Shale Oil

US shale groups step up bond sales to finance drilling

15 Dec 2017   Shale Oil

US exploration and production companies have raised more from bond sales in 2017 than in any year since the slump in oil prices began in 2014, shoring up their finances to support drilling and production growth. Equity financing for the US E&P industry, which boomed in 2016, has slumped this year, but the debt market has been robust, accounting for the largest share of oil and gas E&P company fundraisings since 2009.

Companies in the sector have raised just under $60bn in bond sales so far this year, already a 28 per cent jump from 2016, according to Dealogic. Over the past three weeks, Whiting Petroleum, Continental Resources and Endeavor Energy Resources have each raised $1bn in debt. The bond sales have helped finance increased activity in US shale reserves. The number of rigs drilling the horizontal wells used for shale oil production has more than doubled from its low of 248 in May last year to 652 last week, according to Baker Hughes, the oilfield services group controlled by General Electric. “It is the resurgence in the commodity, that’s the bottom line,” said Tom Stolberg, a portfolio manager with Loomis Sayles.

“The commodity trending better has brought out a slew of new issuance. The fringier [companies], lower rated, more stressed balance sheets, it benefits them a whole lot more because it gets them over the hump of not making it at $50 or $45 oil.”

Drillers Flock to Rockies as Sleepiest Shale Corner Awakens

15 Dec 2017   Shale Oil

It’s not exactly the Pike’s Peak gold rush of 160 years but with crude prices on the rise, explorers are returning to the oil-rich rock of Colorado. (Bloomberg) — It’s not exactly the Pike’s Peak gold rush of 160 years but with crude prices on the rise, explorers are returning to the oil-rich rock of Colorado as a way to expand beyond the shale plays of Texas and New Mexico. During the three-year crude-market collapse, as prices fell below $27 a barrel, the Denver-Julesburg Basin northeast of Denver was largely abandoned as explorers tightened down drilling budgets. Now, with prices headed toward $60 on the heels of OPEC-led production cuts, the region is spurring renewed interest. More than $2 billion of drilling deals have been announced in the last four months in the DJ Basin. In addition, Colorado has seen more than $1.8 billion in pipeline deals and extensions […]

OPEC Wakes Up to the Threat of U.S. Shale 2.0

14 Dec 2017   OPEC, Shale Oil

Stronger U.S. output is blunting OPEC’s effort to clear glut Once expected in third quarter ’18, rebalancing now seen later OPEC predicted that global oil markets won’t rebalance until late next year after boosting forecasts for supplies from the U.S. and other rivals. The Organization of Petroleum Exporting Countries’ monthly report raised its outlook for non-OPEC supply in 2018 by 300,000 barrels a day, as its projections for American output caught up with those of the U.S. government. As a result, an initiative by OPEC and Russia to clear a global oil glut by cutting production — previously seen succeeding in the third quarter of 2018 — will take effect more slowly. Oil prices climbed to a two-year high above $65 a barrel in London this week, supported by a temporary pipeline halt in the U.K. and the Nov. 30 decision by OPEC and Russia to press on with […]

U.S. Shale Sends OPEC Deal Back To Square One

14 Dec 2017   OPEC, Shale Oil

True to its perpetually optimistic form, OPEC, which last month for the first time conceded to the threat posed by rising U.S. shale production…  sharply raised its demand forecast for cartel oil in 2018, ahead of the OPEC meeting at the end of November. And, according to OPEC’s latest market report for the month of December, demand is set to continue rising, with global oil demand projected to grow at around 1.53 mb/d in 2017, in line with last month’s forecast. China is projected to lead oil demand growth in the non-OECD, followed by Other Asia – which includes India – and OECD Americas. Which means that an unexpected Chinese landing, whether hard or soft, will have an adverse impact on oil in addition to all other commodities. (Click to enlarge) Separately, in 2018, world oil demand is expected to grow by 1.51 mb/d according […]

U.S. Shale Output Rises As OPEC Production Falls To 6-Month Low

14 Dec 2017   OPEC, Shale Oil

OPEC’s crude oil production dropped to a six-month low in November, while U.S. and other non-OPEC supply has grown stronger than initially expected this year, which prompted the cartel to revise up on Wednesday its estimates for non-OPEC supply growth in 2018. OPEC’s crude oil production fell by 133,500 bpd from October to stand at 32.448 million bpd in November, OPEC’s Monthly Oil Market Report showed on Wednesday. This was the lowest production the cartel has reported in six months . The largest increase among the members came from Nigeria, whose production in November jumped by 95,800 bpd from October to 1.790 million bpd, according to OPEC’s secondary sources. Angola, Saudi Arabia, Venezuela, and the UAE saw the largest declines in production. The final OPEC monthly report for this year focused on the 2017 highlights and expectations for 2018. In both overviews, the predominant theme was the U.S. shale […]

Rising U.S. output threatens global oil market balance in 2018

14 Dec 2017   Shale Oil

The global oil market will likely show a surplus in the first half of 2018, as rising U.S. supply offsets OPEC’s discipline in maintaining its production cuts for the whole of next year, the International Energy Agency (IEA) said on Thursday. “Total supply growth could exceed demand growth: indeed, in the first half the surplus could be 200,000 barrels per day (bpd) before reverting to a deficit of about 200,000 bpd in the second half, leaving 2018 as a whole showing a closely balanced market,” the Paris-based IEA said in its monthly oil market report. “A lot could change in the next few months but it looks as if the producers’ hopes for a happy New Year with de-stocking continuing […]

Investors pour cash into U.S. shale despite questions on returns

14 Dec 2017   Shale Oil

Financiers keep pouring cash into the shale oil sector, providing producers with a path to keep U.S. output rising through the middle of the next decade.  The United States is on track to deliver up to 80 percent of the world’s oil production gains through 2025, the International Energy Agency estimates, increases fueled in part by easy access to capital. Rising U.S. production is undermining OPEC’s attempts to curb global supply and boost prices, forcing the oil cartel to continue restraining output through the end of 2018. Hedge funds and private equity firms have given producers a range of new and traditional financial levers they can pull as needed to keep shale rigs drilling, according to interviews with more than a dozen financiers, advisers and executives. […]

The ‘Unknown Unknowns’ That Threaten U.S. Shale

14 Dec 2017   Shale Oil

Three years after the oil price crash, the U.S. shale patch is on its second growth phase and is expected to continue to increase its production, at least through the next five years. The global oil markets have become increasingly dependent on U.S. tight oil supply—and the oil industry is still coming to grips with this new reality, Simon Flowers, Chairman and Chief Analyst at Wood Mackenzie, wrote in a recent article . Current projections put the Permian on the forefront of the United States’ ability to deliver increased tight oil supply to the global markets. However, forecasts for the shale patch are as dynamic as production and drilling rates are. And some ‘known unknowns’ have been surfacing such as higher gas-to-oil ratios in some wells, and the parent/child wells issue, Flowers says. Wood Mackenzie said last month that signs had started to show that intensified drilling in the […]

Will Oil Producers Do As They Say Or Do As They Sell?

14 Dec 2017   Shale Oil

North America’s oil producers have adopted a meek tone of late. But the numbers suggest they’re locked and loaded heading into 2018. North America’s oil producers have adopted a meek tone of late. But the numbers suggest they’re locked and loaded heading into 2018. Bloomberg New Energy Finance on Wednesday released an extensive new database (available only to Bloomberg Terminal clients), compiled by Peter Pulikkan, Bert Gilbert, Daniel McLaughlin and Jacob Fericy, detailing the hedging strategies of 53 U.S. and Canadian exploration and production companies. One thing that leaps out from all the data is just how much of next year’s oil and gas production has apparently been locked in already by E&P firms — with one important caveat. As I detailed here in April, producers […]

Fracking Our Way to Mideast Peace

12 Dec 2017   Shale Oil

Whatever you think of President Trump’s decision to recognize Jerusalem as Israel’s capital, it points to the most important strategic reality in the Middle East: Arab power has collapsed in the face of low oil prices and competition from American frackers. The devastating oil-price shocks of the 1970s, orchestrated by the Organization of the Petroleum Exporting Countries, nearly wrecked the world economy. Ever since, the U.S. has looked for ways to break OPEC’s parasitic and rent-seeking grip on the oil market—and thereby to reduce America’s geopolitical vulnerability to events in the Middle East. Victory did not come easily. Intense conservation efforts made the U.S. much more energy-efficient. New oil discoveries in Africa and elsewhere significantly broadened the available supply. Renewable energy sources added to the diversification. But the most decisive development was that decades of public and private research and investment unleashed an American oil-and-gas boom, leading to a […]

Nodding Donkeys Fail as Long Shale Wells Make Pumping Oil Harder

12 Dec 2017   Shale Oil

Imagine trying to slurp a thick chocolate shake through a J-shaped straw four miles long. That’s the kind of cheek-puckering test the American shale industry must overcome to prolong a record boom in oil output. For almost a decade, drillers have been using new techniques to tap vast petroleum reserves scattered within deep, porous rock layers in places like west Texas, Pennsylvania and southern Canada. By digging extra-long wells that went down and then sideways at different angles, engineers were able to capture a lot more crude than from a vertical hole. While those new methods unlocked a torrent of new supply and turned the U.S. into the world’s largest producer, the increased difficulty of sucking fluid from so far underground is overwhelming pump systems that have changed little in decades. The mismatch […]

Are U.S. Shale Stocks Finally Set For A Rebound?

9 Dec 2017   Shale Oil

After years of meager returns and overspending to boost production at all costs, U.S. shale explorers and drillers are finally about to see their share prices rise next year, according to veteran energy investor Shawn Reynolds. The new wave of a more disciplined approach to spending and the focus on higher returns will benefit mostly the exploration and production companies. Drilling firms and oilfield services providers are also set to benefit, Reynolds told Bloomberg in an interview published on Friday. Shale companies have already started to realize the need to finally reward their shareholders, and firms are now planning within their means, not just spending to grow production at any cost. Shale companies now have more growth potential than conventional oil and gas producers, because shale firms face lowered risks in resources extraction, said Reynolds, fund manager at Van Eck Associates. “With shale, you have incredible visibility on growth, […]

Why Isn’t Wall St. Backing The Next Shale Boom?

9 Dec 2017   Shale Oil

No doubt, these four companies are solid and have a lot of running room, but so are the other 12 companies. Plus, all of the upstream oil & gas companies we follow are in much better shape today than they were a year ago. So, why is the Wall Street Gang not moving more money into these high quality upstream companies? 1. FEAR: This oil price cycle has been much worse and lasted much longer than previous cycles. Wall Street analysts are afraid to recommend upstream oil & gas companies when they fear an oil price pullback might come the next morning. I guess it is easier to recommend buying Bitcoin in your IRA even though no one on earth can explain the valuation. 2. There is not much confidence in OPEC + Russia sticking with their production quotas, despite the fact that they have actually been quite disciplined. […]

Chevron boasts of U.S. shale, but spending more elsewhere

8 Dec 2017   Shale Oil

While lauding the opportunities in the Permian shale basin in Texas, Chevron said it would spend more on projects already underway, such as in Kazakhstan. Chevron said it planned to spend $18.3 billion next year on exploration, adding it was focused on the growth potential in the Permian shale basin in Texas. “With production currently exceeding guidance in the Permian, our 2018 plan should deliver both strong production growth and solid free cash flow, at prices comparable to what we’ve seen this year,” Chairman and CEO John Watson said in a statement . In its latest drilling productivity report, the U.S. Energy Information Administration put the Permian shale basin at the top in terms of U.S. […]

Chevron Cuts Total 2018 Capex, Boosts U.S. Shale Investment

Chevron Corporation plans to cut its total capital and exploratory budget for a fourth consecutive year in 2018—to $18.3 billion, compared to the $19.8 billion that it planned for this year, but the supermajor is significantly boosting spending on U.S. shale, especially in the Permian. Chevron’s capital expenditure for 2017 envisaged a $2.5 billion allotment for shale and tight oil and gas, most of which was to be invested in the Permian Basin in Texas and New Mexico. For 2018, Chevron’s investment in U.S. shale includes $3.3 billion—just for the Permian—and another $1.0 billion for other shale and tight rock investments, for a total of $4.3 billion. “We’re fully funding our advantaged Permian Basin position and dedicating approximately three-quarters of our spend to projects that are expected to realize cash flow within two years,” Chairman and CEO John Watson said in Chevron’s press release. “With production currently exceeding guidance […]

Chevron Capital, Exploratory Spending to Total $18.3B in 2018

8 Dec 2017   Shale Oil

Chevron Corporation’s capital and exploratory budget will be $18.3 billion in 2018, down from $19.8 billion in 2017. Chevron Corporation’s capital and exploratory budget will be $18.3 billion in 2018, down from $19.8 billion in 2017. Upstream spend is expected to total $15.8 billion in the period, with approximately $8.7 billion earmarked to sustain currently producing assets, including $3.3 billion for projects in the Permian and $1 billion for other shale and tight rock investments. Around $5.5 billion of the upstream program is planned for major capital projects underway, including $3.7 billion associated with the Future Growth Project at the Tengiz field in Kazakhstan. Global exploration funding is expected to be about $1.1 billion and remaining upstream spend will be for early stage projects supporting potential future developments. Approximately $2.2 billion of planned capital spending will go towards the company’s downstream businesses that refine, market and transport fuels, and […]

Why Isn’t Wall St. Backing The Next Shale Boom?

8 Dec 2017   Shale Oil

No doubt, these four companies are solid and have a lot of running room, but so are the other 12 companies. Plus, all of the upstream oil & gas companies we follow are in much better shape today than they were a year ago. So, why is the Wall Street Gang not moving more money into these high quality upstream companies? 1. FEAR: This oil price cycle has been much worse and lasted much longer than previous cycles. Wall Street analysts are afraid to recommend upstream oil & gas companies when they fear an oil price pullback might come the next morning. I guess it is easier to recommend buying Bitcoin in your IRA even though no one on earth can explain the valuation. 2. There is not much confidence in OPEC + Russia sticking with their production quotas, despite the fact that they have actually been quite disciplined. […]

U.S. Shale Cautious As Oil Majors Invade Texas

8 Dec 2017   Shale Oil

Shale drillers are starting to show some caution when it comes to their pace of drilling, but some of the oil majors are still increasing their efforts in the shale patch. Chevron announced a 2018 capital spending program on Wednesday, which detailed spending cuts for the fifth consecutive year. One of the big reasons why Chevron slashed spending yet again is because of the completion of some massive, high-profile LNG export projects in Australia. But the oil major is also trying to chart a careful course amid uncertainty about oil prices. But the oil major’s caution does not extend to the shale patch, where it is ratcheting up spending and ambition. “Our 2018 budget is down for the fourth consecutive year, reflecting project completions, improved efficiencies, and investment high-grading,” Chevron Chairman and CEO John Watson said in a statement . “We’re fully funding our advantaged Permian Basin position and […]

Oil Investors Are Growing Impatient

8 Dec 2017   Shale Oil

The renewed optimism in the oil markets and the $55-plus WTI prices may have warranted frenzied production growth across the U.S. shale patch, if it wasn’t for the 2015-2016 downturn. U.S. oil and gas companies are surely happier now than they were in June this year when WTI prices dropped to below $43 a barrel, but they have been preaching spending-discipline as the sting from the oil price plunge is still fresh. However, investors are not buying the ‘discipline’ narrative, and fear that the higher the WTI price goes up, the more U.S. shale drillers will want to return to growing production. Investors have also grown increasingly wary of the fact that they have received meager returns so far for their investments in U.S. oil firms and will not be too willing to pour in new financing just to see drillers grow production and not grow returns to shareholders. […]

More U.S. oil export capacity in the works

7 Dec 2017   exports, Shale Oil, USA

A gas pipeline running from Texas shale could be converted to send oil to the Gulf Coast by the start of the next decade, Enterprise Products Partners said. The company announced plans Wednesday to convert a pipeline in its portfolio that carries natural gas from the Permian shale basin to a crude oil pipeline. With a new gas pipeline coming into service at the end of 2019, Shin Oak, the company said it has flexibility to repurpose another line for shale oil. “We have had strong demand for crude oil transportation, storage and marine terminal services for crude oil production from the Permian Basin,” CEO Jim Teague said in a statement . In its latest drilling productivity report, the […]

Wall Street Tells Frackers to Stop Counting Barrels, Start Making Profits

7 Dec 2017   Shale Oil

Twelve major shareholders in U.S. shale-oil-and-gas producers met this September in a Midtown Manhattan high-rise with a view of Times Square to discuss a common goal, getting those frackers to make money for a change . In the months since, shareholders have put the screws to shale executives in ways that are changing the financial calculus of hydraulic fracturing and could ripple through the global oil market. In the past decade, the shale-fracking revolution has made the U.S. the world’s largest oil-and-gas producer and reshaped markets . Yet shale has been a lousy bet for most investors. Since 2007, shares in an index of U.S. producers have fallen 31%, according to data provider FactSet, while the S&P 500 rose 80%. Energy companies in that time have spent $280 billion more than they generated from operations on shale investments, according to advisory […]

When Boom is Bust: the Shale Oil Bonanza as a Symptom of Economic Crisis

6 Dec 2017   Shale Oil

The gradual climb in oil prices in recent weeks has revived hopes that US shale oil producers will return to profitability, while also renewing fevered dreams of the US becoming a fossil fuel superpower once again. Thus a few days ago my daily newspaper ran a Bloomberg article by Grant Smith which lead with this sweeping claim: “The U.S. shale revolution is on course to be the greatest oil and gas boom in history , turning a nation once at the mercy of foreign imports into a global player. That seismic shift shattered the dominance of Saudi Arabia and the OPEC cartel, forcing them into an alliance with long-time rival Russia to keep a grip on world markets.” I might have simply chuckled and turned the page, had I not just finished reading Oil and the Western Economic Crisis , by Cambridge University economist Helen Thompson. (Palgrave Macmillan, 2017) […]

Don’t Expect Aggressive U.S. Shale Drilling

6 Dec 2017   Shale Oil

Many analysts expect U.S. shale to put the pedal to the metal after OPEC extended the production cuts through the end of next year, but some shale executives are unmoved from their pivot towards a more cautious approach to drilling. For years, shale companies burned through cash to grow production, a strategy that promised future returns even at the cost of a sharp increase in debt. The problem was that, by and large, the vast majority of shale companies have come up short, failing to turn a profit even as production soared. They added barrels to the market at an amazing clip, but shareholders have been left disappointed. The dramatic cost cutting and lowering of breakeven prices over the past year or two offered yet another promise to investors. The days of reckless drilling were gone and the leaner and meaner shale operators would finally become profitable. Countless news […]

Is The EIA Overestimating The U.S. Shale Boom?

6 Dec 2017   Shale Oil, USA

The American shale boom may be overstated by the U.S. Energy Department, according to a new MIT study that suggests the agency may be over-attributing a rise in shale drilling to technological advances. “The EIA is assuming that productivity of individual wells will continue to rise as a result of improvements in technology,” MIT researcher Justin B. Montgomery told World Oil . “This compounds year after year, like interest, so the further out in the future the wells are drilled, the more that they are being overestimated.” Instead, lukewarm oil prices have forced oil majors to drill only in easy-to-access areas, located mostly in the Eagle Ford and Permian basins in Texas, and the Bakken formation in North Dakota. This has led to an exaggerated increase in the number of active wells, and a hyperbolized narrative of growth in the shale industry, the study says. “The same forecasting methods […]

Big Shale Turns OPEC Ally From Foe With Focus on Oil Returns

5 Dec 2017   OPEC, Shale Oil

Don’t expect Big Shale to rush and fill the hole left by OPEC in the oil market. (Bloomberg) — Don’t expect Big Shale to rush and fill the hole left by OPEC in the oil market. Executives from three of the biggest independent U.S. drillers say they won’t increase activity just because prices rise after the Organization of Petroleum Exporting Countries and its allies agreed to extend output curbs. The emphasis, instead, will be on maintaining spending discipline and generating profits to return to investors, according to Pioneer Natural Resources Co., Parsley Energy Inc. and Newfield Exploration Co. While crude is trading near the highest level in more than two years as OPEC and its partners limit supplies in a bid to drain a global glut, investors have been concerned stronger prices would encourage U.S. drilling and undermine those efforts. The biggest oil crash in a generation began in […]

After 2.5 Billion Barrels, Eagle Ford Has More Oil Coming

5 Dec 2017   Shale Oil

Mark Twain would appreciate irony in the Eagle Ford Shale, where rumors of the play’s impending exhaustion are greatly exaggerated. The Eagle Ford has produced 2.5 billion barrels (Bbbl) of oil and will generate another 2.1 Bbbl, according to Allen Gilmer, CEO of DrillingInfo, the Austin-based Big Data repository of all things oil and gas. The play has also produced 10 Tcf of natural gas and is on track to produce another 5 Tcf to 6 Tcf. DrillingInfo compiles datapoints on rock quality, drilling parameters and completion techniques. Internally, the company correlates well metric variables to rock quality in an attempt to determine which aspects of rock quality drive are producible. The company has classified 10 grades of rock across the play, which stretches from the Mexican border east and north to the area around Bryan/College Station, Texas. “The reason we did this—and it’s not perfect; there is no […]

Don’t Count On A Utah Shale Boom

5 Dec 2017   Shale Oil

On Monday, President Trump announced his plan to shrink Bears Ears National Monument by 85 percent, while also cutting Grand Staircase-Escalante National Monument by half, a move that could open up Utah to more oil and gas drilling. In the waning hours of Barack Obama’s tenure as President, he signed an order using the Antiquities Act to protect millions of acres in Bears Ears. President Trump is now trying to undo that move, which will be the first time a president has reduced such a large portion of national monument territory since the 1960s. Presidents tend to add land into protection to burnish their legacy – George W. Bush created a massive reserve in the Pacific Ocean around Hawaii in his second term, a Marine National Monument that was expanded under the Obama administration. There are not a ton of examples in which Presidents shrink national monuments, and even […]

US tight oil: Too light, too sweet

4 Dec 2017   Shale Oil, USA

International buyers’ appetite may start to wane in 2018 US light tight oil output is transforming world oil markets. After falling during the 2015 oil price crash, total American production – of which shale is now a major source – surged back onto markets, and the Energy Information Administration (EIA) expects output to rise another 0.5m barrels a day in 2018, to a record 9.9m b/d. Much of this new production is finding its way onto global markets, and exports now regularly run over 1m b/d. But can there be too much of a good thing? Specifically, with Opec ‘s light sweet crude exporters Libya and Nigeria staggering back from extended production outages, and big Persian Gulf producers tightening availabilities of middle-gravity sour crudes, is there a “demand limit” to the volumes of very light sweet crude now produced in the US? Several factors suggest that there is, and […]

OPEC extension a win-win, even for U.S. shale oil producers

2 Dec 2017   OPEC, Shale Oil

A move by parties to an OPEC-led agreement to extend a production cut deal to the end of 2018 is a win-win, including for U.S. shale oil players, analysts said. Ministers from the Organization of Petroleum Exporting Countries and a handful of non-member states, notably Russia, agreed Thursday to extend an agreement that sidelines the equivalent of about 2 percent of total global demand for crude oil through the end of next year. The agreement, implemented in January and meant expire in March, is designed to drain the surplus on the five-year average for global crude oil inventories and Saudi Oil Minister Khalid al-Falih said parties are about halfway to their goal […]

U.S. Vastly Overstates Oil Output Forecasts, MIT Study Suggests

2 Dec 2017   Shale Oil, USA

Estimates from EIA exaggerate impact of fracking technology New well output could undershoot EIA forecasts by 10% in 2020 Turns out, America’s decade-long shale boom might just end up being a little too good to be true. There’s no denying that fracking has turned the U.S. into a force in the global oil and gas markets, which has more than a few people abuzz about the prospect of energy independence. But now, researchers at MIT have uncovered one potentially game-changing detail: a flaw in the Energy Department’s official forecast, which may vastly overstate oil and gas production in the years to come. The culprit, they say, lies in the Energy Information Administration’s premise that better technology has been behind nearly all the recent output gains, and will continue to boost production for the foreseeable future. That’s not quite right. Instead, the research suggests increases have been largely due to […]

Oil Rig Count Rises After OPEC Deal Extension

2 Dec 2017   Shale Oil, USA

A day after OPEC extended the already-extended production cut deal to end-2018, oil and gas rigs in the US climbed by 6 . The boost to the number of oil and gas rigs in the US is likely just a taste of what’s to come if oil prices continue to climb as a result of OPEC’s prolonging of the deal that is designed to ease the glut. And at current prices of WTI, US drillers are bound to find sufficient funds to add rigs, pressuring the prices that OPEC is attempting to hold fast. This week, the number of active oil rigs increased by 2, with gas rigs climbing by 4. The WTI and Brent benchmarks slipped shortly after the agreement was signed on Thursday, but rebounded on Friday, with WTI up $1.23 (+2.14%) to $58.63 and Brent up $1.36 (+2.17%) to $63.99 around 11:00am EST. The total oil […]

How Big Oil Is Transforming Shale

1 Dec 2017   Shale Oil

Shale drillers have successfully lowered their breakeven price over the past several years, but the industry is looking for more ways to cut costs. The oil majors are investing in new technologies that could continue to bring down costs, which will complicate OPEC’s efforts to realize higher prices. Reuters recently illustrated the quiet tech revolution underway in the shale patch, profiling a worker from Royal Dutch Shell who sat in a control room in Houston, helping guide multiple shale rigs at one time 500 miles away in the Permian basin. While smaller companies drove innovation in the shale patch years ago, the oil majors are now bringing their expertise to shale drilling, pouring money into shale as they trim spending on megaprojects around the world. Some of the innovations are being transferred from high-tech, highly automated offshore projects. The International Energy Agency recently published a report on the wave […]

U.S. Shale To Surge After OPEC Extension

1 Dec 2017   Shale Oil

Just as expected: OPEC and the group of non-OPEC countries led by Russia extended their production cuts for an additional nine months through the end of 2018. “It’s been a good long day… in fact, it’s been a great day,” Saudi oil minister Khalid Al-Falih said at the presser. “I’m pleased to announce the decision has been unanimous.” The deal to cut 1.2 mb/d from OPEC, plus nearly 0.6 mb/d from non-OPEC countries, will run from January to December 2018. Assuaging some concerns from the Russian delegation, the deal also included a review of the production limits at the next official OPEC meeting in June. That opens up the possibility of removing or adjusting the agreement in six months’ time, although because OPEC meets every six months anyway to roll over the deal, this is a somewhat redundant statement. Al-Falih said the group will be “agile” and “on its […]

U.S. Shale Becomes More Flexible, Hedges 900,000 Barrels

30 Nov 2017   Shale Oil

U.S. oil producers have hedged almost 900,000 barrels of future crude at prices of US$50-60 a barrel, which will likely allow them to continue growing production whatever OPEC decides to do at its meeting tomorrow. Bloomberg quotes data from Wood Mackenzie that shows during the third quarter, 33 E&Ps hedged a total 897,000 barrels of future production, which was a 147-percent jump over the second quarter and the biggest one since Wood Mac started tracking hedging data. The most active hedgers were Hess and Cenovus – they accounted for more than a third of the total hedged amount of future production. Some 14 companies from the sample of 33 locked in the future prices of at least 25,000 bpd in production. “Producers that are able to lock in prices above previous expectations may feel more comfortable with increasing activity. Others may leave budgets unchanged and promote higher cash-flow guidance […]

Gas production accelerating in the Bakken

29 Nov 2017   Shale Oil

Even though more crude oil than gas comes out of the Bakken shale in North Dakota, the pace of growth for gas is far greater, a federal report found. North Dakota crude oil production stands at around 1.07 million barrels per day, putting it in the No. 2 spot nationally behind Texas. Nearly all of the state oil production comes from the Bakken and Three Forks shale formation and North Dakota now accounts for about 11 percent of total U.S. crude oil production. A profile from the federal Energy Information Administration, however, said oil production is off its peak of 1.2 million barrels per day three years ago and the ratio of gas production to oil finds natural gas output is […]

U.S. Oil Has One Fatal Weakness

29 Nov 2017   Shale Oil

But most of the U.S. oil production is light tight oil, and American exports—especially those of very light sweet crude—may hit a demand constraint next year, Bill Barnes , director of energy consultancy Pisgah Partners, writes in Petroleum Economist. Oil production in the U.S. is currently expected to reach an all-time high at an average 9.9 million bpd next year. In recent weeks, U.S. crude oil exports beat records , and surpassed the 2-million-bpd mark for the first time ever in the week to October 27. Last year, 51 percent of the 8.4 million bpd of crude oil produced in the Lower 48 States was light oil , or less dense oil with an API gravity of 40.1 or above, EIA data shows. The higher the API gravity, the lighter the oil. So far this year, much of the lower 48 states’ crude oil production had 30.1 or higher […]

UK Government Issues Support for Shale Industry

The UK government has lent its support to the UK’s shale gas industry in a recently published white paper. The UK government has lent its support to the UK’s shale gas industry in a recently published white paper. Industrial Strategy: Building a Britain Fit for the Future states that the emerging shale gas industry in the region ‘offers the prospect of creating jobs, enhancing the competitiveness of downstream sectors and building up supply chains’. In the white paper, the government outlined that it will support the development of this industry, while recognizing the devolved nature of planning in the devolved nations, and revealed that it was currently considering how to implement its proposal for a Shale Environmental Regulator. Ken Cronin, the chief executive of UK Onshore Oil and Gas (UKOOG), the trade body for the UK onshore industry, said the sector welcomed the government’s support. “Domestic shale gas production […]

U.S. shale producers renew challenge to OPEC: Kemp

28 Nov 2017   Shale Oil

 U.S. shale producers have started adding more drilling rigs in response to rising oil prices and improving confidence about the outlook for 2018. Experience shows changes in the number of rigs drilling for oil in the United States tends to follow changes in WTI prices with a lag of about 16 to 20 weeks. The active rig count peaked in mid-August and then declined through September and October, in response to the earlier peak and fall in prices between February and mid-June. But WTI prices hit a recent low around June 21 and have been on an upward trend for 22 weeks so […]

Pressured for profit, oil majors bet big on shale technology

28 Nov 2017   Shale Oil

Part of a team working to cut the cost of drilling a new shale well by a third, Portillo works from a Royal Dutch Shell Plc office in suburban Houston, his eyes darting among 13 monitors flashing data on speed, temperature, and other metrics as he helps control rigs more than 500 miles (805 km) away in the Permian Basin, the largest U.S. oilfield. For the last decade, smaller oil companies have led the way in shale technology, slashing costs by as much as half with breakthroughs such as horizontal drilling and hydraulic fracking that turned […]

As Money Tightens, an Oil Boom Town Fights for Its Share

25 Nov 2017   Shale Oil

Williston, N.D., built a $70 million recreation center, complete with an indoor water park, with the influx of wealth from the oil boom. When the oil boom came to Williston, the western North Dakota city tried to use the influx of new wealth to transform itself from a hub for transient roughnecks into a stable and desirable place to live. So it built new roads, a wastewater-treatment plant and a $70 million recreation center, complete with an indoor water park and four tennis courts. But as the oil boom has leveled off and North Dakota’s agricultural sector hit a rough patch, state funding has been stretched thin, stoking resistance to Williston’s plans. North Dakota legislators are re-examining the special state funds Williston receives to pay for the influx of workers who weigh on city resources during boom times. The struggles underscore the difficulties oil-rich towns across the U.S. face […]

Is Trouble Brewing In The Permian?

24 Nov 2017   Shale Oil

The Permian shale play has been attracting so much attention lately it’s started to get a little bit boring. But not for oil investors. The rush to the Permian has continued as everyone forecasts growing production there. The projections suggest strong growth—doubling production over the next three years according to some Permian producers. But one analyst thinks that this explosive growth is a rather unlikely event. At a recent event, Michael Hanson from merchant bank Parkman Whaling said that there is a set of conditions that producers in the Permian will need to meet if their vision of doubling production by 2020 is to become a reality. These are all conditions that do not depend on the producers themselves, but on a lot of factors they have no control over, which makes the challenge all the greater. For starters, despite the Permian’s reputation for being a low-cost play, costs […]

Is Texas Poised For A Sharp Rise In Output?

24 Nov 2017   Shale Oil

His analysis is based on RRC data only. Each RRC data set from Jan 2014 to Sept 2017 for crude and from April 2014 to Sept 2017 for condensate and natural gas are used in the “all data” estimate, the most recent 49 months of data are collected for each individual data set. After March 2016 there was a shift in the data for crude and condensate so for the C+C estimate, I include an estimate which uses all data from April 2016 to the most recent data point (“Corrected 18 month vintage”). Dean prefers to present an “all vintage data” estimate and an estimate using only the most recent 3 months “correction factors”. For Sept 2017 the all vintage data estimate is 3174 kb/d, the last 3 month vintage estimate is 2957 kb/d, and the last 18 month vintage estimate is 3039 kb/d with falls of 68, 96, […]

Can The Gas Glut Kill The Permian Boom?

22 Nov 2017   Shale Oil

Natural gas is produced as a byproduct when drilling for oil. Oil tends to be more lucrative, so shale companies typically target oil in places like the Permian, and the gas is considered an added benefit. However, the Wall Street Journal reports that shale drillers in the Permian are struggling with too much gas and not enough places to put it. The gas pipelines from the West Texas shale fields are at capacity. To the north, the market is saturated with gas from the Rockies and Canada, the WSJ says. And while there are several natural gas pipelines under construction that would carry gas from Texas to Mexico, those projects are not yet online. One key pipeline, the Gulf Coast Express, won’t come online until 2019, and several other projects have similar timelines. While Permian producers really want to continue to ramp up oil production, they are extracting more […]

Is This The New Sweet Spot For Shale?

20 Nov 2017   Shale Oil

Over the last year, ‘permania’ has become so frenzied that the land rush drove exploration rights prices in West Texas sky high—and along with it, equipment and labor costs. So, what’s next? While most analysts and oil companies focus on the larger portion of the Permian in Texas, southeastern New Mexico—home to the smaller part of the shale play with part of the Delaware Basin—has seen increased deal and drilling activity in recent months. Now, shale drillers and oil majors want access to the Permian without paying the high prices and costs in Texas. And they’ve started using cheaper New Mexico as a kind of ‘geological back door’, as Bloomberg’s David Wethe put it, through which they can boost their position in the Permian. Exxon did it in January this year, by buying companies owned by the Bass family, with an estimated resource of 3.4 billion barrels of oil […]

Can Argentina Replicate The U.S. Shale Boom?

20 Nov 2017   Argentina, Shale Oil

Argentina has consistently been hyped as the location where the next shale revolution will unfold. The unfolding has taken some time, but progress in shale production is starting to take off in the South American nation. In October, state-owned YPF announced plans to spend $30 billion on shale investment over the next five years in an effort to scale up oil and gas production from the Vaca Muerta shale. The company hopes to boost shale output by 150 percent over that timeframe. Key to that push is lowering development costs. YPF says that it can produce a barrel of oil equivalent (boe) for $13, and it aims to reduce that to $10/boe by 2020, which the company says would make it competitive with shale production from the Permian or Eagle Ford. Part of the cost cutting drive, the company and the government believe, will be lowering labor costs. Earlier […]

Conoco sets $50-a-barrel oil price ceiling for new projects

20 Nov 2017   Shale Oil

ConocoPhillips, the largest US exploration and production company, has ruled out investing in projects that need an oil price of $50 or higher to make a profit, as it attempts to raise shareholder returns after years of poor profitability. It is also committing most of its investment for growth to shale oil resources in North America, arguing that operations there are most able to respond to volatile markets. Companies in the US shale oil and gas industry have generally made poor returns on capital and been unable to cover their costs of drilling and completing new wells from their cash flows. But Conoco is one of many exploration and production companies now trying to deliver improved returns for shareholders and live within its means without requiring continual infusions of fresh capital. Ryan Lance, Conoco’s chief executive, said the company was seeking “returns over growth”. “The whole E&P sector, really, has not performed very well, even [through] the commodity price cycles,” he said. “We really want to be a stock that will perform through the cycles.”

U.S. oil drilling rig count holds steady this week: Baker Hughes

18 Nov 2017   Shale Oil, USA

U.S. energy companies kept the oil rig count unchanged this week, General Electric Co’s Baker Hughes energy services firm said on Friday, as some analysts expect a gradual decline in overall rigs in the fourth quarter and in 2018. The rig count, an early indicator of future output, held at 738 in the week to Nov. 17, still much higher than 471 rigs a year ago as energy companies boosted spending plans for 2017 as crude started recovering from a two-year price crash. The increase in drilling lasted 14 months before stalling in August, September and October after some producers started trimming their 2017 spending plans when prices turned softer over the summer. So far in 2017, U.S. crude futures have averaged almost $50 a barrel, easily topping last year’s $43.47 average. This week, futures were trading around $56 a barrel after rising close to $58 last […]

Texas jobs, shale production increasing

18 Nov 2017   Shale Oil

Shale oil production in Texas has increased steadily for more than a year and gains have spilled over into the broader economy, a federal reserve bank said. The Federal Reserve Bank of Dallas said that “positive signs are starting to reappear for the Texas oil and gas sector” as crude oil prices held above $50 per barrel for much of the third quarter. The price for West Texas Intermediate, the U.S. benchmark for the price of oil, is up 25 percent since the start of July and trading near $56 per barrel early Friday. Crude oil prices were supported by a decline in commercial crude oil inventories, compliance with an effort steered by the Organization of Petroleum Exporting Countries and recent […]

Markets Shrug On Flat Oil Rig Count

18 Nov 2017   Shale Oil

The number of oil and gas rigs in the United States rose again this week, this time by 8, according to Baker Hughes, ending a short-lived downward trend in weeks prior. The number of oil rigs stayed flat this week, while the number of gas rigs gained eight. The WTI and Brent benchmarks fell earlier in the week on a surprise increase in crude oil inventory reported by API and EIA, and probably the biggest catalyst this week, IEA’s downward revision for crude oil demand growth. Still, crude oil managed to rally on Friday before the data release. The total oil and gas rig count in the United States now stands at 915 rigs, up 327 rigs from the year prior, with the number of oil rigs standing at 738 versus 471 a year ago. The number of gas rigs in the US now stands at 177, up from […]

Higher Oil Prices Reduce North American Oil Bankruptcies

18 Nov 2017   Prices, Shale Oil

Haynes and Boone. This year, only 20 companies on the continent have declared bankruptcy—there were three times more than that last year. So far, the oil price crash of 2014 has caused 134 oil exploration and production companies to go under so far, but prices have risen above $60 a barrel this year, buying some underperforming companies times to shape up. Oil field services companies still face the brunt of the price bust, with 43 of them declaring bankruptcy this year. Still, that’s an improvement from 71 bankruptcies last year. Haynes and Boone says 310 oil producers, oil field services companies, and midstream firms have gone under since the top of 2015, just months after the initial crash. North American shale oil and gas companies have proven that they can adapt their business model through the lower crude oil prices cycle. Now, American shale producers might have to adjust […]