In contrast with previous major hurricanes such as Katrina in 2005, Harvey has actually seen oil prices edge down as traders have focused more on the hit to demand from damaged U.S. refineries than the blow to supply from knocked-out production.

Analysts are divided whether demand from U.S. refineries will recover more quickly than U.S. production.

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Factoid: Geology 101

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This weeks example is the “Fault Trap”. Every now and then, rock strata crack and slide up or down past each other. This is known as a fault. Faults can create oil traps in various ways. The most common is when the fault slides a layer of impermeable rock across a layer of permeable rock through which oil is migrating.

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Both the U.S. Energy Information Administration and the American Petroleum Institute reported massive drawdowns in domestic crude inventories this week.
Harvey Concerns Weigh on Oil Prices Despite Bullish EIA Data

Both the U.S. Energy Information Administration and the American Petroleum Institute reported massive drawdowns in domestic crude inventories this week.

In a largely bullish Wednesday report, the EIA said commercial crude oil inventories, excluding those in the Strategic Petroleum Reserve, decreased by 5.4 million barrels during the week ended Aug. 25. At 457.8 million barrels, U.S. crude oil inventories are in the middle of the average range for this time of year. Consensus estimates called for a draw of 1.9 million barrels of crude.

Meanwhile, neither the EIA nor the API reports indicated a slowdown in refinery inputs as the data runs through the morning of Aug. 25, prior to the first landfall of Harvey.

The EIA reported that U.S. crude oil refinery inputs averaged over 17.7 million barrels per day during the past week, 264,000 barrels per day more than the previous week’s average, according to the EIA. Refineries operated at 96.6% of their operable capacity last week prior to Harvey, the agency said.

Still, more volatile inventory and refinery data is likely to come in the weeks ahead, which could be helping to keep oil prices down near term, according to analysts at energy-focused investment bank and research firm Tudor, Pickering, Holt & Co.

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Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $43.75
Oklahoma Sour:
Sunoco Inc. — $31.75

Oil rises, gasoline jumps 10 percent as U.S. refineries go down

Hurricane Harvey, which brought record flooding to the U.S. oil heartland of Texas and killed at least 35 people, has paralyzed at least 4.4 million barrels per day (bpd) of refining capacity, according to company reports and Reuters estimates.

The shutdowns led the U.S. government to tap its strategic oil reserves for the first time in five years on Thursday, releasing 500,000 barrels of crude to a working refinery in Louisiana. Traders were also scrambling to redirect fuel to the United States.

Gasoline futures surged 10 percent on Thursday as almost a quarter of U.S. refining capacity remained offline and traders scrambled to reroute millions of barrels of fuel, while oil prices rose nearly 3 percent.

U.S. West Texas Intermediate (WTI) October crude futures recovered some early-week losses, closing up $1.27 per barrel higher at $47.23 per barrel, but posted a nearly 6% loss in August.

International Brent crude rose $1.49, or 2.9 percent, to $52.35 a barrel. The contract fell by over 2 percent during the previous session.

NAT GAS NEWS

Despite the fact that Hurricane Harvey essentially shut down 20% of natural gas production in the Gulf of Mexico, total national dry gas output still managed to expand in annual terms this week.

US Gulf of Mexico offshore natural gas output rebounded Thursday, while exports to Mexico struggled to return to normal and some midstream operators continued to report disruptions almost a week after Harvey struck Houston, according to a Thursday afternoon report by S&P Global Platts, the leading independent provider of information and benchmark prices for the commodities and energy markets.

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 30 billion cubic feet for the week ended Aug. 25. On average, analysts were looking for a build of 29 billion cubic feet, according to a survey of analysts conducted by S&P Global Platts. Total stocks now stand at 3.155 trillion cubic feet, down 239 billion cubic feet from a year ago, but 8 billion cubic feet above the five-year average, the government said. October natural gas NGV17, fell a penny from Wednesday’s settlement to $2.929 per million British thermal units.

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Department of Energy Providing 500,000 Barrels of Crude to Cope With Harvey

The U.S. Department of Energy said Thursday that it would distribute 500,000 barrels of crude oil from the Strategic Petroleum Reserve to help the petroleum industry cope with rising fuel prices caused by disruptions from Tropical Storm Harvey, Reuters reports.

The oil will be transported to the Phillips 66 refinery in Lake Charles, LA. The plant was unaffected by the storm, which ravaged the Gulf Coast.

The delivery will include 200,000 barrels of sweet crude and 300,000 barrels of sour crude oil. Phillips 66 will be required to replace the reserves’ oil at a later date.

The Strategic Petroleum Reserve, established in the 1970s over fuel supply panics, currently contains 679 million barrels of oil.

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Remember when: 1968

Oil is found at Prudhoe Bay, northern Alaska. This becomes North America’s major source of oil. The field is an anticline structure located on the Barrow Arch, with faulting on the north side of the arch and a Lower Cretaceous unconformity on the east.

It is the largest oil field in both the United States and in North America, covering 213,543 acres and originally containing approximately 25 billion barrels of oil. The amount of recoverable oil in the field is more than double that of the next largest field in the United States, the East Texas oil field. The field is operated by BP; partners are ExxonMobil and ConocoPhillips Alaska.

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Federal jury awards Oklahoma oil companies $220,000 in ‘well bashing’ case

A federal jury has awarded two Oklahoma oil companies $220,000 in damages from a “well-bashing” incident in 2015 by a company later bought by Devon Energy Corp.

The jury awarded H&S Equipment Inc. and Mark Holloway Inc. the damages after a two-day trial earlier this week in federal court in Oklahoma City.

The companies said a hydraulic fracturing job in the summer of 2015 on a Felix Energy LLC horizontal well near one of their vertical wells in Blaine County overpressured the well and destroyed its production. They sought damages and lost profits in excess of $1 million for subsurface trespass, creating a private nuisance and negligence.

Devon spent $1.9 billion to buy Felix Energy in late 2015, a transaction that gave it another 80,000 net acres in Oklahoma’s STACK play. It also inherited the lawsuit, which was filed against Felix in November 2015.

The jury sided with H&S Equipment and Holloway on the subsurface trespass and nuisance claims. U.S. District Judge Joe Heaton ruled Devon wasn’t negligent as a matter of law.

Devon has not said if it plans to appeal the judgment.

Credit: Paul Monies | NewsOK | Read full story: http://bit.ly/2wsTMyt

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Closing Thought: Whenever you find yourself on the side of the majority, it is time to pause and reflect. — Mark Twain

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Now This Week’s Friday Snippets 

Quantum Energy Partners has formed Vitruvian Exploration IV with a $450 million commitment.

Based in The Woodlands, Texas, Vitruvian IV will acquire, develop and operate unconventional oil and gas assets in the U.S. Virtruvian IV will initially focus on the Eagle Ford Shale in South Texas.

Concentrated energy infrastructure makes US vulnerable to supply disruptions

The shutdown of about 15% of US refining capacity in the wake of Hurricane Harvey demonstrates the nation’s vulnerability to supply disruptions stemming from its dependence on fewer pieces of infrastructure that are concentrated along the Gulf Coast. There are 141 oil refineries in operation today, down from 220 three decades ago, which have nearly 30% more capacity and are being used about 90% on average, but the good news is that the market has adapted to respond more promptly to disruptions.

EnCap Flatrock plans to invest $3B in midstream space

Private equity firm EnCap Flatrock Midstream is seeking to raise $3 billion for its fourth fund, which will focus on investing in the US midstream sector, according to a person familiar with the matter. News of EnCap setting up a fourth fund comes amid surging demand for energy infrastructure projects and fierce competition for lucrative midstream deals.

South Texas shale drillers see shares plunge because of Harvey

Disruptions to oil production operations in Texas due to Hurricane Harvey are putting downward pressure on shale drillers’ shares, which have plummeted by over 7% in some cases. Shares of Eagle Ford-focused producers, such as Sanchez Energy, EP Energy and Wildhorse Resources, were the hardest hit, but larger drillers less dependent on the Eagle Ford were not spared either.

Oil, gas production in Anadarko Basin on the rise

Oil and natural gas production in the Anadarko Basin has climbed to 437,000 barrels per day and 4.9 billion cubic feet per day in July 2017, according to the Energy Information Administration. The agency, which only recently started including the Anadarko Basin in its Drilling Productivity Report, expects crude production in the region to hit 500,000 barrels per day by the end of 2018.

Harvey brings oil prices to new lows as gasoline spikes

Oil prices fell to their lowest level in more than a month on Wednesday, dragged by the storm Harvey, with October West Texas Intermediate crude ending the day down 1% at $45.96 per barrel while October Brent fell 2.2% to $50.86 per barrel. Meanwhile, gasoline continued to rally, with September futures up 5.7% to $1.885 per gallon, the highest level since July 2015.

Anadarko Sues IRS Over Refused $15.6M Loss

Oil and gas producer Anadarko sued the IRS in Texas federal court Wednesday for refusing to recognize a $15.6 million capital loss, with the company contending the agency even changed its rules that cover the deferral of such claims to block such refund requests.

Harvey sets back US fracking activity

The flooding caused by Hurricane Harvey could defer up to 10% of US hydraulic fracturing activity, mainly in the Eagle Ford Shale, according to Raymond James & Associates analyst Marshall Adkins. “Given that much of oil and gas activity occurs in areas only accessible via dirt roads, the heavy rainfall usually makes the movement of trucks and supplies much more difficult,” Adkins said.

Canadian shale producers scale back spending on weak oil prices

Canadian shale drillers such as Painted Pony Energy and Baytex Energy are following in the footsteps of their Permian Basin rivals in announcing spending cuts after frantically drilling 3,344 wells in the first half of the year, up from 1,439 a year earlier. However, Canadian shale producers may be forced to reduce drilling activity more than US frackers due to a combination of challenges such as more limited access to funding and higher operational costs due to a stronger Canadian dollar.

BHP said to enlist Barclays, Citigroup to help it exit US shale

BHP Billiton has reportedly hired Barclays and Citigroup to assist it with the planned divestment of its US shale business, valued at around $10 billion. “The sellside advisors have only invited strategic players to bid for the onshore business at this point, which is likely to be sold in separate packages, some of which will draw more interest than others,” one source said.

Preliminary data show Texas oil production rose in June

Daily crude oil production in Texas rose about 3% year-on-year to 2.51 million barrels of oil per day, according to preliminary data compiled by the Railroad Commission of Texas. For the full month, the volume of crude produced was 75.2 million barrels, which compares with a preliminary volume of 72.8 million barrels for June 2016.

August 25, 2017

Double Eagle re-forms after $2.8B Parsley sale

Fort Worth’s Double Eagle Energy is coming back to life after selling its business earlier this year to Austin’s Parsley Energy for $2.8 billion, which included a roughly 72,000-net-acre position in the Midland Basin. The transaction closed in April.

The Permian Basin-focused oil and gas explorer is again working with the Apollo Global Management private equity firm to create the new Double Eagle Energy III Holdings.

Double Eagle will continue to focus on the Permian under its old leadership team of co-chief executives John Sellers and Cody Campbell.

Double Eagle III will pursue a similar strategy to Double Eagle II, but on a “significantly larger scale and with a more substantial upfront commitment from funds managed by Apollo,” along with the management team, according to the release

“The continued strong relationships with their (Apollo) team, paired with their funds’ financial strength and track record of success allow us to aggressively pursue larger and more numerous opportunities in the most prolific basin in North America,” Campbell said in the announcement.

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Factoid: Geology 101

In conventional fields, when oil companies drill for oil, they look for oil traps. These are places where oil collects underground after seeping up through the surrounding rocks. This weeks example is the “Anticline Trap”. Oil is often trapped under anticlines—places where layers (strata) of rock have been bent up into an arch by the movement of Earth’s crust. If one of these bent layers is impermeable, the oil may ooze up underneath it and accumulate there. Anticline traps like this hold much of the world’s oil.

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Post Oak Energy pumping $100M into Eagle Ford company

Houston-based private equity firm Post Oak Energy Capital announced it’s providing $100 million to a Sierra Resources subsidiary to target dry natural gas in the Eagle Ford Shale. “(Sierra) Management has an impressive track record of investing in and operating across a number of basins across the country and is well-positioned for success in the highly economic Eagle Ford Shale play,” Post Oak Managing Director Frost Cochran said.

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EIA Reports 8th Straight Weekly Crude Draw

U.S. Energy Information Administration reported a 3.3 million barrel draw in domestic crude inventories. It was the eighth consecutive weekly stockpile drawdown.

The EIA gave the market cause for optimism by reporting not only a draw of 3.3 million barrels in crude oil inventories for the week to August 18, but also a draw in gasoline inventories, contrary to what the API had reported. Traders had expected a crude oil inventory draw of 3.5 million barrels.

“These crude draws are primarily supported by continued high refinery margins — U.S. refinery utilization was above 95% last week,” said Jeff Quigley, director of energy markets at consulting and analytics firm Stratas Advisors. “Demand expectations have improved over the last several weeks. U.S. demand has moderated, but demand for product in key markets remains strong, supporting exports.”

U.S. supply continues to grow, as well, EIA data showed. The agency said total products supplied over the past four weeks averaged over 21 million barrels per day, up by 1.4% from the same period last year.

“Crude exports also remain strong and are likely to stay strong as the Brent/WTI differential remains wide, helping to support continued inventory drawdowns,” Quigley said on Wednesday. “One key concern remains how much of an impact the re-routing of OPEC barrels to Asia (primarily by the Saudis) is having on manipulating inventory levels in the U.S.”

On Tuesday, the American Petroleum Institute reported a 3.6 million barrel reduction in oil inventories and said China’s July crude imports rose 12% year-over-year, a bullish signal for demand. The API reported an unexpected 1.4 million barrel increase in gasoline stockpiles, however.

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Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:

Sunoco Inc. — $43.75

Oklahoma Sour:
Sunoco Inc. — $31.75

Gulf hurricane bearish for oil prices

U.S. crude oil prices tumbled 2% on Thursday to $47.43/bbl, as pressure from the risk of weaker energy demand in the wake of Hurricane Harvey outweighed the typical price gain associated with likely production disruptions in the region.

“It’s a new world since the last storm” a decade ago, says Bob Yawger, head of the futures division at Mizuho Securities; unlike Hurricane Ike in 2008, the worry today is about the facilities that refine the oil instead of pump it, since discoveries in U.S. shale have led to more production from locations further from the coast.

According to Commerzbank, the high level of refiner activity has been the sole contributor to the drop in crude storage, as U.S. production and imports have climbed; if refiners stop processing crude, it could lead to another build up in stockpiles, a bearish factor for the oil market.

NAT GAS NEWS

U.S. supply comes in a bit smaller than expected

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 43 billion cubic feet for the week ended Aug. 18. On average, analysts were looking for a build of 46 billion cubic feet, according to a survey of analysts conducted by S&P Global Platts. Total stocks now stand at 3.125 trillion cubic feet, down 223 billion cubic feet from a year ago, but 45 billion cubic feet above the five-year average, the government said. Prices for natural gas also got a boost from forecasts that Tropical Storm Harvey in the Gulf of Mexico may become a hurricane by Friday, which could significantly disrupt energy operations in the region.

September natural gas NGU17, closed Thursday at $2.949 per million British thermal units.

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17.6 million Americans live close to active oil or gas wells

An estimated 17.6 million Americans live within one mile of an active oil or gas well, according to a study published August 23, in Environmental Health Perspectives, a peer-reviewed journal published by the National Institute of Environmental Health Sciences. The study, by researchers at PSE Healthy Energy, a nonprofit research institute; the University of California, Berkeley; and Harvey Mudd College, is the first peer-reviewed nationwide measurement of the number of people living in close proximity to actively producing oil and gas wells.

Credit: PSE Health Energy | Read full story: http://bit.ly/2iw2bhc

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Remember when: Deepwater technology

The first offshore well out of the sight of land was drilled in 1947 in 15 feet of water (4.5 m). Just 30 years ago, deepwater operations meant exploring water depths up to 500 feet (152 m). Today a major new oil or gas floating production platform can cost billions of dollars and take up to three years to complete. Most of today’s exploration is in frontier, deepwater, and ultradeepwater areas. The challenges that have been overcome—and those that remain—in the exploitation of deepwater and ultra-deepwater reserves can be more daunting than the challenges of exploring space.

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Oklahoma energy firms ready to drill 2-mile horizontal wells

With a pair of wells in northern Dewey County, Oklahoma City-based Tapstone Energy plans to be one of the first companies to take advantage of a new law allowing horizontal wells up to two miles long.

“It means a lot to us,” said Bob Costello, Tapstone’s general counsel and vice president of land. “We’re excited to see what happens.”

Because of the emergency designation attached to Senate Bill 867, companies could begin the process of drilling long wells on Thursday.

Tapstone employees expect to file their paperwork with the Oklahoma Corporation Commission next week and plan to start drilling its first such longer wells in late October and early November, Costello said.

Credit: Adam Wilmoth | NewsOK | Read full story: http://bit.ly/2iv8AcF

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Closing Thought: “Never risk what you have and need for what you don’t have and don’t need.”
— Warren Buffett

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This Week’s Friday Snippets

As shale costs rise, conventional drilling makes a comeback

An increasing number of small US oil companies, particularly in California and Oklahoma, are dumping hydraulic fracturing projects in favor of conventional oil drilling as producers seek higher returns with lower risk at reduced costs compared with shale. Drilling a conventional well usually costs less than $1 million, whereas the average shale well requires between $6 million and $8 million.

Alaska’s Umiat oilfield survives against all odds

Minnesota-based Malamute Energy is determined to develop the Umiat oilfield on Alaska’s North Slope despite the risks and challenges it would face, such as the permanently frozen oil reservoir, lack of infrastructure, terrain and remoteness. Undaunted by the fact that the previous owner, Linc Energy, went bankrupt in the process of developing the Umiat and other Alaska projects, Malamute believes the prospect — estimated to hold 200 million barrels of potentially recoverable oil — could be well worth the effort.

New West Texas sand-mining capacity a game changer for Permian drillers

The planned openings of several frac sand mines in West Texas over the next 18 months are expected to give an operational and financial boost to Permian Basin producers, potentially helping them slash the cost of bringing a new well into production by 5%. This will give Permian drillers the upper hand over other regions, but it might also prompt them to boost production, worsening the supply glut and weighing on oil prices.

BHP to sell US shale assets

BHP Billiton on Tuesday announced it would sell its US shale properties after determining the assets are non-core. BHP Billiton CEO Andrew Mackenzie said several potential buyers have expressed interest in buying the assets, but he did not say how much the company wants for them.

Permian Basin land becoming a scarce resource

The Permian Basin land grab has slowed in recent months as the availability of lucrative and reasonably priced acreage shrinks and oil prices remain depressed. The number of transactions in West Texas dropped by one-third to 30 in the second quarter, while their value was down 85% to $2.8 billion compared with the first three months of the year.

Sanchez Energy divesting Eagle Ford assets

Houston-based Sanchez Energy has reached an agreement to sell 39,500 acres producing dry natural gas in the Eagle Ford Shale’s Javelina region for $105 million. “This transaction accelerates the value of the asset, while building our liquidity and providing value to our shareholders,” Sanchez Energy Director and CEO Tony Sanchez said.

North American midstream sector faces challenges amid shifting energy markets

The 11 biggest midstream companies in North America slashed capital spending to $29 billion in 2016 and continue to make budget cuts this year as well in a sign that the industry is going through a rough patch, according to Bain & Co. Stranded assets, the coming expiration of favorable contracts and a flood of private equity money that’s forcing firms to accept more aggressive contract terms are three trends posing risks to midstream companies’ operations and profits, Bain said.

Pioneer CEO: US emerging as swing producer in wake of 2014 price crash

The burst of innovation triggered by the 2014 oil downturn helped oil companies become more efficient, cost-effective and productive, turning the US into a “swing producer,” according to Pioneer Natural Resources President and CEO Timothy Dove. At a time when OPEC is cutting production, US oil output is on track to hit 10.7 million barrels a day by the end of 2018, which suggests that the US is filling the oil supply gap created by OPEC, and in doing so, “we’re also providing a tremendous value to the United States,” Dove said.

DOE Encouraged To Halt Expanded Natural Gas Exports

A manufacturers’ advocacy group on Tuesday urged the U.S. Department of Energy to immediately halt new liquefied natural gas exports to nations that do not have a free trade agreement with the U.S., imploring the agency to gather new data on the current policy’s potentially adverse pricing effects.

August 18, 2017

U.S. drilling creates “industrial inventory” of untapped wells waiting to flow

West Texas drillers again left scores of untapped wells in their wake last month as they drilled and pumped even more oil into the oversupplied market.

– Oil companies left another 135 wells dormant in the Permian Basin in July, bringing the inventory of drilled but uncompleted wells to 2,330, up 73% Y/Y – wells that could add hundreds of thousands of barrels to surging U.S. oil output when the wells are brought into production.

– “You drill, you move on, you frack [and] you get an inventory building,” Precision Dilling (NYSE:PDS) CEO Kevin Neveu says. “The shift to multi-well pads has caused an industrial inventory of uncompleted wells to accumulate. The frackers can’t keep up with the need.”

– The Energy Department expects Permian Basin production to rise by 64K bbl/day this month to 2.6M, part of the seven major U.S. shale plays that could pump 6.1M bbl/day, up by 117K bbl/day.

Credit: Collin Eaton | Houston Chronicle | August 15, 2017 | Read Full Story: http://bit.ly/2uJdV5W

Factoid: TOUGH THREADS

In 1961, DuPont™ chemist Stephanie Kwolek (b. 1923) discovered how to spin solid fibers from liquid chemicals including hydrocarbons. The resulting fibers, called aramid fibers, are amazingly tough. Aramid fibers such as Kevlar ® can be woven together to make a material that is light enough to wear as a jacket, yet tough enough to stop a bullet.

Silver Run Acquisition strikes deal for two Oklahoma energy companies

Silver Run Acquisition II, a private equity backed oil and gas startup led by the former chief executive of Anadarko Petroleum Corp, has agreed to acquire two Oklahoma energy companies.

The two companies are Alta Mesa Holdings LP, an independent exploration and production company, and Kingfisher Midstream LLC, a private midstream company whose anchor producer is Alta Mesa. Both companies are focused on the STACK play in Oklahoma.

Hackett, currently chairman and CEO of Silver Run II, will be executive chairman of the combined company. Alta Mesa executives Harlan Chappelle, Michael Ellis and Michael McCabe will continue as CEO, COO and CFO, respectively, of the combined company.

A spokesman for Alta Mesa was unavailable for comment on terms of the agreement. Silver Run said it expected the market value of the combined companies to be about $3.8 billion based on its projections of future earnings.

Alta Mesa’s core acreage position in Northeast Kingfisher County has breakevens around $25 per barrel, which Hackett called one of the lowest in the U.S. The 30-year-old company is one of the most active operators in the STACK, per the press release. It has approximately 120,000 contiguous net acres and about 4,200 gross identified drilling locations and has completed 173 of its 205 drilled wells, with 167 on production.

Well economics in Oklahoma’s Scoop and Stack plays rate second only to the Permian Basin of West Texas and New Mexico, according to analyst Housley Carr with RBN Energy. Like the Permian, the Stack and nearby Scoop shale plays are also constrained by a lack of infrastructure to deliver oil to the market.

Combining Alta Mesa with Kingfisher creates a kind of vertically integrated independent shale producer that will get first bite at the apple for space on pipelines.

EIA Crude Report

The 8.9 million barrel decrease in U.S. oil inventories is a bullish sign for an oversupplied commodity market, but was lighter than API’s Tuesday inventory report.

Data from the U.S. Energy Information Administration Wednesday showed that domestic crude supplies fell by 8.9 million barrels for the week ended Aug. 11. That’s more than double the forecast for a decline of 3.6 million barrels by analysts surveyed by S&P Global Platts.

The American Petroleum Institute had reported late Tuesday a fall of 9.2 million barrels, according to sources. Gasoline stockpiles were unchanged for the week, while distillate stockpiles climbed by 700,000 barrels last week, according to the EIA.

Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $43.75
Oklahoma Sour:
Sunoco Inc. — $31.75

Oil prices rise on Thursday

Oil prices finished up slightly on Thursday, after posting losses in each of the last three sessions, as traders continued to weigh data showing the biggest weekly fall in U.S. crude supplies in 11 months, but also the highest total domestic production level in more than two years.

U.S. crude production rose 79,000 barrels per day (bpd) to over 9.5 million bpd last week, its highest level since July 2015, and 12.8 percent above the most recent low in mid-2016.

On the New York Mercantile Exchange, October West Texas Intermediate crude added 30 cents, to settle at $47.24 a barrel. October Brent crude on London’s ICE Futures added 76 cents, to finish at $51.03 a barrel.

NAT GAS NEWS

The NYMEX September natural gas futures contract rose Thursday as revisions to the previous weeks’ stocks data overshadowed a larger-than-expected storage build in the most recent week.

The bearish build was above the 50-Bcf average injection for the most recent reporting week over the past five years, the first time in six weeks a build has outpaced the five-year average, according to EIA data. Because of the revision, natural gas stocks now only have a 55 Bcf, or 1.8%, cushion over the five-year average, according to EIA data. There has been sentiment in the market that a colder-than-average winter could boost prices if the surplus to the five-year average continues to dwindle.

Looking ahead, the most recent six- to 10-day weather outlook from the US National Weather Service continues to call for warmer-than-average weather across the Northeast, with the Midcontinent expected to see average temperatures.

The September contract settled at $2.929/MMBtu, up 3.9 cents from Wednesday’s close.

Citi sees oil in $40-to-$60 range for next 5 years

Oil prices will likely fluctuate between $40 and $60 per barrel through 2022, according to Citi analysts, who also said prices could fall below $40 per barrel or climb above $60 if supply disruptions worsen or improve significantly. Citi believes US shale drillers will be able to bring the market into balance in the event of supply shocks, thanks to their flexibility in oil production.

An unexpected drop of 1 million barrels a day of global production from current levels in 2018 could cause prices to jump to the $60 to $70 range.

Credit: Tom DiChristopher, CNBC | Read full story: http://cnb.cx/2uOZRrn

Remember when: Oil Tycoons

Oil has made individuals wealthy, brought huge profits to companies, and transformed poor countries into rich ones. Right from the early days of oil in the 19th century, oil barons made fortunes almost overnight. In Baku, there was Hadji Taghiyev (1823–1924). In the US, the first oil millionaire was Jonathan Watson (1819–94) of Titusville, Pennsylvania, where Drake drilled the first US oil well. Then came the great oil dynasties of John D. Rockefeller (1839–1937) and Edward Harkness (1874–1940), and later the Texas oil millionaires such as H. L. Hunt (1889–1974) and Jean Paul Getty (1892–1976)—each acclaimed at one time as the richest man in the world. In the late 20th century, it was Arab sheikhs who were famous for their oil wealth.

Whiting sells Fort Berthold assets for $500M

Denver-based Whiting Petroleum has agreed to sell its assets in the Fort Berthold Indian Reservation area for $500 million to Calgary-based RimRock Oil & Gas which is backed by private equity firm Warburg Pincus.

The sale will include almost 30,000 net acres, 29 non-op units, and 17 operated units in the play. Net daily production from the properties averaged 7785 barrels of oil equivalent per day in the second quarter of 2017. This represents about 7% of Whiting’s total production in the second quarter of 2017.

The sale is expected to provide Whiting additional liquidity to develop its industry leading properties across the Williston basin, where the company estimates it has 4,850 future drilling locations.

Whiting also plans to use proceeds from the sale to repay $500 million of its current $550 million in bank debt. The sale is expected to close on September 1st, 2017.

Closing Thought: “Good friends, good books, and a sleepy conscience: this is the ideal life.”
― Mark Twain

 

Friday Snippets

Permian drillers embrace multiwell pads to improve efficiency

Despite recent spending cuts announced by major shale producers, many Permian Basin drillers will be able to maintain or even exceed production targets for the year thanks to more efficient drilling processes such as multiwell pads, high-spec rigs and longer laterals. “Pad drilling offers numerous benefits, including reduced drilling cycle times and smaller surface footprints with the possibility for increased frac efficiencies and simultaneous operations,” energy consultancy Westwood Global Energy Group said.

Noble Energy finds solution to West Texas trucking bottlenecks

Noble Energy has launched the first of four planned central gathering facilities in the Delaware Basin portion of the Permian Basin in a bid to cut costs and reduce its need for trucks to transport oil and water to collection points. The average oil well in the Delaware Basin needs about 1,800 truck trips, whereas a centralized gathering system will allow Noble to improve capital and operational efficiency and become more flexible, all while eliminating the risks and shortcomings associated with trucking.

Sanchez Energy divesting Eagle Ford assets

Houston-based Sanchez Energy has reached an agreement to sell 39,500 acres producing dry natural gas in the Eagle Ford Shale’s Javelina region for $105 million. “This transaction accelerates the value of the asset, while building our liquidity and providing value to our shareholders,” Sanchez Energy Director and CEO Tony Sanchez said.

Cabot Oil & Gas steps up consolidation efforts

Cabot Oil & Gas is looking for asset deals to consolidate its business and may consider divesting its Marcellus Shale properties because there are “limited” options for purchasing overlapping acreage in the area. “This tremendous asset, as it moves into maturity, makes sense as part of a larger portfolio, either one we own, or one that we don’t own, for other like, high-quality-grade assets,” Cabot Executive Vice President and Chief Financial Officer Scott Schroeder said.

Colo. county could see 216 new oil wells by 2019

Boulder County, Colo., could see 216 new oil wells by 2019 if a bid by Crestone Peak Resources is accepted. The final version of the proposal could be approved by the state Oil & Gas Conservation Commission by March 2018.

US shale gas production poised to soar in Sept.

The Energy Department predicted that US shale natural gas output in September will climb by 12%, to 59.4 billion cubic feet per day, compared with 53 billion cubic feet per day forecast for August. The increase is due to the fact that the federal government for the first time will include output from the Anadarko Basin in its shale gas estimates.

 

Texas oil, gas firms applying for permits at unprecedented pace

The Railroad Commission of Texas granted 1,011 original drilling permits last month — nearly double the 631 permits issued in July 2016 — of which 893 permits were for new oil and natural gas wells. Production from the Permian Basin is seen increasing by 2.5% to 2.5 million barrels per day from July, according to the Energy Information Administration, although productivity is declining because producers are drilling but not completing wells.

Permian drillers keep adding to backlog of untapped wells

The number of drilled-but-uncompleted wells in the Permian Basin climbed by 135 last month to 2,330, 73% more compared with July 2016, according to the Energy Department. With the average Permian well producing about 400 barrels of oil per day, these untapped wells could boost US oil production by hundreds of thousands of barrels per day once they come online.

New frac sand mining capacity in Texas to help drillers slash costs

Permian Basin drillers could see logistics costs drop by as much as 40% as the planned construction of several frac sand mines in West Texas means hydraulic fracturing in the area will no longer depend on expensive rail transportation to bring sand from Wisconsin. Oil companies pay up to $140 to have a ton of sand shipped by rail to West Texas, but that cost could drop to $85 per ton once producers will be able to buy sand from local mines and haul it by truck, according to IHS Markit.

Permian Basin land becoming a scarce resource

The Permian Basin land grab has slowed in recent months as the availability of lucrative and reasonably priced acreage shrinks and oil prices remain depressed. The number of transactions in West Texas dropped by one-third to 30 in the second quarter, while their value was down 85% to $2.8 billion compared with the first three months of the year.

August 11, 2017

Mineral Rights Start Gushing Cash for Colleges

The resurgence of oil and gas exploration in Oklahoma has turned out to be a surprising source of new revenue for the University of Oklahoma.

As Bloomberg News reported recently, the university has been the recipient of millions of dollars from mineral rights on land given to the school decades ago. Until recently, the mineral rights didn’t produce much. Now they are.

A lot of it is coming from the late OU alumnus Henry Mosier and his wife Ida Mosier. Initially, the land and mineral rights produced about $30,000 a year.

In 2014, it produced $2.35 million all because it’s located in Kingfisher county, one of the three main counties that make up the STACK, one of Oklahoma’s hottest oil and gas plays.

Credit: Janet Lorin | Bloomberg Markets | August 7, 2017 | Read Full story

Oklahoma drilling boosted by longer laterals

FourPoint Energy LLC has drilling rigs ready to go in western Oklahoma, waiting to drill horizontal wells up to two miles long beginning Nov. 1 when the new state law allowing the process becomes effective.

“This is going to be huge for us,” Steve Goodwin Jr., FourPoint’s vice president of operations, said at the Tri-State Oil and Gas Convention in Woodward on Thursday.

“Longer laterals make more wells economic. This adds jobs. This adds investment. It will mean big things for you in the future.”

CREDIT: by Adam Wilmoth | Newsok.com | Published: August 11, 2017 |Read Full Story: http://bit.ly/2uvdbks

EIA Crude Report

The 6.5 million barrel decrease in U.S. oil inventories is a bullish sign for an oversupplied commodity market, but was lighter than API’s Tuesday inventory report.

U.S. crude oil inventories fell by 6.5 million barrels to 1.15 billion barrels while gasoline inventories rose 3.4 million barrels to 231.1 million barrels in the week ended Aug. 4, the Energy Information Administration reported Wednesday. Data from the American Petroleum Institute late Tuesday also showed that crude inventories fell 7.8 million barrels, while gasoline inventories increased 1.5 million barrels during the week.

U.S. crude oil imports, meanwhile, averaged about 7.8 million barrels per day last week, down by 491,000 from the previous week, the EIA noted. Over the past four weeks, crude oil imports averaged over 8 million barrels per day, 4.9% below the same four-week period last year.

Oil and Gas Prices

 

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $45.00
Oklahoma Sour:
Sunoco Inc. — $33.00

Oil prices fall 2%, but natural-gas futures rally to a 3-week high

Oil prices fell more than 1.5 percent on Thursday, as a bruising day on Wall Street bolstered fears of slowing demand amid lingering concerns over a global oversupply of crude.

U.S. West Texas Intermediate crude CLc1 settled down 97 cents or 1.96 percent to $48.59 a barrel. It appears $50 seems to be a formidable foe for the crude bulls.

Brent crude futures LCOc1 were down 80 cents or 1.52 percent to $51.90 a barrel.

Crude prices are down nearly 7 percent so far this year, pressured by concern that output cuts by OPEC and its partners may not eliminate the global crude glut.

NAT GAS NEWS

Elsewhere on Nymex, prices for natural gas ended at their highest level in three weeks following data from the U.S. Energy Information Administration Thursday that showed domestic supplies of natural gas rose by 28 billion cubic feet for the week ended Aug. 4.

On average, analysts were looking for a build of 37 billion cubic feet, according to commodity brokerage firm iiTRADER.

September natural gas NGU17 added 10.2 cents, or 3.5%, to settle at $2.985 per million British thermal units—the highest since July 20.

Houston driller’s Alaska play: Model for oil and gas industry or inexcusable conduct?

In the energy industry, Hilcorp has built a reputation for fast growth, big profits and making people rich. This 28-year-old Houston-based company has kept a low public profile while becoming one of the top five privately held oil and gas producers in the United States.

Hildebrand founded Hilcorp in 1989, when he was about 30 years old. He had a bit of experience working at Irving-based Exxon Mobil Corp., a recent master’s degree in petroleum engineering from the University of Texas at Austin — and a plan. The company would buy older oil and gas fields with declining output and squeeze more out of them using the latest drilling methods.

Credit: Sabrina Shankman, Inside Climate News | Read full story: http://bit.ly/2uJKNGN

Remember when: RED ADAIR

Paul Neal “Red” Adair (1915–2004) was world-renowned for his exploits in fighting oil-well fires. The Texan’s most famous feat was tackling a fire in the Sahara Desert in 1962, an exploit retold in the John Wayne movie Hellfighters (1968). When oil wells in Kuwait caught fire during the Gulf War of 1991, it was the veteran Red Adair, then aged 77, who was called in to put them out.

BP Announces Discovery of Massive Gas Well in New Mexico

BP claims the area around Farmington, New Mexico is a significant new source of natural gas for the country. The Houston, Texas company announced it “has brought online a highly productive natural gas well in the Mancos Shale.”

It said the early production rates at the NEBU 602 Com 1H well in San Juan County are the highest achieved in the past 14 years within the San Juan Basin. The Basin spans southwest Colorado and northern New Mexico. The well had an average 30-day initial production rate of 12.9 million cubic feet a day.

As a result of the major find, BP Lower 48 plans to open a new headquarters office in Denver in 2018 so it can be closer to most of its operated oil and natural gas production assets in the Rocky Mountain region.

Credit: Ryan Collins | Bloomberg | August 7, 2017 |Read Full Story: https://bloom.bg/2uJpTaT

Closing Thought: When performance is measured, performance improves. When performance is measured and reported, the rate of improvement accelerates.

Friday Snippets

Permian shale companies face doubts from investors

Stock prices for several shale companies that operate in the Permian Basin decreased last week, raising speculation that investors are skeptical of continued production increases in the region. “The Permian is going to have some growing pains,” said Scott Hanold of RBC Capital Markets.

Apache reports profit, expects production increase

Apache, which has developed the Alpine High oil and natural gas field in West Texas, posted $572 million in profits in the second quarter, marking the second-consecutive profitable quarter, the Houston-based company reported. “We expect continued production volume increases at Alpine High and in the Midland Basin, as well as from our international regions during the second half of 2017,” President and CEO John Christmann said.

Dallas Fed: Texas drilling may slow even as oil prices rise

Drilling activity in Texas could flatline in the second half of 2017 because the pace of growth might be unsustainable even though oil prices are seen edging closer to $60 per barrel by year’s end, according to the Federal Reserve Bank of Dallas. “The main risk factors going into the second half of the year continue to be a sharp decline in energy prices and uncertainty regarding trade and tax policy,” the bank said.

No Need For New Trial In Gas Royalty Row, Driller Says

Southwestern Energy Corp. on Friday urged an Arkansas federal judge to let stand a jury verdict favoring the natural gas developer in a class action claiming it violated lease provisions in order to scam royalty owners, blasting the royalty owners’ arguments that the trial was fatally flawed.

US refiners’ profit margins under pressure as heavy crude supplies shrink

A shortage of heavy crude supplies is forcing US refiners, including Valero Energy and Phillips 66, to run more light, sweet crude instead, a shift that’s putting pressure on their profit margins due to the higher cost of light crude. This switch comes in response to weak supplies from Venezuela as well as higher prices for heavy crude from Russia and lower production from Canada.

Marathon to produce more oil, trim spending, CEO says

Marathon Oil says it plans to sell oil from more wells during the second half of the year after making drilling improvements in areas such as Oklahoma and North Dakota. The Houston-based company also plans to cut spending by 10% because of low oil prices, President and CEO Lee Tillman said.

Noble Energy plans increase in oil production

Oil drilling in Colorado’s Denver-Julesburg Basin and West Texas’ Delaware Basin will allow Noble Energy to increase its production by 40% this year, the company says. In addition, the Houston-based company plans to increase spending at its Leviathan project off Israel’s coast.

BP makes major N.M. shale gas find

British oil major BP believes it has discovered a potential new prolific source of shale gas in New Mexico after one of its gas wells in the San Juan Basin’s Mancos Shale exceeded expectations. The well achieved an average 30-day initial production rate of 12.9 million cubic feet per day of gas — the highest production rate in the region in 14 years, according to BP.

Concho Resources expands Permian footprint

Concho Resources has paid $600 million in cash for about 12,400 net acres in the Midland portion of the Permian Basin. The asset package, acquired from an unnamed seller, includes land in Texas’ Andrews and Martin counties and 3,000 barrels of oil equivalent per day in legacy production.

Alternatives could eliminate water use in fracking, report says

A report from the EU’s Joint Research Center Institute for Energy and Transport reviews several potential methods for reducing or eliminating the use of water in the hydraulic fracturing process. Among the possibilities are foams, cryogenic fluids, plasma stimulation and fracturing technology, thermal fracturing and enhanced bacterial methanogenesis.

Chesapeake to scale back drilling activity this year

Despite posting better-than-expected profits, US shale producer Chesapeake Energy said it would cut its rig count from 18 now to 14 by year’s end and bring 250 wells into production in the second half of 2017, 10 fewer than initially planned. “We suspect Chesapeake may cut back activity in the relatively gassy North Eastern Appalachia, Haynesville and (to a lesser extent) Midcontinent regions,” Barclays analysts said.

Permico Energia looks to build $1.8B Texas pipeline

Permico Energia of Texas is looking to construct a 510-mile pipeline that would be able to transport 330,000 barrels per day through portions of Texas. The $1.8 billion project is set to begin in late 2020 and would also have a storage facility that could hold 8 million barrels, according to company CEO Jeffrey Beicker.

August 4, 2017

SandRidge News

SandRidge Energy (NYSE:SD) reports Q2 earnings of $0.23/share compared to a $0.03 net loss in the year-earlier quarter and raises its full-year production guidance after securing as much as $200M in funding to drill wells in Oklahoma’s STACK play.
​​
The Oklahoma City-based company said the joint agreement with an unnamed private investment fund will target the Meramec formation in Major and Woodward counties. The private investment fund will provide $100M initially to drill the wells, with an option for a second $100M tranche; the fund will cover 90% of the drilling costs and receive an 80% working interest in the wells.
​​
SD says the agreement will allow it to drill 34 Mid-Continent laterals in 2017, up from previous guidance of 22. SandRidge announced it had raised the company’s total capital expenditure budget by $40 million to a range of $250 million to $260 million to accommodate opportunities in both Colorado’s Niobrara field and in Oklahoma’s STACK play.

Factoid: The Diesel engine is named after the inventor, not the fuel and the original fuel it was developed to run on was peanut oil in 1895.

EIA Report

EIA: US crude inventories drop for 5th straight week

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning, showing that U.S. commercial crude inventories dropped by 1.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 481.9 million barrels. The commercial crude inventory remained in the upper half of the average range for this time of year.

For the past week, crude imports averaged about 8.3 million barrels a day, up by 209,000 barrels a day compared with the previous week. Refineries were running at 95.4% of capacity, with daily input averaging 17.4 million barrels a day, about 123,000 barrels a day more than the previous week’s average. Analysts were looking for refinery usage of 94.4% for the week.

EIA: Nat Gas

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. rose by 20 billion cubic feet in the week ended July 28, just below forecasts for a build of 21 billion.

That compared with a gain of 17 billion cubic feet in the preceding week, a withdrawal of 6 billion a year earlier and a five-year average rise of 44 billion cubic feet.

Total natural gas in storage currently stands at 3.010 trillion cubic feet, according to the U.S. Energy Information Administration, 8.5% lower than levels at this time a year ago but 2.9% above the five-year average for this time of year.

Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $45.50
Oklahoma Sour:
Sunoco Inc. — $33.50

 

Both Brent and WTI are down more than 9 percent since the start of the year and close to 20 percent over a 12-month period.

Oil futures gave up early gains to trade lower Thursday afternoon, as buying appetite faded and as investors awaited a highly anticipated OPEC meeting next week.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in September CLU7, +0.10% fell 56 cents, or 1.1%, at $49.03 a barrel, after trading as high as $49.96 during the session.

Analysts said prices were pressured by rising output, although strong demand limited the losses. “Increasing OPEC production and increasing OPEC exports are the reason the market has been trading lower,” said PVM Oil Associates analyst Tamas Varga.

In the United States, oil production has hit 9.43 million bpd, the highest since August 2015 and up 12 percent from its most recent low in June last year.

Investors will be watching the U.S. rig count expected later today to assess any signs of a slowing down in drilling activity.

NAT GAS Prices

Natural gas futures for September delivery closed on Thursday, down slightly at $2.80 per million BTUs. The highest close for the past five trading days was registered last Thursday at $2.97. The 52-week range for natural gas is $2.76 to $3.60. One year ago the price for a million BTUs was around $3.09.

Samson Resources II, LLC sells East Texas and North Louisianna to Rockcliff Energy II, LLC.

Tulsa, Oklahoma-based Samson Resources II LLC has agreed to sell its assets in East Texas and North Louisiana to an affiliate of Houston-based Rockcliff Energy II, LLC for $525 million.

The transaction, which is expected to close in September, comes shortly after Samson emerged from bankruptcy as the successor to Samson Resources Corp. on March 1. The company eliminated $4 billion of debt through the Chapter 11 process earlier this year.

In May, Samson announced it had retained investment banks Jeffries LLC and Houlihan Lokey Capital Inc. to sell all of the company’s East Texas and North Louisiana assets.

Proceeds from the Rockcliff deal will pay down all of the debt remaining under Samson’s senior secured revolving credit facility. The rest of the proceeds will be used for Samson’s capital needs in 2018 and a possible distribution to equity investors. In addition to the Rockcliff deal, Samson has divested roughly $14 million worth of noncore assets and equipment since March 1 of this year.

Once the deal closes, Samson plans to focus on its oil and gas assets in the Powder River and the Green River Basins of Wyoming.

Remember when: 1859

The first oil corporation, which was created to develop oil found floating on water near Titusville, Pennsylvania, was the Pennsylvania Rock Oil Company of Connecticut (later the Seneca Oil Company).

Earnings News

Newfield Exploration Company (NYSE:NFX) this week reported weaker than expected quarterly earnings.

The energy company reported $0.43 earnings per share (EPS) for the quarter, missing analysts’ consensus estimates of $0.44 by $0.01. The firm had revenue of $402 million during the quarter, compared to analysts’ expectations of $413.70 million. Newfield Exploration had a negative net margin of 28.60% and a positive return on equity of 33.87%. The firm’s revenue for the quarter was up 5.5% on a year-over-year basis. During the same quarter in the previous year, the firm posted $0.32 EPS.

Newfield Exploration has drilled some monster STACK wells this year, including its Burgess well, which delivered a record oil rate for a well of its size. These highly productive wells enabled the company to produce 139,000 BOE/d in the U.S. last quarter, which was 6,000 BOE/d ahead of the mid-point of its guidance range.

Oklahoma’s shale plays have become an important growth driver for the oil industry over the past year. At some point, the improving results of the area should cause the market to recognize that these E&P’s are sitting on a gold mine, which could help reverse the nearly 30% slide they’ve taken this year.

Chesapeake Energy swung to a second-quarter profit on a boost in in energy production and said it expects production to continue rising throughout the year. Still, the natural gas company plans to cut four rigs by the end of the year as it continues to rein in expenses.

The Oklahoma City, company earned $470 million, or 47 cents per share, compared with a loss a year ago. Earnings, adjusted for non-recurring gains, were 18 cents per share.

Chesapeake Energy Corp. is operating 18 rigs and expects to cut that down to 14 rigs by the end of 2017. A lingering decline in energy prices has prompted Chesapeake and its peers to cut rigs and costs.

Closing Thought: Life can only be understood backwards; but it must be lived forwards.

Friday Snippets

US oilfield servicers planning further fee hikes

US oilfield service providers are confident about their prospects in the second half of the year and see enough room to raise fees even though activity isn’t expected to surge considerably. Drilling contractor Helmerich & Payne sees oil prices holding below $50 per barrel for the rest of the year, but President, Director and CEO John Lindsay suggested that this won’t affect the company’s ability to raise rig lease rates.

US energy dealmaking activity holds steady

The pace of US oil and natural gas mergers and acquisitions slowed down in the first half of 2017, but the level of activity was still the highest in eight years, fueled by the upstream sector, according to PricewaterhouseCoopers. US oil and gas companies struck $110 billion worth of deals in the first six months, up from $54 billion in deals in the same period of 2016, with the Permian Basin and the Marcellus and Utica shale plays at the center of attention.

EQT shelves Utica drilling program in favor of Marcellus

US natural gas producer EQT has announced that it’s suspending its Utica Shale drilling program as it doubles down on the Marcellus Shale. EQT said its $6.7 billion merger with Rice Energy would enable it to drill Marcellus wells with better returns than the average Utica well.

Permian drillers lock in $50 per barrel for most remaining 2017 output

Permian Basin drillers have secured prices of $50 per barrel for 65% of the oil they plan to produce for the rest of the year and also hedged 50% of remaining natural gas production at $3 per thousand cubic feet, according to IHS Markit. By comparison, producers outside the Permian have only hedged 19% of oil production and 29% of gas production in 2017.

More US shale drillers announce spending cuts

Several US shale producers, including Hess, ConocoPhillips, Whiting Petroleum and Anadarko Petroleum, announced cuts to their 2017 drilling budgets this week as drillers and investors alike start prioritizing financial discipline over production growth. “This is the right approach for value creation in the upstream sector, especially at a time of uncertainty in the commodity markets,” ConocoPhillips Chairman and CEO Ryan Lance said.

Cheniere’s 4th liquefaction plant reportedly begins operations

A fourth liquefaction plant at Cheniere Energy’s Sabine Pass terminal in Louisiana has begun producing liquefied natural gas and is expected to become fully operational by year’s end, according to a source. The new plant will help Cheniere achieve its goal of doubling export capacity this year.

Penn Virginia pays $205M for Devon Energy’s Eagle Ford assets

Penn Virginia has agreed to acquire 19,600 net acres in the Eagle Ford Shale in south Texas from Devon Energy in a deal worth $205 million. The assets, located in Lavaca County, produce about 3,000 barrels of oil equivalent per day, helping increase Penn’s output by nearly a third.

Wofcamp Water Partners to serve Delaware Basin drillers

Wolfcamp Water Partners has leased 31,000 acres in West Texas and plans to pump about 200,000 barrels of water per day from the Capitan Reef aquifer — becoming the third company looking to supply water to hydraulic fracturing operations in the Delaware Basin. Wolfcamp Water aims to recover just 2% to 3% of the roughly 55 billion barrels its lease holds over the next two decades.

Study measures economic impact of US oil, gas industry

The US oil and natural gas industry supported 10.3 million jobs and contributed $1.3 trillion to the nation’s economy in 2015, according to a study conducted by PricewaterhouseCoopers for the American Petroleum Institute. The biggest beneficiaries were Texas, with nearly 2 million jobs linked to oil and gas operations and $326.3 billion in added value, followed by California with 730,600 jobs, Oklahoma with 379,100 jobs and Pennsylvania with 322,600 jobs.

Oil hedging activity surges as oil prices inch higher

US shale producers are hedging again after a two-month break as West Texas Intermediate closes in on $50 per barrel, with some locking in prices as low as $45 per barrel for their 2018 production, according to BNP Paribas and PVM Oil Associates. “The improving price backdrop has provided US producers with a timely opportunity to lock in selling prices for future production that will help safeguard the US shale boom,” PVM analyst Stephen Brennock wrote.

Big data helps EOG Resources identify drilling prospects

US oil and natural gas producer EOG Resources is harnessing the power of big data to optimize oil and gas exploration and identify the best drilling locations. “Our multi-decade database and learning curves gives us a huge advantage in identifying the best rock to add new and better drilling potential to the company,” said EOG Chairman and CEO Bill Thomas.

Vanguard Natural Resources completes restructuring

Houston-based natural gas producer Vanguard Natural Resources has successfully completed financial restructuring under Chapter 11 bankruptcy protection, shedding $820 million in debt and entering into an $850 million revolving credit facility. However, the company still has $936 million in debt and just $17 million in liquid assets.

Drilling frenzy may be doing more harm than good to US shale fields

In their rush to boost production, US shale drillers may inadvertently cause long-term damage to assets by drilling new wells too close to existing ones, causing production from legacy wells to decline or stop altogether. Data from the Energy Information Administration show that decline rates have risen sharply since 2012, particularly in the Permian Basin, and now output from legacy wells is plunging by 350,000 barrels per day.

July 28, 2017

Exxon Mobil shares fall 2% as profits double, but still fall short of Street expectations

Shares of Exxon Mobil on Friday reported quarterly earnings that fell slightly short of analysts expectations but nevertheless doubled from the same period last year.

Shares of Exxon were trading down 2 percent in pre-market trading.

The oil major earned $3.4 billion, or 78 cents a share in the second quarter, $1.7 billion, or 41 cents a share, in the year ago period.

Exxon posted $62.9 billion in revenue, up 9 percent from $57.7 billion last year.

Analysts had expected Exxon to to post earnings of 84 cents a share on $61.9 billion in revenue.

Factoid: Liquefied natural gas (LNG) is made when natural gas is cooled to temperature of minus 260 Fahrenheit (-162 Celsius). When it becomes liquid its volume is reduced 615 times, which can be done by cooling the gas.

EIA Report

EIA: US crude inventories drop for 4th straight week

US crude stockpiles posted a decline of 7.2 million barrels in the week ended Friday, surpassing expectations for a 2.5-million-barrel drop and marking the fourth consecutive week of declines, according to the Energy Information Administration. Gasoline and distillate inventories plunged by 1 million barrels and 1.9 million barrels, respectively.

EIA: Nat Gas

The U.S. Energy Information Administration reported Thursday that domestic supplies of natural gas rose by 17 billion cubic feet for the week ended July 21. Analysts surveyed by S&P Global Platts forecast a build of 22 billion cubic feet. Total stocks now stand at 2.990 trillion cubic feet, down 302 billion cubic feet from a year ago, but 111 billion cubic feet above the five-year average, the government said.

Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $45.50
Oklahoma Sour:
Sunoco Inc. — $33.50

Oil prices closed up Thursday reaching fresh two-month highs and on track to post the strongest weekly gains this year as investors digested signs of an easing oversupply picture.

U.S. crude and gasoline inventories fell much more steeply than expected this week and the world’s biggest oil exporter Saudi Arabia said it would further reduce oil output in August.

Despite these signs, analysts’ assessments of the oil market remained bearish.

Brent crude futures were up 52 cents closing at $51.49 a barrel after reaching a high for the day of $51.64 a barrel. The front of the crude oil curve jumped into backwardation, with the month-ahead trading above the subsequent month, showing investors are not expecting recent gains to last.

U.S. West Texas Intermediate (WTI) crude futures closed up 29 cents at $49.04 a barrel, near a two-month high of $49.24.

Investors will be watching the U.S. rig count expected later today to assess any signs of a slowing down in drilling activity.

NAT GAS Prices

Natural gas futures for September delivery closed slightly up at $2.96 per million BTUs. The highest close for the past five trading days was registered last Thursday at $3.03. The 52-week range for natural gas is $2.80 to $3.60. One year ago the price for a million BTUs was around $3.01.

Goldman Sachs: ‘Cautiously optimistic’ on oil prices as supply-demand rebalancing

– Goldman Sachs said it remained cautiously optimistic on oil prices, despite the rebound over the past month

– Supportive factors included stock drawdown, falling U.S. rig count and robust demand, it said

– But too large a price recovery will increase downside risk as shale production can ramp up rapidly, it added

The rebalancing in the oil market is accelerating, said Goldman Sachs in a note on Thursday.

“While OPEC’s production path remains uncertain, recent fundamental oil data have come in even better than we had expected,” Goldman said. “If sustained, these trends would help achieve the normalization in inventories by early next year.”

Oil prices have rebounded over the past month due to large inventory draws, falling U.S. rig count and strong demand demand data, with prices rising above Goldman’s September 2017 forecast of $50 a barrel Brent, the investment bank noted.

Credit: By Huileng Tan | CNBC |Jul 27, 2017 – Full Article Here: http://cnb.cx/2tPAJk4

Remember when: 1902

Texaco, Incorporated, known for many years as the Texas Company, was founded in 1902 at Beaumont by oilman Joseph S. Cullinanand New York investor Arnold Schlaet. Capitalizing on its strong brand identity, in May 1959 the Texas Company changed its name to Texaco, Incorporated. The brand-name Texaco was a shortened cable-address for the Texas Company.

More CAPEX Cuts Around The Corner?

This week, Anadarko Petroleum became the first large U.S. oil company to slash its spending plans for 2017 in response to the most recent plunge in oil prices. After reporting a second quarter net loss of $415 million, Anadarko said that it would rein in its capital expenditures for the rest of the year. “The current market conditions require lower capital intensity given the volatility of margins realized in this operating environment. As such, we are reducing our level of investments by $300 million for the full year,” Al Walker, Anadarko Chairman, President and CEO, said in a statement.

More drillers could follow Anadarko’s lead, paring back drilling plans amid more modest expectations for a recovery in oil prices. Whiting Petroleum Corp., a major producer in North Dakota’s Bakken shale play, said on Wednesday that it is slashing its 2017 budget by 14 percent.

The decision by Anadarko, though, to slash its spending budget is one sign that oil companies are responding to weaker prices. It should be noted that Anadarko’s spending cuts are largely related to its international programs, rather than shale drilling specifically. However, the newfound caution could offer a path forward for struggling oil companies.

A new report from Wood Mackenzie finds that even some of the largest shale players won’t be cash flow positive until 2020.

Credit: By Nick Cunningham | July 26, 2017 – Full Article Here: http://bit.ly/2tPBQjq

Closing Thought: The only person you should try to be better than is the person you were yesterday.

Friday Snippets

US oil industry pushes back against “Buy American” policy

US oil and natural gas companies and the US Chamber of Commerce have stepped up cautioning against President Donald Trump’s plan to require new pipeline projects to use US-produced steel and components. The oil industry argues that the “Buy American” requirement would lead to construction delays, higher costs and fewer new projects, which would prevent the US from achieving energy dominance and significant economic and job growth.

Quanta Services buys Stronghold in $550M deal

Quanta Services, an infrastructure services provider for the oil and natural gas, electric power and telecom industries, has bought Stronghold, which provides downstream and midstream services. The deal, worth up to $550 million in cash and stock, will help Quanta expand its footprint in the energy industry.

US shale propels Schlumberger’s Q2 revenues

Schlumberger, the world’s No. 1 oilfield services company, has seen its North American onshore revenue climb by 42% in the second quarter, fueled by a 68% increase in its US revenues from hydraulic fracturing. “While the activity outlook in North America for the second half of the year remains robust, we are now also seeing more positive signs in the international markets with increases in activity,” Schlumberger Chairman and CEO Paal Kibsgaard said.

Engineers recommend well spacing, design plan in Eagle Ford Shale

Proper well spacing and design are critical in the development of unconventional reservoirs in the Eagle Ford Shale in Texas, engineers say. They recommend drilling a child well 600 feet from the parent well, drilling in-fill wells and vertically staggering wells when virgin reservoirs are involved.

QE Resources divesting Wyo. natural gas assets

QEP Resources has agreed to sell its Wyoming natural gas assets, which produced 234 million cubic feet per day in the first quarter, to Pinedale Energy Partners in a deal worth roughly $740 million. The sale comes as QEP shifts its focus to the Permian Basin, where it plans to spend $600 million on acreage.

Renewed shale boom driving frac sand demand to new records

US demand for frac sand will likely hit a record of 73 million tons in 2017, 30% more than a 2014 peak of 56 million tons, according to Credit Suisse. The main demand drivers are the growing completions activity and higher completions intensity, which means that each well completed in 2017 takes in nearly 4,200 tons of sand on average.

Natural gas drillers rush to complete wells as prices spike

US natural gas producers in the Northeast are bringing wells online at an unprecedented pace, causing the backlog of drilled-but-uncompleted wells in the Marcellus Shale to drop to 643 in June, down from 831 in July 2015. The surge in completion activity can be attributed to higher gas prices as well as new pipelines coming into service.

US shale producers’ margins under pressure as costs rise

Higher services, labor and materials costs for shale producers threaten to bring the US shale drilling boom to a halt unless oil prices rise or drillers find innovative ways to deal with these challenges, Spencer Jakab writes. While producers’ margins are under pressure, business is booming for oilfield servicers, which are better positioned to profit from the shale rebound.

No end in sight to US oil export boom, analysts say

US export volumes of petroleum products are on track to break last year’s record of 2.5 million barrels per day in 2017, fueled by growing demand from Latin America as well as Europe and Asia. PIRA Energy has predicted that US exports of transport fuels would jump 8.8% in 2017, bolstered by refinery challenges and high production costs in countries such as Mexico and Venezuela.

Another frac sand mine to be built in Permian Basin

Badger Mining is the latest frac sand mining company planning to build a facility in West Texas’ Permian Basin as it seeks to capitalize on the surging demand for sand in the region. The mine, to be located north of Kermit, Texas, is estimated to hold more than 35 years of sand reserves and will produce 3 million tons of sand per year.

SEC Says Citadel Energy Founder Ran $15M Investor Scheme

The U.S. Securities and Exchange Commission alleged in California federal court Wednesday that the founder of Citadel Energy Partners LLC ran a $15 million investment fraud scheme that paid for some of his personal expenses, including Ponzi-like payments and expensive psychic readings.

July 21, 2017

Viper Spends $270 Million In Permian

Viper Energy Partners LP (NASDAQ:VNOM) a subsidiary of Diamondback Energy, Inc. (NASDAQ:FANG) announced that they plan to release second quarter 2017 financial results on August 1, 2017 after the market closes.

Viper Energy Partners LP (VNOM) surprised the stock market in its last reported earnings when it earned $0.22 a piece versus the consensus-estimated $0.19. Its revenue totaled $29.52 million up 5.73% from the previous quarter. Analysts expect next quarter’s EPS will be $0.24 and the next full year EPS is anticipated to be $1.17.

Oil and Gas Investor reports that so far this summer, Viper Energy Partners LP’s A&D team has been very active through the Permian Basin, closing 50 deals since the first quarter.

Viper purchased mineral interests in the Permian and said in July 17 regulatory filings that more deals are pending after a three-month tear that totaled $276.6 million.

With the deals, Viper, stands to increase its net royalty acreage by 37%. After closing its additional deals, the 3-year-old company will own mineral interests on 8,905 net acres.

Recent deals with third-party sellers also helped diversify its holdings. After closing its remaining deals, Diamondback will operate about 38% of Viper’s net acreage compared with 41% at the end of March. When the company was founded in 2014, about half of its assets were operated by Diamondback.

About Viper Energy Partners LP

Viper is a limited partnership formed by Diamondback to own, acquire and exploit oil and natural gas properties in North America, with a focus on the Permian Basin.

About Diamondback Energy, Inc.

Diamondback is an independent oil and natural gas company headquartered in Midland, Texas focused on the acquisition, development, exploration and exploitation of unconventional, onshore oil and natural gas reserves in the Permian Basin in West Texas. Diamondback’s activities are primarily focused on the horizontal exploitation of multiple intervals within the Wolfcamp, Spraberry, Clearfork, Bone Spring and Cline formations.

Factoid: Oklahoma, whose natural gas, oil and liquids formations are spread far and wide, is one of the top five of U.S. producing states with some of the largest oilfields. One of the biggest fields is the Sho-Vel-Tum field in southern Oklahoma which was discovered in 1905. Comprised of the Tatums, Sholem, and Velma fields, Sho-Vel-Tum is the largest oil and gas complex in Oklahoma encompassing over 650 sq km (241 sq mi).

EIA Report

Wednesdays report showed that domestic crude supplies fell by 4.7 million barrels for the week ended July 14, reflective that Saudi was delivering less crude, holding true to their comittment may act as a force for higher prices. That topped the forecast for a decline of 3 million barrels by analysts surveyed by S&P Global Platts. The American Petroleum Institute had reported late Tuesday a rise of 1.6 million barrels. Gasoline stockpiles also fell by 4.4 million barrels, while distillate stockpiles declined by 2.1 million barrels last week, according to the EIA.

Data from the U.S. Energy Information Administration on Thursday showed that domestic supplies of natural gas rose by 28 billion cubic feet for the week ended July 14. Analysts surveyed by S&P Global Platts forecast a build of 31 billion cubic feet. Total stocks now stand at 2.973 trillion cubic feet, down 299 billion cubic feet from a year ago, but 141 billion cubic feet above the five-year average, the government said. August natural gas NGQ17 closed Thursday at $3.043 per million British thermal units.

 

Oil and Gas Prices

 

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $43.25
Oklahoma Sour:
Sunoco Inc. — $31.25

Oil pulled back Thursday, a day after a third consecutive weekly declines in U.S. crude supplies lifted prices to a six-week high.

The September contract for West Texas Intermediate crude CLU7 fell 40 cents, to finish at $46.92 a barrel on the New York Mercantile Exchange. The price is down another 37 cents this morning as of 8:56 AM ET.

September Brent LCOU7 0.77% lost 40 cents, closing at $49.30 a barrel on ICE Futures Europe, after tapping a high of $50.19.

The supply glut remains as the most significant factor in oil pricing. Until the glut fades in a meaningful way, the odds remain stacked against any substantial upward move in price.

In therapy after strokes, T. Boone Pickens writes that he is in ‘the fourth quarter’ of life

In a column posted Thursday on the LinkedIn website, 89-year-old T. Boone Pickens acknowledged that he is attempting to recover from health setbacks during what he called “the fourth quarter” of his life.

“Just a year ago, I felt immortal, wearing my age with pride (and) even joking about it,” Pickens wrote. “Last year, I opened a speech with this: ‘The other day, I turned 88 and realized my life was half over.’ I refused to call my 2008 autobiography ‘Life in the Fourth Quarter’ because, well, hell, I wasn’t in the fourth quarter.

“But things have changed for me” since December, when he suffered several strokes. “I clearly am in the fourth quarter, and the clock is ticking and my health is in decline, much as it is with others in my stage of life.”

Since 2003, the oil-and-gas magnate and financier has attended nearly every Oklahoma State University home football game and most of the Cowboys’ road games. It’s not a certainty, however, that the 1951 OSU graduate will be able to attend games during the 2017 season.

In the LinkedIn column, Pickens discussed the challenges stemming from the strokes and from an unspecified injury sustained more recently.

A Holdenville native, Pickens is founder and chairman of Dallas-based BP Capital Management.

Credit: By Bill Haisten Tulsa World Jul 20, 2017 – Full Article Here: http://bit.ly/2tNc4Yq

Remember when: 1894

The first economically significant Texas oil discovery came in 1894 in Navarro County near Corsicana. The Corsicana oilfield developed gradually and peaked in 1900, when it produced more than 839,000 barrels of oil.

Encana Delivers Strong Results

Canadian oil and gas producer Encana Corp on Friday posted a quarterly profit that handily beat estimates and the company said it was expecting a strong 2018 even with current commodity prices.

Encana has benefited from downsizing its operations to focus on four core North American assets: the Montney and Duvernay in western Canada, and the Eagle Ford and Permian in the United States.

The company raised its forecast for production growth from core assets in 2017 to between 25 per cent and 30 per cent from the more than 20 per cent growth it had forecast in May.

Encana reported operating earnings of 18 cents per share, which largely beat analysts’ average estimate of 4 cents per share, according to Thomson Reuters I/B/E/S.

Closing Thought: Life consists not in holding good cards but in playing those you hold well. Which is backed up by the thought – Life is 10% what happens to you and 90% how you react to it.

Friday Snippets

US producers face higher drilling costs as more rigs come online

Oilfield service costs rose by 8% in June from a November 2016 low and were up nearly 3% from the same month in 2016, according to data from the Bureau of Labor Statistics. However, these increases have yet to offset the 34% decline in drilling costs during the downturn and can be considered modest given that the US rig count has more than doubled in the past 12 months….

Magnetar sets up office in Houston to expand energy footprint

Illinois-based alternative investment management firm Magnetar Capital, which manages about $13.7 billion, has opened an office in Houston as it seeks to expand its energy investment activities. “The opening of our new Houston office is a natural next step for our energy business given our extensive network across the upstream, midstream, downstream and energy services sectors,” said Magnetar Head of Energy Eric Scheyer…

Oil companies’ focus on natural gas may fall apart

Oil majors have been shifting their focus to natural gas, which they tout as the fuel of the future, but gas could be displaced by the rise of cheaper renewables. Gas’ share of global power generation is seen dropping from 23% in 2016 to 16% in 2040 as building new onshore wind and solar capacity will likely become cheaper than running existing coal and gas plants by the late 2020s, according to Bloomberg New Energy Finance.

Oil market under pressure as number of US uncompleted wells keeps rising

The number of drilled but uncompleted oil and natural gas wells across the seven major US shale plays has increased by 1,000 since December 2016, surpassing 6,000 by June, according to the Energy Information Administration. The Permian Basin alone has seen its backlog of such wells almost double from 1,200 a year ago to nearly 2,250 now — an imbalance that threatens to further weaken West Texas Intermediate prices unless producers step up completions or slow the pace of drilling of new wells.

Energy fund EnerVest loses $2 billion investment

Houston-based EnerVest’s $2 billion energy fund has gone bust, but the private equity firm says asset divestitures will allow it to cover much of its debt. EnerVest invested heavily in oil and natural gas producing assets during the first US oil boom, but the collapse of oil prices from $100 per barrel in 2014 to $46 per barrel now erased all of the fund’s value.

Fracking firm BJ Services planning $100M IPO

Hydraulic fracturing and pressure pumping provider BJ Services, which was separated from Baker Hughes in 2016, plans to launch an initial public offering of up to $100 million. BJ Services has 43 fracking crews and 241 cementers, with about half of each currently active.

EIA: US shale production to jump again in Aug.

The Energy Information Administration predicted that US shale output will rise by 113,000 barrels to 5.59 million barrels per day in August, marking the fifth straight monthly increase in shale production of at least 100,000 barrels. The Permian Basin will drive the increase with 64,000 barrels per day of additional supply, followed by the Eagle Ford Shale with 27,000 barrels.

Plains All American planning expansion of Sunrise pipeline

Plains All American announced plans to expand its Sunrise crude pipeline running from Texas’ Permian Basin to Cushing, Okla., by 180 miles and 120,000 barrels per day of capacity. The expansion is expected to become operational by mid-2019.
US shale-drilling rebound a boon to frac sand miners

The US sand-mining industry is expanding at an unprecedented pace as operators rush to meet the rising demand for sand now that shale drillers use up to 20 times more sand per well than they used to during the previous shale boom. Sand-mining operations have traditionally been concentrated in Wisconsin and Minnesota, but now those states are being challenged by Texas, where 10 frac sand mines have already been built and several more are in the pipeline.

BHP Billiton wants to increase US shale production

Australian mining and oil giant BHP Billiton plans to invest $1.2 billion in US shale next year to double the number of US shale rigs to 10 and boost shale production by 35%, CEO Andrew Mackenzie said. BHP’s shale announcement comes at a time when the company is facing increased pressure from activist investors to divest its US shale assets.

Exxon fined $2M for sanctions breach when Tillerson was CEO

The Treasury Department says it is slapping Exxon Mobil Corp. with a $2 million fine for violating Russia sanctions while Secretary of State Rex Tillerson was the oil company’s CEO. The U.S. says Exxon violated the sanctions in May 2014 when two subsidiaries signed deals with Igor Sechin. Sechin is the chairman of Russian oil giant Rosneft and is on a U.S. blacklist over Russia’s actions in Ukraine.

July 14, 2017

Silverback Exploration II, LLC Forms With $500 Million Equity Commitment From Encap Investments L.P.

Silverback Exploration II, LLC, an independent oil and gas exploration company based in San Antonio, announced today that it has secured an initial equity commitment of $500 million from EnCap Investments L.P. Silverback II was formed by the same team that successfully led its predecessor company, Silverback Exploration, LLC, which was also backed by EnCap.

Silverback II was formed to pursue organic development projects and strategic acquisitions in conventional and unconventional resource plays across the U.S. and is led by the seasoned Silverback I management team — Chief Executive Officer Stephen Lipari, Chief Commercial Officer David Frye and Chief Exploration Officer Jon Conaway. George M. Young Jr. and Ted Collins Jr. serve as nonexecutive advisers.

Silverback I developed a significant position in the heart of the Delaware Basin, including approximately 35,000 net acres, production of 3,500 barrels per day of crude oil equivalent and approximately 600 horizontal drilling locations. In December 2016, its leasehold interests and related assets were sold to Centennial Resource Development Inc. and its affiliates (NASDAQ: CDEV) (NASDAQ: CDEVW) for $855 million.

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Factoid: Natural gas comes in two forms – dry or wet. Dry natural gas is what is commonly referred to by the media and is used in heating and cooling systems, and for electrical power generation. Dry natural gas is almost completely methane (the higher the methane concentration within the gas, the drier it is). In comparison wet natural gas contains less than 85% methane and has a higher percentage of liquid natural gasses such as ethane and butane.

———-

Are OPEC Cuts Making A Difference?

OPEC’s rate of compliance with the 1.2m bbl/day crude output cuts agreed in November 2016 decreased in June to 78%, compared 95% in May, as the cartel’s members Libya and Nigeria, which are exempt from the agreement, increased their output by more than 700,000 bbl/day during June.

Stronger rates of compliance were observed among the non-OPEC producers who also agreed to output cuts in 2016, led by Russia, which rose to 82% among these 11 countries in June, according to the International Energy Agency (IEA).

However, the main objective from the output cuts – to increase crude oil values – remains elusive, with investors slashing their positions in crude futures from the end of May to the end of June by more than 200m bbl to 312m bbl.

Crude prices are currently lower than when the OPEC cuts were officially announced in November.

This Friday morning, Brent crude futures, the international benchmark for oil prices, were up 52 cents, or 1.1 percent, at $48.94 per barrel at 8:23 a.m. (1223 GMT). U.S. West Texas Intermediate (WTI) crude futures rose 46 cents, or 1.2 percent, $46.64.

The day OPEC signed its agreement in November 2016, prices closed trading at $50.47/bbl for Brent and at $49.44/bbl for WTI.

———

Oil and Gas Prices

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $42.25
Oklahoma Sour:
Sunoco Inc. — $30.25

Oil prices edged higher on Friday and were on track for solid weekly gains following positive demand signals, production issues in Nigeria and a reported decline in stocks. Both benchmarks are on pace for a roughly 5 percent gain on the week.

Crude oil prices have turned higher even as the IEA warned that global market rebalancing has become less certain. The agency cited increasing OPEC output despite a cartel-led production cut effort even as more swing supply – particularly from the US – comes online.

———-

US on course to become world’s largest exporter of natural gas: IEA

– The U.S. is challenging Qatar and Australia as leading exporter of natural gas.
– The industrial sector will replace power companies as the biggest natural gas customer.
– Three new LNG terminals are being built on Texas coastline.

The United States is challenging Australia and Qatar as the world’s largest exporter of natural gas, according to a new report by the International Energy Agency.

Global gas demand is expected to grow by 1.6 percent a year for the next five years, with consumption on track to hit almost 4,000 billion cubic meters by 2022. China is projected to account for almost 40 percent of growth.

“The U.S. shale revolution shows no sign of running out of steam and its effects are now amplified by a second revolution of rising LNG supplies,” IEA Executive Director Fatih Birol said in a statement Thursday.

“Also, the rising number of LNG consuming countries, from 15 in 2005 to 39 this year, shows that LNG attracts many new customers, especially in the emerging world,” Birol added.

The U.S. is already the world’s largest producer of natural gas. The IEA estimated that by 2022 the country’s production will be 890 bcm, more than a fifth of global gas output.

 

David Reid

Blog Writer, CNBC.com, Full Story Here http://cnb.cx/2tTBfKo

———-

Remember when: 1911

Water-well drillers on the W.T. Waggoner Ranch in Wichita County in 1911 found oil instead, creating the Electra field.

———-

Goldman: Oil Prices To Fall Below $40 If Shale Doesn’t Slow

Oil prices could soon fall below $40 per barrel if there isn’t a sustained drawdown in U.S. crude inventories and rig counts or without bold action from OPEC. That prediction comes roughly two weeks after Goldman downgraded its three-month oil price forecast from $55 to $47.50.

That prediction comes from Goldman Sachs, which says that the oil market is searching for a new equilibrium. The investment bank says that it is still too early to tell whether or not the most recent inventory reductions in the U.S. are an anomaly or the start of something more durable. Moreover, the higher-than-expected inventory declines in June occurred at the same time that Libya and Nigeria were adding new sources of supply. That is why the enormous drawdown, particularly last week, prevented the oil bulls from coming out in full force. Rightly so.

The rig count also initially appeared to be slowing – and actually declined recently for the first time in months – but rebounded in the most recent data. The same was true for U.S. oil production data, which fell and then rebounded. All of this is short-term noise in the data, and it will take several more weeks to see how the shale industry responds to recent plunge in oil prices. Goldman says the “coming month will be key to testing whether producers are responding to the signal of $45/bbl WTI prices.”

By Nick Cunningham, OilPrice.com, Full Article Here: http://bit.ly/2tTEDVE

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Closing Thought: Risk is what’s left over when you think you’ve thought of everything else.

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US shale drillers seen missing EIA production forecasts this year

US shale producers will likely miss the Energy Information Administration’s output projections for 2017 amid a shortage of fracking crews and weak prices. CUDD Energy Services General Manager Clint Walker said that US demand for hydraulic fracturing equipment outpaces supply by 2 million to 6 million hydraulic horsepower.

Barron’s sees oil hitting $60 by year’s end

Oil prices could reach $60 per barrel by the end of 2017, driven by higher global oil demand, shrinking oil inventories and lower OPEC production, according to a report from Barron’s citing Citigroup senior energy analyst Eric Lee. Lee predicts that global oil demand will hit a record of 97.3 million barrels per day this year, while OPEC supply is expected to decline by about 700,000 barrels per day.Oversupply fears cast shadow over US frac sand market

US frac sand mining companies such as Hi-Crush Partners, Smart Sand and US Silica Holdings saw their shares plunge about 8% or more on Friday amid growing oversupply concerns. Jefferies oilfield services analyst Brad Handler predicted that frac sand demand will total about 100 million tons in 2018, but investors are increasingly worried that demand will fall short of that forecast because of low oil prices.

Berkshire Hathaway Unit To Pay $9B For Bankrupt EFH

Berkshire Hathaway Energy announced Friday it will acquire a reorganized Energy Future Holdings Corp. for $9 billion, which will bring its nondebtor subsidiary Oncor Electric Delivery Co. LLC into Warren Buffett’s portfolio and add to his company’s expanding Texas holdings and energy investments.

Halcon Sells Oil Assets For $1.4B To Bruin E&P Partners

Energy company Halcon Resources Corp. has entered into an agreement that will offload its Williston Basin assets in North Dakota to Bruin E&P Partners for $1.4 billion in cash, according to a Tuesday announcement that said the deal will help raise Halcon’s liquidity.

US drillers sealed $208B worth of shale deals since 2014

US oil and natural gas companies have spent $208 billion combined on more than 650 shale deals in the past three years since the oil price crash, according to Bloomberg data. That amount represents a 12% increase from the total value of the deals struck in the three years leading up to the downturn.

US drillers spend tens of thousands on “super-spec” rigs

US oil companies are spending up to $23,500 per day to contract “super-spec” rigs, which
drill wells faster than older rigs, as producers become more willing to pay 10% to 20% more than spot rates in the Permian Basin and the Eagle Ford Shale for more efficient drilling. Super-spec rigs can cut the time needed to drill a well to under 10 days.

US to ship crude oil to India for first time

Top Indian refiner Indian Oil has purchased a cargo of 1.6 million barrels of US Mars Blend crude for October delivery in a first-time move that demonstrates the growing popularity of US crude in the Asian market thanks to its lower prices. “Heavy grades of US crude have become more price competitive compared with those from the Middle East, thanks to OPEC’s oil-output cut, which provided the US an opportunity to boost its own oil production,” said Global Gas Analytics senior energy analyst Abhishek Kumar.

Oil, gas veterans establish new upstream company

The five oil industry veterans behind Silverback Exploration have joined forces again to launch Silverback Exploration II, a new exploration and production company focused on both conventional and unconventional US plays. Silverback II has already secured a $500 million private equity commitment from EnCap Investments, which also backed the original Silverback.

Halliburton goes on hiring spree amid fracking boom

Halliburton has added about 100 employees to its workforce each month this year as the Houston-based oilfield services firm struggles to keep up with increasing demand for hydraulic fracturing services in West Texas. Halliburton has boosted its payroll in the region by more than a third to 2,700, while its active fleet of fracking trucks and pumps has expanded by 30% in the past few months.

EIA reports steep fall in US crude inventories

US crude stockpiles plunged by 7.6 million barrels in the week ended Friday, whereas analysts had expected a 2.6 million-barrel drop, according to the Energy Information Administration. Gasoline supplies were down 1.6 million barrels, while distillate stocks rose by 3.1 million barrels.

IEA: US to become 2nd-biggest LNG exporter in the world by end of 2022

The International Energy Agency predicted that the US will become the world’s No. 2 exporter of liquefied natural gas by the end of 2022 with a capacity of 3.7 trillion cubic feet per year, second only to Australia. “By the end of our forecast period, the United States will be well on course to challenging Australia and Qatar for global leadership among LNG exporters,” the IEA said in its report.

Ring Energy steps up efforts in Permian Basin

Strong results from four wells in the San Andres play of the Permian Basin have prompted Ring Energy to expedite drilling activity with plans to drill eight to 10 more new wells in the area this year in addition to the 22 originally planned. “As much as we would like to see $50-$55 oil, the economics on these wells work very well with $40 oil,” Ring Director and CEO Kelly Hoffman said.

Small Permian drillers face low oil prices, rising service costs

With oil below $45 per barrel and oilfield-service costs rising, many small shale drillers in the Permian Basin are having to shelve new projects and reconsider growth plans laid out earlier this year. Larger oil producers such as Noble Energy can afford to expand even with low oil prices because they hedged their production, whereas small firms make drilling plans based on cash flow.

Depressed oil prices put Okla.’s economic growth at risk

Oklahoma’s economy is again facing pressure from low oil prices and could see a slowdown in the pace of recovery just as it was starting to improve after four quarters of economic contraction, State Treasurer Ken Miller said. “Leading indicators … point to continued growth, but the anticipated strength of the recovery may be moderating as oil prices have come down slightly,” Miller said.

July 7, 2017

Federal appeals court sends royalty case back to Oklahoma over attorney fees

A federal appeals court on Monday sent a $52 million natural gas royalty settlement case back to federal court in Oklahoma over the calculation of attorney fees.

In a 2-0 ruling, a panel of the 10th U.S. Circuit Court of Appeals in Denver said the district court didn’t properly calculate attorney fees in the class-action settlement according to Oklahoma law.

The case alleged underpayment of natural gas royalties by SM Energy Co., several funds affiliated with EnerVest Energy and FourPoints Energy LLC. It was settled in 2015 for $52 million, minus expenses and fees. The case was brought by Chieftain Royalty Co.

Former appellate judge Neil Gorsuch, now on the U.S. Supreme Court, participated in the oral argument but not in the decision. Court rules allow the remaining two panel judges to act as a quorum to resolve the appeal.

Story by Paul Monies, NewsOK Published: July 4, 2017 5:00 AM CDT – Full Story: http://bit.ly/2sLJwTx

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Factoid: An estimated 15 trillion watts of power are being used across our planet at any one time. That’s the equivalent of powering ten billion 100-watt light bulbs at the same time.

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Oil ends higher as U.S. crude supplies notch biggest decline in 5 weeks

Oil prices rallied Thursday, extending earlier gains after data from the U.S. Energy Information Administration showed that domestic crude supplies dropped by 6.3 million barrels for the week ended June 30. That topped forecasts for a decline of 1.6 million barrels by analysts surveyed by S&P Global Platts, and also came in above the fall of 5.8 barrels reported by the American Petroleum Institute late Wednesday. Supply data were released a day late because of Tuesday’s Independence Day holiday.

Despite the across-the-board petroleum supply declines, U.S. crude production edged up by 88,000 barrels a day to 9.338 million barrels a day, EIA data showed.

Rising U.S. oil production in the wake of the Organization of the Petroleum Exporting Countries accord has been a major concern in the market and has kept a lid on prices in recent months.

The latest EIA report on natural-gas supplies will be released today, a day later than usual because of the Independence Day holiday. Analysts polled by S&P Global Platts forecast a climb of 63 billion cubic feet in natural-gas supplies for the week ended June 30.

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Closing Oil and Gas Prices, Thursday, July 6th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $42.00
Oklahoma Sour:
Sunoco Inc. — $30.00

August West Texas Intermediate crude tacked on 39 cents to settle at $45.52 a barrel on the New York Mercantile Exchange, well below the session’s high of $46.53. On Wednesday, the contract settled $1.94, or 4.1%, lower, posting its first loss in nine sessions and its biggest dollar and percentage drop since June 7.

In London, September Brent oil rose 32 cents to $48.11 a barrel after posting a decline of 3.7% Wednesday.

On Thursday, August natural gas NGQ17 climbed 4.8 cents to $2.888 per million British thermal units.

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Renowned energy trader Mark Fisher: Natural gas will break out above $4 or maybe even $5

– Mark Fisher forecast natural gas prices will break $4 or $5 per mmbtu once a streak of warm winters breaks.

– Fisher says general investors could buy into natural gas drillers rather than trying to time commodity price moves.

– Fisher is less bullish on oil drillers and thinks crude will remain stuck in a range between $40 and $50 a barrel for some time.

Renowned energy trader Mark Fisher on Thursday forecast that a string of unseasonably warm winters will break and send natural gas above $4 or $5 per million British thermal units.

Natural gas prices have remained locked in a range between about $2.75 and $3.25 per mmbtu, but Fisher believes in the next year or two, winter temperatures will return to normal levels and push up fuel costs.

“At some point nat gas is going to trade with a four-, five-handle on it and surprise a lot of people,” the MBF Clearing founder and CEO told CNBC’s “Fast Money: Halftime Report.”

“In energy, natural gas has the potential for the most upside,” he said.

Investors who bought into big-cap natural gas players will be rewarded for waiting, said Fisher. He declined to offer his stock picks, but did say he isn’t certain the heavily indebted shale pioneer Chesapeake Energy would survive.

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Remember when: 1967

The first attempt by GHK at drilling deep gas in the Anadarko Basin, began in 1967 and took two years to reach what at the time was a record depth, 24,473 feet.

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Halliburton Acquires Tulsa’s Summit ESP

Houston-based Halliburton Company has acquired Tulsa-based Summit ESP, a leading provider of electric submersible pump (ESP) technology and services, according to a company press release issued Wednesday. The financial terms were not disclosed.

“The acquisition of Summit expands Halliburton’s existing artificial lift capabilities and increases our overall leading position in North America oilfield services,” said Jeff Miller, president and CEO of Halliburton. “Summit’s unrivaled service quality, proven technology and U.S. market leadership make it a perfect fit for Halliburton. This accretive transaction accelerates our strategy to deliver leading returns to our shareholders and maximize asset value for our customers.”

Founded in 2011, Summit was created by a group of former Baker Hughes Inc. employees, including CEO John Kenner, who previously served as president of Baker Hughes subsidiary Centrilift, according to a report by The Oklahoman.

Summit engineers, manufactures and services a complete product offering of electric submersible and surface pumping systems. The company has more than 500 employees in nearly 30 locations across North America.

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Closing Thought: To a man with a hammer, everything looks like a nail.

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Now Friday Snippets

Anadarko plugs over 6,000 oil and gas flowlines

Following a home explosion in Firestone, Colo., that killed two people, Anadarko Petroleum has plugged more than 6,000 abandoned oil and gas flowlines. It has also tested more than 4,000 active oil and gas lines.

Analysis: US shale drilling growth unsustainable with oil below $50

Oil prices could fall below $40 per barrel if US shale producers don’t willingly scale back activity, putting an end to the drilling boom, writes John Kemp. As oilfield service costs continue to rise, companies need oil prices above $50 per barrel to turn a profit, Kemp writes.

New fields bump up Alaska’s North Slope oil production

New oil wells — mainly in ConocoPhillips’ Alpine and Kuparuk fields and ExxonMobil’s Point Thomson field — boosted production from Alaska’s North Slope over the past year, showing the region remains a viable oil source. Meanwhile, another new field, Armstrong Energy’s Nanushuk, is expected to provide an estimated 1.2 billion barrels of oil.

US strategic crude reserves fall to 12-year lows

US strategic crude inventories shrank by roughly 13 million barrels over the past 17 weeks to 682 million barrels, the lowest level in over 12 years, as the shale drilling boom gradually reduces the nation’s need for a strategic reserve. “Given the fact that we don’t net import that much anymore, we only really need 300 million barrels” of SPR crude, Macquarie Capital analyst Vikas Dwivedi said.

McKinsey: Oil in $60-$70 range would propel US shale production

US shale production could surge to 9 million barrels per day by 2025 if West Texas Intermediate prices stabilize between $60 and $70 per barrel, according to a report from McKinsey Energy Insights. Under this scenario, shale drilling and completion activity would increase at a 20% annual rate while production would grow by 12%.

DOI Looks To Speed Up Oil And Gas Permitting On Fed. Lands

U.S. Secretary of the Interior Ryan Zinke on Thursday signed a secretarial order aimed at speeding up the process for oil and gas permitting on federal lands, saying it was important for the country’s energy strategy to reduce the application backlog and to streamline the mineral development process.

 

June 30, 2017

Carrizo Expands Delaware Basin Footprint

Houston-based Carrizo Oil & Gas Inc. (Nasdaq: CRZO) will buy Delaware Basin properties from Midland, Texas-based ExL Petroleum Management LLC for $648 million in cash plus potential future continent payments.

The deal, which Carrizo announced June 28, is expected to close in mid-August. Carrizo will receive 23,656 gross — or 16,488 net — acres, boosting its Delaware Basin position to more than 42,500 net acres.

Carrizo now plans to focus on its deep inventory of future drilling locations in the Eagle Ford Shale and the Delaware Basin. Therefore, the company plans to begin selling non-core assets and is targeting proceeds of at least $300 million, which it will use to reduce its debt.

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Factoid: Crude oil is classified as light, medium, or heavy, according to its measured API gravity.

– Light Crude has an API gravity higher than 31.1 °API.
– Medium Crude has an API gravity between 22.3 °API and 31.1 °API.
– Heavy Crude has an API gravity below 22.3 °API.

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EIA reports smaller-than-expected drop in US crude supplies

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. The EIA inventory release showed that crude stockpiles recorded an unexpected build. The report further revealed that refined product inventories – gasoline and distillate – both decreased from their previous week levels.

Analysis of the EIA Data

Crude Oil: The federal government’s EIA report revealed that crude inventories increased by 118,000 barrels for the week ending June 23, 2017, following a decline of 2.45 million barrels in the previous week.

The analysts surveyed by S&P Global Platts – the leading independent commodities and energy data provider – had expected crude stocks to go down some 2.6 million barrels. A pullback in refinery crude runs and uptick in imports led to the surprise stockpile build with the world’s biggest oil consumer even as domestic production edged lower.

Importantly, stocks at the Cushing terminal in Oklahoma – the key delivery hub for U.S. crude futures traded on the New York Mercantile Exchange – was down 297,000 barrels from previous week’s level to 60.84 million barrels.

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Closing Oil and Gas Prices, Thursday, June 29th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $41.50
Oklahoma Sour:
Sunoco Inc. — $29.50

 

Crude oil prices firm, set for biggest weekly gain since mid-May

Crude oil futures are on track for their biggest weekly gain since mid-May, ending five weeks of losses with prices underpinned by a decline in U.S. output. Oil prices are still set for their worst first-half performance since 1998.

WTI futures have added 5.1 percent this week, while benchmark Brent has gained 4.8 percent, marking the biggest rise for both markets since the week ending May 19.

Oil prices received momentum from Wednesday’s U.S. data and the market rejected the lows that we saw.

There are two key drivers. One is U.S supply side response to low oil prices. We could see more gains if there is a further drop in oil output, and the other factor is a weaker U.S. dollar.

Data indicating a fall in U.S. production bolstered markets this week after crude prices hit a 10-month low last week in the face of a mounting supply glut. U.S. crude output fell 100,000 barrels per day (bpd) to 9.3 million bpd last week, the steepest weekly fall since July 2016.

Natural gas highs and lows in the last 15 months

Natural gas futures hit $3.99 per MMBtu on December 28, 2016—the highest level in more than two years. On the other hand, it hit a 17-year low of $1.68 per MMBtu on March 4, 2016.

Meanwhile, US natural gas futures contracts for August delivery fell 1.6% to $3.04 per MMBtu (million British thermal units) on June 29, 2017. Prices fell due to profit taking. However, prices have risen 8.5% since June 22, 2017.

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Remember when: 1998

The nationwide average price of a gallon of gasoline in the United States in December of that year was 95 cents. The closing price for a barrel of crude oil sold on the New York Mercantile Exchange on December 31 was $12.05.

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Stack Extension Activity

Two Oklahoma based companies have recently filed permits in Major County up in northwest Oklahoma.

Six drilling permits for the county were issued for Chesapeake Operating (5) and SandRidge Exploration and Production (1).

All five for Chesapeake are wells to be drilled are spotted in Section 21-20N-12W located about 4 miles south of the town of Fairview. The multi-wells at the single platform site will be targeting the Mississippi Solid zone.

The other Major county permit was for SandRidge Energy and the well site spot is in Section 28 -20N-15W and is located approximately 9 miles northeast of the city of Seiling. SandRidge plans to target the Meramec and Osage zones.

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Closing Thought: The happiest of people don’t necessarily have the best of everything; they just make the most of everything that comes along their way.

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Now For Friday Snippets

Fitch Says Eased Regs Won’t Spur Lasting Energy Boom

President Donald Trump’s promises to roll back federal environmental regulations are not expected to be a major driver of new oil and gas exploration and production but will more likely spark opposition among state and local regulators that could open companies up to long-term risk, Fitch Ratings has said.

Devon Energy Urges 5th Circ. To Undo Gas Royalty Suit

A Texas federal judge flouted U.S. Supreme Court precedent and misinterpreted Texas state law when he certified a class of natural gas royalty owners accusing Devon Energy Production LP of stiffing them on royalties, the company told the Fifth Circuit.

Continental’s Hamm says oil prices need to rise above $50 a barrel

With US crude prices dropping almost 18% this year, Continental Resources Chairman and CEO Harold Hamm said a price drop below $40 a barrel is not sustainable. US crude, which traded Wednesday at about $44 a barrel, needs to rise above $50 per barrel, Hamm said in a CNBC interview.

Texas High Court Says Contract Law Rules In Royalty Row

The Texas Supreme Court ruled unanimously against Samson Exploration LLC on Friday and said the company must pay royalties for a gas well’s production to two pooled units of royalty owners, deciding a lower court was right to assert that contract law governed the overlapping obligation.

Shale veteran aims to repeat past success with new venture

Mark Papa, who helped EOG Resources become the fourth-largest US shale driller, is on track to turn his latest venture, Centennial Resource Development, into another shale success story. Under Papa’s lead, Centennial has raised $500 million to expand its debt-free business, boosting its valuation by more than sixfold to $3.6 billion in less than two years.

BP increases focus on Gulf of Mexico deepwater

BP is investing tens of billions of dollars in deepwater projects in the US Gulf of Mexico, hoping to eventually reduce the costs of offshore oil production by 50% or more at a time when competitors shun offshore investments. BP says its $9 billion Mad Dog Phase 2 would turn a profit even with $40-a-barrel oil, in stark contrast with the $100-per-barrel minimum oil price BP needed for new Gulf projects in 2013.

Cheniere looking to build more LNG plants

Cheniere Energy unveiled plans to expand its Sabine Pass terminal in Louisiana with the acquisitions of additional acres and build more, potentially smaller liquefied natural gas plants even though the global market is awash in supply. “Our goal is to leverage the existing infrastructure to build whatever the next round requires,” Cheniere Director, President and CEO Jack Fusco said.

New app provides oil, gas well data

A new mobile app, the Risk Based Data Management System WellFinder, allows users to search oil and natural gas well permit numbers, well types, production data and regulatory and emergency contacts. The app, which the Ground Water Protection Council launched in May, includes data from nine states and is helping field inspectors, industry members and residents

Clayton Williams Investor Wants Tally After $2.7B Deal

Driehaus Appraisal Litigation Fund LP petitioned the Delaware Chancery Court on Monday for an appraisal of its shares of Clayton Williams Energy Inc. after news of a $2.7 billion acquisition by Noble Energy Inc., suggesting that it would not receive fair value without court intervention.

Break-even prices rise for Permian shale drillers

Depressed oil prices along with rising oilfield service costs have pushed break-even prices in the Permian Basin from $39 per barrel earlier this year to $43 per barrel, making most wells unprofitable, according to Wood Mackenzie. The break-even level for new Permian wells could climb to $45 per barrel by the end of 2017 as oilfield service costs are seen rising by 15% to 20% in the region.

South Korean company partners with GE to develop US shale gas

SK Group, a South Korean energy company, and General Electric agreed to develop US shale
gas fields in a deal that could narrow the trade gap between the two countries. The agreement, which will help bring US natural gas to South Korea, was announced the day before a summit meeting between South Korean President Moon Jae-in and President Donald Trump.

As oil prices dip, shale producers remain cautious

US shale oil producers plan to revisit capital spending if prices spend several months below $45 a barrel. US oil prices on Tuesday closed at $44.24 per barrel, lower than highs near $53 in April, causing angst among shale oil producers with aims of generating enough cash flow to pay for higher capital spending.

June 23, 2017

OK doubles oil and gas industry rig count in a year

The oil and gas industry rig count is now double what it was this time last year in Oklahoma. In April, there was an average of 125 active weekly rigs. A year ago, there were 62 active rigs.

Last Friday’s rig count shows four counties in Oklahoma with double digit rigs running. Blaine (25), Kingfisher (21), Grady (17) and Canadian (11). The Oklahoma rig count was at 127 last Friday.

Today’s Baker Hughes Rig Report comes out at 1PM ET.

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Factoid: The summer solstice was this week and temperatures out in the Southwest are near all time highs The highest air temperature ever recorded on Earth was in Death Valley on July 10, 1913 — 134 degrees.

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EIA reports smaller-than-expected drop in US crude supplies

The U.S. Energy Information Administration (EIA) released its weekly petroleum status report Wednesday morning. U.S. commercial crude inventories decreased by 2.5 million barrels last week, maintaining a total U.S. commercial crude inventory of 509.1 million barrels. The commercial crude inventory remained in the upper half of the average range for this time of year.

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Closing Oil and Gas Prices, Thursday, June 22nd

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $39.25
Oklahoma Sour:
Sunoco Inc. — $27.25

Oil rose on Thursday, a day after sliding to 10-month lows, but market sentiment remained negative due to ongoing pressure from a persistent supply glut despite OPEC-led efforts to balance the market.

U.S. crude futures rose 21 cents, or 0.49 percent, to settle at $42.74 a barrel. On Wednesday, they fell as low as $42.05, their lowest intraday level since August 2016.

Since peaking in late February, crude has dropped around 20 percent, erasing gains made at the end of last year after OPEC and other countries agreed to cut crude output 1.8 million barrels per day (bpd) for the first six months of 2017.

Natural-gas

The U.S. Energy Information Administration (EIA) reported Thursday morning that U.S. natural gas stocks increased by 61 billion cubic feet for the week ending June 16. Analysts were expecting a storage injection of 58 billion cubic feet. The five-year average for the week is an injection of 82 billion cubic feet, and last year’s storage injection for the week totaled 63 billion cubic feet. Natural gas inventories rose by 78 billion cubic feet in the week ending June 9.

Stockpiles fell week over week to 10.5% below last year’s level, but remain 8.1% above the five-year average.

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Remember when: BP celebrates 40th anniversary of Prudhoe Bay oilfield
BP on Tuesday celebrated 40 years of production at Alaska’s Prudhoe Bay even though the oilfield was originally intended to have a 30-year life. Prudhoe Bay, which produced over 12.5 billion barrels of oil over the past four decades, accounts for 55% of total Alaska output and supports over 16,000 jobs.

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EIA Tracks Over 200 Percent Growth In Crude Oil Exports Since 2010

Between 2010 and 2016, American crude and petroleum product exports more than doubled from 2.4 million barrels per day to 5.2 million bpd, according to a new report from the Energy Information Administration (EIA).

Since a spending bill signed by President Barack Obama in December 2015 lifted the decades-long ban on American crude exports, oil tankers loaded in U.S. ports have reached Europe, Asia, and other North American countries. In February 2017, total exports reached 1.1 million bpd – the highest monthly level on record.

While Canada remains the largest destination for U.S. crude oil exports, its share of total U.S. crude oil exports has declined, dropping from 92% in 2015 (427,000 b/d) to 58% in 2016 (301,000 b/d). Other leading destinations for U.S. crude oil exports in 2016 included the Netherlands, Curacao, China, Italy, and the United Kingdom.

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Closing Thought: “It’s what you learn after you know it all that counts.” – John Wooden

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Now for Friday Snippets!

US export boom suggests domestic surplus is moving overseas

The declines in US oil inventories in recent weeks along with the surge in US crude exports this year seem to imply that the domestic oil glut is simply being moved elsewhere, according to a Platts analysis. US crude exports crossed 1 million barrels per day in April, displacing other barrels of crude and thwarting efforts to bring the market into balance.

Sanchez Energy divesting Eagle Ford properties

Sanchez Energy has agreed to sell roughly 21,000 net acres in the Eagle Ford Shale to Lonestar Resources for $50 million in cash and 1.5 million Lonestar shares. The assets in Texas’ Fayette and Lavaca counties have net proved reserves of 2.7 million barrels of oil equivalent and net production of about 1,750 barrels of oil equivalent per day.

Exxon’s XTO Energy relocating employees to Houston

XTO Energy, ExxonMobil’s US shale drilling business, will move 1,600 employees from Fort Worth, Texas, to Exxon’s Houston campus in 2018 and 2020. About 350 employees will remain in Fort Worth to oversee XTO’s Barnett Shale operations and midstream business.

Companies expect to profit from shale drilling in Permian

Major oil companies such as Chevron and ExxonMobil say they plan to turn a profit from shale drilling in the Permian Basin in West Texas. They say they’ve learned from smaller companies’ failed efforts and will introduce new drilling methods as they aim to increase production in the basin to 4 million barrels per day over the next 10 years.

EQT to take over Rice Energy in $6.7B deal

EQT has agreed to purchase Rice Energy for $6.7 billion in a move that would turn the Pittsburgh-based company into the biggest natural gas producer in the US, with a total output of 3.6 billion cubic feet of natural gas per day. “This transaction brings together two of the top Marcellus and Utica producers to form a natural gas operating position that will be unmatched in the industry,” said Steve Schlotterbeck, president and CEO of EQT.

Occidental Petroleum acquires Permian assets for $600M

Occidental Petroleum will pay $600 million to acquire four enhanced oil recovery projects in the Permian Basin from Hess, including a natural gas processing plant, oil wells and a carbon dioxide field, with 2016 production of 8,200 barrels of oil equivalent per day on average. This transaction is one of several deals made by Occidental in a bid to boost its Permian output.

US oil production boom to cool down amid low oil prices

Depressed oil prices and a shortage of labor and equipment could force US drillers to scale back production and cut rigs in less-profitable plays such as the Bakken Shale, whereas rig growth in the Permian Basin will likely flatline. However, analysts don’t expect a dramatic slowdown in production unless oil prices fall into the low-$30 range.

Backlog of drilled-but-uncompleted wells keeps oil prices in check

Federal data show that the number of drilled-but-uncompleted wells hit a three-year high of 5,946 at the end of May, many of which could be tapped in the second half of the year when service firms are expected to add new capacity and crews. This means that hundreds of thousands of extra barrels of oil could flow into an already oversupplied market each day starting in late 2017 and through 2018, jeopardizing the oil price recovery and market balance.

Lofty Delaware Basin land prices affect drillers’ ability to turn profit

The exorbitant acreage prices in the Delaware Basin have caused the internal rates of return in the region to drop to 21.5%, compared with 22.8% in the Midland Basin, where prices per acre are 65% lower than in the Delaware. This is putting a squeeze on the margins of drillers, which are finding it increasingly difficult to turn a profit with oil prices around $45 per barrel and rising service costs.

Tropical Storm Cindy prompts shutdown of Gulf oil production

Tropical Storm Cindy has forced Gulf of Mexico energy companies to shut 17% of oil production while vessel offloadings at the Louisiana Offshore Oil Port marine terminal have been put on hold. Shipping activity in the Gulf is expected to be the most affected by the storm, whereas natural gas production operations will remain largely intact.

Noble Midstream acquires energy infrastructure assets in $270M deal

Noble Midstream Partners has agreed to boost its stakes in two midstream firms operating in the Delaware Basin and the Denver-Julesburg Basin in a $270 million deal with Noble Energy. Upon completion of the deal, Noble Midstream will be the sole owner of Colorado River DevCo and will also hold 40% of Blanco River DevCo, up from 25%.

June 16, 2017

Crude prices remain the major question mark for the near future

For all the talk of higher prices and rising activity, crude prices are not significantly higher than a year ago and they recently even slipped below year-ago levels.

The April average oil price was a little higher, but that didn’t last long. The June average is not higher, in fact it’s slightly lower than a year ago.

The April average of $47 is 25.3 percent higher than the $37.51 averaged last April, and the year-to-date average of $47.94 is 50.3 percent higher than the $31.90 averaged in the first four months of 2016. After rising to about $51.50 in late May, prices recently fell below $46 a barrel.

There is no sign that shale producers will restrain production. They have redeployed rigs and personnel quickly since prices began strengthening in 2016 and made shale profitable again. In the Permian, concerns have been growing regarding increasing land prices where values for acreage have increased 30 percent from two years ago.

Increasing production, volatile oil prices, combined with rising service costs and acreage prices are not factors for creating optimism in our industry. Clear skies are not on the horizon.

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Factoid: In 1973, Texas produced around 2.5 million barrels of oil per day and over 53 million barrels per day of waste water. Today, Texas is over 2.6 million barrels of oil per day and only 20 million barrels of waste water.

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EIA reports smaller-than-expected drop in US crude supplies

US crude stockpiles declined by 1.7 million barrels in the week ended last Friday, whereas analysts had expected a draw between 2 million and 3 million barrels, according to the Energy Information Administration. Gasoline inventories climbed by 2.1 million barrels, while distillate supplies rose by 300,000 barrels.

Crude prices have been trading lower in the wake of a report from the International Energy Agency which that warned the global oil glut will persist this year despite efforts to curb supply.

The American Petroleum Institute late Tuesday had reported that crude inventories rose 2.8 million barrels last week, while analysts at Citi Futures forecast a decline of between 2 million and 3 million barrels.

The EIA’s reported decline in crude supplies was “a welcomed sight after Tuesday’s API report, but today’s report on the whole was still quite bearish,” said Troy Vincent, oil analyst at ClipperData. “The small draw to crude stocks was more than offset by the growth in gasoline inventories alone.”

Gasoline stockpiles rose 2.1 million barrels, while distillate stockpiles edged up by 300,000 barrels last week, according to the EIA.

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Closing Oil and Gas Prices, Thursday, June 15th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $41.00
Oklahoma Sour:
Sunoco Inc. — $29.00

Oil prices tanked by nearly 4% to their lowest level since November on Wednesday, following U.S. Energy Information Administration data that showed the decrease in crude stockpiles last week was smaller than anticipated.

Oil settled with a modest loss Thursday, following sharp declines in the prior session, as data showing that the global market remains awash in surplus oil, rising U.S. crude production and weak domestic gasoline demand kept pressure on prices.

Natural-gas rally

Elsewhere in the energy market, natural-gas prices rallied after the EIA reported domestic supplies rose by a smaller-than-expected 78 billion cubic feet for the week ended June 9.
July natural gas NGN17, +0.16% rose 12.3 cents, or 4.2%, to $3.056 per million British thermal units—the highest settlement since May 31, after ending Wednesday at their lowest since mid March.

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Remember when: There were people living in tents with children. There were a lot of them that had these great big old cardboard boxes draped around trees, living under the trees. And any and everywhere in the world they could live, they lived. Some were just living in their cars, and a truck if they had a truck. And I tell you, that was bad. Just no place to stay whatsoever. ~Mary Rogers, Life in the Oil Fields

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Oklahoma Oil and Gas Tax Collections Up in May

With oil and gas production booming in Oklahoma’s STACK and SCOOP plays, gross production tax collections were up significantly in May as part of the General Revenue Fund Collections reported by Secretary of Finance Preston L. Doerflinger.

However, overall general revenue fund collections missed the official monthly estimate by 1.5 percent, leaving the state with just enough money to pay its bills as the state approaches the end of the 2017 fiscal year.

As for the tax collections on oil and gas production, they totaled $13.7 million, a figure that was $3.7 million or 3.5 percent above the estimate. The total was also $7.8 million or 131.4 percent above the previous year.

Natural gas collections were $11.4 million, a total that was 120 percent above May of 2016,. They were also $1.8 million or 19.2 percent more than the estimate and $.2 million above the prior year.

Oil tax collections totaled $2.8 million or $1.8 million or 357.8 percent over the estimate. The oil collections were also 208.9 percent or $1.6 million more than a year ago.

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Closing Thought: The bigger the problem you solve, the more money you make ~Jerry Weintraub

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Now for Friday Snippets!

Analyst: Oil price collapse sends a message to shale drillers

Oil’s recent 5% plunge and its failure to stabilize above $50 per barrel despite the US oil inventory draws in recent weeks indicates that the market wants US shale drillers to slow down, according to Tudor, Pickering, Holt & Co. analyst David Pursell. Pursell expects inventory levels to normalize by year’s end, “but that may only keep prices from falling,” he added.

OPEC’s 2014 price war was a boon to US shale drillers

The recent oil market downturn and collapse in oil prices have helped US shale producers lower breakeven costs in the Midland portion of the Permian Basin from $77 in 2014 to about $50 in January 2017, according to BTU Analytics. Meanwhile, initial 12-month oil estimated ultimate recovery in the Permian, the Bakken Shale and the Powder River Basin had climbed by 41% from 2014 to 2016, while five-year estimated ultimate recovery was up by 22% over the same period, partly thanks to a better understanding of geology and more efficient and greater proppant use, according to the Oxford Institute for Energy Studies.

Low oil prices weigh down US shale drillers as hedging rush wanes

US shale drillers slowed down hedging activity in the first quarter of the year amid soaring oilfield service costs and the prospect of higher oil prices, increasing their exposure to price swings. “I think companies are a little bit nervous that they are underhedged right now and they will try to take advantage of any hedging opportunity they get at about $50 per barrel,” said Westwood Holdings Group Portfolio Manager Bill Costello.

Permian Basin Drives Energy M&A In 1st Half Of 2017

Energy dealmaking in the first half of 2017 saw midstream oil and gas companies joining their upstream counterparts in opening their wallets wide for assets in the oil-rich Permian Basin of West Texas.

PE-Backed Caerus Pays $735M For Colo. Natural Gas Assets

Private equity-backed Caerus LLC has agreed to pay $735 million to buy natural gas assets in northwestern Colorado from a subsidiary of Canadian oil company Encana Corp., the companies said on Friday.

DOJ Clears $32B GE-Baker Hughes Oil And Gas Merger

General Electric Co. and Texas-based Baker Hughes Inc. said Monday that they’ve reached an agreement with the U.S. Department of Justice allowing them to proceed with a planned merger that’s set to create an oil field services company with $32 billion in combined revenue.

US LNG reshaping global markets, Hamm says

Continental Resources Chairman and CEO Harold Hamm touted the cleanliness of American liquefied natural gas and said that US LNG exports to Europe can help reduce Russia’s influence on the continent. Hamm said US natural gas will have a global impact and called on the Trump administration to accelerate the permitting process for the development and export of LNG.

EIA predicts shale oil production increase in July

Oil production in US shale basins is expected to grow by 127,000 barrels per day to almost 5.5 million barrels per day in July, according to the Energy Information Administration. The largest gains will come from the Permian Basin and the Eagle Ford Shale, where production could climb by 65,000 barrels per day and 43,000 barrels per day respectively next month.

Proved oil reserves drop

The oil industry’s proved oil reserves — oil that can be extracted at current crude prices — declined last year, the Energy Information Administration said this week. Based on reports from 68 public companies, proved reserves dropped by 8.2 billion barrels last year, the second straight year of decline.

Goodrich to expand Haynesville position after strong well results

Goodrich Petroleum has acquired an additional 600-acre lease in Louisiana’s Haynesville Shale after a shale gas well in the play yielded better-than-expected results. The Wurtsbaugh 25-24-1 well achieved a 24-hour peak rate of 31 million cubic feet per day.

June 9, 2017

New COO at Continental Resources Exits the Company

Just weeks after Continental Resources Inc. announced the naming of Tony C. Maranto as the company’s new chief operating officer, he has suddenly resigned. Maranto had replaced Jack Stark as COO when Stark was named President.

Word of the resignation came in a one-sentence SEC filing made by Continental Resources this week. The resignation by the 57-year old Maranto was effective June 5, just five weeks after he joined the company.

Word of his hiring came back in April but he didn’t officially join the company until May 1. He had previously been vice president and chief operating officer at EnerVest Operating Company since 2016. Before that, he was vice president and general manager at EOG Resources in Oklahoma City.

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Factoid: Many products are derived from crude oil, including synthetic fabrics, plastics, furniture, insulation, flooring, pharmaceuticals and more. Products including Vaseline petroleum jelly and Maybelline mascara were originally developed from the byproducts of the early Pennsylvania oil fields.

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Break Even By Basins

Can breakevens continue trending lower as service costs rise? The Oklahoma STACK & SCOOP basins remain on the low end of the scale, indicating sustained activity for Oklahoma with a crude oil price range of >$45+.

Even as suffering oilfield-services contractors demand higher fees and help raise those breakeven prices some, OPEC’s room to maneuver in using supply cuts to push prices higher has shrunk significantly.

 

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Closing Oil and Gas Prices, Thursday, June 8th

 

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $42.00
Oklahoma Sour:
Sunoco Inc. — $30.00

Oil prices fell for a second day in volatile trade on Thursday, after hitting one-month lows following an unexpected surge in U.S. inventories and the return of more Nigerian crude to the market.

U.S. crude futures ended Thursday’s session 8 cents lower at $45.64 a barrel. They earlier fell as low as $45.20, the weakest level since the contract crashed through a number of key technical levels to $43.76 on May 5.

Brent crude ended down 20 cents at $47.86 after striking a session low of $47.56.

Yesterday, the Former F.B.I. director James B. Comey delivered senate testimony about the U.S. President and an investigation into Russian interference with the U.S. election. The hearing was distracting U.S. players from the oil market, said Rob Haworth, senior investment strategist at U.S. Bank Wealth Management.

Today the prices are more quiet and a lot of people are focused on a lot of other things that probably wont drive these prices said Haworth.

Thursday’s trading volumes for WTI were down about 84 percent from the same time on Wednesday.

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Remember when: Corsicana, Borger, Wink, Ranger, Brownwood, Humble, Wichita Falls, Mexia, Beaumont, Luling, Kilgore, Longview, Desdemona. These were only a few of the Texas boomtowns where oil derricks crowded the landscape and wildcatters, boll weevils, and roughnecks slogged through the muddy streets dreaming of black gold wealth.

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Halcon’s Permian well comes in far ahead of expectations.

Halcon Resources Corp. received better than expected results from its first Permian Basin well. Completed with a lateral length of 5,167 feet while targeting the Wolfcamp A Interval, Halcon’s first Ward County, Texas well has significantly exceeded Halcon’s expectations.

Based on the results of the CRMWD 79 #1H well, Halcon has decided to exercise an option to acquire more acres in the area. For $11,000 per acre, Halcon will add 6,720 net acres in the Permian. The option to acquire the acres expires on June 15. The CRMWD 79 #1H produced 1,038 boe/d on its 20-day average.

Earlier in 2017, Halcon closed on 3,634 acres in Pecos County for $88 million. In order to fund its newly acquired acreage in Pecos and the new acreage it has chosen to add in Ward County, Halcon has decided to sell its non-operated acreage in the Williston Basin. The property includes 2,350 boepd made up of 91 percent oil spread across 15,600 acres that still have 1,000 gross undeveloped locations. The sale of the assets is expected to take place later this summer.

In January, Halcon exited the Eagle Ford shale play in a 500 million dollar deal for all of its assets.

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Closing Thought: “Men are disturbed not by things, but the view they take of them.” — Epictetus

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Now for Friday Snippets!

Enhanced oil recovery technique could revolutionize oil drilling

An enhanced oil recovery technique that involves capturing carbon dioxide and injecting it into oilfields could substantially extend the life span of oil wells, boost production and create more value for producers while protecting the environment. The wider adoption of the technique, which is currently being used only at conventional oilfields, depends on whether Congress passes a measure this summer that would raise the carbon tax credit from $10 per ton to $35 per metric ton and help protect more US oil wells from future downturns.

Jobs returning to US oil patch

The renewed US drilling boom is breathing life into the oil jobs market, which has added more than 15,000 rig workers across oilfields in Texas, North Dakota and Colorado since the rebound. “Every rig you’re bringing back, you’re probably putting 30 people back to work,” said Graves & Co. energy consultant John Graves.

Texas well positioned to reap benefits from US LNG export boom

The US is poised to become a “global energy superpower” thanks to the growing export market for US liquefied natural gas, while Texas could emerge as one of the biggest winners of the LNG boom, said Railroad Commission of Texas Chairman Christi Craddick. US natural gas production this year is seen rising 2.5% over 2016 to an average of 74.1 billion cubic feet per day, while next year’s gas output could grow by 4% over 2017.

NM, Calif. Seek Quick Win In Energy Royalties Fight

California and New Mexico asked a Golden State district court Friday for a quick win in their suit against the federal government for millions of dollars in postponed oil, gas and coal royalties, saying the delay in payment was against the law.

Landowners Fight Gas Cos. Royalty Suit Arbitration Request

A group of Marcellus Shale landowners asked a Pennsylvania federal court on Wednesday to deny requests by Chesapeake Energy Corp., Anadarko Energy and others to force individual arbitration in a series of lawsuits alleging that the companies engaged in a monopolistic scheme to improperly deduct royalty payments.

Texas oil, gas industry continues recovery

The Texas oil and natural gas industry expanded for the fifth consecutive month in April, according to the Texas Petro Index, which measures the health of the upstream industry in the state. Year-over-year, the rig count rose from 196 to 425 and drilling permits surged from 683 to 909; the value of Texas crude and natural gas produced jumped to $4.7 billion and $1.9 billion, respectively; and upstream jobs in the state climbed to more than 204,000.

Linn Energy dumps remaining Calif. assets

Linn Energy is selling off the rest of its California assets, which consist of 2,000 net acres in the Brea-Olinda field, to an undisclosed buyer for $100 million. Linn plans to use the proceeds from the sale to repurchase shares.

Tallgrass proposes new oil terminal in Colorado

Tallgrass Energy Partners announced plans to develop a new oil terminal with a takeaway capacity of 80,000 barrels per day in Platteville, Colo., with completion scheduled for the second quarter of 2018. “The proposed Platteville Extension and Tallgrass Grasslands Terminal, together with our existing Buckingham Terminal and Northeast Colorado Lateral, give Pony Express and Tallgrass Terminals an unrivaled footprint in the (Denver-Julesburg Basin) and provide meaningful benefits to producers,” said Tallgrass Pony Express Pipeline Vice President and General Manager Doug Johnson.

Powder River Basin sees signs of resurgence

Oil and natural gas companies such as Chesapeake, Kirkwood, EOG and Devon Energy are looking to Wyoming’s Powder River Basin, with plans to invest $600 million combined in new wells in the region this year. The basin is emerging as an alternative to the Permian Basin, as it has similar geology and plenty of growth potential but much lower land prices of about $17,000 per acre.

Texas PE Deals Rebound With Oil Price Upswing

Private equity deal-making within Texas’ energy industry is making a comeback after a downturn in such investments through much of 2015 and 2016, and stabilized oil prices, combined with the affordability of entering the Texas market, means the number of deals in 2017 should continue trending upward.

Petroquest Query Just ‘Hail Mary,’ Say Royalty Owners

A natural gas royalty owner asked an Oklahoma federal court on Tuesday not to approve Petroquest Energy LLC’s request to certify a question for review in a suit accusing the company of taking improper deductions from royalty owners, arguing the question had already been answered and was a Hail Mary.

Halcon to expand Permian position after strong well results

Halcon Resources announced that it will exercise an option to acquire 6,720 additional net acres in the Permian Basin for $11,000 per acre after its first well in the shale play showed solid results. The CRMWD 79 #1H well targeting the Wolfcamp A interval recorded a 20-day average production rate of 1,038 barrels of oil equivalent per day.

 

June 2, 2017

The Trump Effect

The U.S. withdrawal from the landmark 2015 global agreement to fight climate change drew condemnation from Washington’s allies – and sparked fears that U.S. oil production could expand even more rapidly.

“I think we will see a United States that is about to go crazy in terms of producing fossil fuels,” said Matt Stanley, a fuel broker at Freight Services International in Dubai, adding other producers could do the same. “Why wouldn’t they ramp up production when producers like the U.S. have an open invite to do as they please?”

U.S. crude production last week was up by nearly 500,000 barrels per day (bpd) from year-earlier levels, straining OPEC’s efforts to reduce global oversupply.

“This could lead to a drilling free-for-all in the U.S. and also see other signatories waver in their commitments,” said Jeffrey Halley, senior market analyst at futures brokerage OANDA.

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Factoid: “Peak oil” is a concept created by geoscientist M. King Hubbert in 1956 to predict when U.S. oil production would peak.

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Duncan Suffering From High Unemployment

The latest figures from the Oklahoma Employment Security Commission show Stephens County in southern Oklahoma, where Duncan is the county seat and home to big Halliburton operations continues to suffer.

It has the state’s third highest rate of unemployment at 6.5 percent, lagging only behind McIntosh County with 7.5 percent and Latimer County with 6.6 percent.

Those Halliburton layoffs that occurred in the past two years are still draining on the economy in Duncan. Halliburton’s former national headquarters were located there before the company decided to move to Houston, Texas.

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Closing Oil and Gas Prices, Thursday, June 1st.

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $44.75

Oklahoma Sour:
Sunoco Inc. — $32.75

Oil prices were mixed on Thursday, with Brent crude down on concerns that key producers were still adding to the global crude glut but U.S. crude up slightly after a larger-than-expected domestic inventory drawdown.

U.S. crude futures settled up 4 cents at $48.36 a barrel, while Brent ended down 13 cents at $50.63. After settlement, both benchmarks fell, failing to sustain the lift from the morning news of declining U.S. crude and gasoline stocks.
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Remember when: To help reduce consumption, the national maximum speed limit of 55 mph was imposed in 1974, and the US started to stockpile crude oil in the Strategic Petroleum Reserve in 1975.

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EIA reports 8th straight weekly inventory drop

The EIA said inventories, excluding those in the U.S. Strategic Petroleum Reserve, were reduced by 6.4 million barrels week over week.

According to KLR Group analysts, the draw widely beats out consensus estimates of a 3 million barrel draw.

EIA’s Wednesday report follows a Tuesday inventory release from the American Petroleum Institute, which showed an 8.7 million barrel draw in crude stockpiles.

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Closing Thought: There has never been any great accomplishment in history without faith. Faith is confidence in what we hope for and assurance about what we do not see.

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Now for Friday Snippets! 

Certify Underlying Royalty Question, Okla. Gas Co. Says

Petroquest Energy LLC has asked an Oklahoma federal court to certify a question for review that it said would get to the heart of accusations it took improper deductions from natural gas royalty owners and would clarify a key precedent for similar cases.

Oil prices bolstered by higher fuel demand in US

West Texas Intermediate futures crossed the $50 per barrel mark early on Tuesday, boosted by increased demand for transport fuels as the US summer driving season kicks off. “The start of the US driving season … boosted confidence in the market that stockpiles would start to fall in coming weeks,” said ANZ bank, although oversupply concerns persist among traders.

Morgan Stanley warns of oil market oversupply in the long term

The extension of the OPEC’s output cut deal will only ease the oil supply glut in the medium term, according to Morgan Stanley analysts, who believe that strong shale growth will cause the market to oversupply again after the agreement ends in March 2018. “As a result, we lower our end-2018 WTI price forecast to $55 per barrel, from $60 per barrel before, although we could still see lower prices at some point during 2018,” the analysts said in a note.

Targa Resources to build NGLs pipeline in Permian Basin

Houston-based Targa Resources announced plans to build a $1.3 billion pipeline that would transport up to 550,000 barrels per day of natural gas liquids from the Permian Basin to its Mont Belvieu, Texas, plant. “We are excited to be moving forward with Grand Prix, which will enhance our ability to move our customers’ volumes from the wellhead in the Permian Basin and North Texas to key petrochemical and export markets,” said Joe Bob Perkins, CEO of Targa.

OPEC, US shale establish communications as they learn to coexist

OPEC and the US shale industry are set to hold more talks to find ways to coexist without conflict. Last week, US shale bankers attended OPEC’s Vienna meeting, where the cartel discussed shale’s potential and the threat it poses, and soon OPEC officials will travel to Texas to gain more insight into the shale industry.

BHP exploring several options for US shale business

BHP Billiton CEO Andrew Mackenzie held several meeting with investors last week to reassure them that the company was considering its best options to maximize the value of its US shale business. BHP reaffirmed its openness to divesting the shale assets amid pressure from activist investor Elliott Management, which accused the Australian miner of erasing $31 billion in value through its badly timed shale deals earlier this decade.

EIA: Permian well productivity to drop next month

Permian drilling productivity is expected to decline for the first time since 2013 in June, with oil production per new well seen down by 10 barrels to 630 barrels per day, according to the Energy Information Administration. This aspect, together with the fact that the number of drilled-but-uncompleted wells is expected to climb to 1,995 in June, suggests that explorers are adding rigs faster than the understaffed hydraulic fracturing firms can handle.

Texas crude production fell year-on-year in March

Texas produced 86.6 million barrels of shale oil and condensate in March, up nearly 2% from February but down from the same period a year ago, according to preliminary data from the Railroad Commission of Texas. “Texas preliminary March 2017 crude oil production averaged 2,492,349 barrels daily, compared to the 2,506,539 barrels daily average of March 2016,” the commission said.

US shale gas exports at record high

US shale natural gas exports hit a new record in May, with 18 liquefied natural gas cargoes departing Cheniere Energy’s Sabine Pass terminal in Louisiana during the month for destinations such as China, Europe and Latin America. The surging LNG exports could help the US become a net exporter by 2018 and possibly the third-largest operator of LNG export terminals after Australia and Qatar by 2020.

Chevron CEO optimistic about Permian Basin’s future prospects

Chevron Chairman and CEO John Watson is confident that drilling activity will continue to rise in the Permian Basin despite service cost inflation and believes shale will out-compete deepwater and conventional oil “for a long time to come.” To capitalize on the shale rebound, Chevron plans to invest billions of dollars in the Permian and boost its rig count from 12 to 15 by the end of the year and 20 by the end of 2018.

Breitburn’s Ch. 11 Exclusivity Extended Amid Deadline Talks

Breitburn Energy Partners LP has retained the sole right to file a Chapter 11 plan to reorganize for another month after a New York bankruptcy judge said Thursday he’d like to know why he shouldn’t fix an exclusivity deadline in the year-old case, as groups of impatient creditors have asked.

 

May 26, 2017

Oklahoma House passes extended lateral drilling bill in close vote

The Oklahoma House narrowly passed a bill Wednesday that would allow longer drilling in nonshale formations, with the vote held open for more than 30 minutes after an apparent deadlock.

Three members switched their votes on Senate Bill 867 in the last few minutes, giving the bill 51 votes and securing its passage. The final vote was 51-46, with two members claiming constitutional privilege. The bill now goes to Gov. Mary Fallin.

In its first year, SB 867 is expected to generate approximately $490 million in new royalty payments, raise more than $229 million in new state and local revenues and create nearly 6,000 new jobs in the oil and gas sector. Additionally, the measure is expected to spur nearly $6 billion in investment from oil and natural gas producers.

Factoid: Glycerin — a sweet-tasting synthetic ingredient used in toothpaste and other products — is a petrochemical derived from oil.

Linn Energy looks to divest California assets

Linn Energy Inc., Houston, has agreed to sell its properties in the San Joaquin basin of California to an unnamed buyer for $263 million.

The sale will consist of of 500 total net acres in South Belridge field in Kern County, producing from the Tulare and Diatomite formations using waterflood and thermal enhanced oil recovery methods at 800-2,000 ft. First-quarter shows that net production was 3,000 boe/d, with proved developed reserves of 11.7 million boe as of Mar. 1 at updated pricing of $3/MMbtu gas and $50/bbl oil.

The deal is effective Mar. 1 and is expected to close no later than July 31. Linn as of now is appears to be keeping its properties at Brea Olinda field of the Los Angeles basin.

Linn had budgeted $21 million for second-half development of the San Joaquin properties, but it instead will be used for development of growth projects or paying down debt. The firm in 2016 made no significant investments in its California assets.

The San Joaquin sale is the first executed agreement of Linn’s anticipated noncore divestiture program. After it emerged from bankruptcy earlier this year, the firm said it would market 3,000 net acres in California, 5,000 in Salt Creek, 20,000 in the Williston, 90,000 in the Permian, and 130,000 in South Texas.

Earlier this month, Linn agreed to sell 27,500 total net acres in Wyoming—80% of which is currently undeveloped—including 16,000 net acres in the Jonah and Pinedale Anticline fields to Denver-based Jonah Energy LLC for $581.5 million.

Net proceeds from the $844.5 million in sales agreements so far this year are expected to be used to reduce outstanding debt under Linn’s revolving credit facility and term loan. Pro-forma for the deals, the firm expects to have less than $50 million in total debt.

Closing Oil and Gas Prices, Thursday, May 25th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $45.00
Oklahoma Sour:
Sunoco Inc. — $33.00

Oil prices plunged more nearly 5 percent on Thursday after OPEC and other major exporters extended their current deal to limit oil production for nine months, disappointing investors who were anticipating deeper cuts.

OPEC and other major producers, including Russia, will roll over their six-month deal to remove 1.8 million barrels a day from the market through March 2018. Investors had hoped the cartel might reduce output even further to drain a global glut that has depressed the market for almost three years.

Brent crude oil plunged $2.50 to $51.46 a barrel. U.S. West Texas Intermediate (WTI) crude futures ended Thursday’s session down $2.46, or 4.8 percent, at $48.90.

Remember when: September 22, 2008 – Oil prices experience the biggest one-day increase ever, settling up $16.37 to $120.92 a barrel.

Now For This Week’s Snippets:

Carlyle, EOG Resources Sign $400M Partnership

Private equity giant The Carlyle Group LP said Monday that it has inked a deal with oil and natural gas outfit EOG Resources Inc. that will provide up to $400 million for the development of energy assets in Oklahoma.

Southwestern Energy Settles Arkansas Royalty Row For $30M

Southwestern Energy Co. and some of its subsidiaries have settled a class action suit brought by oil and gas royalty owners in Arkansas for $30 million in addition to agreeing to change the way it calculates future payment deductions, according to a U.S. Securities and Exchange Commission filing.

XTO Energy, Royalty Owners Settle Underpayment Claims

An Arkansas federal judge on Tuesday agreed to dismiss suits from royalty owners that had alleged XTO Energy Inc. underpaid them for gas royalties after the owners agreed to drop their cases the same day.

Analysts revise up US shale production growth forecasts

Analysts are predicting larger-than-expected US shale production increases this year, with Macquarie Group lifting its forecast from 0.9 million to 1.4 million barrels per day through December, while JPMorgan Chase & Co. estimated growth of 800,000 barrels per day by the end of the year, double its previous projection. US shale output will continue to grow into 2018, with JPMorgan and Bank of America Merrill Lynch forecasting a 1.05 million-barrel-per-day increase and a 950,000 barrel-per-day surge, respectively.

Natural gas gaining ground in Eagle Ford

Energy companies are drilling more natural gas wells in the Eagle Ford Shale to export it south of the border as they seek to capitalize on Mexico’s soaring gas demand but declining production. As a result, shale gas production in Webb County, Texas, has climbed from about 100 million cubic feet of natural gas per day in 2010 to roughly 2 billion cubic feet per day now, while the number of gas rigs has gone up from three this time last year to eight in the present.

USGS lifts oil resource estimates for Permian’s Spraberry formation

A US Geological Survey assessment finished this month revealed that the Spraberry formation in the Permian Basin could hold 4.2 billion barrels of technically recoverable oil, up from 500 million barrels projected in 2007, and 3.1 trillion cubic feet of natural gas. The upward revision can be attributed to technological advances such as hydraulic fracturing and horizontal drilling that have helped companies unlock previously untapped resources.

Trump proposes US oil reserve sale

The Trump administration is seeking to sell half of the 688 million-barrel Strategic Petroleum Reserve over a 10-year period starting in October 2018, with proceeds estimated at $16.5 billion, according to the White House’s budget proposal. Independent oil analyst and economist Anas Alhajji warned that the move could thwart OPEC’s efforts to stabilize the oil market and raise oil prices through supply cuts.

Oil price recovery affecting oil industry players disproportionately

US shale producers are reaping a windfall from the recent upswing in oil prices while oilfield service companies still struggle, with just five out of the 10 largest oilfield servicers having turned a profit last quarter. Officials at service firms say this unequal situation could slow down production growth or limit the shale revival to just some shale fields.

Fracking has made Texas county the country’s richest

McMullen County, Texas, has become the richest in the US, with an average adjusted gross income of $303,717, thanks to hydraulic fracturing. County landowners make more money from oil and natural gas royalties than from their day jobs, while residents who don’t own land also benefit because fracking creates stable jobs and has helped the county improve its infrastructure and services.

Tide begins to turn for oilfield service companies

The positive effect of the US shale rebound on oilfield service firms’ bottom lines has so far been limited, but analysts have begun lifting their earnings estimates for oil service providers in the second half of the year as companies enjoy greater pricing power. One sign that the oilfield service industry is also poised for a rebound is the soaring demand for hydraulic fracturing sand, a crucial product for shale drillers.

Permian’s Midland basin has lowest shale breakevens in US

Shale drillers in the Permian Basin’s Midland area enjoy the lowest breakeven costs in the nation at $46 per barrel, followed by Oklahoma’s SCOOP/STACK with $47 per barrel and the Eagle Ford with $48 per barrel, according to the Federal Reserve Bank of Dallas. The Midland also emerged as the cheapest play when it comes to operating expenses, with $24 per barrel, while the SCOOP/STACK and the Eagle Ford came in second and third with $27 and $29 per barrel, respectively.

ConocoPhillips To Pay $39M To Leave NJ Water Pollution Suit

ConocoPhillips will pay $39 million to exit federal litigation in which dozens of companies have been accused of polluting New Jersey state waters with methyl tertiary butyl ether, or MTBE, a gasoline additive, according to a deal signed by a New York federal judge on Tuesday.

May 19, 2017

EOG Resources reports record Delaware wells

During its earnings call to discuss first quarter earnings, EOG Resources also reported record-setting wells in the Delaware Basin.In the first quarter, EOG increased its Delaware Basin premium net locations by 700 to 4,150 locations.

The company completed 33 wells in the Delaware Basin Wolfcamp with an average treated lateral length of 5,600 feet per well and average 30-day initial production rates per well of 2,855 barrels of oil equivalent per day or 1,850 barrels of oil, 450 barrels of natural gas liquids and 3.3 million cubic feet per day of natural gas.

Of special note is a four-well pattern in Lea County, New Mexico: The Whirling Wind 14 Fed Com 701H and the Whirling Wind 11 Fed Com 702H – 704H, which were completed with an average treated lateral length of 7,100 feet per well and average 30-day initial production rates per well of 5,060 Boed, or 3,510 Bopd, 700 Bpd of NGLs and 5.1 MMcfd of natural gas. Each well exceeded the prior all-time industry record for 30-day initial production from Permian Basin horizontal oil wells.

“EOG’s Whirling Wind wells shattered industry records in the Permian Basin,” said William R. “Bill” Thomas, chairman and chief executive officer. “Our advanced technology and proprietary techniques are leading to break-through well performance across our diverse portfolio of premium plays.”

In the Delaware Basin Bone Spring, EOG completed three wells with an average treated lateral length of 8,800 feet per well and average 30-day initial production rates per well of 3,255 Boed, or 2,525 Bopd, 335 Bpd of NGLs and 2.4 MMcfd of natural gas.

In the Delaware Basin Leonard, EOG completed three wells with an average treated lateral length of 3,800 feet per well and average 30-day initial production rates per well of 840 Boed, or 505 Bopd, 150 Bpd of NGLs and 1.1 MMcfd of natural gas.

These first quarter 2017 completions were drilled prior to 2016.

Energy Industry looks forward to expedited permits

Energy Industry groups have told President Donald Trump’s administration that they want two main things from his upcoming regulatory overhaul: a speedier permit process and simpler environmental regulations.

Groups representing the drilling, refining, mining, and building industries have submitted documents to the Commerce Department and Environmental Protection Agency in the last couple of weeks, outlining regulations they want to see eliminated or modified.

Many of those comments targeting the EPA, come in response to a pair of executive orders Trump signed during his first weeks in office, meant to cut the regulatory burden on companies. Trump has already moved to pull back and eliminate a slew of Obama-era environmental protections, including some aimed at combating global climate change.

This time around, it appears industry groups will put their focus on easing the permitting process for new facilities and installations.

The first order by President Trump, issued on Jan. 24, directed Commerce Secretary Wilbur Ross to review which U.S. regulations were burdens for domestic manufacturing. The Commerce Department requested feedback from the energy industry as a result of that order, with a March 31 deadline.

Ross was quoted in an interview last week saying “that the department was condensing the comments into a series of recommendations that could be presented to Trump as early as this month.”

The second order was issued Feb. 24, instructing all U.S. agency heads to launch a process to identify regulatory hurdles. Each agency has its own timetable for this process.

If the industry gets its way we could see a boost of approved permits and active rigs across the prominent plays in the U.S.

Factoid: Members of the Organization of the Petroleum Exporting Countries (OPEC) produce about 43% of the world’s crude oil, and possess almost 81% of the world’s total proven crude oil reserves, according to OPEC and U.S. Energy Information Administration data.

Closing Oil and Gas Prices, Thursday, May 18th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $46.00
Oklahoma Sour:
Sunoco Inc. — $34.00

Remember when: So great was Cushing’s output that in 1919 its wells produced 17 percent of all oil marketed in the United States and between 1912 and 1919 produced 3 percent of all the world’s output.

WoodMac: Oil companies still cautious on industry outlook

Uncertainty continues to overshadow the oil market even though a majority of industry players surveyed by Wood Mackenzie see oil prices ranging from $50 per barrel to $60 per barrel this year, potentially hitting $80 per barrel by 2020. Despite the stronger oil prices, companies are cautious and risk-averse, and many will likely put investments on hold to focus on protecting dividends and improving balance sheets this year, Wood Mackenzie Head of Corporate Analysis Martin Kelly said.

Now For This Week’s Snippets:

PE-Backed Gardner Denver Leads 4 IPOs Surpassing $1B

Private-equity-backed industrial parts maker Gardner Denver Holdings Inc. raised $826 million in an initial public offering Thursday under guidance from Simpson Thacher & Bartlett LLP, leading four companies to price IPOs totaling more than $1 billion, albeit mostly at reduced prices.

US shale drillers take a break from hedging

US shale producers’ race to lock in higher prices for 2018 production is coming to a halt amid a decline in West Texas Intermediate 2018 swap prices, according to Societe Generale. SocGen commodity strategist Jesper Dannesboe said the reversal is a sign that US oil production growth will slow down since shale explorers usually hedge new production before boosting spending.

US LNG industry to get a boost from China deal

The US liquefied natural gas sector is moving into a new period of expansion thanks to a new trade deal with China, which opens the way to more exports of US shale gas to that country and may spur LNG investment in the US. Cheniere Energy spokesman Eben Burnham-Snyder said the company has been in talks with “several Chinese commercial entities” to secure long-term contracts.

Oil companies put greater emphasis on cybersecurity

Cybersecurity has become a priority for the US oil and natural gas industry in recent months, with an increasing number of companies boosting their cybersecurity budgets and pushing to improve their industrial control systems, according to Indegy CEO Barak Perelman. “In the last few months, we’ve seen more IT corporate security get demands for proof the facilities are protected,” Perelman said.

US shale production poised to increase again in June

US shale drillers are expected to boost production by 122,000 barrels per day to reach 5.4 million barrels per day in June, according to the Energy Information Administration. The Permian Basin and the Eagle Ford Shale will drive the growth, adding 71,000 barrels and 36,000 barrels respectively to daily shale production next month.

Anadarko to disconnect Colo. return lines

Anadarko Petroleum plans to permanently disconnect all 1-inch diameter return lines like the one linked to a home explosion in Firestone, Colo., from all of its vertical wells in the state. The company also said it would offer methane detection devices to Oak Meadows homeowners.

San Andres emerging as Permian Basin’s hottest play

The San Andres play has potential to become the Permian Basin’s most lucrative because drilling a well there costs between $1.8 million and $2.6 million, less than in the Delaware Basin, while the rates of return are 50% to 70%. “So when you look at the resulting economics, San Andres wells are robust at $45 per barrel of oil,” Yuma Energy Executive Vice President and Chief Operating Officer Paul McKinney said.

More oilfield servicers going public than upstream companies

Five US oilfield service companies have launched initial public offerings since January, compared with just two exploration and production companies, marking the first time in 10 years that oil-service IPOs have surpassed upstream listings, according to Bloomberg data. The shift comes as exploration and production companies increasingly are bought before making it to market.

EIA reports drop in US crude stockpiles

US crude supplies fell by 1.8 million barrels in the week ended Friday, the sixth week in a row of declines, according to the Energy Information Administration. Gasoline inventories dropped by 413,000 barrels, while distillate stockpiles plunged by 1.9 million barrels.

Shortage of fracking workers threatens US shale drillers’ growth

US independent shale producers spent $2.5 billion less than budgeted in the first quarter of 2017 as they struggled to find fracking workers, prompting delays and potentially undermining drillers’ growth ambitions, according to Infill Thinking. This shortage suggests that US oil production will likely continue to grow into early 2018, creating a big supply bubble that could hinder OPEC’s efforts to raise oil prices, said Joseph Triepke, Infill founder and principal research analyst.

Oil, gas companies keep flocking to the Permian Basin

Dealmaking activity in Texas and New Mexico has maintained momentum at the beginning of May as the Permian Basin continues to lure new entrants as well as explorers that exited the play during the downturn. Among this month’s major deals are CP Exploration’s sale of 2,200 acres in the Delaware Basin to Resolute Energy for $160 million and Peregrine Petroleum’s re-entry into the basin after its retreat in November 2016.

Closing Thought: You are the same today as you will be in 5 years, except for two things – the books you read and the people you associate with.

May 12, 2017

EIA Report

Oil prices posts gains after a report showed falling stockpiles, greater demand

– U.S. West Texas Intermediate futures have climbed back above $47 a barrel after government data showed a big drop in the U.S. crude inventories.
– Gasoline demand also recovered from a recent weak spell, driving up U.S. gasoline futures.
– The drop was evidence to some that demand is robust in the U.S.

U.S. West Texas Intermediate futures have jumped back above $47 a barrel and international benchmark Brent topped $50 after the Energy Information Administration reported on Wednesday a much larger drop in the nation’s crude stockpiles and a strong rebound in gasoline demand.

U.S. commercial crude inventories fell by 5.2 million barrels, versus estimates for a 1.8 million barrel decline. This occurred as refinery activity eased from recent elevated levels and oil imports dropped by 644,000 barrels a day.

Gasoline demand rose by 252,000 barrels a day, bringing the four-week average closer to levels at this time last year after a string of data showing weekly consumption declines. While gasoline in storage did not decline as much as analysts anticipated, it did not rise as indicated in the earlier industry report.

But how much higher can crude oil prices climb?

Merrill Lynch cut forecasts for brent crude prices. It now expects the global benchmark to average $54 a barrel this year and $56 a barrel next year, down from the previous forecast of $61 a barrel and $65 a barrel respectively.

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WildHorse Resource Development Looking at a Transformation

WildHorse Resource Development Corp. has agreed to purchase an estimated 111,000 net acres in Texas along with associated production from Anadarko Petroleum Corp. and KKR.

The deal is expected to be valued at $625 million and has an anticipated closing around the end of June.

“This transformative acquisition presented us with a strategic opportunity to consolidate our acreage position,” WildHorse Chairman and CEO Jay Graham said in a May 11 press release.

Graham also added that “With a total of 385,000 net acres, this deal will make WildHorse the second largest operator in the Eagle Ford”

The acreage is in Burleson, Brazos, Lee, Milam, Robertson and Washington counties near College Station, Texas, and are near WildHorse’s existing positions. The net production for the acreage in the final quarter of 2016 was 7,583 barrels of oil equivalent per day, consisting of 72% oil from 386 operated wells.

“WRD’s pre-acquisition drilling schedule already includes 36 wells immediately adjacent to the acquired acreage,” Graham said in the release. “With the new acquisition, WRD can further optimize pad location and development planning with fewer limitations. As a result, this transaction immediately adds value to our existing program.”

WildHorse will pay for the deal with $556 million in cash to Anadarko and 6.3 million shares of WRD common stock valued at approximately $69 million to KKR. In addition, the Carlyle Group will purchase $435 million of Series A Perpetual Convertible Preferred Stock from WildHorse as a part of the financing for the deal. WildHorse will fund the remainder of the acquisition with borrowings under its revolving credit facility.

This deal is sure to set the scene for an exciting year in the Eagle Ford for WildHorse and their competitors.
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Samson announces asset sale
TULSA — Samson Resources II LLC said this week it plans to market its east Texas and north Louisiana assets after a strategic review.

Samson owns about 210,000 net acres in the east Texas and north Louisiana areas with an 86 percent working interest. It will offer the assets either as a whole or in four separate sub-packages: North Louisiana, Shelby Trough, East Texas Haynesville and Gregg-Rusk-Nacogdoches.

Samson II, which employs approximately 140 in Tulsa, acquired substantially all of the assets of Samson Resources Corp. when it emerged from Chapter 11 bankruptcy on March 1. Samson Resources had filed for Chapter 11 protection in September 2015 when it was $4.2 billion in debt.
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Factoid: The world’s 932 giant oil and gas fields are considered those with 500 million barrels of ultimately recoverable oil or gas equivalent. Geoscientists believe these giants account for 40 percent of the world’s petroleum reserves. They are clustered in 27 regions of the world, with the largest clusters in the Persian Gulf and Western Siberian Basin. The past three decades reflect declines in discoveries of giant fields.

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Closing Oil and Gas Prices, Thursday, May 11th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $44.25
Oklahoma Sour:
Sunoco Inc. — $32.25

Remember when: In 1908, the first natural gas pipeline was constructed to transport gas from Caddo-Pine Island to Shreveport, Louisiana. This was one of the earliest commercial uses of natural gas, which was commonly viewed as an undesirable by-product of oil production and often “flared” or burnt off at the well site.

Now For This Week’s Snippets:

OU announces new $43 million engineering facility

A $1 million gift from Phillips 66 will support construction of a new academic building and research laboratory on the University of Oklahoma’s Engineering Quadrangle, President David Boren announced Thursday during a meeting of the OU Board of Regents. The $43 million Gallogly Hall, set to open in fall 2019, will house the College of Engineering’s Diversity and Inclusion Program offices, the Stephenson School of Biomedical Engineering, and new engineering labs and learning spaces.

Companies plan to step up oil drilling in Okla.

Oil companies are increasing their drilling activity in Oklahoma, saying that well results have been better than expected. Among the projects, Chesapeake Energy plans to drill test wells later this year in the Chester formation, and Devon Energy will drill 25 to 30 wells in the Meramec and Woodford formations.

Okla. Tribes Demand Sanctions Against Pipeline Co.

Tribal landowners asked an Oklahoma federal judge Thursday to impose sanctions on Enable Midstream Partners LP for defying court orders and failing to produce discovery documents as part of a suit challenging the company’s use of a natural gas pipeline on their property.

LNG exports are key to easing glut, lifting prices

Expanding liquefied natural gas export capacity and opening the way for US LNG to new markets could be the solution to years of low natural gas prices and also ease the domestic gas surplus, writes Shelley Goldberg. New US terminals and planned expansions could boost annual gas demand by 105 billion cubic meters by 2020, with the biggest demand growth likely coming from India, China, Taiwan and the Middle East, Goldberg writes.

Rate of oil bankruptcy filings slows down

Nine US oil and natural gas producers, including Memorial Production Partners and Vanguard Natural Resources, have filed for Chapter 11 bankruptcy protection in the first four months of 2017, down from 29 a year earlier, according to law firm Haynes and Boone. The number of bankruptcies in the oilfield service sector has also declined, from 22 at this time last year to 16 now.

Oil patch hiring makes tentative comeback, but there are risks

Employment across US oilfields has stabilized between 177,000 and 181,000 positions, according to the US Census Bureau’s latest quarterly data, partly thanks to a reduced number of layoffs. LinkedIn said that oil and natural gas hiring on its platform was 30% higher last month compared with a year ago, but risks to the energy jobs market remain, especially in the wake of last week’s drop in oil prices

Fracking is principal method used in US natural gas extraction

Hydraulic fracturing has become the main technique used to extract natural gas in the US over the past couple of decades. The combination of fracking and horizontal drilling has brought about a natural gas boom, with US gas production surging 40% since 2006.

Oil majors lag behind shale drillers in terms of productivity

US shale drillers are increasing production at an unprecedented pace, with Diamondback Energy, Concho Resources and RSP Permian posting output gains of 61%, 30% and 84%, respectively, in the first quarter. Meanwhile, Big Oil companies are having a hard time keeping up with shale, with all supermajors reporting production gains below 3.6%, while in the case of ExxonMobil and Petroleos Mexicanos, production fell 4% and 9.5%.

BHP Billiton Says Exco Owes It Millions In Royalties

BHP Billiton Petroleum LLC has filed a lawsuit in state district court in Houston alleging that Exco Operating Company LP owes it millions of dollars in royalties and other payments related to revenue from drilling operations in Louisiana that Exco originally said it was holding in suspense but now refuses to hand over.

US shale producers spending 10 times faster than rest of global oil industry

North American shale drillers have plans to spend $84 billion on exploration and production in 2017, an increase of 32%, whereas spending on international projects will rise just 3% this year, according to Barclays analysts. Independent US shale producers are expected to contribute $53 billion of that amount in 2017, up from $35 billion last year.

EIA revises up US crude production forecasts

The Energy Information Administration lifted its US crude production forecast to 9.96 million barrels per day in 2018, up from last month’s prediction of 9.9 million barrels per day. The agency also raised its production expectations for this year to 9.31 million barrels per day, up from 9.22 million barrels per day in April.

Well completion activity slows down in Texas

The number of drilling permits issued by the Texas Railroad Commission in April was up 30% over the year before, reaching 821 and serving as evidence of the oil industry rebound. However, well completions are down substantially, with 2,455 total well completions processed so far this year, down from 4,499 in the same period of 2016.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Samuel Lloyd Noble. Born in Ardmore, he was an oilman, philanthropist, and founder of the Noble Corporation. For more information on Mr. Noble, listen to Mr. Noble’s daughter, Ann Noble Brown, who participated in an oral history interview presented by Voices of Oklahoma and The University of Tulsa, Oklahoma Center for the Humanities. Ann reflects on the memory of her father, Lloyd who died February 14, 1950 at the age of 53 years old. – See more at: http://bit.ly/2pMfEU7

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Lloyd Noble 

Closing Thought: A wise man can learn more from a foolish question than a fool can learn from a wise answer. ~Bruce Lee

May 5, 2017

NOBLE DROPS THE MARCELLUS

Noble Energy has made a deal to sell off its assets in the Marcellus Basin for $1.2 billion.

They did not name the buyer in their statement this Tuesday, however the Houston company said $100 million of the $1.2 billion price tag will come from the three equal contingent payments that depend on regional natural gas prices rising above a certain level over the next few years. The other $1.1 billion is cash.

Noble is selling assets that produce 415 million cubic feet of natural gas equivalent a day across more than 385,000 acres in West Virginia and Pennsylvania. Roughly 88% of that production is gas as opposed to oil or other liquids.

The Marcellus Shale is still the largest shale gas pay in the nation, and it soaked up the majority of the oil industry’s early investments in shale gas. When natural gas prices plummeted half a decade ago, shale drillers started looking for less conventional oil in places like the Eagle Ford Shale in South Texas and another boom was born.

Noble’s deal is expected to close by the end of the second quarter. The company plans to pay off the debt it acquired when it bought Clayton Williams Energy and subsequently shifted their focus to the Delaware Basin in West Texas.

———-

MID-STREAM NEWS

Oklahoma City-based Enable Midstream Partners said its planned Project Wildcat will move up to 400 million cubic feet of natural gas per day to a processing plant and pipeline hub in North Texas.
In addition, Tulsa-based SemGroup Corp.’s Canton Pipeline will connect the company’s natural gas processing plant in N. Oklahoma to the STACK play.

The announcements on Wednesday come less than a month after Enable announced the Cana and STACK Expansion pipeline project, which is designed to transport natural gas from the STACK to existing gas markets.

Both projects are expected to continue the growth in both the SCOOP and STACK plays, which are contributing to a strong comeback for the Oklahoma oil and gas industry.

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Earnings Update-Chesapeake profit beats on higher crude prices

Chesapeake said average realized oil price rose 37 percent to $51.72 in the first quarter ended March 31, while natural gas prices rose about 32 percent. Chesapeake reported a net profit available to shareholders of $75 million, or 8 cents per share, in the quarter, compared with a loss of $1.11 billion, or $1.66 per share, a year earlier.

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Factoid: The largest oil field in the lower 48 states, the East Texas oil field, was not discovered until 1930, when wildcatter Columbus Marion Joiner (more commonly known as “Dad” Joiner) drilled the Daisy Bradford No. 3 well, in Rusk County, Texas.

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Closing Oil and Gas Prices, Thursday, May 4th

Oklahoma crude oil prices as of 5 p.m. Thursday:
Oklahoma Sweet:
Sunoco Inc. — $42.00

Oklahoma Sour:
Sunoco Inc. — $30.00

Oil Prices dropped to a five-month lows on Thursday surrounding record trading volume in Brent Crude, as OPEC and other producers appeared to disregard any ideas further supply cuts to reduce the worlds oversupply of crude.

Closing prices, below $50 a barrel, were the lowest since the end of November 2016, and at the same time erased all of the market gains that followed the late 2016 announcement by OPEC to cut output.

Analysts say that non-OPEC members may have a hard time extending production cuts.

U.S. Crude ended the session almost 4.81% lower at $45.52 per barrel. Brent crude settled at $48.38, which is 4.75% lower.

“While the cartel is expected to extend a self-imposed production cap by another six months, it will be a challenge to convince several non-OPEC members to follow suit” said Abhishek Kumar, senior energy analyst at Interfax Energy’s Global Gas Analytics. “Persistent growth in US oil production will also make extensions of the OPEC cap beyond 2017 unlikely.”

Remember when:  In 1960, five OPEC countries formed an alliance to regulate the supply and price of oil. These countries realized they had a non-renewable resource. OPEC held its first meeting on September 10-14 1960 in Baghdad, Iraq. The five founding members were Iran, Iraq, Kuwait, Saudi Arabia and Venezuela. 

Now For This Week’s Snippets:

Big Oil firms on track for Q2 of profit gains

US oil majors ExxonMobil and Chevron are well-positioned for a second consecutive quarter of earnings growth following a strong first quarter that saw the two companies’ profits beat analyst expectations. If market conditions remain favorable, analysts expect ExxonMobil to boost its earnings per share by 132% this quarter while Chevron could report its best second quarter in three years.

US supply glut moves from crude to refined products

US crude inventories have dropped by an average of 326,000 barrels per day in the first three weeks of April with the help of refineries, which have been ramping up crude processing to 17.285 million barrels a day, the highest level in at least 35 years. But as crude inventories shrink, supplies of gasoline and distillates have surged in the past couple of weeks in a sign that the glut is not being cleared, but rather being shifted from crude to refined products.

Service companies rebound as oil drilling grows

Oilfield service companies such as Schlumberger, Halliburton and Baker Hughes are hiring more people, sending more equipment to fields and charging higher prices for products as US drilling increases. The trend reflects the recovery among oil and natural gas operators, which are showing confidence in oil prices and have more than doubled the number of oil rigs since May.

Explosion in Colo. town prompts 2nd oil company to close wells

Great Western Oil & Gas decided to shut down 61 wells last week as a precautionary measure following a fatal home explosion in Firestone, Colo. The move comes a few days after Anadarko Petroleum voluntarily shut down 3,000 vertical wells, as one of its wells is within 178 feet of the house that blew up.

Feb. oil production in Texas up from year ago

Crude oil production in Texas, the top oil producer in the US, reached 70.3 million barrels in February, up from 70.2 million barrels in February 2016, the Texas Railroad Commission said. Output from the Permian Basin in Texas has increased every month except for three since January 2016, according to the Energy Information Administration.

Permian Basin output expected to go up

Oil output in the Permian Basin may increase to 2.4 million barrels per day this month, the Energy Information Administration says. Closer well spacing, more efficient operations and the drilling of old vertical wells rather than new horizontal wells are contributing to higher output in the basin in western Texas and southeastern New Mexico, according to EIA staff.

Chevron: US shale not enough to meet global crude demand

US shale alone cannot satisfy the global oil demand, which is rising at a pace of more than 1 million barrels per day every year, said Chevron Chairman and CEO John Watson. In an interview with CNBC, Watson said shale can help, “but ultimately oil fields decline, and we’re going to need all sources of supply, including the shales, but also deepwater and other sources around the world.”

Centennial Resource Development expands Permian Basin position

Centennial Resource Development has agreed to acquire 11,860 undeveloped net acres in Lea County, N.M., from GMT Exploration, a $350 million cash deal that boosts its Delaware Basin holdings to 88,000 net acres. Centennial also said it was raising its 2020 oil production target to 60,000 barrels per day, up from 50,000 barrels per day.

EPA Dodges Trump’s Budget Ax, For Now

The U.S. Environmental Protection Agency’s slice of the $1 trillion budget that’s now making its way through Congress is only 1 percent smaller than its current funding level, a far cry from the 30 percent cut requested by President Donald Trump in March, and it’s not clear such drastic reductions will be achievable in the future.

Gas Cos. Want Arbitration For Pa. Shale Royalty Suits

A group of oil and gas companies including Chesapeake Energy Corp. and Anadarko Energy argued in a flurry of filings in Pennsylvania federal court Monday that a series of lawsuits in which hundreds of Marcellus Shale landowners alleged a monopolistic scheme to improperly deduct royalties belong in individual arbitration.

Hess Agrees To $3.75M Deal To End CO2 Royalties Row

Hess Corp. and a group of royalty owners on Monday told a New Mexico federal court that they had reached a $3.75 million deal to wrap up a class action accusing the company of undperpaying carbon dioxide royalties over an eight-year period.

Investigators link Colo. blast to abandoned gas line

Authorities investigating a fatal explosion in Firestone, Colo., have found that it was caused by a natural gas leak from an old underground pipeline that connected to an Anadarko Petroleum-operated well. The line was supposed to be out of service, but it was still filled with gas and leaked because of a cut about 10 feet from the house.

Anadarko Faces Shareholder Suit After Fatal Gas Explosion

A shareholder suit filed in Texas federal court on Wednesday alleges that Anadarko Petroleum Corp. lied about safety risks in its public filings prior to a fatal gas explosion that demolished a home in Colorado, arguing the company’s false disclosures cost investors money.

OPEC’s worst shale fears take the form of Diamondback Energy

Shale driller Diamondback Energy reported stronger-than-expected first-quarter results on Tuesday, with production up 61% year-on-year to 62,000 barrels of oil equivalent per day, even lower costs and cash margins up nearly $19 per barrel compared with a year earlier. Diamondback’s strong performance puts it on track to achieve double-digit growth at $50 oil, which demonstrates just how big of a nuisance US shale is and will continue to be to OPEC

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Samuel Lloyd Noble. Born in Ardmore, he was an oilman, philanthropist, and founder of the Noble Corporation. For more information on Mr. Noble, listen to Mr. Noble’s daughter, Ann Noble Brown, who participated in an oral history interview presented by Voices of Oklahoma and The University of Tulsa, Oklahoma Center for the Humanities. Ann reflects on the memory of her father, Lloyd who died February 14, 1950 at the age of 53 years old. – See more at: http://bit.ly/2pMfEU7

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Lloyd Noble 

Closing Thought:  Great minds discuss ideas; average minds discuss events; small minds discuss people. ~ Eleanor Roosevelt

 April 28, 2017

Supply & Demand

US crude oil stockpiles fell by 3.6 million barrels in the week ended Friday, a bigger decline than analysts had expected, according to the Energy Information Administration. However, gasoline and distillate supplies climbed by 3.4 million barrels and 2.7 million barrels respectively amid an increase in production at refineries.

Analysts warned that weak U.S. gasoline demand could weigh on crude prices in coming weeks unless demand spikes with summer driving season.

Despite a larger-than-expected falloff in crude inventories, the bottom line is we have more crude than we did last year and are well ahead of what we had for the five-year averages—we’re not running out of crude oil anytime soon.

According to oil and gas consulting services firm Rystad Energy, US shale oil output is expected to grow by 100,000 bpd each month for the rest of this year and into 2018 if oil prices hold around $50-$55 a barrel.

“We see a risk for a weaker oil price toward the end of the year… because shale is delivering so much oil,” CEO Jarand Rystad said.

Some experts, however, claim the possibility of a production cut extension by oil producers could support prices to hover around current levels.

OPEC is scheduled to meet on May 25 to discuss whether to extend output cuts of 1.2 million bpd for another six months.

Tom Ward Starts Mach Resources

Natural gas icon Tom Ward may be shopping for shale gas assets that were sold in 2011 by Chesapeake Energy Corp., the company he co-founded in 1989.

Ward, who’s starting Mach Resources with a partner, said in a Bloomberg Television interview Wednesday that the Fayetteville shale in Arkansas and Oklahoma is a “wonderful place to look for gas.” BHP Billiton Ltd., which purchased the Fayetteville assets from Chesapeake in 2011 for $4.75 billion, said it’s weighing a sale a little more than two weeks after billionaire Paul Singer proposed spinning off the mining company’s U.S. petroleum division. (Read More)

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M&A Outlook

For the majority of global oil and gas companies, 2016 was a tough year. Buffeted by the headwinds of depressed crude oil and natural gas prices, corporate profits were squeezed, sparking widespread restructuring, layoffs and bankruptcies.

According to business advisory firm Deloitte, the first half of 2016 saw the lowest number of deals and deal value in 5 years. In the past 12 months, the market produced fewer funding options, in terms of both equity and debt, for buyers of oil and gas assets.

Fast forward to 2017, and it is very much a buyers’ market in the oil and gas industry, but with some limitations. Purchasers are faced with creating more innovative ways of structuring deals and are increasingly required to negotiate with a wider group of stakeholders. Further complicating the M&A picture is the emergence of private equity and other financial buyers who, unaccustomed to normal industry practice, bring a vastly different approach to risk and costs.

With more quality oil and gas assets set to come onto the market in 2017, the outlook for M&A is brightening, especially compared to 2016. When one considers that the industry’s underlying fundamentals are improving, and corporate credit profiles are on the mend, then the prospect of more transactions becomes a reality.

———-

Factoid: Crude oil is measured in barrels, which are each equivalent to 42 U.S. gallons. One barrel of oil accounts for about 19.15 gallons of gasoline, 9.21 gallons of diesel, 3.82 gallons of jet fuel, 1.75 gallons of heating oil and about 7.3 gallons for other petrochemical products like tar, asphalt, bitumen, etc.

———-

Closing Oil and Gas Prices, Thursday, April 27th

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $45.50
Oklahoma Sour:
Sunoco Inc. — $33.50

Crude oil prices are down about 9 percent this year as rising U.S. production caps rallies fueled by short-selling and expectations that OPEC and other producer nations will extend a six-month deal to cut their output.

John Kilduff, founding partner at energy hedge fund Again Capital, believes oil prices could fall even further — to the November lows of $42 a barrel.

On Thursday, Brent crude futures fell 59 cents to $51.82 a barrel. U.S. West Texas Intermediate (WTI) crude futures closed down 65 cents at $48.97.
———-

Remember when: Oklahoma City Field- The Mary Sudik No. 1, “Wild Mary Sudik”, gusher did not blow until March 25, 1930—she sprayed an estimated 3,000 barrels an hour for the next 11 days.

———-

Natural Gas News

The EIA announced a 74 Bcf injection for the week ended April 21. The full range of forecasts ahead of the release was between a 62 Bcf and a 91 Bcf injection, with an average of a 72 Bcf build. The report is bearish again this week as the injection came in higher than most expectations.

Now For This Week’s Snippets:

Surge Of Blank Check Cos. To Oil Patch Won’t Last

A recent influx of private equity-affiliated blank check companies looking to buy private energy companies has injected additional deal-making juice into an industry recovering from a prolonged oil price slump, but experts say that wave may recede quickly as traditional initial public offerings for energy firms pick up again.

Anadarko shuts down thousands of Colo. wells

Anadarko Petroleum announced it was shutting down more than 3,000 vertical wells in northeast Colorado until deemed safe after two people died in a home explosion in the town of Firestone. The cause of the explosion remains unknown.

Drilling methods complicate mineral lease process

Horizontal and extended wells in Oklahoma are causing confusion among mineral owners whose interests include more than one drilling section, mineral managers told the Oklahoma chapter of the National Association of Royalty Owners convention last week. Despite a complicated mineral leasing and payment process, mineral owners in the state are excited about the increase in drilling, the managers say.

US shale resurgence stronger than OPEC can handle

OPEC’s plan to balance the global oil market with production cuts has been derailed by a stronger-than-expected US shale revival, driven by rapid progress, technological advances and higher price expectations. Increased shale activity has caused US crude production to surge by 550,000 barrels per day since OPEC announced in November that it would cut supplies, with production seen rising by 860,000 barrels per day by the end of this year, according to the Energy Information Administration.

Business is booming for Schlumberger’s US fracking segment

Schlumberger plans to bring back into service its entire fleet of hydraulic fracturing equipment this year and ramp up hiring as it seeks to capitalize on the renewed shale boom. The company managed to swing back to profitability in the first quarter of the year thanks to its US fracking business.

Texas city positions itself as hub for exports

Corpus Christi, Texas, is emerging as an oil export hub and alternative to overcrowded Houston as surging oil production in the Permian Basin and Eagle Ford is prompting more investments in pipelines running to the city, according to a Morningstar report. Two new pipelines have been proposed from the Permian to Corpus Christi, potentially adding 1 million barrels of daily capacity by the end of 2019.

Goldberg: Marcellus Shale investments increased eightfold in 2016

Asset and corporate acquisition investments in the Marcellus Shale increased eightfold in 2016 over 2015 levels, analyst Shelley Goldberg writes. The region holds 500 trillion cubic feet of natural gas, 50 trillion of which is recoverable, and is considered the next largest natural gas field globally.

Adams Resources Exploration to file for Chapter 11 bankruptcy protection

Adams Resources Exploration, the upstream subsidiary of Adams Resources & Energy, intends to file for Chapter 11 bankruptcy protection and conduct a sale process to shed its oil and natural gas exploration assets, which include stakes in about 470 wells spread across the Permian Basin, the Gulf Coast and the Haynesville Shale. Adams’ upstream operations took a back seat in recent years as the company increased its focus on its distribution and trucking businesses.

Halliburton Says Supplier’s IP Claims Vague, Seeks Sanctions

Halliburton Energy Services urged a Texas federal judge on Tuesday to dismiss trade secrets claims brought by machine supplier Legacy Separators LLC and to issue sanctions, arguing that after litigating for three years and racking up millions in attorneys’ fees, it still doesn’t know what secret it allegedly stole.

Analysis: Oil service costs to rise significantly this year

Oil field service costs could rise 15% on average this year and climb as high as 40% for certain equipment and services, potentially hurting drillers’ bottom line, according to a Wood Mackenzie report. The biggest increases will be recorded in West Texas oil fields, the report said, adding that companies with break-even costs below $40 per barrel would still be able to turn a profit.

BHP Billiton exploring sale of US shale gas assets

BHP Billiton is looking to divest its US natural gas assets in the Fayetteville Shale in Arkansas, last valued at $919 million, more than two years after it first attempted to sell them. News of a potential sale of the assets comes as activist investor Elliott Management is pressing BHP to spin off its US petroleum business.

After Rough Patch, Pa. Firms Bullish On Energy

Pennsylvania’s initial shale gas boom may be fully in the rear-view mirror, but after new well construction flatlined in 2015, energy lawyers in the state are seeing increased business and expressing renewed optimism — pointing to a surge in the title work that presages drilling and to increased downstream activities.

Bakken crude oil shipped to Asia for 1st time

The first-ever Asia-bound cargo of North Dakota Bakken crude oil departed the US in late March with Singapore as its destination, according to a shipping document. The shipment of more than 600,000 barrels of Bakken, Mars Sour and DSW crude, loaded by Mercuria Energy Trading, is expected to be the first of many to come thanks to the Dakota Access Pipeline, which will make it easier and cheaper to transport Bakken crude to the US Gulf Coast.

Rystad Energy: US shale a much bigger threat to OPEC than thought

US shale production could rise by 100,000 barrels per day every month this year and next if oil prices remain at current levels, potentially triggering a “volume war” between shale drillers and OPEC that could lower oil prices again, Rystad Energy CEO Jarand Rystad said. “A volume war is if they do not extend the production cuts and bring all the fields back into production,” Rystad added.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on H. H. Champlin a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: H. H. Champlin 

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Closing Thought: “Everything we hear is an opinion, not a fact. Everything we see is a perspective, not the truth.” – Marcus Aurelius

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April 21, 2017

OPEC cut doubts put oil on track for biggest weekly drop in a month

There’s a lot of talk the OPEC agreement is going to be extended, but we have a full month to go before the OPEC talks are held.

Both oil benchmarks fell this week as doubts emerged over the effect of the OPEC/non-OPEC production cut by almost 1.8 million barrels per day (bpd) during the first half of the year.

Saudi Arabia and Kuwait, key members of the Organization of the Petroleum Exporting Countries, favor extending their production-limiting deal with non-member producers into the second half of the year.

Russia’s Energy Minister Alexander Novak, however, declined to say whether the top oil producer would adhere to an extension before a joint meeting on May 25, saying global stocks were declining.

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Earnings

Schlumberger posts $279M profit after previous quarter loss

Increased hydraulic fracturing in the United States helped lift Schlumberger back into profitability in the first quarter after a loss in the previous three months.

But even as sequential quarterly earnings improved, the largest oil field service company reported a decline in net income to $279 million, or 20 cents a share, compared to $501 million, or 40 cents a share, in the same period a year ago. Revenues rose from $6.5 billion to $6.9 billion.

Analysts on average had estimated revenue of $6.96 billion.

Schlumberger said a ramp up in drilling activity in North America boosted pricing for its oilfield services, but the cost of reactivating equipment idled during the slump in crude oil prices gutted margins.

Rivals Halliburton Co and Baker Hughes Inc are set to report results early next week.

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Factoid: The largest environmental fine in U.S. history is $18.7 billion, which was given to BP for its oil spill in the Gulf of Mexico in 2010, the worst offshore oil spill ever in the U.S.

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Closing Oil and Gas Prices, Thursday, April 20th

Oklahoma crude oil prices as of 5 p.m. Thursday:

Oklahoma Sweet:
Sunoco Inc. — $46.50o
Oklahoma Sour:
Sunoco Inc. — $34.50

U.S. oil prices fell nearly 4 percent Wednesday, reaching a session low of $50.28 per barrel and marking their biggest daily percentage decline since early March, as inventories posted a less-than-expected decline for the week.

On Thursday, Brent crude futures climbed slightly to $52.99 a barrel. U.S. West Texas Intermediate (WTI) crude futures closed at $50.71.

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Remember when: On April 15, 1897, the Nellie Johnstone No.1 well became the first producing oil well in Oklahoma Territory. It produced more than 100,000 barrels of oil in its lifetime.

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Natural Gas News

U.S. natural gas futures edged lower on Thursday, holding on to losses after data showed that natural gas supplies in storage in the U.S. rose more than expected last week. Data from the U.S. Energy Information Administration Thursday showed that domestic supplies of natural gas rose by 54 billion cubic feet for the week ended April 14. Analysts polled by S&P Global Platts expected an increase of between 47 billion and 51 billion cubic feet. Total stocks now stand at 2.115 trillion cubic feet, down 368 billion cubic feet from a year ago, but 282 billion cubic feet above the five-year average, the government said.

Now For This Week’s Snippets:

IEA forecasts weaker global oil demand growth in 2017

Flat oil demand in the US and other countries such as Russia and India will have a greater impact on global oil demand growth than initially expected, with the International Energy Agency forecasting a demand increase of 1.3 million barrels of oil per day for 2017, down from a previous forecast of 1.4 million barrels per day. Meanwhile, the IEA expects production to climb by 485,000 barrels per day this year, compared with a drop of 790,000 barrels per day in 2016.

Investors step up funding for US shale drillers

Energy companies raised $19.8 billion in private equity funds in the first quarter of 2017, a nearly threefold increase from the same period of 2016, according to data provider Preqin. A large portion of that amount benefited shale producers, who are enjoying ever-declining costs, giving investors confidence that shale projects can offer returns with oil prices in the $40 to $55 per barrel range.

Williams Partners steps up gas efforts with sale of petrochemical plant

Williams Partners is selling its 88.46% interest in an olefins plant in Geismar, La., to Nova Chemicals for $2.1 billion in cash in a move that reflects the company’s desire to increase its focus on natural gas. Proceeds from the sale will be used to pay off debt and cover capital and investment costs.

ConocoPhillips sheds energy assets

ConocoPhillips Chairman and CEO Ryan Lance said output from shale drilling will help the company maintain production after selling $30.8 billion worth of oil and gas assets in the last six years. The company plans to sell almost 30% of its proved reserves to reduce debt and generate returns for stockholders.

Surge in US LNG exports a concern for manufacturers

Growing US liquefied natural gas exports threaten to shrink domestic supply and consequently raise prices for US consumers, the Industrial Energy Consumers of America wrote in a letter to Energy Secretary Rick Perry. In the letter, the manufacturing association also urged the Trump administration to reject new export permits and instead promote cheap natural gas as a means of creating jobs.

EIA: US shale production to post biggest increase in 2 years in May

US drillers are expected to boost shale production by 123,000 barrels per day to 5.19 million barrels per day in May, representing the biggest surge in output since February 2015 and the highest production level since November 2015, according to the Energy Information Administration. Natural gas production is also poised to increase by 0.5 billion cubic feet per day to a record 50.1 billion cubic feet per day in May.

PE-Backed Blank Check Co. TPG Pace Energy Files $600M IPO

TPG Pace Energy Holdings Corp. filed a $600 million initial public offering Monday, marking the latest of several private equity-affiliated blank check companies to seek money for an energy acquisition.

Even with high production, fewer wells completed in Permian Basin

February oil and natural gas production rose in the Permian Basin for the first time since 2014, indicating more drilling driven by higher prices, according to the most recent Texas Permian Basin Petroleum Index. However, there were fewer well completions, reflecting producers’ more careful shift toward monitoring each well’s activity before drilling.

Ring Energy expands Permian Basin footprint

Midland, Texas-based Ring Energy has acquired an additional 33,000 acres in the Permian Basin in a $16.6 million deal that brings its position in the play to 63,000 net acres. “Our drilling inventory is such that we can stay very busy for a number of years even if we choose to accelerate the program by adding additional rigs,” said Ring Energy Director and CEO Kelly Hoffman.

Economist hails recovery for Texas oil and gas

Karr Ingham, an economist with the Texas Alliance of Energy Producers, says the industry is steadily recovering from its worst recent downturn, as it recorded its fourth straight month of increased output on the Texas Petro Index. The rise is mainly attributed to the OPEC production cut, although the index is still around half the level of its November 2014 peak.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on H. H. Champlin a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: H. H. Champlin 

April 14, 2017

OKC Based Tapstone Files For $100 Million IPO

The Oklahoma City-based E&P Tapstone Energy Inc., filed for an IPO of up to $100 million as disclosed in regulatory filings on April 13. Tapstone claims to hold the largest contiguous leasehold position in the Northwest Stack Play,

The company’s acreage position in the Northwest Stack Play consists of about 200,000 net acres and is situated in Dewey, Woodward, Ellis and Major counties in Oklahoma, SEC filings said. Tapstone also holds an additional 220,000 net acres throughout the Anadarko Basin in Oklahoma, Texas and Kansas.

The company applied to the New York Stock Exchange to be listed under the symbol “TE.” Bank of America Merrill Lynch and Citigroup are underwriters to the IPO, according to Tapstone’s filings with the Securities and Exchange Commission (SEC).

Formed back in 2013 by its former CEO Tom Ward, Tapstone was funded by GSO Capital Partners LP, a subsidiary of The Blackstone Group LP.

“We began assembling our acreage position through a grassroots leasing program that we commenced in September 2014. As a result of our early identification of the resource potential of the Northwest Stack, as well as the general weakness in the oil and gas industry at the time, we were able to assemble a large, contiguous block of acreage in the Northwest Stack, which we do not believe would be possible to replicate in today’s market,” the company said in SEC filings.

Steven C. Dixon is the current chairman, president and CEO of Tapstone. Dixon has more than 36 years of experience in the oil and gas industry, according to filings, and was previously with Chesapeake Energy Corp. (NYSE: CHK). Dixon replaced Ward as Tapstone’s CEO in January after Ward left to focus on a new venture to be based in Oklahoma City.

Austin Atty Pleads Guilty To $30M Oil, Gas Securities Fraud

A Texas attorney and his business partner pled guilty Tuesday to two counts each of wire fraud and securities fraud stemming from charges they defrauded investors by convincing them to invest $30 million in fake entities they claimed were purchasers of oil and gas royalties

Robert Allen Helms and Janniece S. Kaelin, both of Austin, each pleaded guilty Tuesday to securities fraud and conspiracy to commit securities fraud and mail fraud.

Helms and Kaelin face up to 10-year federal prison terms and making restitution over what investigators have called a Ponzi scheme. Authorities say clients were defrauded between 2010 and 2013, with funds meant for energy-related investments instead used for personal expenses of Helms and Kaelin.

Prosecutors say Helms and Kaelin operated Austin-based Vendetta Royalty Partners and forged documents to create the appearance of mineral and royalty operations.
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Factoid: The natural gas distribution pipelines in the US alone could stretch from Earth to the Moon 7-8 times.

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Closing Oil and Gas Prices, Thursday, April 13th

Oil prices were little changed on modest volume on Thursday, in a week where crude benchmarks recouped more of March’s losses on increased hopes world supply and demand were nearing balance.

The oil market is “slowly but surely” reaching a balance as a result of the success of the OPEC production deal, the head of the oil industry and markets division at the International Energy Agency (IEA), told CNBC on Thursday.

On Thursday, Brent crude futures climbed to $55.89 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose to $53.18.
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Remember when: In 1901 one of the largest and most significant oil strikes in history occurred near Beaumont, Texas, on a mound called Spindletop.

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Natural Gas News

U.S. energy firms are scrambling to finish a slew of pipelines that will unleash rich reserves of shale gas in Pennsylvania, West Virginia and Ohio as the nation prepares to become one of the world’s top natural gas exporters.

The pipelines are expected to boost output from shale fields in the three states by giving producers access to new domestic and international markets.

Those states could supply about a third of all U.S. natural gas once the pipeline expansion is complete, up from about 25 percent now, according to projections from the U.S. Energy Information Administration (EIA).

Now For This Week’s Snippets:

Antero Resources Ducks W.Va. Landowner’s Drilling Suit

A West Virginia federal judge on Friday tossed a landowner’s suit accusing Antero Resources Corp. of unauthorized drilling on her land, saying she can’t escape agreements allowing the energy company to drill a trio of wells and lease her mineral estate.

Okla. Fracking Earthquake Suit Heads Back To State Court

A federal judge on Wednesday remanded to state court a suit claiming the fracking operations of two oil companies caused destructive earthquakes in an Oklahoma county, ruling Oklahoma district court doesn’t have jurisdiction over the case since proposed class members don’t include those who reside on tribal or federal lands.

Seventy Seven Energy Investor Says Merger Details Lacking

An investor in Seventy Seven Energy Inc. filed suit Friday in Delaware Chancery Court alleging a proxy detailing the company’s merger with Patterson-UTI Energy Inc. failed to disclose the company’s internal projections of future performance and seeking to halt an upcoming shareholder vote on the $1.76 billion deal.

Mont. bill would force companies to reveal fracking chemicals

The Montana Legislature is considering a bill that would change the state’s current fracking disclosure rules, requiring energy companies to divulge the chemicals they use in the hydraulic fracturing process. The bill would require companies to submit chemical information to the state’s Oil and Gas Conservation Board, which would decide whether the information is confidential and would need a court order to be released.

Bonanza Creek Energy ready to emerge from bankruptcy protection

Bonanza Creek Energy said it plans to exit bankruptcy protection by the end of April after the US Bankruptcy Court in Delaware approved its reorganization plan. As part of the restructuring, Bonanza will convert $867 million in unsecured debt, get rid of $50 million in annual interest and hold a rights offering to raise $200 million.

Okla. oil, gas companies drilling longer wells

Oil and natural gas companies are deploying longer horizontal wells to Oklahoma’s SCOOP and STACK shale plays thanks to a combination of geological factors and improved well economics and processes. As a result, prices for acreage in the area are ticking up as promising results prompt companies to focus their capital and efforts on big wells.

Texas drilling permit applications surged in March

The Texas Railroad Commission issued 1,310 oil and natural gas drilling permits in March, up from 511 a year earlier, mostly in the Permian Basin. However, well completions declined year over year, down 60% to 77 for natural gas wells and 44% to 533 for oil wells.

EOG Resources’ newly completed Permian well could be next hot shale spot

EOG Resources has recently completed a new well in Loving County, Texas, in the Permian Basin’s Delaware Basin lobe with strong results, which suggests the area may present massive opportunities for EOG, Concho Resources, Energen, Matador Resources and WPX Energy, according to SunTrust Robinson Humphries analysts. Based on the results for other recently drilled wells in the Delaware Basin, the four companies’ drilling locations in the area could spearhead their production growth and help them beat their own expectations for the year.

Oil, gas industry concerned over requirement to buy American steel, pipe

A coalition of oil and natural gas industry trade groups including the American Petroleum Institute has voiced concern over President Donald Trump’s directive requiring energy companies to use US-made steel and pipe in their infrastructure projects. Industry players and their representatives argue that the uncertainty the policy has created could lead to infrastructure project delays and cancellations and reduced investments.

API: Overall drilling activity declined in 2015, but shale proved resilient

The American Petroleum Institute’s 2015 Joint Association Survey on Drilling Costs revealed that overall spending on drilling fell 27.2% to $122.8 billion in 2015 while the number of drilled oil and natural gas wells plunged by 37.6% over 2014 to 28,809. Shale provided a bright spot for the industry, accounting for 47.7% of all drilling spending for the year, while the number of shale wells remained at about the same level compared with 2014.

EIA: Shale to push US oil production near record levels

US oil production could average 10.1 million barrels per day by the end of 2018, up from the current 8.96 million barrels per day, bringing output levels within 30,000 barrels of a record high recorded in November 1970, according to the Energy Information Administration. The agency lowered its projections for US oil prices, expecting them to average $52.24 per barrel in 2017 and $55.10 per barrel in 2018.

Price gap between Midland crude, US benchmark keeps widening

The discount for Midland crude compared with the US benchmark reached its widest level since April 2015 last week, trading at a discount of $1.65 per barrel, down from a premium of $1.05 per barrel four months ago. “Aggressive Permian production growth alongside regional refinery outages and weaker export demand for shale crude has forced heavy discounts for Midland crude,” said Energy Aspects analyst Dominic Haywood.

Vine Resources to go public

Plano, Texas-based Vine Resources seeks to raise up to $500 million in an initial public offering on the New York Stock Exchange, according to a Securities and Exchange Commission filing. Vine is a natural gas exploration and production company focused on the Haynesville Basin.

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Closing Thought: “The path in front of you is rarely a straight line.” ~Ellen Bennett

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PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on E. W. Marland, a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: E. W. Marland

April 7, 2017

Last nights attack on Syria and the President’s developing role in geopolitics and the after effects of those dynamics on oil prices are factors on which to keep a close eye. The U.S. airstrike consisted of 59 Tomahawk missiles. The missiles targeted the Shayrat air base near Homs, and were in response to a Tuesday chemical weapons attack.

The attacks last night had no dramatic effect on oil prices as the Friday markets reflect only sight increases in the front month contracts for both Brent crude and WTI.

Further volatility in the oil markets may come from what occurs between the U.S. and Russia. The U.S. missile strike could make it all but impossible to improve relations. The attack last night comes ahead of U.S. Secretary of State Rex Tillerson’s trip to Moscow next week.

EIA reports surprising jump in US crude inventories
US crude stockpiles expanded by 1.6 million barrels in the week ended Friday, missing expectations for a decrease of 435,000 barrels, according to the Energy Information Administration. Gasoline inventories dropped by 618,000 barrels, less than expected, while distillate supplies were down 536,000 barrels, also missing forecasts.

The rise in inventories indicates that the supply glut position in the market is increasing, which adds more uncertainty to the movement of crude oil prices.
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Factoid: The US has 4% of the world’s population but consumes 25% of the world’s crude oil.

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Closing Oil and Gas Prices, Thursday, April 6th

Oil prices rose more than 1 percent on Thursday, on track for a fourth straight day of gains, but analysts remained cautious about record-high U.S. crude inventories.

Brent crude futures climbed to $54.89 a barrel. U.S. West Texas Intermediate (WTI) crude futures rose 55 cents a barrel to $51.70. WTI touched a session high of $51.82 a barrel on Thursday.
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Remember when: 1973-1974 – Due to US support of Israel in the Arab-Israeli conflict, the members of OPEC decide to raise the cost of oil from $3/barrel to around $12/barrel.

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Natural Gas News

Natural gas futures jumped nearly 2 percent following a report indicating natural gas supply growth may have already peaked. Natural gas inventories rose by only 2 billion cubic feet following last week’s 43 billion cubic feet draw, far short of expectations that supply would rise by 7 billion cubic feet.

Although natural gas has not returned to its 52-week low of $2.64, which it reached in April 2016, the energy commodity has seen greater volatility in recent weeks due to unseasonably warm weather crimping the commodity’s bull run at the start of 2017. From the middle of February to today, natural gas reversed course and remains 8.8 percent up from the start of the year.

Now For This Week’s Snippets:

$5M Continental Oil Settlement Wins Initial Approval

A $5.1 million deal to settle a class action alleging oil producer Continental Resource Inc. failed to pay interest on some well royalties received preliminary approval from an Oklahoma federal judge Thursday.

Judge Certifies Class In Colo. Gas Royalty Payment Fight

A Colorado magistrate judge on Friday certified a class action filed by natural gas royalty owners accusing Augustus Energy Resources LLC of underpaying royalties, saying they’d established common allegations that the driller improperly deducted post-production costs despite varying language on the issue contained in lease agreements.

Oklahoma Judge Tosses Enviros’ Fracking Earthquake Suit

An Oklahoma federal judge on Tuesday dismissed environmentalists’ lawsuit against a Chesapeake Energy Corp. unit and two other oil companies alleging that their fracking disposal wells are causing Oklahoma’s increase in earthquakes, saying that the court doesn’t know enough about earthquake science to rule on the case.

Enable Midstream, Newfield Exploration sign gas transportation deal

Enable Midstream Partners has signed an agreement with Newfield Exploration to transport up to 205 million cubic feet of natural gas per day from Oklahoma’s STACK shale play to gas markets in a move that could boost drilling in the region. “There’s a lot of development that can take place in the SCOOP and STACK, but that’s only going to happen if we can solve this issue of being sure we can get the associated natural gas produced with the oil to market outside the Anadarko Basin,” Enable Midstream President and CEO Rod Sailor said.

Increase in drilling prices signals balancing oil market

The producer price index for well-drilling climbed by 8.7% in February from January, the biggest increase since 2005, in a sign that the oil markets are finding a balance. “Oil prices look to have entered Phase 2 of the commodity bear super-cycle; low and range-bound price action ($30 to $60), as the market recalibrates,” said Wells Fargo Investment Institute Head of Real Asset Strategy John LaForge, noting that Phase 1 was represented by the oil price crash between 2014 and 2016.

What makes the Permian Basin so important

Land prices have risen sharply in the oil-rich Permian Basin, ranging from $32,000-$54,000 per acre, but Seaport Global Securities’ managing director and head of exploration and production research Mike Kelly said “the Permian deserves every ounce of investor love.” Kelly said money keeps flowing into the Permian because of the multiple zones that can offer returns at $40-per-barrel oil and potentially produce wells yielding 3 million barrels in estimated oil recoveries, while prices per acre could hit $223,000 in the future, making present investments in the Permian look cheap.

Edge Natural Resources Rakes In $650M For 2nd Fund

Dallas-based private equity firm Edge Natural Resources LLC, has closed its second fund after collecting $650 million from limited partners, the firm said on Tuesday, with plans to invest in North American gas and oil companies.

Surge in crude production pushes US petroleum exports to record

Government data show the US exported a record of 5.69 million barrels of crude and petroleum products per day in January as crude production for the month climbed to 8.84 million barrels per day. Crude exports were up 69% to 746,000 barrels per day.

Texas oil production growing faster than pipelines can handle

West Texas drillers are facing a shortage of pipeline space as the state’s pipeline network is unable to keep up with the fast-growing oil production in the region. This threatens to lower crude prices just like what happened three years ago, with West Texas Intermediate crude at Midland, Texas, already having dropped to its lowest level since September.

Bonanza Creek Defends Ch. 11 Plan Ahead Of Confirmation

Bankrupt oil driller Bonanza Creek Energy Inc. defended its proposed Chapter 11 plan of reorganization Friday, saying the company’s debt-for-equity swap with noteholders enjoys widespread support among most parties, except for a group of equity holders opposing the plan.

Chevron steps up Permian Basin development efforts

Chevron is shelving plans for new multibillion-dollar projects and increasing its bets on US shale, with Chevron Chairman and CEO John Watson saying that shale plays are now some of the best assets in the company’s portfolio. Chevron controls 2 million, mostly royalty-free acres in the Permian Basin, which could yield over 700,000 barrels of oil per day within a decade — eight times more than current production volume.

Oilfield investments grew to 5-year high after OPEC deal

US oil companies raised capital spending by $4.9 billion combined in the fourth quarter of 2016, which represents an increase of 72% compared with the fourth quarter of 2015 and the biggest increase in five years, according to the Energy Department. Before the recovery, combined oilfield spending for the 44 oil producers reviewed by the Energy Department had dropped by $475 million partly because of reduced oil production.

Oil majors having a hard time balancing the books

Big Oil companies such as Chevron, ExxonMobil, BP and Royal Dutch Shell failed to turn a profit or at least become cash-flow neutral in 2016 and ended the year with more debt than they had at the beginning of it, a Wall Street Journal analysis shows. The hefty dividends the companies pay to shareholders, which are at the same level they were when oil prices were above $100, and capital investments are two factors weighing on their finances.

Production costs drop in Permian Basin

The $36-per-barrel cost of oil production in the Permian Basin’s Midland region in Texas is about half of what it was in 2014. The Permian contains almost half of all rigs operating in the US and leads other US shale fields in cost savings, which resulted from lower drilling prices and more efficient operations.

Lower 48 natural gas production continues to fall

The Lower 48 states produced 78.3 billion cubic feet of natural gas per day in January, down from 78.7 billion cubic feet per day in December, marking the second consecutive month of declines, according to the Energy Information Administration. Output declined in Texas and Oklahoma, but remained steady in Pennsylvania.

Seadrill Says Future Could Include Ch. 11

Offshore driller Seadrill Ltd. is likely facing a formal restructuring in coming months, even as lenders have cooperated to push back impending maturation dates on $2.9 billion worth of debt, it said Tuesday.

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Closing Thought:  “We are kept from our goal not by obstacles but by a clear path to a lesser goal.” ~Robert Brault

——

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks new presentation is on E. W. Marland, a man who made fortunes in oil in Pennsylvania in the 1900s and in Oklahoma in the 1920s, and lost each in the volatility of the industry and the times. He became a politician who was a U.S. Congressman and Oklahoma governor.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: E. W. Marland

March 31, 2017

The market is dealing with fears of oversupply as OPEC struggles to tighten the oil market because inventories in many parts of the world are at, or near record highs and as U.S. production rises.

Both WTI and Brent have traded more than 6% lower year to date but oil prices climbed for a third day onThursday to their highest in three weeks after Kuwait gave its backing for an extension of OPEC production cuts in an attempt to reduce global oversupply.

Kuwait oil minister Essam al-Marzouq said his country was among several nations supporting the extension of a deal between OPEC and other exporters to limit output, state news agency KUNA reported.

Data from the U.S. Energy Information Administration released Wednesday revealed an increase in domestic-crude supplies to another record, but also showed larger-than-expected declines in gasoline and distillate supplies and refiners processing oil at a higher rate.

Drilling Continues

According to Baker-Hughes, as of March 24 there were 809 rigs operating in the United States, and 49.9 percent of them were drilling in Texas.

Of the 404 rigs currently making holes in Texas, 77 percent of them are working in the Permian Basin — 313 rigs total.

Those numbers represent an increase at every level over last year’s count.

At this time last year, there were 464 rigs operating in the U.S., with 209 in Texas; 70 percent of rigs at that time were drilling in the Permian Basin (147).

Takeaway: Oil and gas activity is continuing to grow even with low oil prices.

Factoid: Sand costs now represent 30% to 60% of frack costs per stage and are set to become nearly 15% of well costs by 2018.

Closing Oil and Gas Prices, Thursday, March 30th

Oil prices rose for a third straight session Thursday, with U.S. benchmark crude topping $50 a barrel. Brent crude closed at $53.13 per barrel (bbl). U.S. West Texas Intermediate crude closed at $50.35/bbl, after touching $50.46.

Remember when: Oil hit a 13-year low of just above $26 a barrel in February 2016.

Natural Gas News

U.S. natural gas futures declined on Thursday, holding on to losses after data showed that natural gas supplies in storage in the U.S. fell broadly in line with market expectations last week.

U.S. natural gas for May delivery settled down at $3.19 per million British thermal units.

The U.S. Energy Information Administration said in its weekly report that natural gas storage in the U.S. declined by 43 billion cubic feet in the week ended March 24, compared to forecasts for a drop of 42 billion.

Now For This Week’s Snippets:

US drillers rush to hedge higher oil prices

Hedging activity surged by 33%, or 648,000 barrels a day of new oil hedges, in the fourth quarter of 2016 from the third quarter as US oil producers sought to protect themselves against any losses caused by prices below $50 a barrel by locking in higher prices between $50 and $60 a barrel for their oil, according to a Wood Mackenzie analysis of 33 producers. However, the consultancy warned that the surge in hedging will likely worsen the oil supply glut as drillers continue to ramp up production.

Supercomputer helps ExxonMobil optimize efforts

ExxonMobil is using a supercomputer with 716,800 processors to simulate reservoirs. The simulations, which show rock and fluid conditions over the drilling period of an oil or natural gas field, help the company plan more efficiently and make better predictions.

Okla. Tribal Landowners Get Pipeline Kicked Off Property

An Oklahoma federal judge on Tuesday ordered Enable Midstream Partners LP to remove a natural gas pipeline from land held in trust for a group of tribal landowners by the federal government, ruling that the company is liable for trespassing on the landowners’ property.

Keystone Challengers Unlikely To Trump Presidential Permit

President Donald Trump’s approval of a cross-border permit for the Keystone XL pipeline will ignite a lengthy legal firestorm over the controversial project, but experts say overturning the presidential permit will be difficult for pipeline opponents and a better chance of success lies in challenging federal environmental permits and state-level actions.

Number of drilled but uncompleted wells reaches record

US shale producers are leaving thousands of wells unfinished in the Permian Basin, with the number of drilled but uncompleted wells hitting a record of 1,764 in February, government data show. This suggests that rig count data is not a reliable indicator of production as many companies drill wells just because they are forced to do so to retain their leases.

Anadarko cuts jobs after Eagle Ford asset divestiture

Anadarko Petroleum cut 60 jobs last week following the company’s sale of its Eagle Ford Shale assets to Sanchez Energy and the Blackstone Group for $2.3 billion. The asset package included 155,000 net acres in Texas’ Dimmit and Webb counties with daily production of 45,000 barrels of oil and 131 million cubic feet of natural gas.

Samson, Magnum Hunter End $17M Claims Fight In Del. Ch. 11

Samson Resources Co. withdrew more than $16.8 million in oil and gas well claims against a bankruptcy successor to Magnum Hunter Resources late Thursday, citing an earlier settlement deal to wind up loose ends trailing both companies’ confirmed Chapter 11 reorganization plans.

Haynesville Shale activity surges again

Activity at the Haynesville Shale in northwest Louisiana and eastern Texas dropped off in recent years because of lower-cost natural gas supplies elsewhere, but activity has been renewed thanks to pipeline complications in the Northeast. Gas rates have gone up and rig counts have increased to 37 since November at the formation, which produces about 6.3 billion cubic feet of gas per day and is estimated to hold almost 500 trillion cubic feet.

Shell, Anadarko reflect on Permian joint venture

Royal Dutch Shell and Anadarko Petroleum may decide against renewing their 10-year Permian Basin joint venture agreement, set to expire this summer, in a bid to accelerate development of their respective activities in the area. One proposed course of action involves dividing the land between the two sides into “two 100% owned and operated parcels,” said Greg Guidry, head of Shell’s unconventional business.

JV announced by Schlumberger, Weatherford

Oilfield service giants Schlumberger and Weatherford on Friday announced OneStim, a North America-focused joint venture that will provide services and technologies related to the process of producing shale oil and natural gas, such as hydraulic fracturing. The joint venture will be 70% owned by Schlumberger, with Weatherford set to receive $535 million from its joint venture partner.

Devon Energy looks to double number of US rigs

Devon Energy plans to have 20 rigs by the end of 2017, up from 10 in 2016, but said it will double its rig count without hiring new employees or increasing administrative costs. “If we are fortunate enough to have the right commodity price environment where we can continue to expand the capital program in 2018, we see very little need for increased staffing in order to accomplish that,” said Devon CEO and President Dave Hager.

US on track to become net natural gas exporter in 2018

The US in 2018 is expected to become a net exporter of natural gas for the first time in six decades and earn the title of the third-largest liquefied natural gas exporter in the world, all thanks to the shale revolution. LNG export capacity in the contiguous 48 states is seen topping 6 billion cubic feet per day by the end of 2018, representing 8% of domestic consumption.

Permian drillers evade acquisition costs by trading land

Instead of paying as much as $60,000 per acre in the Permian Basin, shale drillers such as Parsley Energy, Double Eagle Energy Permian and Pioneer Natural Resources are rushing to trade land with competitors in win-win deals that allow them to drill longer laterals while preserving the value of their acreage. Double Eagle co-founder and co-CEO John Sellers said land, not money, is the real currency in the Permian, adding that “you have to have acreage they need as much as you need acreage from them.”

Permian may be more promising than Eagle Ford for ConocoPhillips

ConocoPhillips controls 200,000 net acres in the Eagle Ford, and although it’s not the biggest position compared with other companies, it’s probably the best, boasting 3,500 remaining drilling locations profitable under $50 a barrel with an estimated resource potential of 2.4 billion barrels of oil equivalent, writes Matthew DiLallo. Conoco’s 1 million-acre position in the Permian Basin may hold even more potential and become the company’s future growth driver, especially considering that its 75,000-acre foothold in the Delaware Basin is estimated to hold 1.8 billion barrels of recoverable resources profitable under $50 a barrel.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Robert Hefner III, the father of deep natural gas and great prognosticator of the Anadarko Basin. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert Hefner III

March 24, 2017

OIPA presents awards to Oklahoma energy industry leaders

The Oklahoma Independent Petroleum Association’s Wildcatters Gala was held at the Skirvin Hotel in Oklahoma City this week and recognized Aubrey McClendon’s role in launching the American energy renaissance as co-founder of Chesapeake Energy Corp.

A “short memory and a thick skin” were among the traits that made Aubrey McClendon an energy industry leader, Jack McClendon said of his late father Tuesday evening as he accepted a “legend of the industry” award on behalf of the McClendon family.

“My father was a visionary who early on recognized that, by combining horizontal drilling and hydraulic fracturing techniques, we could commercially develop the bountiful, unconventional oil and natural gas resources in our country,” McClendon said. “He combined that vision with his indomitable work ethic to help revolutionize the U.S. energy industry, much to the chagrin of the industry naysayers and others who doubted that the vast amount of hydrocarbons trapped in tight rock could be unlocked.”

Jeff McDougall, OIPA chairman and president and owner of JMA Energy Co., introduced a video honoring Aubrey McClendon’s leadership and philanthropy with remembrances from friends, colleagues and elected officials.

Aubrey McClendon died in an automobile crash in Oklahoma City in March 2016. He was 56.

Factoid: US independence on imported oil peaked in 2005.

Closing Oil and Gas Prices, Thursday, March 23rd

Oil prices extended their streak of losses on Thursday, as traders focused on the persistent oversupply of crude in the global market that has weighed on prices in recent years.

Oil prices saw a late-session surge on Wednesday, but still closed lower. Data early Wednesday from the U.S. Energy Information Administration showed that U.S. crude supplies rose by 5 million barrels to a record high of 533.1 million barrels.

On Thursday, May West Texas Intermediate crude CLK7 settled at $47.70 a barrel on the New York Mercantile Exchange. May Brent crude LCOK7 closed down at $50.56 a barrel on London’s ICE Futures exchange.

Natural Gas Outlook

Natural gas inventories and prices
Natural gas prices are impacted by the spread between natural gas inventories and their five-year average. Over the past ten years, whenever natural gas inventories have been higher than their five-year average, prices have fallen.

Recent natural gas inventories and prices
Last winter, natural gas usage for heating was weak due to mild temperatures. At the end of March 2016, US natural gas inventories were at 2.5 trillion cubic feet—67.0% higher than the levels in 2015 and 53.0% higher than the five-year average. As a result, natural gas futures hit a 17-year low of $1.64 on March 3, 2016.

At the start of the injection season on April 1, 2016, the spread between natural gas inventories and their five-year average was at its widest since April 2012. However, the spread narrowed in subsequent months. In the week ending on December 16, 2017, inventories fell below their five-year average for the first time in 19 months. Natural gas active futures prices rose 53.9% between April 1, 2016, and March 22, 2017.

The spread reversed in the week ending January 27, 2017. During the week ending March 10, 2017, natural gas inventories were at 2,242 Bcf—21.4% more than the five-year average. In the six weeks since the reversal, natural gas prices have lost 11.2%. However, inventories are 9.5% lower than they were last year, which should ensure that prices don’t fall to the lows we saw at that time.

Now For This Week’s Snippets:

IPO activity across US shale industry to spike in 2017

The number of drillers, oilfield service companies and pipeline operators expected to go public this year could surge to 30, with a combined value estimated at $8.5 billion, which is close to four times more than in 2016, according to Credit Suisse. Oilfield service companies are expected to account for half of the initial public offerings.

US shale gas commands record prices overseas

Importers of US shale gas paid a record of $7.52 per million British thermal units of liquefied natural gas shipped from Cheniere’s Sabine Pass export terminal in January, up from a high of $6.21 last year. The volume of LNG exported in January and February also climbed to a record of 15 tankers, headed mainly to Mexico, China, Japan and Jordan.

Phillips 66 unveils plans to build Rodeo pipeline in Permian

Houston-based Phillips 66 has announced the Rodeo project, a 130-mile pipeline that would transport oil from Texas’ Reeves County in the Permian’s Delaware sub-basin to the Odessa-Midland area. The pipeline will have an initial capacity of 130,000 barrels of crude per day and is expected to be completed in the second half of 2018.

Kinder Morgan to build natural gas pipeline in Permian Basin

Kinder Morgan on Wednesday unveiled plans for a 430-mile, 42-inch pipeline that would transport natural gas from Waha, Texas, in the Permian Basin to Agua Dulce in the Corpus Christi area. The project is expected to be completed in late 2019.

Marathon Oil boosts Permian position in $700M deal

Marathon Oil announced plans to acquire 21,000 net acres in the Northern Delaware Basin of the Permian Basin for $700 million in a move that will boost its Permian foothold to 90,000 net acres. News of the acquisition comes less than two weeks after Marathon said it would pay $1.1 billion for over 70,000 net acres in the Permian.

EIA: US crude production decreased in 2016

The US produced an average of 8.9 million barrels of crude oil per day in 2016, down from 9.4 million barrels of oil per day in 2015, despite production growth in the Permian Basin and record high average daily output in the Gulf of Mexico, according to the Energy Information Administration. US crude exports surged 12% to 520 thousand barrels of oil per day, while inventories rose by 35 million barrels to 484 million barrels by the end of the year.

Oil majors are doubling down on US shale

Big oil companies such as Chevron, ExxonMobil and Royal Dutch Shell are leaving huge projects behind in favor of fast-growing US shale with plans to invest a combined $10 billion in US shale fields in 2017, up from close to zero a few years ago. This shift will likely raise US production further, keeping oil prices down, and transform US shale with projects such as the Bongo 76-43 in the Permian Basin, where Shell plans to break with tradition and drill five wells in a single pad for the first time.

Goldman Sachs warns of oil oversupply

The US shale revival along with new oil production projects could add one million barrels of extra oil per day, potentially causing an oversupply in the next two years, Goldman Sachs said in a research note. Over the next two years we are “likely to see the largest increase in mega projects’ production in history, as the record 2011-13 capex commitment yields fruit,” the bank wrote.

Texas High Court Weighs Eagle Ford Deed Royalty Dispute

Texas Supreme Court justices on Wednesday wrestled with whether they should overturn decades-old precedent as they interpret an Eagle Ford property deed that granted oil and gas interests and has spurred competing royalty claims.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Robert Hefner III, the father of deep natural gas and great prognosticator of the Anadarko Basin. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert Hefner III

March 17, 2017

Too Many Headwinds To ExxonMobil/BP?

U.S. energy giant ExxonMobil (NYSE:XOM) has reportedly gauged potential interest among BP’s major shareholders regarding a possible takeover, British newspaper Evening Standard reported on Friday, sending BP’s stock (NYSE:BP) soaring to one-month highs in London and trading nearly 3 percent higher in New York shortly after opening.

Analysts say the two companies would face massive antitrust headwinds in the wake of Brexit and combined with the high debt of BP, especially when viewed relative to cash flow, creates a massive headwind to acquisition.

U.S.-based Chevron is also reportedly among “other interested parties”, Evening Standard said, noting that Exxon and BP said that they do not comment on speculation.

Court approves Chaparral exit plan from bankruptcy

A judge has approved Chaparral Energy Inc.’s plan to exit bankruptcy, wiping out $1.2 billion in debt from the Oklahoma City-based company. Chaparral expects to emerge from bankruptcy by the end of March, the company said Monday.

Under the plan, Chaparral’s unsecured bondholders and general unsecured creditors will own all of the company’s ownership interest, subject to some dilution.

Chaparral said it expects to have liquidity of more than $100 million when it emerges from bankruptcy. The oil and natural gas producer filed for bankruptcy reorganization in May.

Chaparral, founded in 1988, has focused its operations in Oklahoma’s fast-growing STACK play. The company also is the third-largest oil producer in Oklahoma.

Factoid: The United States leads the world in total daily petroleum production (petroleum + liquids), ahead of Saudi Arabia and Russia.

Closing Oil and Gas Prices, Thursday, March 16th

Oil prices on Wednesday climbed for the first time in more than a week on a surprise drawdown in U.S. crude inventories and data from the International Energy Agency (IEA) suggesting OPEC cuts could create a crude deficit in the first half of 2017.

Those increases pushed both Brent and WTI out of technically oversold territory for the first time in six days

Natural Gas News

So far this year, natural gas has performed the worst among major commodities, posting significant losses in January and February. It has rebounded somewhat in the last few weeks, but hovering around $3 per MMBtu, gas prices are still sharply lower compared to the fourth quarter of last year.

“It’s a real risk that a year from now that prices could be below $2,” Brandon Blossman, a managing director at Tudor Pickering Holt, said in a Bloomberg interview. “You have this unfortunate confluence of Permian production ramping right into the teeth of a lot of new takeaway capacity in the Northeast.”

Now For This Week’s Snippets:

US shale drillers unfazed by oil price drop

Oil prices would have to fall to $30 per barrel or less to hurt the finances of US shale producers because many of them, including Pioneer Natural Resources and Parsley Energy, are well-hedged against potential market crashes for the next several years, according to Katherine Richard, founder and CEO of Warwick Energy Investment Group. Richard says oil prices will likely continue to fall over the next few months, but companies operating in the most lucrative shale plays will not be affected.

Pioneer Natural Resources Sells Midland Acreage in $266 Million Deal

Pioneer Natural Resources Co. (NYSE: PXD) continues to high-grade its Midland Basin acreage with the sale of acreage in northeastern Martin County, Texas. Pioneer said an undisclosed buyer will acquire the acreage with an average production of about 1,500 barrels of oil equivalent per day for $266 million. The sale of the Martin acreage comes after January agreements to sell 5,600 net acres in Upton and Andrews counties, Texas for $63 million in gross proceeds.

Increased drilling efficiency putting pressure on prices

US oil and natural gas companies’ rush to lower break-even costs is also putting downward pressure on oil prices. US shale break-even prices have fallen by 46% between 2014 and 2016, but Ernst & Young’s Deborah Byers notes that “everyone is driving break-even prices down,” including deep-water and conventional companies.

US faces shortage of pipeline inspectors

There are 528 government inspectors overseeing the US’ 2.7 million-mile pipeline network, which means that each inspector is responsible for more than 5,000 miles of pipeline. The country’s sprawling network is set to expand by 1,499 miles after the Keystone XL and the Dakota Access pipelines are completed, but it’s still unclear whether the Pipeline and Hazardous Materials Safety Administration will hire new inspectors.

Gas production out of Permian poised to surge dramatically

Tudor Pickering Holt & Co. predicted that an upsurge in drilling activity in the Permian Basin will lead to a 25% increase in natural gas production out of the US’ hottest shale play over the next year, which threatens to send natural gas prices below $2 per million British thermal units. Natural gas production is also accelerating in the Marcellus Shale in Pennsylvania and West Virginia.

Signs of oil market upturn increasingly evident in Texas

The Railroad Commission of Texas reported four oil and natural gas discoveries in Texas in February, up from two in January, and said it issued 991 original drilling permits during the month, compared with 573 in February 2016. However, Texas Alliance of Energy Producers economist Karr Ingham points out that oil production and employment are still weaker compared with a year ago, raising questions about Texas’ future growth.

Trump’s tax plan could be windfall for US drillers

US oil drillers could save up to $10 billion per year as a result of President Donald Trump’s proposed corporate tax cuts, with the extra cash expected to go toward drilling, leading to an upsurge in activity. The Trump administration plans to cut the corporate tax rate to 15% or 20%, down from the current 35%, but it’s unclear when a reform bill will be enacted as there are many challenges.

Noble Energy to cut 197 positions in Texas

Noble Energy announced plans to shut down Clayton Williams Energy’s office in Midland, Texas, by year’s end and lay off about 197 Clayton employees starting in May after its $2.7 billion merger with Clayton Williams is finalized. Noble may choose to keep some of the employees, especially field workers.

Industry CEOs expect natural gas demand to continue

Oil and natural gas industry CEOs told the CERAWeek by IHS Markit conference last week they expect to see continued global demand for natural gas, though production might not be able to keep up. The executives also discussed exploration and production technology, as well as the political climate.

Making a case for natural gas as energy future of US

Market forces dictate that natural gas, not coal, will power America in the future, even though President Donald Trump is pushing to bring back coal. Natural gas was the top electrical power source in the US in 2016 as utility companies increasingly prefer gas over coal because it has become cheaper thanks to the shale boom, is cleaner than coal, benefits from better technology and is in high demand overseas.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks presentation is on Charles Page, oilman, industrial developer, philanthropist, and father of Sand Springs, Oklahoma. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Page

 

March 10, 2017

WTI plunges 5% to year-low on oversupply fears

The price of U.S. crude oil has dipped below $50 for the first time since December as a global supply glut persists despite production cuts by big exporters.

Just when oil prices seemed high enough to spur a sustainable revival in domestic drilling, a surge in U.S. petroleum stockpiles and a warning from Saudi Arabia’s energy minister pushed them sharply lower this week.

Senior Saudi energy officials told top independent U.S. oil firms in a closed-door meeting this week that they should not assume OPEC would extend output curbs to offset rising production from U.S. shale fields, two industry sources said on Thursday.

The Saudis called the meeting to exchange views on the market and to gauge the outlook for shale output, both sources said.

Speaking at an industry conference in the U.S. energy capital of Houston on Tuesday, Saudi Arabia’s Energy Minister Khalid al-Falih said that there would be no “free rides” for U.S. shale producers benefiting from the upturn.

Harold Hamm, the billionaire shale oilman, said the U.S. industry could “kill” the oil market if it embarks into another spending binge, a rare warning in a business focused on fast growth to compete with OPEC.

The statement by Mr. Hamm, who is attending the same conference in Houston, comes as top shale companies announce large increases in spending for this year, and the U.S. government says domestic oil output next year will surpass the record high set in 1970. OPEC ministers have said they are keeping a close watch on shale production to decide in late May whether to extend their oil-supply cuts into the second half of the year.

Factoid: What’s lighter than air? Natural gas.

Speculators head for the door, hastening the falling oil price…

Speculators have started exiting the nearly record long positions in oil futures that they had amassed. “It’s a combination of an overhang of (speculative) length and the overhang in inventories … and the other thing unnerving the market is rapid growth in U.S. crude production,” Andrew Lebow, senior partner at Commodity Research Group in Darien, Connecticut, told Reuters on Wednesday.

Closing Oil and Gas Prices, Thursday, March 9th

Natural Gas News

Warmer than normal weather throughout much of the United States resulted in the first recorded net natural gas injection during a week in February since weekly storage data has been collected.

For the week ending February 24, the amount of natural gas in storage in the Lower 48 states increased 7 billion cubic feet (Bcf). While some weeks during March in previous years had recorded injections, net injections of natural gas into storage do not typically occur until at least April.

Now For This Week’s Snippets:

OPEC, US shale producers find common ground in Houston

OPEC Secretary-General Mohammed Barkindo and about 20 US shale executives attended a dinner event in Houston on Sunday during which they reportedly agreed that oil market balance would benefit both sides. However, the shale producers said they didn’t want to miss out on the growth opportunity in front of them, but Barkindo said OPEC will continue to fight for higher oil prices even if shale companies get rich in the process.

API reports bigger-than-expected surge in US crude supplies

US crude stockpiles climbed by 11.6 million barrels in the week ended March 3, compared with analyst estimates for a 1.6 million-barrel build. Gasoline inventories fell by 5 million barrels while distillates declined by 2.9 million barrels.

EIA revises up US oil production forecasts

The Energy Information Administration raised its US crude oil output predictions to an average of 9.21 million barrels per day in 2017 and 9.73 million barrels per day in 2018. That’s up from previous estimates of 8.98 million for this year and 9.53 million for 2018, respectively.

Higher frac-sand prices put pressure on shale drillers’ cash flows

Growing demand from shale drillers has spurred a rebound among producers of sand used in the hydraulic fracturing process, while pushing frac-sand prices to new highs, which in turn is hurting shale drillers’ cash flows. An ordinary well in the Permian Basin could require between $800,000 and $1 million worth of frac sand by late 2017, up from $350,000 last year.

US shale breakeven prices are higher than thought, KLR Group says

Research by KLR Group claims that the breakeven prices for US shale are $50 per barrel of oil and $3.35 per thousand cubic feet of natural gas, well above other estimates. The lowest breakeven prices for oil are achieved in the Permian’s Midland basin and the eastern Eagle Ford, while the Marcellus Shale has the lowest breakevens for natural gas.

ExxonMobil to spend $20B on Gulf Coast downstream projects

ExxonMobil on Monday announced plans to invest $20 billion to build chemical and oil refining plants along the US Gulf Coast through 2022. The plan consists of 11 projects, some of which are already underway, and is expected to create 47,000 temporary and permanent jobs, according to ExxonMobil Chairman and CEO Darren Woods.

Halcon Resources expands Permian footprint

Halcon Resources will pay $22.3 million to acquire 594 acres and 160 barrels of oil equivalent per day in the Permian’s Delaware sub-basin in Pecos County, Texas, adding to the 20,901 net acres it already owns in the county. Halcon also has the option to acquire 15,040 net acres in Ward County, Texas, for $11,000 per acre.

Goldman Sachs predicts oil undersupply in 2017

A report from Goldman Sachs forecast that global oil supply will lag demand in the second quarter of 2017, mainly because of OPEC’s production cuts and some declines in US output. Demand will overtake supply by 170,000 barrels for the year, the report said, but it warned that US shale could push supply above demand again.

Challenges made US shale industry stronger, more efficient

Over 100 shale drillers went bankrupt in the past two years, but those that survived the downturn have emerged stronger, more efficient and more cost-effective and are able to thrive with oil at $55 per barrel. The US rig count climbed by 91% to 602 in the past nine months, production surged by over 550,000 barrels per day since summer 2016 and North American oil companies, including oil giants that shunned shale during the first boom, plan to boost spending by 25% this year.

Shale drillers’ efficiency threatened by soaring costs

Oilfield service and equipment companies are finding it increasingly difficult to hire workers and keep commitments, tightening the supply of services and equipment and leading to higher costs for producers. Drillers face costs of more than $20,000 per day to rent a rig from the biggest land-rig contractor, Nabors Industries, while the average price for a ton of frac sand supplied by US Silica Holdings has climbed 20% to $35.

Permian companies face challenges over wastewater injection

Companies operating in the Permian Basin might need to find new ways to dispose of wastewater resulting from the hydraulic fracturing process because it “will be a huge issue past a certain amount that you can inject,” said BHP Billiton Asset President of Shale Alex Archila. Another challenge for Permian companies is obtaining enough water for fracking, according to Archila.

Resolute Energy acquiring Permian acreage in $160M deal

Resolute Energy has agreed to buy an asset package that includes 4,600 net acres in the Permian’s Delaware sub-basin, two horizontal wells and six drilled but uncompleted wells for $160 million. “The acreage to be acquired is adjacent to our Appaloosa project area and immediately north of our Mustang project area, and 95% of the acquired acreage will be operated by Resolute,” said Resolute CEO and Director Rick Betz.

MMEX Resources to build $450M crude refinery in the Permian

Austin, Texas-based MMEX Resources wants to build a $450 million crude oil refinery in the Permian Basin on a 250-acre site in Pecos County, a project that would create about 500 temporary and permanent jobs. The construction of the refinery, which would have a capacity of 50,000 barrels per day, is expected to begin in 2018 and be completed in 2019.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks new presentation is on Charles Page, oilman, industrial developer, philanthropist, and father of Sand Springs, Oklahoma. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Page

 

March 3, 2017

EIA: US crude stockpiles surge to record high

The Energy Information Administration reported the eighth straight week of build, with a build of 1.5 million barrels in U.S. oil inventories, compared to analysts’ expectations for the growth of 1.3 million barrels. This moved inventory levels to an all-time high of 520.2 million barrels in the week ended Feb. 24. Gasoline inventories dropped by 546,000 barrels, while distillates declined by 925,000 barrels.

The latest growth in oil stockpiles was driven by increased imports from Saudi Arabia, Canada and Iraq, while domestic production was also standing above 9 million barrels.

The U.S. oil production increases have turned out to be a big threat for price stabilization despite massive production cuts from OPEC and 11 non-OPEC players. Moreover, U.S. production could expand at a significantly higher rate in the coming months, as North American and global players are increasing their drilling programs in the key U.S. oil plays.

In the last two consecutive months, OPEC producers indicated production compliance above 90%, strengthening future fundamentals for prices. In the short-term, U.S. oil production and the U.S dollar could pressure oil prices.

Factoid: John Rockefeller. He founded Standard Oil in 1870, at the age of 31, and bought up most of the oil refineries in the United States, eventually controlling about 90% of the American oil business.

Brigham Resources Closes $2.55 Billion Southern Delaware Basin Asset Sale to Diamondback Energy

Brigham Resources Operating, LLC and Brigham Resources Midstream, LLC (collectively “Brigham Resources”) announced that it has closed the sale of substantially all of its southern Delaware Basin assets for $2.55 billion to Diamondback Energy, Inc.

Brigham Resources has closed the sale less than four years after receiving its initial private equity commitment in April 2013. The sale to Diamondback included the following assets: 80,185 net leasehold acres in Pecos and Reeves counties, 48 Brigham operated producing horizontal wells accounting for the bulk of its southern Delaware Basin production, 170 miles of natural gas and water gathering and water recycling infrastructure supporting its producing wells, and 5,745 net mineral acres (assuming an average 23% royalty) underlying Brigham Resources’ operated leasehold acres or where its ownership will give Diamondback the right to operate.

Was Aubrey McClendon a Billionaire, or Broke?

On the anniversary of his death yesterday, the Wall Street Journal published an article noting that “lawyers in Oklahoma City are sifting through the tangle of obligations and assets he left behind, trying to determine if he died a wealthy man—or swamped by debt.”

There isn’t much comprehensive historical data on probate cases, but attorneys say that Mr. McClendon’s estate is surely one of the largest and most complex ever to wind through probate.

Read the full article here: https://t.co/USHlf7hLdD

Closing Oil and Gas Prices, Thursday, March 2nd

Oil prices headed lower for a third consecutive session on Thursday to log their lowest finish in about three weeks. Crude oil prices continue to trade in the range of $5 over the last two months, while higher than expected growth in U.S. oil production lowers their potential to breach the recent trading range. U.S. crude oil closed at $52.61 a barrel on Thursday. Brent crude also declined to close at $55.08 a barrel.

Natural Gas Outlook

U.S. natural gas prices have fallen 30% since the start of the year as demand this winter fell to the lowest in four years due to the warmest weather on record in December, January and February.

Since the start of the year, gas futures have collapsed by 30%, with the April contract closing yesterday $2.80 per million British thermal units (MMBtu) from a two-year high of $3.994/MMBtu on Dec. 28.

Now For This Week’s Snippets:

SandRidge Energy Acquires STACK Acreage

SandRidge Energy picked up 700 boe/d & 13,100 net acres (88% operated, priced at $2,456/acre) targeting northwest STACK in Woodward County for $48MM from IOG Capital &Red Mountain Energy.

Halcón Picks Up New Delaware Deal As It Closes Another

The company said it closed its $705 million acquisition and had picked up additional interest in Pecos County, Texas, for $22.3 million. On Feb. 28, the company closed its acquisition of Samson Exploration LLC’s Pecos County, Texas, acreage and in the interim agreed to buy additional interests from a nonoperating owner in the acreage for $22.3 million. The “incremental acquisition” includes 594 additional net acres and average production of about 160 barrels of oil equivalent per day (boe/d). The deal is expected to close in early March.

Post Oak Capital Invests $100 Million in Mineral Fund

Post Oak Energy Capital, LP announced that it led a $100 million equity commitment to Saxet II Minerals, LLC. The management team will co-invest alongside Post Oak. Saxet II Minerals, LLC is the second partnership with Post Oak; the first iteration has aggregated a position of mineral and royalty interests primarily in the SCOOP/STACK play in Oklahoma and the Midland Basin in West Texas.

Current shale boom enjoys greater momentum than first one

US shale companies have increased production by an average of 125,000 barrels per day every month since a September 2016 low, compared with an average monthly increase of 93,000 barrels per day during the first shale boom between 2011 and 2015. This suggests that the current US shale upturn is more powerful than the previous shale boom and particularly dangerous for OPEC’s plans to balance the global oil market with production cuts.

Oil companies plan more drilling in Okla.

Some of the biggest oil and natural gas producers in Oklahoma say they’ll step up their efforts this year after suffering a downturn last year. They’ve cut costs and reduced debt by drilling fewer wells, speeding up drilling time and making better use of sand in the hydraulic fracturing process.

Hi-Crush Partners to buy Permian Basin Sand in $275M deal

Houston-based oilfield services firm Hi-Crush Partners agreed to acquire frac sand provider Permian Basin Sand for $275 million to take advantage of the soaring demand for hydraulic fracturing sand in the Permian. As part of the deal, Hi-Crush will take over Permian Basin Sand’s 1,226-acre sand reserve, which contains over 55 million tons of sand.

Australis to pay $80M for Encana US shale assets

Australian oil and natural gas company Australis agreed to acquire Encana’s assets in the Tuscaloosa Marine Shale along the Louisiana and Mississippi border for $80 million. The asset package includes 122,000 acres and interests in 47 wells with an output of 1,900 barrels per day.

Exporters ship record volume of US crude

The volume of US crude for export reached a record 1.21 million barrels per day in the week ended Feb. 17, the most since 1993, with the Far East as the main destination. “As output moves from 9 million barrels a day to 9.3 million or 9.4 million, three-quarters of that increased output will be for export,” said Gary Morgan, Clarksons Platou Shipping Services USA Analyst Group director.

Oil majors prioritize US shale over Canadian oil sands

An increasing number of major oil companies are shelving their Canadian oil sands projects to pursue more lucrative opportunities in US shale plays, which are less expensive and provide faster profits. ExxonMobil and ConocoPhillips recently de-booked almost 5 billion barrels combined of bitumen at their Alberta oil sands projects, while Statoil and Royal Dutch Shell also abandoned similar projects.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

The current presentation is on Charles Colcord (1859-1934), a successful cattle rancher, U.S. Marshal, Chief of Police, businessman, and oil man. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Colcord

 

 

February 24, 2017

STACK INTEREST GROWS

Billionaire real-estate investor Sam Zell is joining Continental Resources Inc.’s Harold Hamm in the growing list of enthusiasts of Oklahoma’s Stack shale formation.

Zell, founder of Equity Group Investments Inc., made an investment in the region this week and sees “awesome” prospects for the oil-producing area, he told Alix Steel, David Westin and Jonathan Ferro in a Bloomberg TV interview Wednesday.

The Stack formation, along with the nearby Scoop, is going through a drilling boom as it offers good returns at a $50 oil price. Continental expects to more than double output from the area’s oil-soaked rocks this year, while Marathon Oil Corp. plans to double the number of rigs in Oklahoma.

Factoid: About 40% of all seaborne cargo is oil, and there is literally more seaborne cargo at any given time (by weight) than there are fish in the sea.

Apache Raises 2017 Capex By More Than 60%

Apache Corp. (NYSE: APA) estimated its capex in 2017 would be more than 60% higher than 2016, joining a growing list of shale producers that are ramping up spending to take advantage of recovering oil prices.

Apache said Feb. 23 that it plans to spend $3.1 billion in 2017, higher than the $1.9 billion it spent last year. It spent $4.7 billion in 2015.

Apache joins other producers such as ExxonMobil Corp. (NYSE: XOM), Chevron Corp. (NYSE: CVX) and Hess Corp. (NYSE: HES) who have increased their capital budgets for this year.

Apache earmarked nearly two-thirds of its 2017 budget for the Permian Basin in Texas, with $500 million alone budgeted for developing infrastructure in its Alpine High Field.

The company said last September that it had amassed more than 300,000 acres in the field, most of which is in Reeves County, Texas.

Closing Oil and Gas Prices, Thursday, February 23rd.

WTI prices have maintained within the $50-55/Bbl range, however they have been edging closer to the $55/Bbl mark since the IEA and OPEC reports showed 90%+ compliance with quotas. The high compliance levels appear to be largely factored in to current pricing level . Any bullish sentiment is largely founded on hopes that existing cuts will work to quickly normalize inventories. Expectations of further OPEC cuts, or an extension of the cuts beyond the agreed upon six months are still in play.

Natural Gas Outlook

Front-month gas prices have plummeted, down to the $2.61 mark from the mid-$3.90s we saw in late-December and the $3.20-3.45 range that persisted for January, but began to fall in February.

EIA reported a 114 Bcf storage withdrawal for the week of February 10, which was about 12% below expectations and nearly 30% below the five-year average. Overall, we are now at 2,445 Bcf of gas in storage, or about 11% below last year and 4% above the 5-year average.

Now For This Week’s Snippets:

Chesapeake Energy to invest more in crude projects in 2017

Chesapeake Energy, the second-biggest natural gas producer in the US, is planning to scale back its investments in natural gas in favor of crude oil projects as part of its effort to shed debt and improve investment-grade metrics. The company, which has lost $18.5 billion over the past seven quarters, plans to allocate 60% of its 2017 budget into crude projects and drill 320 new crude wells this year, versus 90 natural gas wells.

Energy Dept.: Peak US shale production to be reached in 2026

Production from US shale and tight oil formations will top out in 2026 as oil reserves start depleting and well productivity declines, according to the Energy Department. Production will begin to drop in the Eagle Ford first after 2020 and the Bakken will start declining after 2030, while production in the Permian Basin will remain strong through 2040.

US gas sector continues to have an edge over rest of the world

Production innovation, over a century’s worth of natural gas reserves and cheap liquefaction put the US at the forefront of the global natural gas industry, said Charif Souki, co-founder and chairman of LNG company Tellurian Investments and former CEO of Cheniere Energy. “Three years ago, I thought they had finished improving, but no, they continue to lower the cost of production in the US dramatically by a factor of 15, 20% every year,” Souki said in an interview.

Production efficiency in Utica improved more than in Permian

Utica Shale wells produced 4.2 times more barrels of oil equivalent in January 2017 than January 2014. By comparison, Permian Basin wells produced 3.4 times more barrels of oil equivalent in January compared with three years earlier, while nationwide, production efficiency per well improved threefold.

Apache looking to sell Goodland Lime assets

Apache is exiting the Goodland Lime play in East Texas two years after entering it to focus more on its Permian Basin position. The company is now looking to sell all its Goodland assets, which include 10,723 undrilled net acres in Smith and Van Zandt counties.

Matador forms Permian joint venture with Five Point Capital Partners

Matador Resources and private equity firm Five Point Capital Partners have formed a 51-49 joint venture named San Mateo Midstream, which will operate and expand Matador’s Delaware Basin midstream assets in New Mexico’s Eddy County and Texas’ Loving County. The two companies plan to invest $150 million in the joint venture.

US shale producers could face frac sand shortage

Shale industry experts are concerned that increased drilling activity across US shale plays will lead to a shortage of frac sand later this year as suppliers fail to keep up with demand. Raymond James estimates demand for frac sand would surge to a record 55 million tons this year and top 80 million tons by 2018 as producers drill wider and longer wells that require more frac sand.

US shale production costs to rise for first time in 5 years

Increased drilling activity and pricier oilfield services will drive up break-even prices for US shale producers for the first time since 2012 this year, data from Rystad Energy suggest. The break-even production cost will average $36.50 per barrel in 2017, up $1.60 from last year.

Moriah Henry Partners raises $200M from Post Oak Energy Capital

Midland, Texas-based exploration and production company Moriah Henry Partners has received a $200 million equity commitment from Houston-based Post Oak Energy Capital to help it boost its position in the Permian Basin. The company will use the capital to acquire and develop acreage in the Midland Basin.

Whiting Petroleum plans to boost US shale production in 2017

US shale producer Whiting Petroleum said it will invest over $1 billion in US shale fields this year, particularly in North Dakota’s Bakken Shale and Colorado’s Niobrara Shale. The company expects to produce an average of 140,000 barrels of oil equivalent per day in the fourth quarter of the year, 23% more than in the first quarter.

BHP Billiton considers expanding US shale footprint

Australia’s BHP Billiton is considering adding more rigs in US shale formations, but said it would take its time to avoid repeating mistakes. The company only has one rig in the Permian Basin and doesn’t plan to add more until it better understands and evaluates the region.

US crude inventories declined last week, API says

The American Petroleum Institute reported an 884,000-barrel drop in US crude stockpiles in the week ended Friday, missing analysts’ expectations for a 3.4-million-barrel surge. Gasoline and distillates supplies also plunged by 893,000 barrels and 4.3 million barrels, respectively.

Exxon wipes 3.5 billion barrels from proved reserves

ExxonMobil slashed its proved crude reserves by 19%, the biggest write-off since at least 1999. The de-booking of the 3.5-billion-barrel Kearl oil sands project in western Canada, once valued at $16 billion, accounted for the reduction.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

This weeks new presentation is on Charles Colcord (1859-1934), a successful cattle rancher, U.S. Marshal, Chief of Police, businessman, and oil man. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Charles Colcord

 February 17, 2017

NAPE SUMMIT – HOUSTON TEXAS

The NAPE Summit Exhibit Floor opened on Thursday to a crowd of upstream industry leaders that lasted throughout the day. NAPE Week attendance to date has exceeded expectations, with nearly 11,300 attendees and 1,000 new registrants since yesterday.

Attendees buzzed about the exhibit floor, reflecting an optimistic atmosphere and expectation for industry recovery. There are numerous corporate parties and dinners taking place in the space of 48 hours. The restaurants and bars are packed with industry participants catching up and discussing basin activity, pricing and whether the price of oil is headed up or back down.

Retired four-star general and former Secretary of State Colin Powell, the keynote speaker for the NAPE Charities Luncheon, emphasized the exciting ongoing evolution of the global oil and gas industry.

“This is a fascinating time for the industry. It is the time to cut costs and lower risks,” said Powell. “We are experiencing a revolutionary change in the energy industry – shifting toward ways we can go off the grid and decentralize energy.”

Powell explained that while he can sense the anxiety and concerns among the audiences he addresses, he also sees confidence in the American people.

“There is a resiliency in our society,” Powell said. “We are a country that has been separated. We have to bridge the differences in our thinking and [how we] talk to each other, like our founding fathers once did.”

This year’s 700 exhibitors included an array of domestic, international and offshore companies. In addition, two individual domestic and international theaters each ran a full day of prospect previews.

Doors to the NAPE Summit Exhibit Floor open again this morning at 8 a.m.

Factiod: Since June 3, 2016, oil rigs have risen by 266 as of the week ending February 10, 2017—a rise of 87% from the bottom.

Closing Oil and Gas Prices, Thursday, February 16th.

Natural Gas Outlook

Despite a recent blast of winter weather, natural gas prices have quickly been falling. Winter is almost over for the so-called Henry Hub natural gas prices on the NYMEX, since that contract closes on Feb. 24, 2017, and the imminent onset of the refinery buying ahead of the U.S. summer driving season presents additional bullish risks to WTI crude oil prices — and bearish risks to natural gas prices.

Natural gas production volumes in December were 1.6 percent higher than December 2015 and 2016 volumes were 8.4 percent higher than 2015 levels.

Now For This Week’s Snippets:

US shale exports hit record last week

US shale producers exported a record 7 million barrels of oil last week, or 1 million barrels of oil per day, almost double the volume shipped during the previous week. Customers are “looking at other types of crude to fill the gap left by a reduction in OPEC production, and at the same time you’re seeing continuing demand in China, as world oil continues to increase,” said Lipow Oil Associates President Andrew Lipow.

Chesapeake, Ex-CEO’s Estate End Trade Secrets Disagreement

Chesapeake Energy Corp. has reached a deal with the estate of its former CEO to settle a $445-million-plus claim that he stole trade secrets to launch a rival energy company, according to court records.

Noble Energy to nearly double 2017 capital spending

Noble Energy plans to spend between $2.3 billion and $2.6 billion in 2017, up from about $1.3 billion last year, three-quarters of which will be invested in US onshore projects. Noble expects to direct almost half of the onshore budget toward the Denver-Julesburg basin in Colorado, while the Permian’s Delaware Basin should absorb about $500 million.

Drillers shift focus as Permian price bubble continues to inflate

US oil and natural gas companies and investors set their sights on other shale plays such as Oklahoma’s SCOOP and STACK regions, the Bakken formation and the Eagle Ford and Haynesville Shale as land prices in the Permian Basin skyrocket, hitting as much as $60,000 per acre. Williams Capital Group analyst Gabriele Sorbara says out-of-control valuations in the Permian make it nearly impossible for newcomers to get involved.

Diamondback planning to deploy more rigs to Permian Basin this year

Permian-focused Diamondback Energy has set a 2017 budget of up to $1 billion, more than half of which will go toward drilling and completions. Diamondback President and CEO Travis Stice said the company could deploy two more rigs to the Permian’s Delaware and Midland sub-basins by the end of 2017 if oil prices continue to rise.

Applications for new drilling permits spike in Texas

The Texas Railroad Commission issued 956 original drilling permits last month, up from 510 in January 2016, as oil and natural gas companies step up drilling activity to capitalize on higher oil prices even though production has yet to climb. Texas produced 81.5 million barrels of oil in November, a one-million-barrel decline from October.

N.D. posts record decline in oil production

North Dakota oil production fell by over 92,000 daily barrels to 942,455 barrels per day in December, the biggest single-month drop in history, as harsh weather conditions hindered activity. Natural gas output also declined to 1.54 billion cubic feet per day in December, down from 1.76 billion cubic feet per day the previous month.

US shale production in March to gain most barrels since Oct.

US shale drillers are expected to boost production by 79,000 barrels per day to 4.87 million barrels per day in March, the biggest monthly increase in five months, according to the Energy Information Administration. The Permian Basin will drive the gains, with production there predicted to jump by over 70,000 barrels per day to 2.25 million barrels per day.

Williams swaps Permian assets for stakes in Marcellus gathering systems

Williams Partners has agreed to hand over its 50% stake in a natural gas gathering system in the Permian Basin to Western Gas Partners in exchange for interests in two Marcellus Shale gathering systems as well as $155 million in cash. “They want to ‘core down’ to their competency, and their competency is moving gas from the Northeast to end users in the Mid-Atlantic, Southeast and Gulf Coast,” said Tudor Pickering Holt & Co. energy analyst Brandon Blossman.

Occidental Petroleum looks to sell South Texas assets

Occidental Petroleum is reportedly searching for a buyer for its remaining South Texas assets, which comprise 180,000 acres mainly in the Vicksburg Shale, wells and staffed offices worth up to $500 million combined. The asset divestiture follows Occidental’s exit from the Eagle Ford last year and comes as the company increases its focus on the Permian Basin.

No rebound in sight for offshore oil, gas industry

The US offshore oil and natural gas sector continues to be plagued by bankruptcies and declining demand, forcing drillers such as Transocean, Atwood Oceanics and Noble to cut jobs and idle or scrap rigs. Diamond Offshore President and CEO Marc Edwards said he doesn’t expect a rebound earlier than 2019 or 2020 because the industry has yet to “see a floor in the declining demand of deep-water assets.”

Plains All American, Noble form joint venture to buy Permian pipeline system

Plains All American Pipeline and Noble Midstream Partners have entered a 50-50 joint venture agreement to acquire Advantage Pipeline’s assets for $133 million. Advantage Pipeline owns a 70-mile oil pipeline system in the Permian’s Delaware Basin originating in Reeves County and running to Crane County, Texas.

Trump Signs Repeal Of SEC Payment Disclosure Rule

President Donald Trump on Tuesday signed off on legislation that nixed a U.S. Securities and Exchange Commission rule requiring oil and gas extraction companies to disclose their payments to foreign governments, marking the first time in 16 years that a president utilized the Congressional Review Act to overturn a predecessor’s rule.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma.

The current video presentation is on J. Paul Getty, one of the most frugal, but wealthiest men to ever live. He drilled his first oil well out near Haskell, OK. We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected]

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: J. Paul Getty

February 10, 2017

Welcome to this week’s Friday Snippets!

With the onslaught of an increase in U.S. oil inventories last week – oil continues to rise, which provided some evidence of stronger-than-expected demand.

With inventories close to 80-year record levels at 508 million barrels, the oil markets do not seem deterred. Wall Street is pouring the most money into oil and gas companies in the U.S. since at least 2000, according to Bloomberg.

In January alone, drillers and oilfield service companies raised $6.64 billion in 13 different equity offerings. “The mood is absolutely different,” Trey Stolz, an analyst at the investment banking firm Coker & Palmer Inc., told Bloomberg. “Go back to a year ago and the knife was still falling. But today, it feels much, much better.” The Permian continues to be the hottest onshore play. In 2016, there was $24 billion spent on mergers and acquisitions.

Wood Mackenzie reports that less than two months into the New Year, the industry has already spent half of that amount in the Permian. In Oklahoma, we have two of the country’s hottest plays, central Oklahoma’s SCOOP and STACK portions of the Anadarko Woodford play. In the coming months, several Oklahoma companies are scheduled to announce their 2016 earnings and 2017 CAPEX. Look for more acquisitions as well. We will be down at NAPE next week, where the sentiment is sure to be more optimistic than last year, when rig counts and the price of oil were much lower. Hope to see you there.

Closing Oil and Gas Prices, Thursday, February 9th.

BP plans to invest more in US shale industry

British oil major BP is considering slowly boosting its position in US shale plays, but it will exercise capital discipline because shale assets are expensive, BP CEO Bob Dudley told analysts. Dudley also said the company may pursue several projects in countries such as Trinidad and Tobago, Oman and India.

Shale rebound could push US oil production to 48-year highs in 2018

The Energy Information Administration predicted that US oil output could climb to an average of 9.53 million barrels per day in 2018 — the most since 1970 — up from an anticipated 8.98 million barrels this year. US shale will drive the increase as bullish shale drillers continue to add rigs.

Targa Resources expands Permian footprint

Targa Resources Corp. has executed definitive agreements for a subsidiary to acquire the membership interests of Outrigger Delaware and Outrigger Midland Operating LLC for US565M.

Senate votes to repeal SEC anti-graft rule targeting energy companies

The Senate on Friday voted 52-47 in favor of rescinding a Securities and Exchange Commission anti-corruption rule that would have required US oil, natural gas and mineral companies to divulge payments made to foreign governments. “Passing this CRA will right the ship and put U.S. companies back on a level playing field with their private and foreign competitors; it will also protect them from a dramatic increase in regulatory compliance costs,” said Sen. James Inhofe, R-Okla.

EQT boosts Marcellus Shale position

EQT has acquired 14,000 net acres in the Marcellus Shale in a $130 million deal that will allow the Pittsburgh-based company to drill lateral wells with an average length of 5,700 feet, up from 1,900 feet. The acreage is in West Virginia’s Marion and Monongalia counties.

Record volume of US crude to head for Asia in coming weeks

Oil companies and trading houses including BP, Shell and Mercuria are expected to export between 700,000 and 900,000 barrels of US crude oil per day in February, mostly to Asian countries such as China, Japan and Singapore. “It’s a good time to buy US crude because of the OPEC cut, but our spot room has limitations so we have to compare every cargo,” a Japanese refiner said

Oilfield services costs skyrocket in Permian Basin

The prices asked by oilfield service companies for drilling and hydraulic fracturing in the Permian Basin have surged by as much as 50% in recent months amid increased demand and a shortage of frack crews. Denver-based Lilis Energy says the lowest daily rate for drilling a well is now $16,000, up from $13,900 per day a couple of months ago, while well-fracking costs surged from $2.2 million two months ago to $3.2 million currently.

US oil rig count increased last week, Baker Hughes reports

The number of US oil rigs surged by 17 to 583 in the week ended Friday, the biggest total since October 2015, according to Baker Hughes. The US oil and natural gas rig count is expected to average 795 this year and 911 in 2018. The number of rigs looking for oil and natural gas in the US increased by 4.4% in January compared with January 2016.

US shale production weighs on oil prices

Signs of a continued jump in US shale production depressed oil prices on Monday, despite OPEC’s compliance, with US light sweet crude for March delivery down 1.5% to $53.01 per barrel and Brent crude for April down 1.9% to $55.72. SEB bank analyst Bjarne Schieldrop expects a “strong revival in US shale oil production” and sees US onshore exploration and production spending up by 30% to 40% this year, while the rig count could top 1,000 by 2019.

EIA reports surge in US crude inventories

US crude stockpiles climbed by 13.8 million barrels last week fueled by a 1.1 million-barrel increase at the Cushing, Okla., oil storage hub, the Energy Information Administration said on Wednesday. Gasoline inventories were down 869,000 barrels while distillates surged by 29,000 barrels.

PROMINENT OILMEN

Another story we release every other week in Friday Snippets is a look back at prominent Oklahoma oilmen who have helped create, shape and transform the oil and gas industry in Oklahoma. This weeks new video presentation is on J. Paul Getty, once named him as the world’s richest private citizen. He founded the Getty Oil Company, but despite his wealth, Getty was notably frugal. The Nancy Taylor No. 1 Oil Well Site near Haskell, Oklahoma, was crucial to his early financial success. This oil well was the first to be drilled by J. P. Getty.

We have a long list of historical characters we will be presenting but we welcome any suggestions of someone you would like to see featured.

If you have someone to nominate, reach out to me via email at [email protected] Have a great weekend from Oklahoma Minerals!

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: J. Paul Getty

 February 3, 2017

Republicans working to repeal Obama’s methane rule

House Republicans are expected to introduce a bill today to overturn former President Barack Obama’s rule targeting methane emissions from venting and flaring at oil and natural gas drilling sites. “These are abusive, last-minute regulations that are grossly inconsistent with congressional intent,” said House Natural Resources Committee Chairman Rob Bishop, R-Utah.

US oil rig count climbed by 15 last week, Baker Hughes reports

The number of US oil rigs increased by 15 to 566 — the highest level since November 2015 — in the week ended Jan. 27, according to Baker Hughes. The total oil and natural gas rig count is expected to climb to an average of 783 this year, 898 in 2018 and 1,009 in 2019.

Border tax could further reduce Mexican oil exports to US

A proposed 20% border tax on Mexican goods will likely encourage Mexico’s oil industry to abandon the American market in favor of Asia and Europe, where demand for Mexican crude is on the rise. The volume of Mexican oil exports to the US is already declining, with 48% of Mexican crude shipped to the US in 2016 compared with 69% in 2014.

US-Mexico dispute unlikely to hinder US shale gas exports

Mexico’s dependence on US shale gas will likely continue to tie the two countries together even if tensions grow. The flow of US shale gas to Mexico more than doubled in the past two years, and ING Groep Chief International Economist Rob Carnell believes Mexico will decide against putting tariffs on US imports in retaliation to President Donald Trump’s proposed 20% border tax because “they would rather have the gas at a decent price.”

Investments keep flowing to the Permian Basin

US shale companies continued their land-buying spree in the Permian Basin into 2017, with about $9 billion in land deals in January. If drillers keep up the current pace, Gesco Sales Manager Josh Clawson estimates that an additional 100 drilling rigs could be deployed to the Permian by June.

Delaware Basin becomes ExxonMobil’s primary focus this year

ExxonMobil announced plans to deploy at least 15 more rigs in the Delaware Basin over time as it seeks to boost production in the region, which has the potential to yield 350,000 barrels of oil equivalent per day at its peak after more than 10 years of sustained drilling. The company, which reported a $2.3 billion loss in the fourth quarter, said it would raise its 2017 budget by 14% to $22 billion.

EV Energy Partners divests Barnett Shale assets to buy Eagle Ford acreage

EnerVest affiliate EV Energy Partners has sold some of its natural gas assets in North Texas’ Barnett Shale for $52 million, with proceeds going toward funding its $59 million acquisition of a 5.8% working interest in 529 net Eagle Ford acres located in Karnes County. “We believe that this position in the Eagle Ford Shale affords many attractive, self-funding, near-term drilling opportunities and will increase our crude production by approximately 25 percent in 2017,” said Michael Mercer, EV Energy president and CEO.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert S. Kerr

January 27, 2017

Lario Oil & Gas spends $345M on Permian acreage

Lario Oil & Gas has expanded its position in the Permian Basin with the $345 million acquisition of 10,000 net acres in the Midland sub-basin, which have a production of about 1,850 barrels of oil equivalent per day. The assets also include “hundreds” of potential drilling locations in the Spraberry and Wolfcamp shales.

US oil rig count surges by 29, Baker Hughes reports

The number of US oil rigs expanded by 29 to 551 in the week ended Jan. 20, the biggest increase since April 2013, according to Baker Hughes. Thirteen rigs were deployed to the Permian Basin, while the Cana-Woodford Shale gained nine rigs.

EP Energy unveils drilling joint venture targeting Wolfcamp

EP Energy and Apollo Global Management-backed Wolfcamp Drillco Operating have formed a 50-50 joint venture with plans to drill 150 wells in two 75-well tranches in the Wolfcamp formation of the Permian Basin. EP Energy put the value of its Wolfcamp assets at about $20,000 per acre.

Midstream companies get caught in Permian Basin frenzy

The recent spike in acquisitions of gathering infrastructure and announcements of pipeline expansions in the Permian Basin suggest that midstream assets in the shale play are becoming as hot of a purchase as Permian Basin land. Most recently, Plains All American Pipeline said it was acquiring the Alpha Crude Connector System in the Permian’s Delaware Basin for $1.2 billion.

Trump administration working on first energy policy changes

President Donald Trump is reportedly preparing to roll back a number of energy regulations enacted by the previous administration as part of his “America First Energy Plan,” published on the White House’s website after his inauguration. Trump plans to repeal Obama’s Climate Action Plan, accelerate permitting for cross-border pipelines, remove the climate change factor when making government decisions and temporarily stop the use of the social cost of carbon as a metric, according to sources.

OPEC members confident US will continue to import their oil

Saudi Arabia and Venezuela are unfazed by President Donald Trump’s pledges to reduce US reliance on OPEC oil and expect their oil export volumes to the US to stay stable. Bloomberg data show the US imported roughly 3 million barrels of oil per day from OPEC in 2016, 60% of which came from Saudi Arabia and Venezuela.

Energy Dept. sells crude from petroleum reserve to Phillips 66

Phillips 66 earlier this month submitted a winning bid to acquire crude from the Strategic Petroleum Reserve, the company announced Monday without disclosing volume or price. The Energy Department has put up for sale 8 million barrels of sweet crude coming from the Big Hill, Bryan Mound and West Hackberry SPR sites as part of its plan to sell $375 million worth of crude from the strategic reserve in fiscal 2017.

Trump clears path for Keystone XL, Dakota Access pipelines

President Donald Trump signed two executive orders on Tuesday to move forward with construction of the Keystone XL and Dakota Access pipelines and invited TransCanada to resubmit an application for a permit for the Keystone project. “Today’s news is a breath of fresh air, and proof that President Trump won’t let radical special-interest groups stand in the way of doing what’s best for American workers,” said Sen. John Cornyn, R-Texas.

Halcon Resources enters Delaware Basin in $705M deal

Halcon Resources has agreed to pay $705 million to acquire a package of Delaware Basin assets that includes 20,748 net acres in Texas’ Pecos and Reeves counties with a production capacity of 2,600 barrels of oil equivalent per day. The company also said it was selling its El Halcon assets in the Eagle Ford Shale in East Texas for $500 million, which it will use to fund the Delaware Basin acquisition.

API: US crude inventories up 2.9 million barrels

US crude stockpiles rose by 2.9 million barrels in the week ended Jan. 20, surpassing analysts’ forecast of a 1.9 million-barrel build, the American Petroleum Institute reported on Tuesday. Gasoline and distillates inventories also climbed by 4.9 million barrels and 2 million barrels, respectively.

Barclays: Oil production will only increase in the Permian in 2017

The Permian Basin will be the only US shale play where oil production will surge in 2017, according to Barclays commodity analysts. They expect output in the Permian to increase by 490,000 barrels per day from the fourth quarter of 2016 to the final quarter of 2017

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Robert S. Kerr

January 20, 2017

EIA forecasts higher US shale oil production in Feb.

The Energy Information Administration expects US shale oil production to climb in February for the first time in three months, surging by 40,750 barrels per day to reach 4.748 million barrels per day. The Permian Basin will drive the growth, with production in the region estimated to increase by 53,000 barrels per day to reach 2.180 million barrels per day.

API: US crude inventories decline more than expected

US crude stockpiles shrunk by 5 million barrels in the week ended Jan. 13, exceeding analysts’ forecast for a 900,000-barrel drop, according to the American Petroleum Institute. Gasoline and distillates inventories rose by 9.8 million barrels and 1.2 million barrels, respectively.

Oil executives sound alarm over US shale

Oil industry executives and officials at the World Economic Forum in Davos, Switzerland, are concerned that the growing US shale industry will cause oil prices to fall again. “Physical delivery of oil will force the price back down again in the second half of this year,” said Bjarne Schieldrop, chief commodities analyst at Swedish bank SEB.

Jagged Peak seeks to raise up to $791M in IPO

Denver-based Jagged Peak Energy has launched an initial public offering — this year’s first in the upstream sector — with an eye to raising up to $791 million of gross proceeds, or $421 million of net proceeds. The company operates more than 68,000 acres in the Permian’s Delaware Basin, with a daily output of 6,600 barrels of oil.

ConocoPhillips makes big oil discovery in Alaska

ConocoPhillips has announced the discovery of as much as 300 million barrels of oil in the northeast part of the National Petroleum Reserve in Alaska, which could become a multibillion-dollar project generating up to 100,000 barrels of oil per day once it’s operational. Production could begin in 2023.

US drillers show renewed interest in the Eagle Ford

A recent surge in dealmaking and drilling activity in the Eagle Ford Shale suggests the South Texas shale play may be poised for a comeback in 2017. Two of the most recent Eagle Ford acreage deals sold land at about $15,000 per acre, up from last year’s average of $3,500, while the number of active drilling rigs has climbed by 18 since reaching a low of 29 in June 2016.

ExxonMobil expands Permian Basin footprint with $5.6B acquisition

ExxonMobil has agreed to pay $5.6 billion in stock to the Bass family in Fort Worth, Texas, to purchase a number of companies that control about 275,000 acres, mostly in the Permian Basin. The purchase doubles ExxonMobil’s Permian holdings to about 6 billion barrels of oil equivalent.

Noble Energy to acquire Clayton Williams in $2.7B deal

Noble Energy has agreed to buy Clayton Williams Energy in a $2.7 billion deal that will expand its position in the Permian Basin to 120,000 acres and 4,200 drilling locations. “This makes us a leading player in the core of the core of the Delaware Basin,” said Noble Energy President and CEO David Stover.

SM Energy to divest remaining Williston Basin assets

SM Energy is searching for a buyer for its remaining acreage in Divide County, N.D., as it seeks to exit the Williston Basin to focus on the Permian Basin. “Over the next five years, we intend to focus on generating significant high margin production growth from our operated acreage positions in the Midland Basin and Eagle Ford,” said SM Energy President and CEO Jay Ottoson.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: William Skelly

January 13, 2017

US shale set to share in $51B cash injection

A capital allocation of $51 billion aimed at the US and Canadian energy sector from the 70 natural resource funds that were launched globally last year may bring particular benefits to US shale oil producers. Industry analyst Dave Forest believes the boost could even lead to what he calls a “second wave” of shale development.

Shale-rich Okla. sees financial pressure easing

Pressure on shale revenues for the state of Oklahoma remain a concern but are showing signs of easing, says State Treasurer Ken Miller. Oklahoma was adversely affected by last year’s oil price downturn, but its rally to prices in the mid-$50-per-barrel range led to a 15.6% jump in oil and natural gas tax revenues in December.

Consultants predict doubling of oil projects in 2017

Analysts at Wood Mackenzie say they are “cautiously optimistic” that oil and natural gas companies will raise their spending this year on the back of increased crude oil prices, resulting in new product developments that could be double last year’s number. This would mark an end to the past two years of relative inactivity, although the rise in spending is still likely to be 40% below the 2014 figure.

Oil companies may boost E&P spending after 2 years of declines

Oil and natural gas companies are expected to return to spending on exploration and production, raising their investment by an estimated 7% after several years of relative frugality. The upturn comes on the back of a 21% oil price rally since November.

US announces sale of 8M barrels from oil reserves

The Energy Department has invited bids for 8 million barrels of light, sweet oil that it seeks to offload in the coming weeks. The sale is part of its plan to sell as much as $375.4 million of crude in fiscal 2017 in order to finance infrastructure revisions to its emergency reserves of around 695 million barrels.

C&J Energy ends bankruptcy with liquidity worth $220M

C&J Energy Services has emerged from Chapter 11 bankruptcy protection with $1.4 billion in debt eliminated and liquid funds of $220 million. The turnaround comes less than a year since the untimely death of then-CEO Josh Comstock and the company’s subsequent bankruptcy filing, and President and CEO Don Gawick called the achievement “an outstanding resolution.”

Drillers back to work after nearly half-million job loss

For the first time in three years, the US oil industry is set to increase spending, paving the way for thousands of oilfield workers to be rehired, as well as for equipment suppliers and contractors to increase productivity. The upturn is a result of rising oil prices following the earlier slump.

Noble to drill 7,200 new acres in Delaware Basin

Noble Energy has spent $300 million to buy drilling rights on a further 7,200 acres in the Delaware Basin, bringing its total Delaware coverage up to 47,200 net acres. The company has also brought a third oil rig to the site, and Executive Vice President of Operations Gary Willingham said Noble is “aggressively moving forward with development.”

Samson Files Amended Ch. 11 Plan After Deal With Creditors

Samson Resources Corp. and its creditors aired full details Wednesday of a proposed global settlement in the oil and gas producer’s long-running, $4 billion Chapter 11 restructuring battle, setting the stage for a Delaware court hearing.

WPX Increases Position In Delaware Basin

WPX Energy Inc., is increasing its Permian operations to more than 120,000 net acres with a bolt-on acquisition, the Tulsa, Okla.-based company said Jan. 12. The sellers are Panther Energy Co. II LLC and Carrier Energy Partners LLC. For $775 million cash, WPX agreed to acquire 18,100 net Delaware Basin acres with about 6,500 barrels of oil equivalent per day (boe/d) of production, of which 55% is oil.

The acreage is located in Reeves, Loving, Ward and Winkler counties in West Texas and includes 920 gross undeveloped locations in the geologic sweet spot of the Delaware. The company is also acquiring 23 producing wells (17 horizontals) and two drilled but uncompleted horizontal laterals.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: William Skelly

 

January 6, 2017 

American oil companies’ stock offerings pay off

Most of the North American oil companies that were bold enough to sell shares during the past two years got rewarded for their courage and were among the top performers of 2016 as oil prices rebounded. More than 70 oil companies sold stock amounting to about $57 billion combined in the last two years, and while some companies went bankrupt, the majority survived the oil price crash and emerged stronger and less indebted thanks to the stock offerings.

US crude stockpiles decline more than expected

US crude oil stocks fell by 7.4 million barrels in the week ended Dec. 30, far outstripping analysts’ predictions of between 1.7 million and 2.2 million barrels, the American Petroleum Institute reported. Meanwhile, gasoline and distillates inventories surged by 4.25 million barrels and 5.24 million barrels, respectively.

Trans-Alaska Pipeline sees oil volume surge for first time since 2002

The volume of oil moved through the Trans-Alaska Pipeline System increased nearly 2% to 188,887,500 barrels in 2016 — the first year-on-year rise in 14 years, according to operator Alyeska Pipeline Service. The increase can be attributed to a surge in North Slope oil production.

SM Energy divesting $800M worth of assets in the Eagle Ford

SM Energy has agreed to sell a package of assets in the Eagle Ford Shale that includes about 37,500 net acres and related pipeline infrastructure to Venado Oil and Gas for $800 million. The divestment comes as SM Energy shifts its focus to the Permian Basin, where it bought 35,700 net acres for about $1.6 billion in October.

Lucas Energy gets a foothold in the Permian Basin

Houston-based Lucas Energy has acquired 3,630 net acres in the Permian Basin’s San Andres formation as part of an area of mutual interest partnership with a privately held holding company, and it will pay $1.43 million for a 90% interest in the leases. “With this initial leasehold position, we have established our entry into the prolific Permian Basin,” said Lucas Energy President and CEO Anthony Schnur.

DCP Midstream Partners acquires joint venture

DCP Midstream Partners has acquired the assets of a joint venture between Phillips 66 and Spectra Energy to form an $11 billion company, named DCP Midstream, that will be the largest natural gas liquids producer and gas processor in the country. Under the agreement, DCP Midstream is paying DCP Midstream Partners $424 million in cash in exchange for about 31.1 million shares.

2 N.M. counties lead other Permian Basin counties in oil, gas production

New Mexico’s Lea County is the top oil-producing county in the Permian Basin, while Eddy County leads in terms of natural gas production, according to Texas and New Mexico state agencies. Oil production in Lea County exceeded 70.9 million barrels in 2015, while Eddy County produced 311.9 million thousand cubic feet of natural gas.

No boom in sight in the Eagle Ford despite spike in drilling activity

An oil boom in the Eagle Ford Shale is unlikely because it would take a “tremendous and unexpected increase in global demand to get up to over $100 a barrel,” said economist Karr Ingham. However, drilling activity in the Eagle Ford is on the rise, with ConocoPhillips, Pioneer Natural Resources and BHP Billiton among the companies planning to add rigs this year.

PDC Energy boosts its Permian footprint

PDC Energy is expanding its Delaware Basin position with the $118 million acquisition of an asset package that includes 4,500 net acres in Ward County, Texas, one drilled but uncompleted horizontal well and a wastewater disposal well. “Our net acreage, drilling inventory and estimated reserve potential in the basin are expected to increase by approximately 10% with this transaction,” said PDC CEO Bart Brookman.

JPMorgan predicts increased US shale production in later 2017

JPMorgan’s head of regional oil and gas for Asia Pacific Scott Darling predicts an increase in oil production from US shale companies in the second half of 2017, which will likely offset some of the oil price gains triggered by OPEC’s production-cut deal. US shale could add 200,000 barrels per day with prices at $50, up to as much as 1 million barrels per day if prices rise above $60, Darling says.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Everette Lee DeGolyer 

December 30, 2016

API reports surge in US crude oil inventories

US crude stockpiles increased by 4.2 million barrels last week, according to the American Petroleum Institute, whereas analysts had expected a 1.5 million barrel decline. Gasoline inventories dropped by 2.8 million barrels while distillate stocks were down 1.7 million barrels.

What will Trump’s impact be for oil, gas production?

The oil and natural gas industry sees President-elect Donald Trump as a good thing for production, pointing to his promises to approve infrastructure projects and expand operations on federal lands. Some analysts say the actions of the incoming administration won’t have as much effect on the industry as market conditions.

A wave of IPOs could hit US oil industry through 2018

As many as 40 North American oil and natural gas companies could go public over the next two years, up from 13 this year, because of higher crude prices and the potential for deregulation, according to Tudor Pickering Holt & Co. CEO Maynard Holt. “The number of companies expressing interest in going into this window is really high, and the number of investors saying we’d like to see something different is really high,” Holt said.

Macquarie: US shale output could surge by 1 million barrels per day

The gains in oil prices from OPEC’s production cut plan would likely be erased by an increase in US shale production by 1 million barrels per day, Macquarie analysts say. Potential cheating by OPEC members, higher output in Libya and Nigeria and an anticipated slowdown in oil demand growth amplify the threat to the recovery in oil prices.

Baker Hughes: US oil rig count surges for 8th week in a row

The number of US rigs drilling for oil rose by 13 to 523 in the week ended Dec. 23, marking the eighth consecutive week of gains, according to Baker Hughes. The Permian Basin added four oil rigs for a total of 262 rigs

US sale of sweet crude from emergency oil reserve to kick off in Jan.

The Energy Department plans to start selling off about 8 million barrels of sweet crude from the Strategic Petroleum Reserve in early to mid-January, with delivery anticipated in March, a department notice to potential bidders revealed. The $375 million sale is the first of several slated to be held over the next few years, with total value estimated at $2 billion.

3 US oil companies to file for bankruptcy

Memorial Production Partners, Forbes Energy Services and Bonanza Creek Energy plan to file for Chapter 11 bankruptcy protection over the next few weeks, joining the more than 200 North American oil and natural gas companies that filed for bankruptcy. However, bankruptcies in the oil and gas industry are expected to decline in 2017 as crude prices rise.

Golden Pass LNG project gets the green light

The Federal Energy Regulatory Commission granted a permit to Golden Pass Products to build a $10 billion liquefied natural gas facility in Sabine Pass, Texas, with a total capacity of 17.2 million tons of LNG per year. The project is expected to create about 3,800 jobs in 25 years of operations.

Iraq commits to OPEC cuts, sends oil prices higher

Iraqi Oil Minister Jabar al-Luaibi told the official Kuwait News Agency his country was committed to cutting as much as 210,000 barrels per day from production starting next month. Iraq, he said, is keen on maintaining balance in the global market and has an eye on oil priced at $60 per barrel.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: Everette Lee DeGolyer 

December 23, 2016

Chesapeake Energy hopes supersize wells will help it make a comeback

Chesapeake Energy has drilled a supersize oil and natural gas well to a depth and horizontal length of two miles in the Haynesville Shale as part of an experiment which, if successful, could help the company produce more fossil fuels for a cost 75% lower than average and stage a financial recovery. “What we’re learning in the Haynesville, we’re testing in the Eagle Ford, we’re going to apply to the Utica,” said Frank Patterson, the company’s executive vice president of exploration and production.

Operators extend Glass Mountain Pipeline to enter Okla.’s STACK play

SemGroup and NGL Energy Partners have announced plans to build a 44-mile extension of the Glass Mountain Pipeline so it can transport crude oil from the STACK play to Cushing, Okla. The project is expected to be completed in the fourth quarter of 2017.

US energy companies need oil prices at $55 per barrel for turnaround

US independent oil and natural gas companies that survived the oil price crash will be the first oil industry players to make a comeback in 2017 if oil prices stabilize above $55 per barrel, according to energy research firm Wood Mackenzie. Average oil prices above $50 per barrel will allow US independents to boost investments by 25% and in some cases, increase production by an average of 2% in 2017.

Drilling in the Permian is becoming too expensive for some oil companies

Increased competition could make it unsustainable for some oil companies to continue to drill in the Permian Basin at the current rate because it could prompt workers to ask for higher wages and lift oilfield service costs, which in turn would hurt drillers’ already weak profits, analysts say. “We think it’s going to become a big-company game,” said Instinet analyst Lloyd Byrne.

Phillips 66’s liquefied petroleum gas export facility is now operational

Phillips 66’s liquefied petroleum gas export terminal in Freeport, Texas, exported its first contracted cargo Friday aboard the Commander LNG ship. The facility has an export capacity of 4.4 million barrels per month and mostly ships propane and butane.

Forbes Energy Services could file for bankruptcy this month, sources say

US oilfield services firm Forbes Energy Services is reportedly planning to file for bankruptcy protection as soon as this month in an effort to reduce its $300 million debt load. The company posted third-quarter losses of $23.2 million and warned last month in its quarterly financial statement that it could have to file for bankruptcy.

Anadarko Petroleum to divest $1.2B in Marcellus Shale assets

Anadarko Petroleum has agreed to sell 195,000 acres along with associated equipment in Pennsylvania’s Marcellus Shale to a subsidiary of Alta Resources Development for $1.2 billion. The deal, expected to close in early 2017, marks Anadarko’s exit from the Marcellus as the company is shifting its focus to Colorado’s Denver-Julesburg Basin and Texas’ Delaware Basin.

December 16, 2016

Gulfport to buy acreage in Oklahoma’s SCOOP for $1.85 billion

Gulfport Energy Corp (GPOR.O) said it would buy acreage in Oklahoma’s SCOOP region from a privately held company for $1.85 billion. The deal is expected to close in February 2017.

The purchase price consists of $1.35 billion in cash and about 18.8 million of Gulfport’s shares. Oil companies have resumed buying oil and gas acreage in low-cost shale fields in the United States, restocking their inventories on a bet that a two-year slump in the price of oil has abated. Gulfport said it would buy 46,400 acres from Vitruvian II Woodford LLC, a portfolio company of Quantum Energy Partners, a Texas-based private equity and venture capital firm.

The leases include access to the Woodford and Springer rock formations under parts of Grady, Stephens and Garvin counties. The deal also includes 48 producing horizontal wells and an interest in more than 150 non-operated horizontal wells. Existing production was about 183 million cubic feet of natural gas equivalent per day in October. The properties are 80 percent held by production.

Four rigs are currently operating on the acreage and Gulfport plans to add two more rigs in 2017. Gulfport has identified about 1,750 drilling locations in the area, the company said.

BP moves headquarters of Lower 48 onshore business to Denver

BP on Wednesday announced it would move the headquarters of its Lower 48 onshore division from Houston to Denver in the first quarter of 2018 and have at least 200 employees there as a result. “With two-thirds of our operated oil and natural gas production and proved reserves in the Rockies … Denver is a logical — and strategic — place for us to be and a natural fit for our business,” said David Lawler, CEO of BP’s Lower 48 business.

Diamondback boosts its Permian Basin footprint with $2.43B acquisition

Diamondback Energy has agreed to acquire 76,319 net acres in Texas’ Pecos and Reeves counties from Brigham Resources Operating and Brigham Resources Midstream in a cash-and-stock deal worth $2.43 billion. The acreage produced an average of about 9,500 barrels of oil equivalent per day in November.

Panhandle Oil and Gas reports FQ4 results

Michael C. Coffman, President and CEO, said, “As have all companies in the oil and gas industry, Panhandle experienced a very difficult year in 2016, brought on by extremely low product prices. Our average per Mcfe sales price of $2.73 in 2016 compared to $3.97 in 2015 and $5.88 in 2014.

For fiscal 2016, the Company recorded a net loss of $10,286,884. This compared to a net income of $9,321,341 for fiscal 2015. Total revenues for 2016 were $39,063,183, a decrease from $70,882,093 for 2015. Oil, NGL and natural gas sales revenues decreased $23,122,561 or 42% in 2016, as compared to 2015.

Swift Energy completes sale of remaining 25% interest in La. fields

Swift Energy has sold its remaining 25% interest in Louisiana’s Burr Ferry and South Bearhead Creek fields for $8 million, with proceeds going toward reducing debt. “These transactions to date have simplified our business model, as our cost structure is now more representative of our Eagle Ford development program,” Swift Energy CEO Bob Banks said.

Kinder Morgan reportedly plans to divest Permian Basin assets

Kinder Morgan is looking to sell its oil and natural gas assets in the Permian Basin, which produce about 56,000 barrels of oil per day, sources say. Proceeds from the sale could amount to more than $10 billion and will likely be used to clear some of the company’s debt, according to analysts.

Congress authorizes sale of $375M worth of emergency reserve US crude

The US government will sell $375 million worth of crude oil from the Strategic Petroleum Reserve this winter as part of an up to $2 billion overhaul designed to “increase the integrity and extend the life” of the 695 million-barrel oil reserve. Additional annual sales will have to be approved over the next three fiscal years to hit the overhaul target.

US shale recovery to offset oil price gains, Goldman Sachs says

Goldman Sachs analysts predicted that crude prices above $60 a barrel will trigger a rebound in US shale production next year, which in turn will cause prices to fall back to $55 a barrel. The bank’s analysts also said they disagree with Saudi Arabia Energy Minister Khalid al-Falih’s recent comments that the American shale industry will not increase output significantly in response to higher prices.

Trump names ExxonMobil CEO Tillerson secretary of state

President-elect Donald Trump brought an end to his wide-ranging search for a secretary of state by appointing ExxonMobil CEO Rex Tillerson. Trump brushed aside concerns expressed by leaders of both parties that the energy executive’s relationship to Russian President Vladimir Putin was too close to permit him to represent the global interests of the US.

Darren Woods to succeed Rex Tillerson as ExxonMobil CEO

Darren Woods, the former head of ExxonMobil’s refining and supply arm, is set to replace Rex Tillerson as CEO of the company following the latter’s retirement and nomination for secretary of state. Woods has been with the company since 1992 and has served as president and member of the board since January of this year.

Extraction Oil & Gas pays $177M for D-J Basin acreage

Denver-based Extraction Oil & Gas is in the process of acquiring about 16,800 net acres in the Denver-Julesburg Basin for $177 million and will sell about 25 million shares for net proceeds of $442 million to fund the deal. The majority of the acreage is expected to achieve breakeven prices below $45 a barrel.

Patterson-UTI to merge with Seventy Seven Energy in $1.76B deal

US drilling companies Patterson-UTI and Seventy Seven Energy will merge in a $1.76 billion all-stock deal, creating a combined company that would have 201 high-specification rigs and 1.5 million hydraulic fracturing horsepower. The transaction is expected to close in the first quarter of 2017.

Callon Petroleum to acquire Southern Delaware Basin acreage in $615M deal

Callon Petroleum plans to pay $615 million to purchase assets in the Southern Delaware Basin from American Resource Development, American Resource Development Upstream and American Resource Development Midstream. The acreage had a net production of 1,945 barrels of oil equivalent per day in October.

EIA: US shale production to rise for the first time in 5 months in Jan.

The Energy Information Administration expects US shale production to surge by 1,400 barrels per day to 4.542 million barrels per day in January, marking the first month-on-month increase since July. The Permian Basin will lead the gains, with production expected to jump by 37,000 barrels per day to 2.13 million barrels per day.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: FRANK BUTTRAM 

December 9, 2016

EIA: US crude inventories fall

US crude stockpiles plunged by 2.4 million barrels in the week ending Dec. 2, compared with analysts’ expectations for a draw of 1.7 million barrels, according to the Energy Information Administration. Gasoline inventories rose by 3.4 million barrels, while distillate supplies increased by 2.5 million barrels.

Bankruptcies in oilfield services sector growing

Troubled US oilfield services companies are increasingly filing for Chapter 11 bankruptcy protection as they seek to clear debt and raise funds for investments in preparation for the upturn expected during President-elect Donald Trump’s presidency. About 70 oilfield services companies filed for bankruptcy this year through October, compared with 39 in all of last year.

SM Energy to sell shares to fund Midland acreage acquisition

SM Energy seeks to raise $363.4 million from the sale of 9.5 million common shares, with plans to use part of the proceeds to acquire 4,100 acres in the Midland Basin of the Permian for $120 million. “The bolt-on nature of the acreage acquired will stretch laterals and improve well economics,” Capital One Southcoast analysts said.

Noble Energy expands Delaware Basin position

Noble Energy has paid $216 million for 7,200 acres in the Delaware Basin portion of the Permian and has also increased working interests in certain assets it already operates there. As a result of the deal, the company will boost its Delaware position with 150 new locations.

Dakota Access denial casts shadow over new projects

The US Army Corps of Engineers’ decision to deny an easement needed for the Dakota Access Pipeline could spell uncertainty for future pipeline projects, considering that Energy Transfer Partners had received all necessary permitting approvals. “I think it sends a horrible signal to anyone wanting to invest in a project, and I strongly suspect those policies will be discontinued on Jan. 20th,” said former Pipeline and Hazardous Materials Safety Administration head Brigham McCown.

Asia receives nearly 3 million barrels of US crude from BP

BP has exported almost 3 million barrels of US crude oil to Asia over the past few months as part of a $150 million operation that involved seven tankers and several transfers. More long-haul shipments of US crude such as BP’s are expected in 2017 in the wake of Russia and OPEC’s oil production cuts.

Fraser Institute names Okla. best place for oil and gas investment

Oklahoma, Texas, Kansas, Saskatchewan and Wyoming are the top five most attractive jurisdictions for oil and natural gas investment worldwide thanks to their friendly policies, according to the Fraser Institute’s annual Global Petroleum Survey. “Most US states are bucking the global trend of decreasing confidence for investment, and Oklahoma’s top spot in this year’s ranking demonstrates how coherent environmental policy and sound regulation can improve investor perception,” said Fraser Institute Senior Director of Natural Resource Studies Kenneth Green.

Chesapeake Sells First Of Two Haynesville Packages For $450 Million

Chesapeake Energy Corp. (NYSE: CHK) is delivering on its divestment plans, saying Dec. 5 it agreed to sell a package of producing Haynesville Shale acreage in northern Louisiana for about $450 million. The deal covers 78,000 net acres, with slightly more than half—40,000 net acres—considered core to Oklahoma City-based Chesapeake. Assets include 250 wells producing 30 million cubic feet of gas per day (MMcf/d).

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: HARRY SINCLAIR 

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December 2, 2016

Mary Fallin a Candidate as Secretary of Interior

Oklahoma Gov. Mary Fallin as secretary of the interior would be great news — at least for the state’s oil and gas industry. The Department of Interior, along with the Environmental Protection Agency and, to a lesser extent, the Department of Energy, are important federal agencies for oil and gas producers. Interior oversees the Bureau of Land Management, which is responsible for 245 million surface and 700 million subsurface acres owned by the federal government. Also in the secretary of the interior’s portfolio are the Bureau of Indian Affairs and the Office of the Special Trustee for American Indians, both of which have connections to energy production and the State of Oklahoma.

OPEC Deal Sends Energy Stocks Through The Roof

US energy stocks surged on Wednesday on news of the OPEC production cut agreement, with 16 out of the 36 energy stocks in the S&P 500 posting gains of at least 10%. The top three gainers were Marathon Oil, Transocean and Newfield Exploration, up 21%, 17% and 16%, respectively.

US Becomes A Net Exporter Of Natural Gas

The US has exported 7.4 billion cubic feet a day of natural gas on average this month, compared with an average of 7 billion cubic feet a day in imports, figures from S&P Global Platts show. It’s the first time in almost 60 years that the US has shipped more gas than it has bought.

Low Oil Production Costs In US Shale Plays Threaten OPEC

The ability of US shale drillers to produce oil at costs as low as $15 a barrel threatens to offset any rise in crude prices that an OPEC production cut deal could bring because it would stimulate US shale producers to boost output. Break-even price points in the Bakken Shale have dropped to $29.44 in 2016 from $59.03 in 2014, and the downward trend is expected to persist.

Concho Resources Strengthens Permian Basin Position with $430M Deal

Concho Resources is expanding its Permian Basin acreage with the acquisition of land in the Delaware Basin, part of a $430 million deal that would provide opportunities for denser development for multi-well pads. Concho aims to increase its rig count in the Delaware Basin, a section of the Permian, in 2017 and is targeting 20% production growth.

Baker Hughes Divests Cementing, Fracking Operations to Form Joint Venture

Baker Hughes has divested its cementing and hydraulic fracturing business, which will become part of a new joint venture in partnership with CSL Capital Management and a Goldman Sachs merchant banking division. Baker Hughes will own a 46.7% stake in the venture, called BJ Services, and will receive $150 million in compensation as part of the deal.

Texas Crude Oil Production Stable

Crude oil production in Texas averaged 2.38 million barrels per day in September, 1.6% lower than in September 2015, the Texas Railroad Commission reported. Texas, the top oil producer in the US, produced 995 million barrels of crude over the past 12 months.

US Crude Inventories Fall by 900,000 Barrels, EIA Reports

The U.S. Energy Information Administration reported Wednesday that crude inventories decreased by 900,000 barrels for the week ended Nov. 25, putting inventories at 488.1 million barrels. “At 488.1 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year,” the EIA said in a statement. However, Cushing, Okla., posted a record increase of 2.3 million barrels, the biggest since March 2015. Cushing is still near maximum operating capacity.

STORIES & LEGENDS SERIES ABOUT OKLAHOMA OILMEN: HARRY SINCLAIR 

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November 25, 2016

Results of The Short Rig Count Week

The overall US drilling rig count increased by 5 to 593 during a week ended Nov. 23 that was shortened by the Thanksgiving Day holiday. The latest jump comes after last week’s increase of 20 rigs, the largest since April 2014. Oil-directed rigs gained 3 units this week to 474, an increase of 158 since May 27. Gas-directed rigs rose 2 units to 118, up 35 since Aug. 26. The horizontal count is now up 161 since May 27.

Pawnee Nation Sues US Government in Bid to Cancel Okla. Drilling Permits

The Pawnee Nation of Oklahoma has sued the federal government claiming that the Interior Department, the Bureau of Indian Affairs and the Bureau of Land Management approved drilling permits and leases on tribal lands despite a tribal moratorium on new oil and natural gas wells. The Pawnee Nation, with its tribal headquarters located in Pawnee, has approximately 3,200 members.

Trump Vows to Lift Fossil Fuel Restrictions on First Day in Office

President-elect Donald Trump pledged to eliminate regulations that limit fossil fuel production on his first day in the White House. “On energy, I will cancel job-killing restrictions on the production of American energy — including shale energy and clean coal — creating many millions of high-paying jobs,” Trump said in a video message.

US Rig Use Down This Year, But More Activity Expected in 2017

The use of rigs dropped around the world this year following two years of decline in drilling activity, according to an annual rig census by National Oilwell Varco. The US fleet saw a decrease of 188 rigs, and the number of active global offshore mobile units declined by 29%, but an increase in new wells and rigs is expected next year.

Swift Energy Divests Southeast La. Assets

Swift Energy has sold its 14,000-acre assets in the Lake Washington field in Southeast Louisiana for about $40 million as the company shifts its focus to the Eagle Ford Shale in South Texas. “We’ve had a tremendous amount of success with the development of our assets in South Texas, and this transaction allows us to focus exclusively on our very best rate of return projects,” said Swift Chief Operating Officer, Executive Vice President and interim CEO Bob Banks.

Some US Oil & Gas Companies That Survived Bankruptcy Face Risk of Relapse

US oil and natural gas companies that emerged from Chapter 11 bankruptcy protection with still too much debt or too little cash on hand are vulnerable to “Chapter 22,” a term for firms that failed to solve their problems with a Chapter 11 restructuring. Such is the case of oil and gas industry data provider Global Geophysical Services and offshore driller Hercules Offshore, while other companies such as Vantage Drilling International, ETX Energy and Titan Energy are at risk of a subsequent bankruptcy.

Stories & Legends Series About Oklahoma Oilmen: Frank Phillips

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November 18, 2016

Oklahoma’s earthquake problem, Is There a Solution?

Earthquakes in Oklahoma, such as the magnitude 5.0 temblor that damaged buildings Sunday in Cushing, are related to the underground disposal of wastewater in oil and gas production, and they likely will continue for several years, experts say. Even once injections into the Arbuckle formation under Oklahoma stop, earthquakes will continue because of the time it takes for pressure to spread out from concentrated areas, said Jeremy Boak, director of the Oklahoma Geological Survey.

Entrepreneurs are working on ways to deal with Oklahoma’s earthquake problem, which is believed to be caused by the pumping of salty wastewater back into the ground during the hydraulic fracturing process. Among the ideas are to extract salt from the water and release the water into rivers, turn the salt slurry into disposable brine, and use the water for other parts of the drilling operation.

Wolfcamp Shale Could Contain 20 Billion Untapped Oil Barrels

USGS says the Wolfcamp Shale in West Texas is believed to hold 20 billion undiscovered, recoverable barrels of oil, more than any other oil deposit in the US, the US Geological Survey said in a study released Tuesday. The Wolfcamp could also contain 16 trillion cubic feet of associated natural gas and 1.6 billion barrels of natural gas liquids.

Although the Permian has been gushing crude since the 1920s, its multiple layers of oil-soaked shale remained largely untapped until the last several years, when intensive drilling and fracturing techniques perfected in other U.S. regions were adopted. The Wolfcamp, which is as much as a mile thick in some places, has been one of the primary targets.

API Reports Larger-Than-Expected Inventory Buildup Against Decreasing Shale Oil Output.

US crude oil stockpiles grew by 3.6 million barrels in the week ended Nov. 11, more than twice as much as analysts had predicted, according to the American Petroleum Institute. On the flip side, US shale oil production in December is expected to decline by 20,000 barrels a day, less than in November, for a total of 4.498 million barrels a day, according to a report by the Energy Information Administration.

Output in the Permian Basin is forecast to climb by 27,000 barrels a day, while production at Texas’ Eagle Ford and North Dakota’s Bakken Shale plays will likely fall by 33,000 barrels a day and 14,000 barrels a day, respectively. It will be interesting to see if Donald Trump’s threat to ‘become independent of any need to import energy from the OPEC cartel‘ materializes and whether the President-elect will follow through on his threats to ban Saudi crude imports to the U.S.

Oil Drillers Increasingly Focus on The Permian Basin

With a count of about 220 active oil rigs, the Permian Basin has almost the same number as the rest of the US combined, the Energy Department said in a report. The Permian is also the only US region expected to have an increase in production for a third month in a row.

Double Eagle Receives Up To $450 Million For Midland Deals

Double Eagle Energy Permian LLC formed a strategic relationship to grow and develop its position in the Midland Basin, the company said Nov. 14. As part of a definitive agreement, Magnetar Capital agreed to invest up to $450 million of equity and delayed draw unsecured debt capital to support Double Eagle’s Midland development and A&D activities.

Double Eagle has rapidly grown to become one of the largest pure-play Midland Basin E&Ps following the recent merger of two private equity-backed companies, the release said. In October, Double Eagle Lone Star LLC and Veritas Energy Partners Holdings LLC, both based in Fort Worth, Texas, agreed to combine forming Double Eagle Energy Permian. Combined, the companies control more than 60,000 core Midland net acres (over 70% operated) located predominantly in Midland, Martin, Howard and Glasscock counties in West Texas.

Double Eagle is backed by funds managed by affiliates of Apollo Global Management LLC and Post Oak Energy Capital LP.

Beckham County Well Completion

In far Western portion of the Anadarko Basin, Atalaya Resources LLC completed a Des Moines Granite Wash D well in Section 32-11n-21w of Beckham County, Okla. The #1H Barnett 29/28-11-21 was tested in an acidized and fracture-stimulated horizontal interval at 13,335-17,995 ft. It initially flowed 2.48 MMcf of gas, 566 bbl of 53-degree-gravity condensate and 158 bbl of water per day. The discovery was drilled northward to 18,080 ft and it bottomed in Section 29-11n-21w with at true vertical depth of 13,010 ft. Tested on an 8/64-in. choke, the shut-in tubing pressure was 6,375 psi and the flowing tubing pressure was 6,200 psi. According to the Tulsa-based operator, the estimated ultimate recovery is 5.0 Bcf of gas and 350 Mbbl of condensate

Franco-Nevada Corp. Acquires Stack Interest

Franco-Nevada Corp. has entered into an agreement to acquire royalty interest in STACK assets in Oklahoma for $100 million. The transaction includes ~1.61% royalty interest over 74,880 gross acres in Blaine Co., and Kingfisher Co., OK. The seller is rumored to be Felix Energy II LLC. Franco-Nevada owns rights to precious metals across the world. Felix is now active in the Delaware Basin, where it is permitting wells.

Stories & Legends Series About Oklahoma Oilmen: Frank Phillips

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November 11, 2016

Donald Trump Is President-Elect: What Now?

After an ugly, hard fought campaign, voters chose Republican Donald J. Trump as the next president of the United States. The win completely caught the pollsters and mainstream media by surprise. Many oil and gas industry executives were prepared for a Hillary Clinton administration, they now find themselves asking: What does a Trump administration mean for the industry? Will his economic policies help or hinder economic growth and favor oil and gas exploration? One sure winner is the coal industry which was punished by the Obama administration.

Trump counts among his advisers champions of fracking such as Harold Hamm, chairman and CEO of Continental Resources Inc. (NYSE: CLR). Hamm is considered a contender for U.S. energy secretary.

Anadarko plans to seek more oil, heavy liquids

Anadarko Petroleum intends to move away from natural gas and focus on drilling for oil in West Texas’ Delaware Basin, Colorado’s Denver-Julesburg Basin and the Gulf of Mexico, company executives said in it’s recent third-quarter conference call. Anadarko reported third-quarter losses of $830 million, down from $2.24 billion in the same period of last year. Anadarko announced Oct. 31 that it has a deal to sell its Carthage assets on the eastern border of Texas for more than $1 billion.

Since the end of the second quarter, the company also closed more than $500 million in asset sales through divesting assets in Elm Grove, Hearne, Hugoton and Ozona, Texas, and in Adams County, Colo. With the divestitures, the company exceeded its March goal of selling up to $3 billion worth of assets. This year, Anadarko closed $3.08 billion in sales and, with the Carthage sale, will eclipse $4 billion.

Royal Dutch Shell to sell Permian Basin acreage

Royal Dutch Shell has put up for sale two small properties in the Permian Basin, but it remains open to acquisition opportunities in West Texas, Shell Chief Financial Officer Simon Henry said on an analysts call Tuesday. “The Permian is the crown jewel. Not just in terms of value and quality of the asset but also the capability that is being developed there,” he said.

Värde Partners and Titanium Exploration Partners, LLC Announce Closing of STACK Acquisition

Värde Partners and Titanium Exploration Partners, LLC today announced they have acquired oil and gas assets in the STACK play in Oklahoma. Titanium will manage the STACK Acquisition assets on behalf of Värde, who provided the financing. The STACK Acquisition, which closed on September 9, 2016, consists of non-operated working interests covering approximately 3,600 net acres and 1,100 barrels of oil equivalent of daily production as of the effective date of the acquisition.

The assets consist of non-operated working interests in Blaine and surrounding counties, primarily alongside Continental Resources, Inc., one of the leading operators in the play.

Substantial damage after earthquake rattles Cushing

Dozens of buildings sustained “substantial damage” after a 5.0 magnitude earthquake struck an Oklahoma town that’s home to one of the world’s key oil hubs with almost 600 million barrels of stored crude, but officials said Monday that no damage has been reported at the oil terminal. It was only the sixth 5.0 magnitude or higher to strike Oklahoma since 1882, said George Choy, a geophysicist with the U.S. Geological Survey in Boulder, Colo. Three of those larger quakes occurred this year. The strongest ever recorded in Oklahoma was a 5.8 magnitude that hit Pawnee in September.

The quake struck at 7:44 p.m. Sunday and was felt as far away as Iowa, Illinois and Texas. The U.S. Geological Survey initially said Sunday’s quake was of magnitude 5.3 but later lowered the reading to 5.0. In response to Sunday’s earthquake near Cushing, Oklahoma’s oil and gas regulator says it plans to shut some disposal wells and reduce the volume of others. The Oklahoma Corporation Commission says its plan covers 700 sq. miles but does not say how many wells were affected; when a quake of similar magnitude hit the state in September, the agency ordered 37 wells shut over a 500 sq. mile area

Oil majors’ cash flow improved for 3 straight quarters

The world’s biggest oil companies — ExxonMobil, Royal Dutch Shell, Chevron, Total and BP — saw their combined cash flow surge 67% to almost $26 billion in the July-September period, marking the third consecutive quarter of growth. “Cash deficits should start to shrink in 2017 as oil prices gradually recover and cost-cutting initiatives continue,” Fitch Ratings Senior Director Maxim Edelson said.

US drillers attracted record amount of cash this year

US drilling companies, including Anadarko Petroleum and RSP Permian, have raised an unprecedented $28 billion so far this year from over 60 secondary stock offerings, beating out all but one other industry group. The capital helped companies build up their war chests for mergers and acquisitions.

OKLA Tax Collections on the Rise

State tax collections from oil and natural gas production are up for the first time in almost two years, Oklahoma Treasurer Ken Miller said Tuesday. October gross production collections of $35.1 million were above October 2015 collections by $2.9 million, or 8.9 percent. The last such increase was in December 2014, when receipts totaled $72.1 million.

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November 4, 2016

Devon Reports Earnings

Devon Energy (DVN+3.1%) posted better than expected Q3 earnings and revenues, as it cut expenses and shifted to higher margin production. It expects cost savings to reach $1B this year. David A. Hager of Devon, noted that development programs delivered the best quarterly drillbit results in Devon’s 45-year history, with new wells reaching peak 30-day rates of nearly 2,000 BOE per day. These prolific drilling results were centered in our world-class STACK play, where oil production increased by nearly 40% year over year. DVN says it plans to increase its rig activity in the U.S. from five operated rigs running in Q3 to as many as 10 operated rigs by year end.

Earthquake Shakes Oklahoma

A magnitude 4.5 earthquake rocked north-central Oklahoma Tuesday night at 11:27 p.m. – the strongest and latest in a series of tremors that have been rattling the state for months. The US Geological Survey reports that the epicenter was near Pawnee, some 70 miles northeast of Oklahoma City. Pawnee Police say that preliminary reports show no significant damage. This was the fifth earthquake of the day in the state that registered at least a 2.0 magnitude, according to The Tulsa World.

GE Oil & Gas, Baker Hughes Plan Mega-Merger

Baker Hughes Inc. (NYSE: BHI), left at the altar in the failed merger with Halliburton Co. (NYSE: HAL), will combine with GE Oil & Gas, the companies said Oct. 31. GE (NYSE: GE) and Baker Hughes said they will merge into a new oilfield technology company with a value of $32 billion. As part of the deal, GE will give Baker Hughes shareholders’ a $7.4 billion sweetener, with shareholders receiving a special one-time cash dividend of $17.50 per share. The merger will create a “new Baker Hughes,” with GE owning a 62.5% majority interest in the company. Baker Hughes would hold the remaining 37.5% of the company.

Oxy’s $2 Billion Deal Doubles Permian Basin Holdings

Occidental Petroleum Corp. (NYSE: OXY) will take control of 35,000 net Delaware Basin acres and other Permian Basin interests in a $2 billion deal, the company said Oct. 31. Oxy said the company purchased producing and non-producing leasehold acreage in the Permian as well as interests in enhanced oil recovery (EOR) and CO2 properties and related infrastructure. The seller was undisclosed. In the Southern Delaware, Oxy added acreage in Reeves and Pecos counties, Texas, in areas where the company already holds working interests.

The acquisition:
  • Includes production of about 7,000 net barrels of oil equivalent per day (boe/d) (72% oil) from 68 horizontal wells;
  • Adds an inventory of about 700 gross horizontal drilling locations targeting the Wolfcamp A and B and Bone Spring as well as potential for additional zones; and Boosts the company’s leasehold Delaware position to nearly 59,000 acres

Wall Street Steps Up Investments in Permian Basin

West Texas is attracting new money from investors such as Blackstone Group, Apollo Global Management and WL Ross, which increasingly recognize the long-term potential of the region, particularly the Permian Basin. Contributing to the Permian’s allure for investors are advances in horizontal drilling and fracking, as well as the widespread presence of oilfield services companies, which help keep costs down.

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