Shale Oil

U.S. shale producers ‘hedging like mad’, to boost investments: Total CEO

18 Oct 2017   Shale Oil

The U.S. shale industry will see another wave of investments as producers are “hedging like mad” against a fall in oil prices, the chief executive of Total Patrick Pouyanne said on Wednesday. Total Chief Executive Officer Patrick Pouyanne poses next to the logo of Total Spring during a news conference in Paris, France, October 5, 2017. REUTERS/Charles Platiau Pouyanne, speaking at the Oil & Money conference in London, said he expected global oil demand to grow strongly again this year by up to 1.6 million barrels per day. “Our U.S. colleagues are hedging like mad at $56 a barrel so we will see another wave of investment in U.S. shale, no doubt about it.” A sharp drop in investment since a collapse in oil prices in 2014 has led to a drop in development of new projects which could lead to an oil supply shortage after […]

Shell Shale Leader Discusses the ‘Non-Moonshot’

18 Oct 2017   Shale Oil

Collaboration, repurposing tech will help company to achieve ‘shale field of the future,’ says exec. Like other major natural gas producers, Shell has a vested interest in ensuring that the fossil fuel remains a key component in the global energy mix – particularly as renewable elements within that mix gain prominence. “Shale is a future growth engine for Shell,” Greg Guidry, executive vice president of Shell’s Unconventionals business, told Rigzone on the sidelines of Energy Dialogues LLC’s North American Gas Forum earlier this month. “We characterize it as a future growth opportunity because of its long-term growth potential, and we are on path to achieve that strategic intent of being a material, sustainable growth engine for Shell within the next decade.” According to Guidry, ensuring natural gas is seen as a stable, reliable energy source – ideally placed to partner with an ever-increasing share of renewables – will require […]

U.S. shale output seen posting 11th straight rise in November: EIA

17 Oct 2017   Shale Oil, USA

U.S. shale production for November is forecast to rise for a 11th consecutive month, the U.S. government said on Monday, as U.S. prices CLc1 stabilize around $50 a barrel. U.S. oil output is expected to increase by 82,000 barrels per day (bpd) to 6.12 million bpd, according to U.S. Energy Information Administration’s drilling productivity report. North Dakota’s Bakken output is set to rise by 7,600 bpd to 1.1 million bpd, the most since March 2016, while Eagle Ford oil output in Texas is set to rise by 2,500 bpd to 1.2 million bpd. Permian production is forecast to rise by 50,000 bpd to 2.7 million bpd, a new record, the EIA said. Meanwhile, U.S. natural gas production was projected to […]

U.S. Oil Production To Increase in November As Rig Count Falls

17 Oct 2017   Oil Supply, Shale Oil, USA

U.S. oil production is set to increase in November, according the Energy Information Administration’s (EIA) Drilling Productivity Report published on Monday. (Click to enlarge) The EIA has forecast an increase of 81,000 barrels per day in November over October levels, even as the number of active oil rigs in the United States dipped steadily over the third quarter, shedding 20 rigs over the last eight weeks. The EIA is also predicting that U.S. crude oil production will hit 9.9 million barrels per day in 2018, a new high for the United States, according to the agency’s Short-Term Energy Outlook. The previous high was 9.6 million barrels per day, which was reached in 1970. The largest increase to crude oil production is expected to come from the Permian Basin, where the EIA is predicting an increase of 51,000 barrels per day to hit 2.66 million bpd in November. Anadarko and […]

U.S. oil pipeline rivals look to consolidate West Texas projects

14 Oct 2017   Shale Oil

As shale oil producers have rushed back into the Permian Basin after a downturn, U.S. pipeline firms have scrambled to plot new pipelines to take all that petroleum from West Texas to refineries, export hubs and petrochemical plants. But operators with plans for up to 20 new lines are now selling stakes in some of those projects amid concerns that production could fall short of the volumes needed to fill them. “I suspect some projects will disappear altogether,” said Roberto Simon, Americas head of natural resources and infrastructure for investment bank Societe Generale. “Not every one is going to be viable.” The shakeout comes despite record crude volumes being pumped now in the […]

France’s Biggest Listed Bank To Stop Funding Shale, Oil Sands Projects

12 Oct 2017   France, Shale Oil

As part of efforts to support energy transition, France’s biggest listed bank, BNP Paribas, said on Wednesday that it would no longer do business with companies whose main business is exploration, production, trading, or marketing of oil and gas from shale or tar sands projects. In one of the latest signs that the banking industry is evaluating the wisdom of doing business with the oil and gas industry in the face of mounting pressure from investors, BNP Paribas also said that it wouldn’t finance any oil or gas exploration or production projects in the Arctic region. The bank will also no longer finance LNG terminals that predominantly liquefy and export gas from shale projects, and choke off funding for pipelines that carry oil and gas from shale and/or tar sands. It doesn’t stop there. BNP Paribas won’t finance coal mines and coal-fired power plants either, and will be no […]

U.S. shale producers called to OPEC balancing effort

11 Oct 2017   OPEC, Shale Oil

OPEC Secretary General Mohammad Sanusi Barkindo calls North American shale producers to do their part in the effort to balance an oversupplied market for crude oil. Photo courtesy of the Organization of Petroleum Exporting Countries Oct. 10 (UPI) — Operators working in shale basins in the United States are called on to do their part to bring the oil market back to balance, OPEC’s secretary general said. Members of the Organization of Petroleum Exporting Countries and a handful of non-member states started an effort to drain the surplus on the five-year average in global crude oil inventories through managed production declines in January. The agreement stands until March. Speaking at an energy conference in New Delhi, OPEC Secretary General Mohammad Sanusi Barkindo said oil demand growth in 2018 should be “quite robust,” while commercial oil stocks in the world’s advanced economies continues to fall. Barkindo said the effort in […]

Is The Bakken Profitable At $50 Oil?

10 Oct 2017   Shale Oil

This is followed with economic life cycle analysis for the average LTO well of the 2014, 2015 and 2016 vintages in the Bakken. This analysis found that companies in aggregate continue to outspend net cash flows from operations and for 2017 this is now expected to total $2 – $3 Billion. • The strong growth and sustained high LTO extraction from the Bakken were facilitated by considerable amounts of debts. The growth in total debts outstanding (employed capital) continues to grow, albeit at a slower pace. • With oil prices sustained at present levels the total employed capital (primarily debt) constitutes severe obstacles for the profitability for the Bakken. • In a scenario where no wells were added post 2017 and the wellhead (at WH) price remained at $40/bo [~ $50/bo WTI] estimated losses for the project would be $20 – $22 Billion. • In a scenario where no […]

Most ‘Competitive’ Oil In The World Befuddles Analysts

9 Oct 2017   Shale Oil, USA

U.S. oil exports hit record highs last week, doubling over the course of a week as the Gulf Coast clears out product backed up because of Hurricane Harvey. The high level of crude exports won’t last forever, but there appears to be a little more life left in the export boom. The surge in exports led net import totals to plunge to levels never seen in EIA data dating back to 2001. Over the last few years, weekly net imports tend to fluctuate between 6 and 8 million barrels per day (mb/d). But September was a highly unusual month. Net imports fell to 5.7 mb/d in the week ending on September 8 before recovering a bit mid-month. By September 29, however, net imports plunged to 5.2 mb/d, the lowest weekly total on record. (Click to enlarge) As mentioned, those low import figures were the direct result of an explosion […]

A little on the Profitability of the Bakken

9 Oct 2017   Shale Oil

In the first part of this post I present an update on the profitability for Light Tight Oil (LTO) extraction in the Bakken (ND) as one big project. This is followed with economic life cycle analysis for the average LTO well of the 2014, 2015 and 2016 vintages in the Bakken. This analysis found that companies in aggregate continue to outspend net cash flows from operations and for 2017 this is now expected to total $2 – $3 Billion. The strong growth and sustained high LTO extraction from the Bakken were facilitated by considerable amounts of debts. The growth in total debts outstanding (employed capital) continues to grow, albeit at a slower pace. With oil prices sustained at present levels the total employed capital (primarily debt) constitutes severe obstacles for the profitability for the Bakken. In a scenario where no wells were added post 2017 and the wellhead (at […]

Consultant: Permian plays are marginally profitable

7 Oct 2017   Shale Oil

Companies are dependent on outside capital, Art Berman says Opening the West Texas Geological Society’s annual fall symposium Wednesday, keynote speaker Art Berman threw a bucket of cold water on the red-hot Permian shale plays. More accurately, the geological consultant and well-known questioner of the nation’s shale plays attempted to put the Permian in perspective and highlight the long-term debt cycle. “This doesn’t in any way diminish the importance of the achievement,” Berman said after his presentation at the Horseshoe. “I know people are mindful of the past, but they tend to be exuberant.” The most important fact to remember is that, on balance, the Permian Basin shale plays are, in most cases, marginally profitable “because costs are very high and you have to balance the costs with the results,” he said. “These wells, these companies, these plays are totally dependent on outside capital.” If companies spend more than […]

Energy producers gain breathing room to borrow amid price uptick: survey

7 Oct 2017   Shale Oil

U.S. oil and gas producers have gained more flexibility to borrow money as crude prices have modestly rebounded, according to a survey of the companies, lenders and others released on Friday. Greater room to borrow means energy producers are under less immediate pressure to cut costs or output. Only 26 percent of energy producers with loans are likely to see a decrease this fall in their borrowing bases, according to the survey by Dallas-based law firm Haynes and Boone. Borrowing base redeterminations are a measure that lenders use to determine available credit according to property value. A year ago, the same survey showed 41 percent were expected to see a decline. The calculations factor in banks’ price projections for producers’ oil and gas reserves. Abundant crude oil inventories, which have driven prices down by half since 2014, are starting to dwindle. NYMEX futures have gained about […]

Time running out on closing budget gap in shale-rich Oklahoma

7 Oct 2017   Shale Oil

The governor of shale-rich Oklahoma said time is running out to address budget problems, even as the state treasurer said oil market recovery has led to gains. House Minority Leader Scott Inman, who is running to fill Fallin’s seat after she leaves office on term limits, said Thursday afternoon there was a bipartisan agreement to raise sin taxes, cut a tax on wind energy producers and raise the rate for gross production taxes. Fallin responded by saying that maybe there were agreements on common goals, but if there were a budget deal, should would’ve announced it herself. Fallin called lawmakers to a special session in late September to address budget strains […]

Tax Breaks Make $50 Oil Profitable In The U.S.

6 Oct 2017   Shale Oil

While the U.S. administration is pushing for a tax code overhaul and supports American “energy dominance”, an environmental group suggests in a new study that at the current oil prices of $50, the development of U.S. oil resources may be much more dependent on tax deductions and provisions than previously thought. The study , conducted by researchers at the Stockholm Environment Institute and Earth Track, concludes that at a $50 oil price, around half of discovered and yet-to-be developed oil resources in the U.S. would depend on existing tax deductions to go from unprofitable to profitable. The researchers divided U.S. fields into four groups: the Permian Basin, the Williston Basin, the Gulf of Mexico, and a fourth group to include all other basins. Then they studied how each of the tax provisions influence the return on investment for new U.S. oil resources of more than 800 fields that have […]

The Permian Boom Is Coming To An End

6 Oct 2017   Shale Oil

The pressure on shale drillers to throttle back on their aggressive drilling continues to crop up in new places, and there are growing signs that the Permian is slowing down. Shale companies spent just $5 billion on land deals in West Texas in the last six months, a fraction of the $35 billion spent in the prior nine-month period, according to the Houston Chronicle , citing Wood Mackenzie data. It’s the latest piece of evidence to suggest that “Permania” might be easing. The hottest shale basin on the planet has suffered from rising costs as too many companies pour money into West Texas. The crowded field has pushed up the price of land, labor, oilfield services, rigs and more. That has led to a rude awakening for a lot of shale drillers. “It’s just taken the edge off the Permian,” said Greig Aitken, head of upstream oil and gas […]

U.S. Shale Juggernaut Shows Signs of Fatigue

6 Oct 2017   Shale Oil

American shale companies are starting to tap the brakes on drilling. U.S. oil output remains robust and may still surpass the record annual average of 9.6 million barrels a day, set in 1970. But companies, confronting technological, operational and financial obstacles, are starting to ease up on drilling. The pace of innovation that allowed shale drillers to maintain production even as prices fell appears to be slowing, experts say. The cost of labor and services, meanwhile, is rising in the most popular oil fields, driving up drilling expenses. And companies are facing a backlash from investors , who have grown weary of drillers focusing on growth over profit and insist they live within their means. “There’s always a lot of exuberance,” said Robert Clarke, an analyst with energy consulting firm Wood Mackenzie. “But then something happens that kind of puts the brakes on.” Future oil production is notoriously difficult […]

Dirty water in U.S. shale patch drives investment in water handlers

6 Oct 2017   Shale Oil

Huge volumes of dirty water produced by U.S. shale firms are driving up investment in water-handling specialists, as cash-conscious oil and gas companies try to trim costs. For every barrel of crude, drillers generate up to six barrels of brackish water containing chemicals used to release oil and gas from shale rock. The water is trucked or piped to disposal wells, or recycled. Transporting and disposing of water is costly for energy producers who are cash-strapped after more than two years of slumping oil prices, and some are opting to sell pipelines and wells to wastewater companies and then pay them to manage water. Water-handling companies benefit from economies of scale, but convincing energy CEOs to release water operations that they traditionally managed in-house is challenging, as new players build up their expertise. In the biggest deal this year, water-handling firm Select Energy Services agreed to […]

Activist Investors Crack Down On Shale CEO Salaries

5 Oct 2017   Shale Oil

The growth-at-all-costs model for shale drillers has succeeded in ramping up U.S. oil production, but it hasn’t necessarily led to impressive financials. A group of activist investors are hoping to upend this arrangement by breaking the link between the pace of drilling and CEO pay. Reuters reports that some activists investors are pushing for some fundamental changes to executive compensation, which they argue could make shale drilling much more profitable. For years, shale executives have enjoyed huge paydays for increasing their companies’ oil production – the more oil produced, the more the CEO earns through pay and bonuses. Wall Street has showered money on companies that post impressive growth numbers, and higher share prices mean more executive pay. Much of this was premised on the fact that enormous profits would eventually arrive. But to date that hasn’t been the case, and shareholders are wising up to the fact that […]

Shale Boom’s Dark Secret, Ruined Old Oil Wells in Oklahoma

4 Oct 2017   Shale Oil

Not every oilman is gaining from the U.S. shale boom. Just ask Joe Warren. Warren, a partner at Brown & Borelli Inc., is caught in a historical hiccup, of sorts. More than a third of the 65 to 70 old-line vertical wells his company operates in Oklahoma are negatively affected by horizontal drilling, he says. The new-style wells can run sideways for miles in a shale play, carrying sand, water and chemicals that can leak into older wells, gumming up the works. The cost: For Warren’s company, it’s about $250,000 a year in lost production and $150,000 in added operating expenses, he said. It’s an issue spurring rising anxiety among small drillers. Already, several lawsuits have been filed while a group representing old-guard drillers is gathering data, aiming to force legislation guaranteeing compensation when damages occur. “We […]

Oil Drillers, Not Forecasters, Are Responsible For WTI Weakness

The U.S. Energy Information Administration (EIA) is distorting oil prices by being far too optimistic in its forecasts for U.S. production, according to Harold Hamm, the chief executive of Continental Resources. Hamm, who also chairs the Domestic Energy Producers Alliance (DEPA), a lobbying group, blames EIA for both the outright decline in U.S. oil prices and their underperformance compared with Brent since June. Hamm faults EIA for being too optimistic about U.S. production, creating an impression there will be surplus of crude and depressing futures prices for West Texas Intermediate (WTI). EIA currently forecasts U.S. crude production will climb to 9.69 million barrels per day […]

U.S. Shale Isn’t As Strong As It Appears

3 Oct 2017   Shale Oil

The extraordinary cost reductions achieved by North American oil and gas companies have likely reached their limit, and any boost in profitability for much of the U.S. shale and Canadian oil sands industries will have to come from higher oil prices, according to a new report from Moody’s Investors Service. Moody’s studied 37 oil and gas companies in Canada and the U.S., concluding that although the oil industry has dramatically slashed its cost of production in the past three years and is currently in the midst of posting much better financials this year, there is little room left for more progress. “After substantially improving their cost structures through 2015 and 2016, North American exploration and production (E&P) companies will demonstrate meaningful capital efficiency to the extent the West Texas Intermediate (WTI) oil price is above $50 per barrel and the Henry Hub natural gas price is at least $3.00 […]

Sustainability Or Growth? E&Ps Face A Difficult Decision

2 Oct 2017   Shale Oil, USA

U.S. unconventional E&Ps often find themselves in a difficult position in the current environment. The environment has long been “grow or die,” with high emphasis placed on companies growing production. Firms that have little growth prospects generally trade at significantly lower multiples. On the other hand, a different group of investors have much different priorities. Many investors have begun to place a premium on operational sustainability instead of growth. These investors prefer that companies are able to sustain operations and generate free cash flow, rather than spend beyond their means to keep growing. Companies, then, are often forced to decide. Is it worthwhile to spend beyond cash flow to grow? The ideal company is able to do both, but most must choose one or the other. A tough downturn and volatile commodities prices have made E&Ps and investors cautious. Out of 119 E&P companies, 72 are predicted to have […]

Shale Drillers To Lose At Sub-$50 Oil

30 Sep 2017   Prices, Shale Oil

Shale oil and gas producers need WTI prices at least US$50 oil to be able to see significant returns, analysts from Moody’s said in a research note today. For natural gas, the minimum price level to ensure reasonable profitability is US$3 per MMBtu, the analysts said. The team studied the capital efficiency indicators of 37 shale drillers, focusing on operating cash margins and the costs associated with finding and developing oil and gas resources. Over the first eight months of the year, WTI averaged US$49.34 a barrel, while the Henry Hub price per MMBtu of natural gas was US$3. Even though WTI prices are now above US$50 a barrel, the latest price forecast from the Energy Department sees the average for this year at US$48.83 and the average for 2018 at US$49.58. While the Moody’s analysts acknowledged the progress that shale oil and gas producers have made in reducing […]

Investors Push U.S. Shale Firms to Separate Executive Pay from Drilling

30 Sep 2017   Shale Oil

Activist investors are taking aim at U.S. shale producers, pushing them to stop rewarding executives for spending billions of dollars on new wells when crude prices are depressed. HOUSTON, Sept 29 (Reuters) – Activist investors are taking aim at U.S. shale producers, the companies most responsible for turning the nation into a global energy powerhouse, pushing them to stop rewarding executives for spending billions of dollars on new wells when crude prices are depressed. U.S. crude output has surged past 9 million barrels a day largely because of the shale sector, whose output this year is up 27.5 percent. The gains are fueled by a boost of about 50 percent in capital spending, benefiting executives come bonus time but crimping shareholder returns. Investors want the higher spending to go to dividends and buybacks, not more drilling. The shift they are seeking could dampen spending on new wells, chilling a […]

U.S. shale hinders hopes for oil market rebalancing: Reuters poll

29 Sep 2017   Prices, Shale Oil

Oil prices are unlikely to rise much beyond this month’s two-year highs this year, as concern among analysts persists that growing U.S. shale output will hamper the rebalancing between global crude supply and demand, a Reuters poll showed. Brent crude is expected to average $52.60 a barrel in 2017, a touch higher than last month’s forecast of $52.53. For 2018, the North Sea crude was seen averaging $54.40 a barrel versus the previous month’s forecast of $54.48. The monthly poll of 36 analysts and economists projected Brent to average over $60 a barrel by 2020. This week, Brent hit its highest since July 2015, driven by demand for refined products and views of a quickly balancing oil market following production cuts led by the Organization of the Petroleum Exporting Countries. OPEC and 11 rival producers, including Russia, have committed to output cuts of 1.8 million barrels per […]

$60 Oil Could Revive The Eagle Ford

29 Sep 2017   Shale Oil

The world’s hottest shale play right now, the Permian, is boosting its oil production and contributing the most to the U.S. crude output growth. Meanwhile, Texas’ other shale play, the once-hot Eagle Ford, has cooled, turning thriving communities into ghost towns. The economic impact of the oil price crash is plainly seen across the counties in and around the Eagle Ford. Small business owners began struggling after the oil boom turned to gloom in 2014. Ghost towns and abandoned plots now bear the scars of the downturn, Bloomberg’s Dan Murtaugh and photographer Max Burkhalter report . Photos of what could easily be mistaken for the set of The Walking Dead document how the Eagle Ford-related economy has suffered through the oil price crash. Still, the business owners who spoke to Bloomberg called the bottom of the downturn a few months ago, and report signs of a rebound lately. Back […]

Regulator: Duvernay Field Holds Canada’s Biggest Shale Oil Resources

28 Sep 2017   Canada, Shale Oil

The Duvernay field in Canada’s western province of Alberta holds the country’s largest marketable resources of unconventional light shale oil and condensate, according to a new report from the national energy regulator. It is the first time the National Energy Board has done a detailed study of resources in the 130,000 square kilometer (50,193 square mile) Duvernay play, which covers around 20 percent of Alberta, Canada’s main crude-producing province. The NEB report showed the Duvernay holds 3.4 billion barrels of marketable light oil and condensate and 6.3 billion barrels of natural gas liquids. It also holds nearly 77 trillion cubic feet (Tcf) of natural gas, equivalent to 25 years of Canada’s annual consumption. “This gives markets much more clarity in terms of how much oil and gas is available in the long term,” said Mike Johnson, the NEB’s technical leader of hydrocarbon resources, […]

Erase fracking regulations, industry tells Trump

27 Sep 2017   Shale Oil

With a court dismissing a challenge to federal rules on hydraulic fracturing, producers said it was time for President Trump to erase the law altogether. “The industry recognizes that every energy-producing area has different geologic, topographic, and hydrologic conditions, which is why the states are far more efficient and effective at regulating hydraulic fracturing than the federal government,” Barry Russell, the president and CEO of the Independent Petroleum Association of America, said in a statement . The 10th U.S. Circuit Court of Appeals overturned a lower court’s ruling on overreach challenges against the U.S. Bureau of Land Management, which wanted regulatory oversight from the states during President Barack Obama ‘s tenure. While appeals were pending, however, U.S. […]

US oil producers lock in prices after crude’s rally

27 Sep 2017   Prices, Shale Oil

North American oil producers have pounced on the recent rise in crude prices to lock in sales at current levels, something that could safeguard prospective shale output in the face of a future downturn. Bankers and brokers say hedging in the US and Canada has accelerated as West Texas Intermediate crude pushes above $50 a barrel, a break-even price for many shale oil companies. “There’s been more producer-hedging in the past two weeks than in the past four or five months,” a banker said. US crude prices this week climbed to a five-month high as petroleum demand booms, Opec curtails output and bloated inventories start to decline. Hedging could embolden US producers to raise volumes after putting the brakes on drilling in recent weeks. A flurry of selling could also cap rallies. Already, the rush to sell has affected futures prices. WTI for delivery in December 2019 now costs about a dollar less than the contract for delivery this December. A month ago it cost a dollar more. Independent producers often hedge through swaps and options transactions with Wall Street banks. These banks then offset their exposure with futures and options at the New York Mercantile Exchange and Intercontinental Exchange commodities bourses.

Chesapeake sees 15 percent drop in third-quarter output as Harvey hurts

27 Sep 2017   Shale Oil

Chesapeake Energy Corp said on Tuesday it expects a 15 percent drop in third-quarter production, partly blaming Hurricane Harvey, which forced the company to stop work in the Eagle Ford shale region of Texas. Hurricane Harvey tore through Corpus Christi in southern Texas late in August, disrupting operations of energy companies in the region as it drenched the area with historic rains that killed more than 60 and displaced about 1 million people. Chesapeake had warned that Harvey would impact its business and said on Tuesday it expects current-quarter production to be about 542,000 barrels of oil equivalent per day (boepd), lower than the 638,100 boepd it reported a year earlier. The company’s forecast was below Wall Street’s estimate of about 550,000 boepd, according to investment bank […]

Permian ‘Super Basin’ Holds Up to $3.3 Trillion in Untapped Oil

26 Sep 2017   Shale Oil

The Permian Basin of Texas and New Mexico holds 60 billion to 70 billion barrels of yet-to-be pumped crude oil, according to a study by IHS Markit Ltd. The Permian region’s so-called recoverable resources would be enough to supply every refinery in the U.S. for 12 years and have a market value of about $3.3 trillion at current prices for West Texas Intermediate oil, the domestic benchmark. IHS spent three years studying output data from more than 440,000 wells to calculate the amount of crude remaining within the sprawling, mile-thick rock formation that pumps more oil than any other U.S. field, the London-based researcher said in a statement on Monday. The estimate may grow as IHS geologists and data scientists extend their analytical techniques to deeper geological zones. “The Permian Basin is America’s super basin in terms of its oil and gas production history and for operators […]

Permian Still Holds 60-70 Billion Barrels Of Recoverable Oil

26 Sep 2017   Shale Oil

The lucrative Permian Basin still holds between 60 and 70 billion barrels of unharvested oil, IHS Markit Ltd said this week. The recoverable resources in the basin shared by Texas and New Mexico could supply crude to every U.S. refinery for 12 years straight—that’s a total market value of $3.3 trillion at the going rate for West Texas Intermediate (WTI) barrels. The data comes from a three-year study on 440,000 wells in the basin, which pumps more oil than any field in the continental United States. “The Permian Basin is America’s super basin in terms of its oil and gas production history and for operators it presents a significant variety of stacked targets that are profitable at today’s oil prices,” IHS Markit researcher Prithiraj Chungkham said in a statement from the London-based organization. The world’s top shale play, the Permian, has shown remarkable resilience amid the lower-for-longer oil prices. […]

‘Game-Changing’ new research on prolific Permian Basin estimates 60 billion to 70 billion barrels remain

26 Sep 2017   Shale Oil

Energy researchers at IHS Markit have completed the first, three-year phase of a massive Permian Basin research project that models and interprets the giant basin’s key geologic characteristics to better estimate its remaining hydrocarbon potential, and initial results indicate the giant basin still holds an estimated 60 billion to 70 billion barrels of technically recoverable resources. To conduct this new analysis, researchers used the IHS Markit historical well and production database that includes more than 440,000 Permian Basin wells, and a new proprietary software tool that, for the first time, enables them to leverage interpreted formation ‘tops’ data to identify accurate formations for completion intervals on hundreds of thousands of wells. These results significantly alter the understanding of the Permian Basin’s resource potential, according to new analysis from IHS Markit (Nasdaq: INFO), a world leader in critical information. “When a geologist looks for new oil reserves , we typically […]

U.S. shale oil producers profitable despite low crude prices: WPX Energy

26 Sep 2017   Shale Oil

U.S. shale producers are making more money now than at the time when oil prices were much higher as they have become more efficient, U.S. independent shale oil producer WPX Energy said on Tuesday. “We look much more profitable than we did even in the $100 world. We are more profitable – we make more per barrel than we did in that environment,” WPX Energy’s chief operating officer, Clay Gaspar said at an industry conference in Singapore on Tuesday. U.S. crude for November delivery stood around $52 per barrel on Tuesday.

In World’s Hottest Oil Patch, Jitters Mount That a Bust Is Near

26 Sep 2017   Shale Oil

What’s unusual, and unnerving, is that the Permian is still thrumming with activity after prices cratered for the stuff it pumps out. (Bloomberg) — Steve Pruett has seen more than his share of booms in three decades in the oil business. None, though, as strange as the one gripping the Permian Basin right now. The telltale signs are the same as always, with companies like his desperate for skilled workers to man the drilling rigs that pierce the horizon in west Texas. What’s unusual, and unnerving, is that the Permian is still thrumming with activity after prices cratered for the stuff it pumps out. Crude is trading for around $50 a barrel, but this is the hottest oil patch anywhere on Earth, a swing producer influencing the trajectory of global markets and threatening OPEC. That either means the industry has become so incredibly efficient that production can continue to […]

Chevron to invest $4 billion to boost Permian Basin output

25 Sep 2017   Shale Oil

Oil major Chevron Corp will next year invest around $4 billion to ramp up its crude production in the Permian Basin area of the United States, a company executive said on Monday. Ryan Krogmeier, Chevron’s vice president of crude supply and trading, told the S&P Global Platts APPEC conference in Singapore that the company would increase its output from the Permian Basin, largely situated in Texas and New Mexico, to over 400,000 barrels per day over the next few years. “We will be investing roughly $4 billion, next year, of capital in the Permian Basin, and we plan to grow production over the next several years to well in excess of 400,000 bpd,” he said. Chevron expects crude oil output from all producers operating in […]

U.S. Shale’s Most Productive Play May Peak By 2021

25 Sep 2017   Shale Oil

The world’s top shale play, the Permian, has shown remarkable resilience amid the lower-for-longer oil prices. Permian production has grown and should continue its rise into the foreseeable future. Technological advances spurred the rapid rise of the Permian, but as drillers are set to continuously develop the hottest U.S. shale play, they may soon start to test the region’s geological limits. If E&P companies can’t overcome the geological constraints with tech breakthroughs, Permian production could peak in 2021, putting more than 1.5 million bpd of future production in question, and potentially significantly influencing oil prices, energy consultancy Wood Mackenzie said in an analysis this week. According to EIA’s September Drilling Productivity Report , the Permian will pump 2.580 million bpd of oil this month. Crude oil output is set to rise by another 55,000-bpd next month, to 2.635 million bpd. The Permian, as usual, contributes the most to the […]

Colorado Landfills Contain Radioactive Substances From Oil Sector

23 Sep 2017   Shale Oil, USA

Landfills in Colorado have begun to fill their space with low-level radioactive substances from oil and gas activities, state health officials have said , according to the local news site the Daily Camera. After a series of meetings with local officials, state authorities have concluded that unknown amounts of radioactive material have been stored at landfills throughout the state. Local authorities are currently trying to prohibit the practice altogether by strengthening their oversight mechanisms. “There is some of it that is just going to solid waste landfills…It is probably, mostly, staying in state,” the state health agency’s director Gary Baughman said during the Wednesday meeting. So far, no “imminent” threats to public health have been detected, though landfill operators will continue to monitor water flowing out of the fills for radioactive qualities. Technologically advanced naturally occurring radioactive materials, or TENORM, have been a concern for health officials for a […]

The Math on E&P Stocks Doesn’t Add Up

23 Sep 2017   Shale Oil

CEOs and boards are focusing on the wrong metrics. But if they change their ways, the opportunity could be great. This opinion piece presents the opinions of the author. It does not necessarily reflect the views of Rigzone. In my over twenty years of being in the investment business, I have seen many companies and industries lose their focus and discipline for a variety of reasons. Today, the exploration and production (E&P) sector fits squarely into that category. The compensation plans laid out by E&P corporate boards encourage these companies to grow production at almost any cost — which builds the personal net worth of the CEOs, but does nothing for the shareholders for whom they are legally fiduciaries. There are actions that boards and CEOs can take to rectify this situation, however. In my view, such changes could present a unique opportunity for the E&P sector to generate […]

Both sides claim win with fracking ruling

23 Sep 2017   Shale Oil

 Both sides in the debate over hydraulic fracturing claimed victory with a federal appeals court in Denver ruling on federal powers. The 10th U.S. Circuit Court of Appeals overturned a lower court’s ruling on overreach challenges against the U.S. Bureau of Land Management, which wanted regulatory oversight from the states. Environmental groups said the ruling meant regulations developed under former President Barack Obama would now take effect. “The 10th Circuit vacated the lower court’s ruling, which means the rule will now take effect,” Michael Freeman , an attorney for Earthjustice, said in a statement . “These are long-overdue protections for our public lands, water and public health.” While appeals were pending, however, U.S. President Donald Trump took office and […]

The Frac Sand Industry Has A Big Problem

22 Sep 2017   Shale Oil

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk management, emerging market economic development, and market risk assessment. His… But there’s a certain court case that’s becoming a really big thing… even by Texan standards. Last week in San Antonio, Texas State Senator Carlos Uresti testified in a bankruptcy hearing. The process follows from the 2015 insolvency of FourWinds Logistics. The company’s former CEO, a consultant to management, and Uresti himself have been charged in a separate criminal case alleging investor fraud. For his part, the senator has been indicted by a federal grand jury in San Antonio on no less than 11 counts, including wire fraud, money laundering, securities fraud, and engagement in monetary transactions with property from specified unlawful activity. If found guilty on all 11 counts, he could get some 200 years in prison. Unlike most of the company folks, […]

U.S. Shale: Water Is the New Oil

22 Sep 2017   Shale Oil

Rising U.S. shale output has led to increased amounts of the water that inadvertently flows out of wells together with oil. For now, drillers use trucks to transport this dirty water—which exceeds the amount of oil produced—to disposal sites, creating heavy traffic on roads. But now, at the heart of the shale boom in Texas, water management companies are thinking about new ways to move this water, creating a new opportunity in the onslaught of U.S. shale—and a new hurdle for U.S. shale drillers desperately trying to cut costs to stay afloat. Water is used—and produced—in the various stages of hydraulic fracturing. Drillers source freshwater or brackish water, and then transport it to the well, mix it with proppants, and inject the fluid into the well to create cracks in the rock formations. Oil and gas flows to the surface, and the water comes with it. And the quantity […]

US shale oil reaching 10 million barrels per day is fiction

22 Sep 2017   Shale Oil

Any financial advisor worth their salt will caution you that past performance is not a guarantee of the same in the future. And so it is with US shale oil. Recent EIA estimates claim potential production of up to 10 million barrels per day (BPD). That projection is pure fiction and in this article I will explain why. Right off the bat, assuming annual declines of 2.0 Million BPD, wells having a 365-day average annual rate of 400 BPD requiring 5,000 wells and utilizing 330 rigs (with each well drilling 15 years per annum) would be needed just to offset declines. Should annual declines exceed 20% per new and vintage production, the number of rigs goes up proportionally. Productivity of shale basins (a misnomer as the dominant facies consist of mixtures of sandstone, dolomite, limestone, siltstone, and clays) is determined by a number factors. The first is the degree […]

Permian could top out in 2021

22 Sep 2017   Shale Oil

The world’s hottest oil field could run out of steam in just a few years if shale drillers can’t overcome the natural constraints of the region’s geology, a new study says. By 2021, oil production could peak in Permian Basin, as rapid drilling and fracking exhaust underground pressure in the most prolific areas of the West Texas play, according to one scenario outlined by energy research firm Wood Mackenzie. In five years, the firm said, oil companies could be drilling wells that pump as much as 30 percent less crude than the ones that kicked off the region’s oil boom. “We’re drilling so many wells and with such tight spacing, should we really expect well No. 5,000 to perform like well No. 5 did?” Robert Clarke, a research director at energy consultancy Wood Mackenzie in Dallas. It’s impossible to predict exactly when drillers will reach the limits of the […]

Shale Billionaire Hamm Slams ‘Exaggerated’ U.S. Oil Projections

22 Sep 2017   Shale Oil

‘Just flat wrong,’ and unfairly limiting oil prices, he says Cites new driller discipline seeking return on investments Billionaire oilman Harold Hamm says the government was way too optimistic with its prediction of more than 1 million new barrels a day in U.S. production, and the snafu is “distorting” global crude prices. This year’s rise is likely to be closer to about 500,000 barrels, far off an initial forecast by the U.S. Energy Information Administration, according to Hamm, the chairman of Continental Resources Inc. and a pioneer in the shale industry. The EIA projection is “just flat wrong,” failing to take into account a new discipline among U.S. drillers, Hamm said in an interview Thursday on Bloomberg TV. “We have capability of producing a whole lot, but you have to get a return on investment,” he said, adding, “that’s where people have been this last quarter and this year.” […]

Harvey makes landfall in Texas, but drilling returns remain strong

21 Sep 2017   Shale Oil

Despite devastating weather that sent energy market participants into a frenzy, the average of the 12-month forward curve for WTI remained flat month on month at $50.43/b. However, internal rates of return (IRR) increased across the board due in large part to higher natural gas liquids (NGLs) prices. More than three weeks ago, Hurricane Harvey hit the US Gulf Coast with an estimated 51 inches of rain near Mt. Belvieu, Texas, a prominent US NGL price hub. As a result, the entire midstream sector was forced to respond, sending liquids prices higher. While we typically think of the Permian and Eagle Ford basins as oil plays, there are a fair amount of NGLs produced as well. A typical well in both the Permian and Eagle Ford has an NGL composition of around 25%, and with higher liquids prices, returns in each play have benefited. IRRs in the Permian Delaware […]

Drilling Productivity Report

19 Sep 2017   Shale Oil

New-well oil production per rig barrels/day New-well gas production per rig thousand cubic feet/day Region September 2017 October 2017 change September 2017 October 2017 change Anadarko 372 376 4 2,512 2,521 9 Appalachia 129 129 – 14,238 14,179 (59) Bakken 1,192 1,204 12 1,561 1,562 1 Eagle Ford 1,075 1,026 (49) 4,006 3,968 (38) Haynesville 33 34 1 7,589 7,614 25 Niobrara 1,074 1,074 – 4,552 4,577 25 Permian 578 572 (6) 999 998 (1) Total 596 586 (10) 3,410 3,407 (3) NOTE: The rigs from DeWitt County were inadvertently left out of the total Eagle Ford rig count in the August Drilling Productivity Report . In this update, The Eagle Ford productivity and production estimates are being revised down due to two factors: the production volumes from the source were revised down and the anticipated impact from hurricane Harvey on the production, drilling, and completion activities in southeast […]

U.S. shale output set to rise for 10th consecutive month: EIA

19 Sep 2017   Shale Oil

U.S. shale production is set to rise for the 10th month in a row in October, the U.S. government said on Monday, spurred by U.S. oil prices rising above the $50 a barrel threshold. Output across seven shale plays is forecasted to rise by nearly 79,000 barrels per day (bpd) to 6.1 million bpd, according to the U.S. Energy Information Administration’s monthly drilling productivity report. North Dakota’s Bakken output is set to rise by 7,900 bpd to 1.06 million bpd, the highest since May 2016. In Texas, Eagle Ford oil output is set to fall by 9,000 bpd to 1.27 million bpd, the first monthly decline since April, the EIA said. Permian production is forecast to rise by nearly 55,000 bpd to 2.6 million bpd, the highest level in records dating back to 2007. U.S. natural gas production was projected to increase to a record […]

Reserves vs Valuations: Exxon’s Permian Predicament

19 Sep 2017   Shale Oil

The world’s largest listed oil firm, ExxonMobil, has been lagging behind other supermajors in reserve replacement ratio—a key metric in the industry that shows the amount of proved reserves a company adds to its reserve base during the year relative to the amount of oil and gas it produced. For Exxon, one of the quickest ways to add reserves is to buy a Permian-focused driller, which would be immediately accretive to reserves. However, in order for such a deal to be soundly justified financially, Exxon might need to find enough cost cuts to justify paying a premium for a potential target, says Reuters Breakingviews’ columnist Lauren Silva Laughlin . In January this year, Exxon bought companies owned by the Bass family in a deal that more than doubled the oil giant’s Permian Basin resources to 6 billion barrels of oil equivalent, after adding an estimated resource of 3.4 billion […]

Sub-$50 Oil Could Kill Shale

18 Sep 2017   Prices, Shale Oil

Oil prices are at their highest levels in months on the back of strong demand and some key supply outages around the world. But the next price movements are unclear, as is the response from U.S. shale. As the International Energy Agency (IEA) noted last week, global oil supply fell in August by about 720,000 bpd—a large contraction after months of sizable gains. Much of that is probably temporary, particularly in the U.S. and Libya, two countries that saw unexpected outages. But the demand story is arguably more important: the IEA upgraded its demand forecast for the year, as consumption has surprised on the upside. WTI is now back in the vicinity of $50 per barrel, while Brent topped $55 per barrel in recent days—its highest level since the beginning of 2017. But that doesn’t mean that the price gains will continue. There are a few reasons to be […]