Shale Oil

US E&Ps Can Turn A Profit On $50 to $60 Oil, Barclays Finds

27 Apr 2017   Shale Oil

Declining development costs and capital efficiency improvements position US E&P companies to earn solid returns at $50 to $60 per barrel oil prices, says Barclays’ report. Sharp declines in development costs and advancements in capital efficiency means exploration and production companies (E&Ps) can turn a solid profit even if oil remains in the $50 to $60 per barrel range, according to Barclays’ analysis of year-end 2016 annual reports. In fact, Barclays is projecting that within that range, the industry can deliver average recycle ratios (per-barrel profit divided by the cost of discovering and extracting the product) close to 145 percent, grow reserves and production at a consistent 7 percent rate and keep balance sheets in shape. Last year, drill-bit finding and development costs dropped 30 percent from 2015 and 50 percent from 2015, Barclays said in an April 26 equity research report. Permian and Appalachian players have typically been […]

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

27 Apr 2017   Shale Oil, USA

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 […]

First US Bakken crude set to arrive in Asia mid-May:

27 Apr 2017   Shale Oil, USA

The first cargo of US Bakken crude is heading to Asia, adding to the widening list of western crude moving eastward amid the narrowing spread between low sulfur crude in the West against high sulfur crude in the East. Western trading firm Mercuria Energy has chartered a vessel to move a cargo of the crude, which has a gravity of 43 API, into Asia for the first time ever, according to a source close to the matter. The crude has been co-loaded with US Mars crude on the VLCC Maran Canopus, traders said. The VLCC left the US Gulf Coast on March 20 and is due to arrive in Singapore on May 13, according to cFlow , S&P Global Platts trade flow software. The vessel is currently located off the coast of South Africa. It is unclear however, if the cargo has a final outlet. Article continues below… Oilgram […]

Halliburton Helped by Drilling Boost in U.S.

25 Apr 2017   Shale Oil

Stepped-up drilling for oil in the U.S. may have global producers on edge about oversupply, but the increased activity in the domestic energy sector is a boon for oil-field services firm Halliburton Co. The Houston company reported its first quarterly increase in revenue since the fourth quarter of 2014, when oil prices fell off and started to pressure production. The company said its results in the first three months of 2017…

US onshore rig day rates jump as glut fades

25 Apr 2017   Shale Oil

Perhaps the most surprising sign of a recovery in the US onshore drilling industry has been the abrupt about-face for day rates, an analysis by RigData, a unit of S&P Global Platts, showed Friday. The first quarter has seen a 3.5% spike in the average day rate to $14,600, according to RigData. While that is still down from a record $19,015 in Q4 2014, it is the biggest quarter-to-quarter jump since the previous post-bust recovery in 2010. A major contributing factor to the day rate recovery has been the erosion of the rig glut, which can be monitored by tracking the available rig ratio. The ratio is calculated by dividing the number of available rigs by the number of marketed rigs. Once this ratio has sustained above a certain threshold, then day rates soften; when it trends below that threshold, day rates begin to rise. On a nationwide basis, […]

East Coast refiners eye Texas oil as North Dakota alternative

25 Apr 2017   Shale Oil, USA

U.S. East Coast refiners are looking to buy increasing volumes of domestic crude oil from the Gulf Coast, two sources said, the latest twist in a trade flow upheaval in the wake of the opening of the Dakota Access pipeline. Major U.S. East Coast refiners profited from railing hundreds of thousands of barrels of discounted Bakken crude to their plants daily from 2013 until 2015. But as more and more pipelines were built in North Dakota, the discount began to disappear, and so did the rail cars. Now, at least two East Coast refiners, Phillips 66 ( PSX.N ) and Delta Air Lines Inc’s ( DAL.N ) subsidiary Monroe Energy, are looking to move more crude […]

U.S. drillers add oil rigs for 14th week in a row -Baker Hughes

22 Apr 2017   Shale Oil

U.S. drillers added oil rigs for a 14th week in a row, extending an 11-month recovery that is expected to boost U.S. shale production in May in the biggest monthly increase in more than two years. Drillers added five oil rigs in the week to April 21, bringing the total count up to 688, the most since April 2015, energy services firm Baker Hughes Inc said on Friday. That is more than double the same week a year ago when there were only 343 active oil rigs. U.S. crude futures dropped below $50 a barrel on Friday, for the first time in two weeks and putting it on track for its biggest weekly loss in six weeks, due to doubts the OPEC-led production cut will restore balance to an oversupplied market, especially as U.S. drillers keep producing more oil. [O/R] U.S. shale production in May was set for its […]

U.S. Oil Drilling Growth Shows First Signs of Cooling Off

22 Apr 2017   Shale Oil, USA

U.S. oil drillers slowed the pace of a months-long expansion as investors worry that growing shale production will ruin OPEC’s efforts to prop up prices. Drillers added 5 rigs targeting crude this week, bringing the total to 688, according to Baker Hughes Inc. data reported Friday. While all four of the biggest oil basins boosted activity this week, the handful of rigs added is the smallest amount of growth in nearly two months. The number of working rigs has more than doubled from a 2016 low of 316 in May, often expanding weekly by double digits, with as many as 29 rigs added during one week in January. Crude dropped below $50 Friday on concerns that surging U.S. production could undermine OPEC’s efforts to reduce global supplies. “It’s not surprising to see the rig count continue to build from the carryover from recently higher commodity prices,” Luke Lemoine, an […]

More oil production possible from Texas shale

22 Apr 2017   Shale Oil

Exploration and production activity in the Permian basin shows the area could respond with major output once conditions improve, the Dallas Fed said. The Federal Reserve Bank of Dallas in a report on regional energy indicators said gains in crude oil prices since the Organization of Petroleum Exporting Countries in January placed a ceiling on production has improved market conditions in Texas. “The firming of crude oil prices since the OPEC agreement has likely boosted confidence in the sector, which is reflected in the continuous increase in drilled wells in the Permian since the beginning of this year,” Dallas Fed senior research analyst Kunal Patel said in a statement . The overall picture for the United States has improved steadily since January, with total domestic […]

Exxon Is Going Primetime With The World’s Next Shale Hotspot

22 Apr 2017   Argentina, Shale Oil

The U.S. shale sector continues to be the hottest spot in natural resources investment. But news this week suggests America’s oil and gas industry may have a new rival — as shale in a completely different part of the world gets ready to go commercial. In Argentina. The governor of Argentina’s Neuquen province Omar Gutierrez said in a statement Monday that shale production is about to begin in earnest in his territory. With ExxonMobil reportedly about to push the button on a major project in the Vaca Muerta shale here over the coming weeks. Governor Gutierrez noted that he was in Houston last week meeting with Exxon management. Who reportedly told him the company will enter the “production phase” on the company’s Vaca Muerta projects this May. Gutierrez didn’t give additional detail on the specific projects that will be put into full-scale production. And Exxon itself hasn’t made any […]

Why Exxon Is Giving Its Shale Unit a Long Leash

21 Apr 2017   Shale Oil

In a matter of weeks, crews working for Exxon’s XTO Energy Inc. unit will begin erecting drilling rigs across a patch of southeast New Mexico to exploit the region’s mile-thick strata of oil-soaked rock. ExxonMobil Corp. paid almost $6 billion for the drilling rights in late February—its biggest acquisition in more than six years—but that’s where the parent company’s involvement ends: Decisions on when and how to harvest the crude fall solely on the shale experts at XTO. Exxon Chief Executive Officer Darren Woods and his top lieutenants at corporate headquarters in suburban Dallas are intentionally staying out of the way of the tightly knit phalanx of XTO engineers, physicists, and geologists leading the oil major’s advance into shale. Based largely in the Texas cities of Fort Worth and Midland, XTO’s 5,000-person staff has been exempt from many of the centralized bureaucratic and planning structures of their overlords since […]

Will Banks Allow Another Slew Of Oil Bankruptcies?

21 Apr 2017   Shale Oil

Last week, U.S. banks boosted the borrowing bases for several independent energy companies, lifting spirits in the industry. The move was taken as a sign that lenders are beginning to share in the optimism that oil and gas producers have been enjoying since the beginning of the year, with prices staying above $50. While some banks seem to be sharing some of the optimism, others are more cautious. A recent analysis from Bloomberg Gadfly’s Lisa Abramowicz reveals that a lot of energy companies with revolving credit lines are tapping deep into these resources. Abramowicz cites data from Bloomberg Intelligence that shows at least 11 companies have used up more than two-thirds of their credit lines. Banks, Abramowicz says, do not like this, so they may well decide to cut the credit lines of companies they consider risky. They can afford to—exposure to the oil and gas industry is more […]

Fracking Bolsters the American Economy

20 Apr 2017   Shale Oil

Our friends at Institute for Energy Research shared this guest post with us, which was written by their founder and CEO, Robert Bradley, Jr. and recently published in Forbes . Warning: low-cost, clean energy may be hazardous to your health . Or so say environmental activists who will trot out any line of attack in their crusade against fossil fuels. For years, the green movement has spread falsehoods about hydraulic fracturing — or fracking — the practice of unlocking hydrocarbons by injecting high-pressure liquid deep into the earth. Lately, the leave-it-in-the-ground lobby has doubled down on its mission to thwart the latest oil and gas extraction techniques. But research consistently shows that fracking is a secure — and economically savvy — form of energy production. Banning it, as New York State and Maryland have done, hurts economies — and the environment. False Issues Critics have recently blamed fracking for […]

Oil prices fall on expected surge in U.S. shale output

19 Apr 2017   Prices, Shale Oil

Oil prices fell on Tuesday on news that U.S. shale oil output was expected to post the biggest monthly rise in more than two years, fuelling concerns that U.S. production growth is undermining OPEC-led efforts to rein in oversupply. The latest U.S. government drilling data showed shale production in May was set to rise to 5.19 million barrels per day (bpd), with output from the Permian play, the largest U.S. shale region, expected to reach a record 2.36 million bpd. Global benchmark Brent crude futures were down 26 cents at $55.10 a barrel at 0803 GMT. They touched an intraday low of $54.98, the weakest level in 11 days. U.S. West Texas Intermediate (WTI) crude futures traded down 21 cents at $52.44 a barrel, the lowest since April […]

Why The Permian Doesn’t Keep OPEC Awake At Night

19 Apr 2017   Shale Oil, USA

The old saying goes, “Everything’s bigger in Texas”. The latest subject of this axiom is the legendary Permian Basin. The recent headlines have been eye-popping. “The Permian Basin Keeps On Giving”. “A $900 Billion Oil Treasure Lies Beneath West Texas Desert”. “Shell’s New Permian Play Profitable at $20 A Barrel”. “The World’s Hottest Oil Play”. “Permian Basin Prevails”. “The Permian Basin: An existential Threat To Canadian Oil As The War On Cost Heats Up”. “This Texas Oilfield Is Messing With OPEC”. The articles contain analysis and commentary concluding that no matter what happens in the rest of the world, the future of oil prices will be heavily influenced by U.S. light tight oil (LTO) producers and more specifically, the Permian. This is more of the popular thesis OPEC is dying or dead and the United States has replaced Saudi Arabia as the world’s swing producer. Except it is not […]

May U.S. shale oil output seen rising most in over two years

18 Apr 2017   Shale Oil

U.S. shale production in May was set for its biggest monthly increase in more than two years, government data showed on Monday, as producers stepped up their drilling activity with oil prices hovering at over $50 a barrel. May output is set to rise by 123,000 barrels per day to 5.19 million bpd, according to the U.S. Energy Information Administration’s drilling productivity report. That would be the biggest monthly increase since February 2015 and the highest monthly production level since November 2015. In the prolific Permian play located in West Texas and New Mexico, oil production is forecast to rise by nearly 76,000 bpd to 2.36 million bpd, data showed, a new record for the largest U.S. shale play. In the Eagle Ford region, output is set to rise by 39,000 bpd to […]

Citi Sees Oil Surging $10 as OPEC Combats Roaring U.S. Shale

18 Apr 2017   OPEC, Prices, Shale Oil

Mid-$60 oil seen by end-2017 as effects of OPEC cuts increase Bank sees commodity investment flows rising in second quarter Citigroup Inc. joined Goldman Sachs Group Inc. in backing commodities, saying it’s the season to have faith in raw materials and oil will probably rally to the mid-$60s by the end of the year. While U.S. shale output may come “roaring back” amid higher crude prices, production curbs by OPEC and its allies should help offset that increase over the next six to nine months, Citi analysts including Ed Morse and Seth Kleinman wrote in an April 17 report. The producers need to extend their deal to cut supplies through the end of the year amid concerns that Russia is lagging behind on its pledged reductions, the bank said. While the historic agreement between producers that went into effect Jan. 1 “induced a euphoric and unsustainable surge” in bullish […]

Undaunted by oil bust, financiers pour billions into U.S. shale

18 Apr 2017   Shale Oil

Investors who took a hit last year when dozens of U.S. shale producers filed for bankruptcy are already making big new bets on the industry’s resurgence. In the first quarter, private equity funds raised $19.8 billion for energy ventures – nearly three times the total in the same period last year, according to financial data provider Preqin. The quickening pace of investments from private equity, along with hedge funds and investment banks, comes even as the recovery in oil prices CLc1 from an 8-year low has stalled at just over $50 per barrel amid a stubborn global supply glut. The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions – slashing up to half the cost of pumping a […]

Undaunted by oil bust, financiers pour billions into U.S. shale

17 Apr 2017   Shale Oil

Investors who took a hit last year when dozens of U.S. shale producers filed for bankruptcy are already making big new bets on the industry’s resurgence. In the first quarter, private equity funds raised $19.8 billion for energy ventures – nearly three times the total in the same period last year, according to financial data provider Preqin. The quickening pace of investments from private equity, along with hedge funds and investment banks, comes even as the recovery in oil prices CLc1 from an 8-year low has stalled at just over $50 per barrel amid a stubborn global supply glut. The shale sector has become increasingly attractive to investors not because of rising oil prices, but rather because producers have achieved startling cost reductions – slashing up to half the cost of pumping a […]

Can We Expect A Big Draw In Crude Inventories Anytime Soon?

14 Apr 2017   Oil Supply, Shale Oil

With shale producers adding rigs every week, output is rising and so are stockpiles which weighs on prices and curbs their upward potential, ruining OPEC’s efforts to rebalance the market.  That’s good news for bears and bad news for bulls, but according to RBC commodity analysts, it is not so much the growing production which is hurting the price rise. It is refinery runs, which have been lower over the first quarter of the year because of maintenance season.  In fact, the RBC analysts have estimated that lower refinery runs – below 90 percent of capacity – in the first quarter have accounted for the bulk of the inventory increase, a hefty 64.2 percent of it, while rising production only accounted for 11.5 percent. Where did the rest of the stockpiles increase come from? Imports accounted for 20.8 percent of it, and the strategic petroleum reserve accounted for the remaining 3.5 percent. When they wrote their estimates, the analysts were confident that, as maintenance season ends, inventories will begin to fall. However, this is not yet happening, despite the Energy Information Administration reporting refinery runs of over 90 percent for the last two weeks.

ConocoPhillips Sells San Juan Basin Assets For $3B

14 Apr 2017   Shale Oil

ConocoPhillips, the largest U.S. independent oil producer, said on Thursday it would sell natural gas-heavy assets in San Juan basin to privately held Hilcorp Energy Co for about $3 billion. ConocoPhillips has been selling assets to reduce its exposure to profit-sapping natural gas assets and shore up its balance sheet. The assets, which span New Mexico and Southwestern Colorado, produced 124,000 barrels of oil equivalent per day, about 80 percent of which was natural gas, ConocoPhillips said. Conoco said last month it would sell oil sands and western Canadian natural gas assets to Cenovus Energy Inc for $13.3 billion. Conoco will receive $2.7 billion in cash from the San Juan basin asset sale, which is expected to close in the third quarter. The deal […]

Bankers’ Fading Fear of Oil Lending Is Latest Boon for Shale

14 Apr 2017   Shale Oil

JPMorgan, Wells Fargo, Citigroup cut reserves amid oil rise Banks release $370 million loan provisions in first quarter Wall Street banks’ growing optimism about the energy industry is the latest boost for U.S. oil and natural gas producers already enjoying higher prices. JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc. said on Thursday in their first-quarter earnings results that rising oil prices have helped them free a combined $370 million they previously set aside to cover bad loans. If the optimism turns into an increase in lending, it would be a boon to shale firms from Texas to North Dakota that rely on borrowed money to finance their drilling and fracking. That could further accelerate U.S. oil production, which is already expected to rise above 10 million barrels a day for the first time in late 2018, and put more pressure on OPEC’s efforts to restrain […]

North Dakota oil output rises back above 1 mil b/d in Feb

14 Apr 2017   Shale Oil

Up 5% from Jan; first month above 1 mil b/d since Nov Spring thaw will slash output, but rebound expected by May Bakken spot prices rise while breakeven prices fall North Dakota crude oil production rose back above the 1 million b/d threshold in February for the first time since November, but output could drop as low as 950,000 b/d in March or April as frozen roads thaw and force the state to impose weight restrictions on service trucks, the state’s top oil and gas regulator said Thursday. February’s preliminary output of 1.03 million b/d was 5% higher than January’s adjusted figure of 981,380 b/d, but it’s still well below the state’s all-time high of 1.23 million b/d in December 2014. Lynn Helms, director of the state Department of Mineral Resources, said during a press conference that he did not expect production to hit 1 million b/d until much […]

U.S. Oil-Rig Count Climbs by 11

14 Apr 2017   Shale Oil, USA

The number of rigs drilling for oil in the U.S. rose by 11 in the past week to 683, according to oil-field services company Baker Hughes Inc. The Baker Hughes report was delivered a day early because U.S. financial markets will be closed in observance of Good Friday. The U.S. oil-rig count is typically viewed as a proxy for activity in…

U.S. Oil Rig Count Climbs to Highest in Almost Two Years

14 Apr 2017   Shale Oil

U.S. crude production will likely rise in the months ahead as explorers added rigs for a 13th week, capping the longest stretch of gains since 2011. Rigs targeting crude rose by 11 to 683 this week, the highest level since April 2015, according to Baker Hughes Inc. data released Thursday. The number of wells drilled has more than doubled since tumbling to 316 in May.

Will Shale Kill Off The Oil Price Rally Again?

13 Apr 2017   Prices, Shale Oil

WTI has rallied more than 11 percent over the past month, raising hopes from oil bulls that maybe, just maybe, the price gains are here to stay. Oil had dipped in February and March on record high levels of oil sitting in U.S. storage, but by April, the market is starting to look tighter. (Click to enlarge) The oil market bust is closing in on the three-year mark, and there are growing signs that things could finally be moving in the right direction. Despite the record high levels of crude oil storage in the U.S., inventories are falling pretty much everywhere else. South Africa, the Caribbean, Nigeria, and Iran are all reporting lower inventory figures, although the reasons vary. Iran cleared out its fleet of floating storage, which had built up during years of sanctions that prevented the Islamic Republic from exporting to its full potential. That backlog of […]

Texas drilling activity more than doubled from last year

11 Apr 2017   Shale Oil

The total number of original drilling permits more than doubled year-on-year in March, though commercial prospects may be lower, a Texas regulator reported. Texas is the No. 1 oil producer in the United States and its Permian shale basin is considered more resilient to lower crude oil prices than other reservoirs. Texas exploration and production activity slumped early last year when crude oil prices dropped below $30 per barrel, but has since recovered with oil holding about $50 per barrel. The Railroad Commission of Texas, the state’s energy regulator, issued 1,310 original drilling permits in March, compared with 511 last year. That could indicate energy companies are willing to spend more on oil and gas opportunities in Texas as the […]

The Oil Giant Hidden in the World’s Biggest Mining Outfit

11 Apr 2017   Australia, Shale Oil

Mining group runs global oil business from Texas to Australia Oil and gas account for about 20% of BHP’s underlying profits The usual suspects have planted their flags along the dusty byways of the Permian Basin, declaring where they’ve staked claims. There are names like Royal Dutch Shell Plc, Anadarko Petroleum Corp., Pioneer Natural Resources Co. And, on signs fronting a barbed-wire fence, BHP Billiton Ltd. For the world’s largest mining company, the heart of the U.S. shale boom in West Texas might seem to be strange territory, a very long way from the iron-ore deposits of Australia or the copper mines of Chile’s Atacama desert. But BHP actually has been in the oil business for years, with operations stretching from Texas to the North Sea. Its U.S. assets alone are so valuable that activist investor Paul Singer urged the company to spin them off — a suggestion BHP […]

Shale Hotspot Draws In Another Big Oil Player

10 Apr 2017   Shale Oil

The oil price crash that destroyed a lot of smaller oil producers has not spared the finances of even the oldest and largest oil companies. Trying to keep the precious dividends intact and growing, Big Oil is focusing on cost control and cash preservation, and has effectively deferred investments in new ultra-expensive drilling ventures. One of the biggest companies, U.S. Chevron, is now planning to capitalize on its vast acreage holdings in the Permian. Investments in new mega projects, at least over the next few years, are not currently on the table, chief executive John Watson told Reuters in an interview published this week. Chevron is now betting big on the Permian; the star shale play straddling West Texas and New Mexico that has seen most of the resurgence since oil prices started steadily recovering in the fourth quarter last year. Unlike some other (and smaller) producers who have […]

The U.S. Rig Count Is An Over-Rated Indicator Of Future Oil Prices

10 Apr 2017   Shale Oil

The Baker Hughes North American Rotary Rig Count wallowed in relative obscurity among the world’s business writers for decades. The Hughes in Baker Hughes is the original Hughes Tool Company, inventor of the tri-cone rotary rock bit. The company started accumulating this data because every operating drilling rig was a potential customer. That this weekly report might one day move the needle on North American oil prices with every vacillation was never surely never anticipated. The fact Baker Hughes still calls drilling rigs “rotary” highlights its antiquity. Thanks in large part to Hughes bits, rotary drilling had rendered cable tool rigs all by obsolete by the 1940s. Even more perplexing is today rigs drill horizontals primarily with mud motors, not by rotating the drill string. The first entry nowadays is July 17, 1987, utterly meaningless because of so many changes in rigs, bits and penetration rates. The U.S. Oil […]

North American rig count increased in March

8 Apr 2017   Shale Oil

Exploration and production activity in North America outpaced the rest of the world in terms of general gains, oilfield services company Baker Hughes reported. The company offered its report on rig activity for March, noting global activity was on the rebound for 2017, but still lower year-over-year. Rig counts offer a loose indication of the level of confidence to invest in exploration and production activity in a particular region. Investments last year were curbed after crude oil prices dropped below $30 per barrel. Crude oil prices have been holding relatively stable in a range between $50 per barrel and $55 per barrel after the Organization of Petroleum Exporting Countries agreed to limit production in an effort to […]

OPEC Can’t Stop The Beat: U.S. Adds 10 Oil Rigs

8 Apr 2017   Shale Oil

The United States oil and gas rig count jumped by 15 this week, to its highest level since September 18, 2015, according to Baker Hughes ’ latest report on domestic drilling activity. The number of oil and gas rigs currently active in the United States now sits at 839, which is an increase of 396 year over year. Prices seemed undeterred by the ambitions of US shale count this week, likely in part due to Canada, which lost a total of 23 rigs this week, more than offsetting the additional rigs in play in the United States. Prior to the Baker Hughes data release on rig counts, oil prices had spiked to a one-month high less than a day after President Trump ordered missile strikes against Syrian military infrastructure in response to a chemical weapons attack for which security sources held responsible the Bashar Assad government. By 12:25pm EST, […]

Weak crude oil stunts U.S. energy IPOs, boosts outlook for M&A

8 Apr 2017   Shale Oil

The stream of U.S. energy companies going public at the start of 2017 has dried up on concerns over the future direction of oil prices, but private buyers seeking mergers and acquisitions are ready to take advantage of the volatility to secure cheap deals. Texas-based FTS International and Select Energy Services are among six U.S. energy companies that filed for listings in the first quarter but delayed, even after receiving the green light from local regulators, Thomson Reuters data showed. Four U.S. oil and gas companies went public in January, when more stable crude prices gave them confidence to tap into investor demand after a barren listings period that followed a slump in […]

Did The Banks Just Give U.S. Shale A Carte Blanche?

7 Apr 2017   Shale Oil

Twice a year, in April and in October, banks review the creditworthiness of oil and gas companies in what is known as a borrowing base redetermination. Ahead of this year’s spring review, both banks and U.S. oil companies are showing improved outlook for the industry, with cautious optimism seeping in through more oil and gas producers, oilfield services companies, lenders, and private equity firms. According to Haynes and Boone’s ‘Borrowing Base Redeterminations Survey’: Spring 2017 , the majority of polled banks and oil and gas companies expect borrowing bases to increase, and nearly all survey respondents see U.S. exploration and production companies raising their capital expenditure budgets this year compared to 2016. Haynes and Boone’s spring 2017 survey shows a brighter picture compared to last year’s spring survey and to the fall 2016 survey. Judging from the results of this spring’s poll, lenders and U.S. companies alike are dispelling […]

Bankrupt Oil Companies Pay Huge Bonuses To CEOs

7 Apr 2017   Shale Oil

The oil price rout that sent several hundred U.S. oil and gas companies under seems to be largely over, and in a somewhat surprising turn of events, some chief executives of companies that filed for bankruptcy protection in the last two years are doing better than they did when oil traded at over $100 a barrel. A Wall Street Journal analysis cites the CEO of Ultra Petroleum, for example, who received a portion of 7.5 percent of new shares, to be issued after the company emerges from bankruptcy protection. In absolute terms, this translates into about $35 million – a tenfold jump on Michael Watford’s annual salary in the pre-crisis years. Another chief executive, Seventy Seven Energy’s Jerry Winchester, got a stock package of 440,000 shares that were worth $6.6 million when the company emerged from bankruptcy last August, which have now swelled to $16 million, thanks to the […]

NAmerico unveils natural gas pipeline plan to relieve Permian glut

4 Apr 2017   Shale Oil

NAmerico Partners LP is proposing a multibillion-dollar pipeline to ferry natural gas from fast-growing fields in West Texas to the Gulf Coast, the company said on Monday, angling to match plans by rivals such as Kinder Morgan Inc ( KMI.N ). The pipeline, one of at least three being considered to ease a looming gas glut in the Permian producing region, would link to existing lines, including those that export gas to Mexico and to a Cheniere Energy Inc ( LNG.A ) liquefied natural gas export facility under construction. The pipeline would be the first major project by NAmerico Partners, founded two years ago in Houston. The company is backed by private equity fund Cresta Energy LP, whose management includes former executives from Regency Energy Partners LP, a large energy infrastructure company that was bought by Energy Transfer Partners ( ETP.N ) in 2015. NAmerico Managing Partner Jeff Welch […]

Most Lucrative Energy Job? Some Say It’s CEO of a Bankrupt Company

4 Apr 2017   Shale Oil

When Ultra Petroleum Corp. emerges from bankruptcy protection in the coming weeks, as expected, the natural gas producer’s chief executive is on track to be rewarded with roughly $35 million worth of its stock, more than 10 times his annual compensation in recent years. Michael Watford, the CEO, and other employees at the Houston company are sharing 7.5% of the Ultra’s new shares, a fairly typical cut awarded to managers of companies emerging from bankruptcy protection to incentivize them to stick around. Bankrupt…

Permian Pipeline Bottleneck Forces Steep Discounts

Oil production in the Permian Basin is rising so quickly that drillers may find themselves without enough pipeline capacity to move their product. Shale drillers large and small are rushing to West Texas, where drilling is profitable even at today’s prices. Other shale basins have lost capital and drilling rigs as industry activity becomes increasingly concentrated in the Permian. Even as shale production contracted in most of the country, the Permian continued to grow over the past several years through the worst of the downturn. Oil production in the Eagle Ford, for example, hit a peak in March 2015 at 1.7 million barrels per day (mb/d), but has since fallen sharply to just 1.1 mb/d today. But Permian production has spiked over the same timeframe, rising by nearly 0.5 mb/d to nearly 2.3 mb/d. (Click to enlarge) Production increases have continued despite the plunging rig count since 2014. Companies […]

Exclusive: NAmerico unveils natural gas pipeline plan to relieve Permian glut

NAmerico Partners LP is proposing a multibillion-dollar pipeline to ferry natural gas from fast-growing fields in West Texas to the Gulf Coast, the company said on Monday, angling to match plans by rivals such as Kinder Morgan Inc ( KMI.N ). The pipeline, one of at least three being considered to ease a looming gas glut in the Permian producing region, would link to existing lines, including those that export gas to Mexico and to a Cheniere Energy Inc ( LNG.A ) liquefied natural gas export facility under construction. The pipeline would be the first major project by NAmerico Partners, founded two years ago in Houston. The company is backed by private equity fund Cresta Energy LP, whose management includes former executives from Regency Energy Partners LP, a large energy infrastructure company that was bought by Energy Transfer Partners ( ETP.N ) in 2015. NAmerico Managing Partner Jeff Welch […]

Texas Drillers Face Threat of Too Much Oil, Too Few Pipelines

1 Apr 2017   Shale Oil, USA

Oil production in West Texas is about to outgrow pipeline capacity, a combination that knocked down crude prices in the region three years ago. West Texas Intermediate crude at Midland, Texas, the heart of the Permian Basin, sank this month to the lowest level since September. It’s the weakest for this time of year since 2014, according to data compiled by Bloomberg. That year, the discount versus the same oil in Cushing, Oklahoma, the U.S. benchmark, plunged to $21 in August as the shale boom flooded the region with oil. Permian output is expected to rise to 2.65 million barrels a day in December, said William Foiles, an oil analyst with Bloomberg Intelligence. In comparison, takeaway capacity in the region may only reach 2.54 million barrels a day by end of this year, according to Bloomberg Intelligence pipeline analyst Michael Kay. While Midland prices probably won’t reach 2014 levels, […]

North Dakota oil output set to rise as controversial pipeline opens

31 Mar 2017   Pipelines, Shale Oil

North Dakota oil production will get a shot in the arm next month as a pipeline comes online despite opposition by environmental groups and Native Americans, allowing the energy industry to save at least $540 million in annual shipping costs. The Dakota Access Pipeline gives the state’s producers cheaper access to refineries and other customers on the U.S. Gulf Coast. Market players said they expect this will hasten a revival of output from the Bakken region which fell sharply along with global oil prices during the past two years. “We’re back to growth in the Bakken,” Hess Corp ( HES.N ) Chief Executive Officer John Hess said in a recent interview. The New York-based company has contracts to send roughly half its daily North Dakota output […]

Fracking 2.0: Shale Drillers Pioneer New Ways to Profit in Era of Cheap Oil

31 Mar 2017   Shale Oil

Using a proprietary app called iSteer, Brian Tapp, a geologist for EOG Resources Inc., dashed off instructions to a drilling rig 100 miles away. This tool is among the reasons the little-known Texas company says it pumps more oil from the continental U.S. than Exxon Mobil Corp.—or any other producer. A rig worker received Mr. Tapp’s iPhone alert and tweaked the trajectory of a drill bit thousands of feet underground,…

Huge 300,000 Bpd Fracklog Could Derail Oil Price Recovery

30 Mar 2017   Shale Oil

Thousands of drilled shale wells are sitting idle, unfracked and uncompleted. The backlog of drilled but uncompleted wells (DUCs) grew dramatically beginning in 2014, as low oil prices forced drillers to hold off on completion in hopes of higher prices at a later date. After all, why bring production online in a low price environment when the same oil could earn more in the future if prices rebound. That calculation is particularly important given that a shale well typically sees an initial burst of production in its first few months of operation followed by a precipitous decline in output. The surge in DUCs created an enormous backlog of wells awaiting completion. This “fracklog” loomed over the oil market, threatening to derail any sign of an oil price recovery. As soon as oil prices rebounded to some higher point, the shale industry would bring thousands of already-drilled wells online, and […]

Shale Drillers Face an Uncertain 2018 With Most Hedges Expiring

30 Mar 2017   Shale Oil

A surge in hedging contracts is helping U.S. shale drillers ride out the turmoil in global oil markets this year. Next year may not be so easy. As of March, the biggest explorers had hedged 28 percent of this year’s production, according to Warren Russell and Michael Cohen of Barclays Plc. Those contracts, which lock in future payments, are expected to help U.S. output reach a “multi-decade high by December, within sights of the all-time high reached in 1970,” the analysts wrote in a note to clients. There are no guarantees for 2018, however, when most of the hedges expire. The falling price of crude, which has dropped 10 percent since the start of the year, is taking its toll, according to Francisco Blanch, head of commodities research at Bank of America Corp. in New York. “There was a lot of hedging when prices were between $50 and $55,” […]

Land Swaps Let Permian Drillers Expand Shale Wells on the Cheap

30 Mar 2017   Shale Oil

Horizontal drilling in the Permian Basin is creating a new kind of swap meet. Working with fresh technology that lets producers drill longer wells than ever before, companies such as Pioneer Natural Resources Co. , Parsley Energy Inc. and Double Eagle Energy Permian LLC are increasingly haggling with other producers for slivers of land that allow them to extend the reach of their drilling with hardly any acquisition costs. Prices for Permian drilling rights can run as high as $60,000 an acre. Trading land allows companies to drill the longer wells using ground a second company probably won’t develop, a win-win situation, said Bryan Sheffield, Parsley’s chief executive officer. But developers should take advantage now, because the practice likely has a low life expectancy. “The trade rush is happening now,” said John Sellers, co-chief executive officer at Fort Worth-based Double Eagle, which built much of its current position in […]

Here’s how much it costs both Saudi Arabia and the US to produce oil

When crude oil prices crashed into the $20 range early last year, it had most oil-producing nations quaking in their boots. That’s because few countries can make much — if any — money at that price point. I say most because there are a handful of producers that were still able to make a tidy profit at that price point. Leading the way was Saudi Arabia. According to data from energy industry consultant Rystad Energy, on average it cost Saudi Arabia less than $9 to produce a barrel of oil last year. That’s the cheapest in the world, though fellow OPEC countries Iran and Iraq can produce for around $10 per barrel as well, which is well below rival nations: The Motley Fool Here’s a look at why Saudi oil is so cheap, and what one emerging rival is doing to catch up. Drilling down into what makes Saudi […]

Newest Texas Refineries Plan to Turn Shale Into Fuel for Mexico

29 Mar 2017   Mexico, Shale Oil

The newest oil refineries in Texas are looking to join the hottest two plays in the North American oil industry. Raven Petroleum LLC and MMEX Resources Inc. are building refineries in the Eagle Ford and Permian Basin that will process ample local supplies of light crude into gasoline and diesel. The fuel will be shipped on existing rail lines across the border to Mexico, where the government has opened the market to foreign competition, attracting companies including BP Plc and Glencore Plc. U.S. shale drillers have doubled the number of rigs seeking oil since May, with most of the gains seen in Texas. Production nationwide is expected to approach the all-time high from 1970. At the same time, Mexico’s gasoline demand is outpacing local supply, forcing the nation to increase imports, which government data show grew 3 percent year-on-year in 2016. “It looks like they are a set of […]

Exclusive: Shell and Anadarko mull clean break from Permian venture

28 Mar 2017   Shale Oil

Royal Dutch Shell Plc ( RDSa.L ) and Anadarko Petroleum Corp ( APC.N ) may let a 10-year joint venture in the oil-rich Permian Basin of Texas expire and split their properties, hoping to speed up development, according to a senior Shell executive. The divorce and re-parceling of acreage would let each company drill and develop new wells at its own pace in the Permian, which has become the U.S. oil industry’s hottest development area for its low operating costs as crude prices CLc1 hover under $50 per barrel. Shell and Anadarko have been discussing how to proceed after the partnership agreement expires this summer and are not likely to renew it, Greg Guidry, who oversees the Anglo-Dutch group’s shale business, told Reuters. The talks come as Shell hopes to boost its North American shale output by 140,000 barrels of oil equivalent per day in the next three years, […]

The DNA of oil wells: U.S. shale enlists genetics to boost output

28 Mar 2017   Shale Oil

A pump jack and pipes are seen on an oil field near Bakersfield on a foggy day, California January 18, 2015. A small group of U.S. oil producers has been trying to exploit advances in DNA science to wring more crude from shale rock, as the domestic energy industry keeps pushing relentlessly to cut costs and compete with the world’s top exporters. Shale producers have slashed production costs as much as 50 percent over two years, waging a price war with the Organization of the Petroleum Exporting Countries (OPEC). Now, U.S. shale producers can compete in a $50-per-barrel oil market, and about a dozen shale companies are seeking to cut costs further by analyzing DNA samples extracted from oil wells to identify promising spots to drill. The technique involves testing DNA extracts from microbes found in rock samples and comparing them to DNA extracted from oil. Similarities or differences […]

US producers build up sales hedges as oil falls

28 Mar 2017   Prices, Shale Oil, USA

US independent oil companies have used derivatives to protect much more of their expected revenues against a fall in crude prices than they had a year ago, helping them sustain capital spending and production even if the market continues to weaken. Filings from the leading US exploration and production companies show they have hedged the revenues from about 27 per cent of their expected 2017 oil production, according to Wood Mackenzie, the research firm. This time a year ago, they had protected just 17 per cent of their revenues for 2016. Crude prices jumped in the final two months of last year as 13 Opec member countries and 11 non-members agreed to cut production, and US companies were quick to take advantage by locking in those levels. In the fourth quarter of 2016, the 33 small and midsized oil companies surveyed by Wood Mackenzie put on hedges for 648,000 barrels per day of oil production, almost four times as much as they hedged in the equivalent period of 2015. The hedges, which include swaps and collars using options, typically have strike prices of $50-$60 per barrel of benchmark Brent crude, and an average price of $54. That compares with an average strike price of $42 per barrel for new contracts in the first quarter of last year. Anadarko Petroleum and Apache, two of the larger independent oil producers that have assets offshore as well as in US shale reserves, were the most active in the fourth quarter, accounting for about 28 per cent of the oil hedges taken on in the quarter.