Shale Oil

High Costs Are Pushing Investors Away From The Permian

23 Jun 2017   Shale Oil

The Permian has enjoyed a rush of capital since oil prices began to recover from a low of $26.21 in February of last year. The play is home to some of the best economics in the country, making it a prime target for E&P companies looking to maximize profit in a lower price environment. But the surge in land costs is leaving little room for new investors to profit. The Delaware basin, the Permian’s hottest zone, is beginning to become a victim of its own success. EnerCom Analytics’ well economic models indicate that the internal rates of return (IRRs) in the Delaware are now lower than those seen in the Midland due to the high cost of land. At $45 WTI, EnerCom’s well economics models show IRRs in the Midland of 22.8 percent compared to 21.5 percent in the Delaware when acreage costs are included in the equation. The […]

Oil bear market separates strong, weak U.S. shale producers

22 Jun 2017   Shale Oil

A service truck drives past an oil well on the Fort Berthold Indian Reservation in North Dakota, November 1, 2014. Crude oil’s bear market is highlighting the haves and have nots among U.S. shale producers, with the stronger promising to keep pumping even as prospects dim for some of their financially strapped peers. Crude prices have dropped more than 20 percent since late February, in part because of rising U.S. shale production that is offsetting OPEC’s efforts to tame global stockpiles. On Wednesday, prices fell more than 2 percent to $42.58 after touching a 10-month low during the day. The price tumble has dragged down shares of oil and natural gas producers and raised the specter of trims to drilling budgets set when oil was trading around $50 a barrel. Oil producers’ average capital spending was previously projected to rise by 50 percent this year over depressed levels of […]

Are Hedge Funds Expecting A Permian Bubble?

22 Jun 2017   Shale Oil

Last year’s OPEC deal to cut production managed to lift oil prices and stabilize them around US$50 for most of the first quarter this year. The higher price of oil led to quite the Permania, with a lot of the available capital and subsequent production focused on the most lucrative of the U.S. shale basins, but investors backing the Permian adventurers are threatening its top spot. The Permian continues to lead production gains of U.S. crude output, which is exceeding the wildest projections for recovery. However, a group of investors in Permian-focused drillers have reduced their positions in the largest U.S. oil field, in what could be a sign of concern that the unstoppable rise in production could sink oil prices and unravel the resurgence U.S. shale has been enjoying since OPEC decided to play the market-fixer again and collectively reduce output. These investors are some prominent hedge funds […]

Frackers Collide With Traditional Oil Drillers

21 Jun 2017   Shale Oil

Supersized new oil wells are sometimes running into existing wells, a little-noticed consequence of the shale boom that has started to trigger complaints and lawsuits. The emerging problem is known as a “frack hit,” and it has flared up in Oklahoma, where a group of small oil and gas producers say more than 100 of their wells have been damaged by hydraulic-fracturing jobs done for companies like Chesapeake Energy Corp., Devon Energy…

A Newcomer’s Guide to Oil and Gas: The Upstream Zoo

20 Jun 2017   Shale Oil

Here’s a breakdown of some of the “critters” you can find on a drilling rig. Drilling rigs are sophisticated machines – so sophisticated that some of them can even “walk.” Nevertheless, some components of these advanced devices that can access hydrocarbons thousands of feet below the earth’s surface are described in a decidedly “low-tech” fashion. Consider the abundance of “animal” terms below in this installment of “A Newcomer’s Guide to Oil and Gas.” (Special thanks go out to intrepid Rigzone subscriber and retired BP drilling pro Jim Jenner, who suggested a discussion of “animal” terms and provided detailed descriptions of each.) What Is a Doghouse? In oil and gas parlance, the doghouse is not an enclosure where Spot, Fido or Rover takes a nap or where husbands spend the night when they screw up. Instead, it’s a small building located on a rig floor that serves as the driller’s […]

Shale-Related Seismic Activity Rises In Texas, Report

20 Jun 2017   Shale Oil

Oklahoma is the state that springs to mind whenever earthquakes and oil are mentioned in the same sentence, but a fresh report from the Academy of Medicine, Engineering and Science of Texas has revealed that the shale oil industry’s activity in the Lone Star State has led to changes in seismic activity. The report found that while between 1975 and 2008 the average number of quakes above a magnitude of 3 was one or two, between 2008 and 2016 it increased to 12 to 15 a year. The TAMEST task force that authored the report noted that this increase has been linked not to fracking itself, however, but to wastewater disposal wells, which is in line with findings from other studies. As to whether contaminated water from these disposal wells could seep through into subsoil aquifers that may supply drinking water, the report found that this is highly unlikely, […]

Daniel Yergin on U.S. Oil’s Global Impact

19 Jun 2017   Shale Oil, USA

Daniel Yergin says the boom in shale in concentrated areas like the Permian Basin, Texas and New Mexico is changing the global energy position of the U.S. “You go to Asia. You go to Europe. You go to the Middle East. They realize the position of the U.S. in the world is different today because of this change in our energy position. Among other things, the sanctions on Iran would not have worked had it not been for shale, because you could not have replaced the Iranian oil that was taken off the market. And so now instead of just OPEC and non-OPEC, you have the big three. You have Saudi Arabia, you have Russia, and you have a country called the United States.” — Daniel Yergin, vice chairman, IHS Markit

Funds pull back from Permian as U.S. shale oil firms go into overdrive

17 Jun 2017   Shale Oil

Cash, people and equipment are pouring into the prolific Permian shale basin in Texas as business booms in the largest U.S. oilfield. But one group of investors is heading the other way – concerned that shale may become a victim of its own success. The speed of the recovery in the U.S. shale industry in the past year has surprised oil investors after a global supply glut led to a two-year crude price slump and bankrupted many shale firms. Eight prominent hedge funds have reduced the size of their positions in ten of the top shale firms by over $400 million, concerned producers are pumping oil so fast they will undo the nascent recovery in the industry after OPEC and some non-OPEC producers agreed to cut supply in November. The funds, with assets of $286 billion and substantial energy holdings, cut exposure to firms that are either pure-play Permian […]

Big Oil Firms Are Exploring a New Frontier in Shale: Profits

16 Jun 2017   Shale Oil, USA

For Bruce Niemeyer, the Chevron Corp. executive overseeing the company’s $15 billion expansion here, one question looms above all: Will we make money? Big oil companies including Chevron, Exxon Mobil Corp. and Royal Dutch Shell PLC are piling into the Permian Basin, the oil-rich region straddling Texas and New Mexico that is the epicenter of the second wave of U.S. shale drilling. Chevron and others say they…

How A $200,000 Well Could Drastically Change The Oil Industry

16 Jun 2017   Shale Oil

Technological upheavals in the oil sector will make it possible for mini-producers to market crude profitably, creating new competition for bloated fossil fuel companies accustomed to benefitting from their largesse. It takes serious cash to start an oil and gas exploration company the traditional way. A single well in the Permian Basin – recognized as the most cost-effective drilling area as barrel prices recover enough to support new rigs – currently costs between $5 million to $9.3 million to operate, depending on the well’s depth. And while logistical tricks and fracking R&D allow oil and gas companies to stretch the productive lifespan of their wells, those efforts only add to the sites’ operational costs. Average estimated costs for wells—as of 2015—in the Marcellus ($6.1 million), Bakken ($5.9 million) and Eagle Ford ($6.5 million) formations are just as pricey, because the economies of scale model has dominated the oil sector […]

Shale Drillers Digging Themselves a Hole as Oil Breaches $45

15 Jun 2017   Shale Oil

U.S. shale is coming perilously close to puncturing its own rally.  Just months after predicting double-digit production increases, largely based on crude prices sitting between $55 and $60 a barrel, drillers are suddenly contemplating the possibility of retrenchment as a stubborn global supply glut pushes prices below $45.  It’s a reversal that could accomplish what OPEC and other global producers have failed to do this year: slow down America’s booming shale industry. Analysts and company officials say a drop to $40 a barrel could halt rig growth for smaller drillers in less active U.S. shale basins, and undercut efforts by fracking service providers such as Halliburton Co., FTS International and Patterson-UTI Energy Inc. to raise their fees.  “The growth outlooks proposed by many oily E&Ps appear tenuous at best and not resilient to prolonged weak oil prices,” Mizuho Securities USA analysts Timothy Rezvan and James Lizzul wrote in a June 11 note. They cited rising service costs and the industry’s lack of hedging protection for next year.  West Intermediate Texas crude, the U.S. benchmark, tumbled as far as $44.54 a barrel in New York trading Wednesday, its lowest level in five weeks after the U.S. government reported gasoline and other petroleum product stockpiles swelled last month. WTI has fallen 19 percent this year from its peak of $55.24 on Jan. 3.

Shale Efficiency Has Peaked… For Now

15 Jun 2017   Shale Oil

Learning takes time and effort. But a good education pays off. North America’s oil industry has been in school for the past three years, studying how to become more productive in a fragile $50-a-barrel world. Many companies in the class of 2017 have graduated and are now competing hard for a greater share of global barrels. Having said that, North America’s education on how to make oilfields more productive appears to be stalling. After a breathtaking uphill sprint, productivity data from the U.S. Energy Information Agency (EIA) shows that the last few thousand oil wells in top-class American plays may have hit a limit—at least for now. Our Figure this week shows a classic S-curve learning pattern in the mother lode of all oil plays: the Permian Basin. Slow improvements to rig productivity (2012 to 2015) were followed by a steep period of rapid learning (2015 to 2017). Eventually […]

Hedging Rush In U.S. Shale Could Send Prices Tanking

14 Jun 2017   Shale Oil

The U.S. shale industry could add yet another dose of new supply in July, with the EIA projecting production growth of about 127,000 barrels per day month-on-month. The fact that shale output is still growing at a rapid clip should raise some concerns about the trajectory of the “rebalancing” process. The gains expected in July will come largely from the Permian Basin (+65,000 bpd) and the Eagle Ford (+43,000 bpd). While total figures are still uncertain, the production gains could put total U.S. output close to 9.4 mb/d in the relatively near future, only a few hundred thousand barrels shy of the all-time high. (Click to enlarge) Surging output would come even as oil prices have faltered recently, a worrying sign that shale drillers are going to continue to ramp up even if the market softens. There are a few interesting trends to watch that could contribute to even […]

North Dakota oil output up 25,000 b/d in April, gas sets record

14 Jun 2017   Shale Oil

North Dakota oil production averaged over 1.05 million b/d in April, up nearly 25,000 b/d from March, the state Department of Mineral Resources said Tuesday. Oil production in April was still nearly 177,000 b/d below the all-time monthly record set in December 2014, according to state data. April marked the third month in a row that production remained above the 1 million b/d threshold. Since crossing over the 1 million b/d mark in April 2014, statewide monthly oil production has fallen below 1 million b/d just four times. Article continues below… US Marketscan provides you with a daily market overview of the major refined products in the United States delivered via e-mail. It carries spot prices for all key products traded in the US market. Gasoline, heating oil, jet fuel, residual fuel and naphtha prices are listed for the Atlantic Coast, Gulf Coast, Group 3, Chicago and West Coast […]

Shale Output Set To Hit All Time High Next Month

14 Jun 2017   Shale Oil

While the June oil production data is still pending, it is safe to say that the June oil output from U.S. shale producers – estimated today by the EIA at 5.348mb/d – will post the first double-digit production growth since July of 2015, when oil prices tumbled and a substantial portion of U.S. production was briefly taken offline. (Click to enlarge) Chart courtesy of Forge River Research Indicatively, while over the past year total U.S. production is up roughly 525kb/d, virtually all of it, or 98.5 percent, is the result of horizontal rig production in the Permian Basin, where output is up by 507kb/d. The Permian basin has been leading the increase in horizontal oil rig count (+178 percent) (Click to enlarge) More important, however, is that according to the latest EIA Daily Prodctivity Report forecast released today, in July total shale basin output is expected to rise by […]

U.S. shale firms more exposed to falling oil prices as hedges expire

14 Jun 2017   Shale Oil

Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply. The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said. However, rising U.S. production has stymied OPEC’s efforts to rebalance markets. Crude oil futures have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness. The market peaked at $55 a barrel in January as cuts got under way, but […]

U.S. shale firms more exposed to falling oil prices as hedges expire

13 Jun 2017   Shale Oil, USA

Cash-strapped U.S. shale firms scaled back their hedging programs in the first quarter, leaving them more vulnerable to tumbling spot market prices just after OPEC reached a landmark deal to curb global supply. The pullback in hedging was driven by rising service costs and expectations that prices would continue to rally after the Organization of the Petroleum Exporting Countries extended those cuts in May, analysts said. However, rising U.S. production has stymied OPEC’s efforts to rebalance markets. Crude oil futures have lost 15 percent of their value since February, raising the risk that unhedged companies are more exposed to market weakness. The market peaked at $55 a barrel in January as cuts got under way, but […]

U.S. Rig Count Continues Its Ascent Unabated

13 Jun 2017   Shale Oil, USA

The number of active oil and gas rigs in the United States rose again this week by 11—making it 21 weeks of consecutive gains—the longest growth streak since at least 1987, which is the earliest date that Baker Hughes Excel data is available. As if the 11 rigs added to the U.S. repertoire weren’t enough, Canada added 33 rigs this week as well. The number of oil rigs in operation increased by 8, while gas rigs increased by 3. Combined, the total oil and gas rig count in the U.S. now stands at 927 rigs, which is 513 rigs over a year ago today, when oil prices were significantly higher than they were today. (Click to enlarge) It would appear that there is no end in sight to the steady stream of oil rigs being put into play in the U.S. shale patch, and according to Rystad Energy , […]

A Shale-Oil Boomtown Climbs Back From the Bust

13 Jun 2017   Shale Oil

Radio stations here are again running ads from oil-field companies seeking drivers and mechanics. A store is serving up an alligator-and-crawfish lunch to welcome workers from the Gulf Coast. New rigs are rising across the sprawling prairie. Drillers are inching back to action in North Dakota’s Bakken shale region, a sign the recovery of the American oil and gas sector is spreading beyond the Texas and Oklahoma…

Record Breaking U.S. Exports Could Hurt Oil Markets

12 Jun 2017   exports, Prices, Shale Oil

U.S. exports have spiked in recent weeks, upending longstanding trade flows. But while that may be good news for some U.S. drillers, the unusually high level of crude exports are not obviously a good sign about the health of the oil market. At the same time, it is not guaranteed that U.S. producers will be able to continue to ship oil abroad at such a high rate for very long. U.S. oil producers were prohibited from exporting crude oil for decades until Congress scrapped the ban at the end of 2015. For much of last year, exports only rose slightly. But that changed in 2017 – U.S. crude oil exports topped 1 million barrels per day (mb/d) several times in recent weeks, double the rate from a year earlier. (Click to enlarge) The exports provide an outlet for shale drillers but they also put pressure on the global oil […]

New technology could recover more oil from early Bakken wells

12 Jun 2017   Shale Oil

Oil companies are applying new hydraulic fracturing techniques to early Bakken wells, a process industry leaders say has the potential to recover more oil without increasing the footprint on the land. Operators are targeting wells drilled between 2008 and 2010, the early years of Bakken development before fracking technology advanced to where it is today. Companies are refracturing the older wells using today’s technology and getting promising results, said Justin Kringstad, director of the North Dakota Pipeline Authority, who recently analyzed the wells. “On average, they’re getting better performance from the wells,” Kringstad said. Fracking — or pumping a high-pressure mixture of water, sand and chemicals deep underground — and horizontal drilling techniques allowed operators to recover oil from the Bakken. But the industry believes it’s only recovering about 5 to 15 percent of the oil available, Kringstad said. More than 140 wells in the Bakken have been refractured, […]

Shale production may soon hit a wall

12 Jun 2017   Shale Oil

A decade or so ago I was doing a TV interview and talked about a technology called horizontal fracturing and shale oil that might one day make the U.S. energy independent and I was laughed off the air. You see back then the concept of energy independence was thought to be an impossibility. Fast forward to 2017 and because of the success of hydraulic fraction the term “shale oil” is now widely known by people inside and outside of the oil and trading industry. Shale oil has changed the world and the global economy and now the U.S. can go tell OPEC to take a hike and we can just be increasing production and prices of oil will stay low forever. Not so fast. Despite the meteoric rise of shale oil and the recent surge in U.S. oil rig counts there is a coming shale oil production peak. Not […]

U.S. rig count doubled from last year

9 Jun 2017   Shale Oil, USA

The number of rigs targeting oil and gas reserves in the United States in May was double the level from last year, Baker Hughes reported. Rig counts serve as a loose metric to gauge the industry’s interest in spending on exploration and production in a particular sector. A report last year from consultant group IHS Markit found new production from the heavier oil sands in Canada, for example, needed crude oil prices higher than $70 per barrel in some cases to get off the ground. U.S. shale oil basins, meanwhile, have become more efficient and therefore more resilient to a weaker market. Oilfield services company Baker Hughes reported a net gain in North American rig counts, […]

The Next Big U.S. Shale Play

9 Jun 2017   Shale Oil

Media coverage of the U.S. shale oil and gas industry makes it sound like the Permian is the only place where things are happening. Everybody is buying acreage in the Permian, selling acreage in other shale plays, and production costs are falling the fastest in that same Permian. True as this may be, this shale play is by no means the only one where production is growing. In fact, oil and gas output across the shale patch has been growing, as the Energy Information Administration’s latest drilling productivity report shows. And that’s not all because there is a new actor on stage: Powder River Basin in Wyoming. Now, in its May drilling productivity report the EIA confirmed what media have been saying: the Permian is the hottest spot in the shale patch, with a 71,000-bpd increase in output in April. This hottest spot was followed by the Eagle Ford, […]

Are Super Rigs The Driver Behind The New Shale Boom?

5 Jun 2017   Shale Oil

Cost cuts and efficiency—the two key ingredients of the U.S. shale’s recipe for surviving the worst of the downturn—have led to drillers now employing a growing number of rigs capable of reducing the time needed for drilling a well and for moving from one area to another. The U.S. shale patch has been increasingly using the so-called super-spec rigs, a more advanced type of drilling machine, since the shale resurgence began at the end of last year, helped—inadvertently—by OPEC’s production cut deal that pushed oil to a more stable, around-US$50, price. The market was particularly unimpressed with OPEC extending the output cuts into March next year, while U.S. shale continues to increase production by the week, having found ways to get more bang for the buck and be profitable at a US$50 oil price. “OPEC’s market influence is highly questionable,” Antoine Halff, director of global oil markets at Columbia […]

Big oil, small U.S. towns see new reward in old production technique

5 Jun 2017   Shale Oil

Amid the frenetic activity of American shale oilfields recovering from a two-year recession sit a handful of oil towns that seemed impervious as many producers went into bankruptcy and the economy around them sank. Occidental Petroleum Corp and a few other oil producers with wells near this town on New Mexico’s border with Texas steadily pumped low-cost oil through the downturn, using a technique that has been heralded worldwide as a way to reduce carbon emissions and boost oil output. “When everyone else in the oil industry was going down, Oxy kept working,” said Joshua Grassham, vice president of Lea County State Bank and a Hobbs Chamber of Commerce board member. The city of […]

Has Permian Productivity Peaked?

3 Jun 2017   Shale Oil

The U.S. shale industry might have just received a huge windfall with the nine-month extension of the OPEC cuts. Shale output was already expected to come roaring back this year, but the extension of the cuts provides even more room in the market for shale drillers to step into. The sky is the limit, it seems. However, there are growing signs that the U.S. shale industry could be reaching the end of the low-hanging fruit. Or, more specifically, drilling costs are starting to rise and the enormous leaps in production that can be obtained by simply adding more rigs also appears to be running into some trouble. According to the EIA’s Drilling Productivity Report , productivity (as opposed to absolute production) is set to fall next month […]

Has Permian Productivity Peaked?

1 Jun 2017   Shale Oil

The U.S. shale industry might have just received a huge windfall with the nine-month extension of the OPEC cuts. Shale output was already expected to come roaring back this year, but the extension of the cuts provides even more room in the market for shale drillers to step into. The sky is the limit, it seems. However, there are growing signs that the U.S. shale industry could be reaching the end of the low-hanging fruit. Or, more specifically, drilling costs are starting to rise and the enormous leaps in production that can be obtained by simply adding more rigs also appears to be running into some trouble. According to the EIA’s Drilling Productivity Report , productivity (as opposed to absolute production) is set to fall next month in the Permian Basin. In other words, the average rig will only be able to produce an estimated 630 barrels per day […]

Does The Permian’s Sweet Spot Hold 8 Times More Oil Than Predicted?

31 May 2017   Shale Oil

What with all the rig additions, land deals, and low breakeven costs, the Permian basin has been the subject of much love from the oil industry as of late, and recently revised estimates are now showing that the Permian holds a whole lot more oil than previously thought. Horizontal drilling and technological breakthroughs of the past decade have made the U.S. shale industry a force to be reckoned with, but they have also prompted the U.S. Geological Survey to start re-assessing how much technically recoverable continuous (unconventional) oil and gas resources lie in today’s hottest shale play—the Permian. The latest USGS assessment , conducted in May, shows that the Spraberry Formation of the Midland Basin in the Permian holds technically recoverable resources of 4.2 billion barrels of oil and 3.1 trillion cubic feet of gas. The previous assessment , published in 2007, had put a mean estimate of 510 […]

OPEC ponders how to co-exist with U.S. shale oil

30 May 2017   OPEC, Shale Oil

First, they ignored each other. Then, they went into a bruising fight. Finally, they are talking, albeit with opposing agendas. The history of the relationship between OPEC and the U.S. shale oil industry has evolved a great deal since the cartel discovered it had a surprise rival emerging in a core market for its oil around five years ago. U.S. shale bankers came to Vienna this week and OPEC is readying a trip for its top officials to Texas in a bid to understand whether the two industries can co-exist or are poised to embark on another major fight in the near future. REUTERS RECOMMENDS: “We have to coexist,” said Khalid al-Falih, Saudi Arabia’s energy minister, who pushed through OPEC production cuts in December, reversing Riyadh’s previous strategy to […]

U.S. drillers add oil rigs for 17th week in a row: Baker Hughes

13 May 2017   Shale Oil, USA

U.S. energy firms added oil rigs for a 17th week in a row, extending a 12-month drilling recovery that is expected to help boost crude production in the United States to a record high next year. Drillers added nine oil rigs in the week to May 12, bringing the total count up to 712, the most April 2015, energy services firm Baker Hughes Inc said on Friday. While that is more than double the same week a year ago when there were only 318 active oil rigs, the pace of those additions has declined with the total over the past four weeks falling to the lowest since March. U.S. crude output was expected to rise to an average of 9.3 million barrels per day (bpd) in 2017 […]

US oil rig count up 9 to 712 in week ended Friday: Baker Hughes

13 May 2017   Shale Oil, USA

The US oil rig count rose by 9 to 712 in the week ending Friday, up from 318 a year ago, Baker Hughes said in its weekly report.
The US natural gas rig count fell by one to 172, up from 87 rigs a year ago.  The total US oil and gas rig count was 885 for the week, eight higher than a week ago, and 479 rigs higher than a year ago.  There was one miscellaneous rig working this week, flat from last week and flat from a year ago.  Horizontal rigs operating in the US rose by eight week on week to 742, and was up from 315 a year ago. The vertical rig count rose by one on the week to 77, but was 24 higher than a year ago. Directional rigs totaled 66, down one from a week ago and 28 higher than a year ago.  There were 21 US offshore rigs operational this week, up two from last week and down one from a year ago.  Canada’s rig count fell by two to end the week at 80, but was up from 43 rigs operating the same week a year ago. Canada’s oil rig count rose by two on the week to 29, while the gas rig total fell by four to 51.

In Fight Against U.S. Shale Oil, OPEC Risks Lower for Longer

12 May 2017   OPEC, Shale Oil

Saudi Arabia signals curbs will be rolled into next year Oil market attention shifts to potential oversupply in 2018 When Khalid Al-Falih arrived at Davos in late January, the Saudi oil minister was exultant. The output cuts he’d painstakingly arranged with fellow OPEC states and Russia were working so well, he said, they could probably be phased out by June. Almost five months later, U.S. production is rising faster than anyone predicted and his plan has been shredded. In a series of phone calls and WhatsApp messages late last week, Al-Falih told his fellow ministers more was needed, according to people briefed on the talks, asking not to be named because the conversations are private. In their battle to revive the global oil market, OPEC and its allies are digging in for a long war of attrition against shale. “OPEC is now recognizing they need longer — and potentially […]

U.S. Shale Spending Dwarfs Competition: Grows 10 Times Faster

12 May 2017   Shale Oil

While OPEC has just two weeks left until the May 25th meeting to decide on an extension of its production cuts, U.S. shale is back to drilling and planning capital spending increases this year at a pace that is ten times faster than the rise in international oil companies’ budgets. Emerging from the oil price rout with leaner operations and a meaner cost attitude, U.S. shale has started taking advantage of the increase in oil prices following the production cut deal that OPEC and 11 non-OPEC nations led by Russia struck at end-November. U.S. production started growing from the recent lows, and drillers have become more confident in their plans, with WTI prices hovering around US$50 for most of the first quarter this year. Drillers in North America plan a combined capital expenditure of US$84 billion this year, an increase of 32 percent compared to last year, according to […]

Higher U.S. crude output should pressure oil prices: EIA

10 May 2017   Prices, Shale Oil, USA

A pump jack is seen at sunrise near Bakersfield, California October 14, 2014. Higher crude output from the United States should pressure global oil prices through the end of 2018, the U.S. government said on Tuesday, ahead of a meeting later this month at which OPEC and non-member producers will discuss extending supply cuts. “Higher oil production from the United States, along with rising oil output from Canada and Brazil, is expected to curb upward pressure on global oil prices through the end of 2018,” said EIA Acting Administrator Howard Gruenspecht, in a statement. The United States, Canada and Brazil are not among producing countries including Russia who meet with OPEC this month to decide whether to continue output cuts of 1.8 million barrels per day in an effort to reduce a global crude glut and support prices. The U.S. Energy Information Administration said it expects domestic crude production […]

Shale Drillers Are Outspending the World With $84 Billion Spree

10 May 2017   Shale Oil

North American independents to lift outlays 51 percent in ’17 Wave of new crude supplies to hit world markets by end of year U.S. shale explorers are boosting drilling budgets 10 times faster than the rest of the world to harvest fields that register fat profits even with the recent drop in oil prices. Flush with cash from a short-lived OPEC-led crude rally, North American drillers plan to lift their 2017 outlays by 32 percent to $84 billion, compared with just 3 percent for international projects, according to analysts at Barclays Plc. Much of the increase in spending is flowing into the Permian Basin, a sprawling, mile-thick accumulation of crude beneath Texas and New Mexico, where producers have been reaping double-digit returns even with oil commanding less than half what it did in 2014. That’s bad news for OPEC and its partners in a global campaign to crimp supplies […]

US shale groups roar back to life after oil slump

10 May 2017   Shale Oil

Members of President Donald Trump’s cabinet have a new catchphrase for how they see the future role of the US: not just “energy-independent”, but “energy-dominant”. As Ryan Zinke, the interior secretary, put it at an industry conference in Houston last week: “Dominance is what America needs.” It would be tempting to dismiss that talk as hype, except that every week the US energy sector is coming up with evidence to justify that ambition. The latest round of earnings reports from US exploration and production companies, the leaders of the shale revolution, has shown fresh evidence of their resilience and growth potential. The resurgence of the US shale industry after the oil slump of 2014 was a key factor in how crude prices fell sharply last week, to back below $50 per barrel. The market is concerned about whether efforts by Opec, the producers’ cartel, to tackle a supply glut by curbing output will be undermined by reinvigorated US shale companies. These companies are proving that they are able not just to stay in business, but increase production as well, with oil prices close to today’s levels of about $47 per barrel for benchmark US crude. The great weakness of the shale industry has always been that the companies have typically not generated enough cash to pay for their capital spending, and have relied on debt and equity sales to finance their growth. But producers have typically cut their costs by about 40 per cent in the past three years, and many are now at or close to the point where they are covering their spending from operating cash flows.

Will New Pipelines Be Enough To Handle The Permian Boom?

10 May 2017   Pipelines, Shale Oil

As production in the Permian Basin continues to increase, the accompanying infrastructure has struggled to keep up. Expansions to pipeline capacity are needed to handle the heavier flow, as more investment is pumped into the Permian and new production comes on line. That’s got a host of Texas-based Permian players excited, as new pipeline projects are launched, existing lines are expanded and new acquisitions bring fresh capital into midstream ventures. According to the EIA , the rise in Permian output is expected to add 420,000 bpd by the end of 2017. Permian production in April 2017 was measured at 2.3 million bpd according to the Drilling Productivity Report , an increase of 300,000 bpd from last year. But existing pipelines can’t quite handle the load, and this has thrown spot prices off-kilter. WTI Midland, a local hub for the Permian, boasts a significant discount compared to WTI Cushing, though […]

Google Asked To Label Anti-Fracking Websites As ‘Fake News’

9 May 2017   Shale Oil

An oil and gas drilling advocacy group published an open letter to Google asking the search engine giant to consider “purging or demoting” websites spreading misinformation about hydraulic fracturing. Google rewrote its search engine algorithm to bury “fake news” websites in the wake of the 2016 presidential election. The industry-funded Texans for Natural Gas wants Google to include anti-fracking websites. “We believe many of the most prominent anti-fracking websites have content that is misleading, false, or offensive – if not all three,” the group wrote in an open letter to Google published Monday. “As a result, we urge you to consider purging or demoting these websites from your algorithm, which in turn will encourage a more honest public discussion about hydraulic fracturing, and oil and natural gas development in general,” the group wrote. Google raters “assess search results — to flag web pages that host hoaxes, conspiracy theories and […]

Brimming U.S. oil storage tanks to feel OPEC cuts last

An oil derrick and wind turbines stand above the plains north of Amarillo, Texas, U.S., March 14, 2017. The energy industry scrutinizes U.S. oil stockpile data every week for evidence that OPEC supply cuts are ending a global crude glut, but growing domestic output means the world’s largest oil consumer may be the last place to feel the cuts. Stubbornly high U.S. inventory levels have shaken market confidence that a deal by the Organization of the Petroleum Exporting Countries (OPEC), Russia and other top producers to cut 1.8 million barrels per day (bpd) from supply will end the two-year glut. This week, benchmark Brent crude prices slipped below $50 a barrel. Brent has given up all the gains made since the supply cuts were agreed late last year. [O/R] U.S. inventories are a trusted barometer for the health of global oil markets because of the transparency of the data […]

U.S. drillers add oil rigs for 16th week in a row: Baker Hughes

6 May 2017   Shale Oil

The Elevation Resources drilling rig is shown at the Permian Basin drilling site in Andrews County, Texas, U.S. on May 16, 2016. U.S. energy firms added oil rigs for a 16th week in a row, extending a drilling recovery into a 12th month even as the pace of those additions has slowed in recent weeks as crude prices have held below $50 a barrel. Drillers added six oil rigs in the week to May 5, bringing the total count up to 703, the most since April 2015, energy services firm Baker Hughes Inc said on Friday. While that is more than double the same week a year ago when there were only 328 active oil rigs, the pace of those additions has declined over the past four weeks to the lowest since the week to March 10. U.S. crude futures were trading around $46 a barrel after […]

Nimble Shale Drillers Outpump Giants, Confounding OPEC Clampdown

5 May 2017   Shale Oil

Exxon, Pemex oil output fell while Chevron’s grew by just 0.4% Independent, shale-focused drillers pumping double-digit gains The biggest oil explorers in the world are being left in the dust by the production gains registered by nimbler shale oil specialists who are confounding OPEC’s glut-killing efforts. None of the so-called supermajors increased output by more than 3.6 percent in the first quarter, according to company statements. Production actually shrank by 4 percent at Exxon Mobil Corp. , the biggest of the group, and tumbled 9.5 percent at Mexico’s state oil company, Petroleos Mexicanos. Compare that to Diamondback Energy Inc. , which raised production 61 percent. The stout shale production gains rattled the oil market Thursday, sending oil prices to 5-month lows and effectively canceling out positive earnings news from U.S. producers, which fell along with crude. Measured or even non-existent production growth hasn’t hurt the bottom line for Exxon, […]

Ohio lawmakers add budget provision that could open state parks to fracking

4 May 2017   Shale Oil, USA

Ohio legislators took a step toward allowing fracking in state parks, adding a provision in a pending budget that would strip the governor of the ability to control the issuing of licenses for the oil and gas drilling practice that has raised environmental concerns. The provision, added on Tuesday by the Republican-controlled House, would allow the state legislature instead of the governor to control appointments to the Oil and Gas Commission responsible for issuing drilling licenses for state lands. Governor John Kasich, a Republican, has not named any members to the four-member commission since signing the bill that created the group in 2011. This has effectively halted any fracking in parks. Fracking opponents complained that the legislature was now trying to find a way to allow […]

Conservationists sue to halt fracking in Ohio’s only national forest

3 May 2017   Shale Oil, USA

Four conservation groups on Tuesday sued the U.S. Forest Service and Bureau of Land Management in an attempt to halt fracking plans in a portion of Ohio’s only national forest. The suit, filed in U.S. District Court in Columbus, argues that the federal agencies failed to sufficiently analyze risks to watersheds, public health, climate and endangered species, including Indiana bats, before auctioning 670 acres (270 hectares) in December of the Wayne National Forest in Southeast Ohio for eventual hydraulic fracturing, or fracking, of underground shale. The groups are seeking an injunction to halt oil and gas leasing and development until a new assessment can be made. Fracking involves injecting water, sand and chemicals into wells to fracture shale and release natural gas and oil. U.S. Forest Service and Bureau of Land Management officials could not be reached immediately for comment. The Ohio Oil and Gas Association declined to immediately […]

Oil Price Optimism Wears Off as Texas Wildcatters Drill On

1 May 2017   Shale Oil

The relentless drilling ramp-up in America’s top shale plays is making investors more skeptical that an oil price rebound is on the horizon.  After increasing their bets on rising West Texas Intermediate crude for three straight weeks, money managers slashed the wagers by 21 percent, according to U.S. Commodity Futures Trading Commission data. Producers in Texas are leading the longest shale revival since 2011, making OPEC-led efforts to rebalance the market increasingly difficult.  After the year started on a bullish note, with prices in New York topping $55 a barrel as Saudi Arabia, Russia and other major exporters began to cut production, the rally has staggered. Saudi Arabia’s Energy Minister Khalid Al-Falih has admitted the first three months of supply curbs failed to bring inventories below the five-year average. As optimists lose heart, prices fell back below $50 last month.  There’s still a lot of talk about high inventory levels, Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, said by telephone. Investors felt that prices had “gone up too much compared to the fundamentals. The shale oil production trend is definitely bullish, which is bearish for prices.”  This month’s production in the top U.S. shale plays will reach about 5.2 million barrels a day, the highest level since November 2015, according to the Energy Information Administration. As producers pour billions of dollars of investment into fields like the Permian and Eagle Ford in Texas, the country’s oil-rig count has more than doubled in a year to 697 last week, according to Baker Hughes Inc.

U.S. Shale Rebound Hobbled By Higher Drilling Costs

1 May 2017   Shale Oil

Optimism surrounding the potential increase in oil prices is fading with WTI back below $50 per barrel. Nevertheless, the oil industry is doing much better than it was last year. As the first few earnings reports start trickling in, profits are up sharply from 2016 levels. Chevron and Exxon reported strong figures on Friday, beating expectations. Chevron took in $2.3 billion in the first quarter of this year, compared to a loss of $725 million in the same period in 2016. Its cash flow more than tripled to $3.9 billion. Exxon’s profits more than doubled to $4 billion in the first quarter, year-on-year. Although the oil majors exceeded the consensus estimates, the sharp increase in profits was widely anticipated. Even though crude oil got stuck in the $50s per barrel in the first quarter, prices were up dramatically from the first quarter of 2016, a period of time when […]

Is The Permian Starting To Get Crowded?

1 May 2017   Shale Oil

The first quarter of the year saw record-high oil and gas M&A activity in the U.S., with the value of deals topping US$73 billion – a whopping 160-percent annual increase and a record high. That’s what PwC reported , adding that most of these were in the upstream segment and that 20 of the 53 M&A deals were made in the Permian, cementing the play’s status as star performer of the U.S. oil patch. The revival of M&A activity was a direct result of OPEC’s decision to start cutting production at the end of last year, but PwC also notes that the majority of deals were in fact asset sales, rather than corporate acquisitions. This means, according to the consultancy, that energy companies are being smart about optimizing the value of their production assets rather than just seeking to expand these as much as they can. And it seems […]

Permian Basin and Texas Update- April 2017

1 May 2017   Shale Oil

Chart 1 – A Model using data from Enno Peter’s shaleprofile.com. The chart above (chart 1) needs some explanation. It is based on the Permian LTO model found by using Enno Peters’ data from shaleprofile.com and an estimate of future well completions. I doubt output will rise this quickly, but the peak level may be about right if oil prices follow the assumed scenario. Chart 2 The estimate of future well completions is based on past well completions and horizontal oil rig counts from Baker Hughes in Chart 2. Chart 3 For the most recent 3 months the average wells completed per horizontal oil rig count from 17 weeks ago (3.9 months) was about 1.89 wells per rig as seen in Chart 3. Chart 4 If it is assumed that this value (1.89 wells/rig) remains constant over the next 4 months, we can use the horizontal oil rig counts […]

Fast-rising U.S. shale oil output puts OPEC cut at risk: Rystad

28 Apr 2017   Shale Oil

Shale oil output in the United States is rising much faster than expected and gaining market share globally, increasing the risk of a “volume war” with OPEC and weaker oil prices, the founder of oil and gas consultancy Rystad Energy said. Rystad Energy expects U.S. shale oil output to grow by 100,000 barrels per day (bpd) each month for the rest of this year and into 2018 if oil prices hold around $50-$55 a barrel, well above estimates by the U.S. Energy Information Administration for monthly gains of about 29,000 bpd in 2017 and 57,000 bpd in 2018. “We see a risk for a weaker oil price towards the end of the year … because shale is delivering so much oil and OPEC might fight back,” Jarand […]

Texas oil production in February increased slightly from last year

28 Apr 2017   Shale Oil, USA

Preliminary data from Texas show total crude oil production for February was slightly more than figures from the same time last year, a regulator reported. The Railroad Commission of Texas, the state energy regulator, reported a preliminary crude oil production volume of 70.3 million barrels for February, against the preliminary output of 70.2 million barrels in February 2016. Oil production figures from the commission don’t include condensate, an ultra-light form of oil found in some shale deposits, and last February’s preliminary data was updated to 82.7 million barrels. Texas is the No. 1 oil producer in the United States and home to shale basins seen as more resilient to the relative low price for crude oil than elsewhere […]