Shale Oil

Oil’s Bad Timing Pressures Drillers as Banks Review Loans

22 Mar 2017   Shale Oil

‘The next month is going to be absolutely critical’: analyst Photographer: Brittany Sowacke/Bloomberg The rally in global oil prices has stalled at the worst possible time for explorers, just as banks reassess credit lines crucial to their growth. This year’s reviews, due to start next month, will arrive with the industry nursing a nasty case of whiplash. Spot prices surged late last year on OPEC’s pledge to cut output, hitting $54.06 a barrel in New York. Since then, they’ve fallen 12 percent, undercut by rising U.S. rig counts. Futures contracts show longer-term prices deteriorating as well. A drop below $45 would likely spur credit-line reductions, raising the specter of cuts that crippled drillers a year ago, said Kraig Grahmann, a partner in Houston for law firm Haynes & Boone LLP . Between the end of 2015 and October, when credit lines were last reassessed, the average borrowing base for […]

New projects, shale boom could trigger oil oversupply by 2018-19: Goldman

22 Mar 2017   Shale Oil

New production projects and a fresh shale boom could boost oil output by a million barrels per year and result in an oversupply in the next couple of years, according to Goldman Sachs. “2017-19 is likely to see the largest increase in mega projects’ production in history, as the record 2011-13 capex commitment yields fruit,” the U.S. investment bank said in a research note on Tuesday. OPEC’s landmark decision to limit output for the first time in eight years in a bid to arrest the existing supply glut reduced price volatility and increased stability, unintentionally helping the shale producers, the bank said. ADVERTISING “OPEC’s decision in November 2016 to cut production was rational, in our view, and fit into its role of inventory manager of last resort,” Goldman said. “However, the unintended consequence […]

Big Oil’s Plan to Buy Into the Shale Boom

22 Mar 2017   Shale Oil

Exxon, Shell, and Chevron plan to spend $10 billion in the U.S. shale patch this year. A gas flare is seen through the window as Royal Dutch Shell’s Scott W. Scheffler drives near Mentone, Texas, in Loving County situated in a central portion of the Delaware Basin, on Thursday, March 2, 2017. Big Oil is muscling in on shale country. Exxon Mobil Corp. , Royal Dutch Shell Plc and Chevron Corp. , are jumping into American shale with gusto, planning to spend a combined $10 billion this year, up from next to nothing only a few years ago. The giants are gaining a foothold in West Texas with such projects as Bongo 76-43, a well which is being drilled 10,000 feet beneath the table-flat, sage-scented desert, and which then extends horizontally for a mile, blasting through rock to capture light crude from the sprawling Permian Basin. While the first […]

U.S. oil production keeping oil prices low

22 Mar 2017   Prices, Shale Oil

Crude oil futures started the day slightly improved Tuesday after falling for seven of the last 10 sessions.  Prices remained below the $50 per barrel mark, an improvement on January 2016’s fall to below $30 per barrel, but well below the $100 per barrel seen 2014. Oil is regarded as a barometer of the global economy, and while stocks have traded up since the start of President Donald Trump‘s administration, the bump seen in stock prices in other sectors of the economy may not be showing up for the oil industry soon.  Producers in the United States are partially responsible for the current oversupply in oil. Global supply increased by 260,000 barrels per day in February, to 96.52 million barrels per day, and U.S. production is the highest it has been in a year, at 9.1 million barrels per day, roughly the amount Saudi Arabia produced in February.  The United States also has 528.4 million barrels in storage, seven percent more than it stored a year ago. The U.S. effort largely nullified a 2016 agreement by OPEC, Russia and 10 non-OPEC oil producing nations to limit production, which sent oil prices to about $55 per barrel but encouraged U.S. producers to pump more oil.

Oil, Gas Job Recovery Much Slower Than Industry Rig Count, Spending Growth

22 Mar 2017   Shale Oil

Higher oil prices and a US rig count surge propel industry earnings toward recovery, but hiring is expected to lag behind, according to Moody’s Investors Service. The U.S. rig count has almost doubled during the last 10 months and upstream spending is on track to increase up to 30 percent this year – but the workforce recovery is traveling at a much slower step. More rigs are back to work based on shale’s quick development cycle, minimal geological risk and producers’ nimble action to reduce costs, analysts at Moody’s Investors Service said in a new report. Since bottoming out in May, 357 land rigs have gone to work in onshore U.S. activity. About 48 percent of the total has joined the ranks in the Permian Basin, but lucrative plays in Texas’ Eagle Ford, as well as the STACK and SCOOP in Oklahoma, have also grown. The increased drilling activity […]

Has OPEC Underestimated U.S. Shale Once Again?

16 Mar 2017   OPEC, Shale Oil

The U.S. shale cowboys are back on their horses and leading a strong recovery in the oil patch that is not expected to falter even as WTI prices dropped last week below $50 per barrel for the first time in more than two months. With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast. Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw […]

Oil at $40 No Problem as U.S. Drillers Snub OPEC With Hedges

15 Mar 2017   Shale Oil

OPEC’s worst enemy isn’t U.S. shale drillers. It’s the hedges propping them up. American oil explorers who survived the worst of the 2014-2016 market rout are shrugging off the 14 percent slide in prices this year from a high of $55.24 to less than $48 a barrel Tuesday. The price would have to drop to the $30s or lower to dent the bottom line of many drillers now working U.S. shale fields, said Katherine Richard, the CEO of Warwick Energy Investment Group, which own stakes in more than 5,000 oil and natural gas wells. That’s because many producers have already locked in future returns with financial contracts that guarantee the price of their oil for most of the rest of the decade. Such resilience poses a dilemma for countries that agreed to an OPEC-led production cut aimed at tightening supplies to raise prices and relieve their distressed national economies. […]

U.S. shale oil output to soar in April, Permian to hit fresh record

14 Mar 2017   Shale Oil

U.S. shale oil production in April was set for its biggest monthly increase since October as output in the Permian Basin, America’s fastest growing shale oil region, was expected to hit another record high, government data showed on Monday. Total shale oil production was expected to rise 109,000 barrels per day to 4.96 million bpd, according to the U.S. Energy Information Administration’s drilling productivity report. Oil production in the Permian Basin in Texas and New Mexico, the largest U.S. shale oil field, was set to rise 79,000 bpd to 2.29 million bpd, the highest level on records dating back to 2007. In the Eagle Ford region in Texas, output was expected to grow nearly 28,000 bpd to 1.14 million bpd, the highest level since November. Production in the Bakken, however, was set to […]

U.S. Shale Faces A Workforce Shortage

14 Mar 2017   Shale Oil, USA

A problem for the U.S. shale oil and gas industry that analysts and observers have warned about for a long time has materialized: there is a shortage of workers. According to one service provider for E&Ps, trucker jobs remain vacant even with an annual paycheck of $80,000 , which is certainly a big change from a couple of years ago when layoffs were sweeping through the shale patch. This shortage could dampen the prospects of not just shale producers, who are eager to ramp up production as quickly as possible and take advantage of higher international oil prices, but it will also seriously hamper the recovery of the oilfield services segment, which has been hit harder than E&Ps by the price crash. We wrote earlier this year how oilfield service providers are starting to get back at producers with higher fees for their services, to make up for the […]

Russian oil major says U.S. shale growth imperils OPEC deal

14 Mar 2017   -, Russia, Shale Oil

A recovery in U.S. oil output may deter OPEC and non-OPEC producers from extending production cuts beyond June and might lead to a new price war, Russia’s top oil major said on Monday. U.S. shale oil production had been in retreat as oil prices tumbled from above $100 a barrel in 2014 to below $30 in 2015, making costly fracking processes less profitable. A deal by the Organization of the Petroleum Exporting Countries with Russia and other producers to rein in output by 1.8 million barrels per day (bpd) for six months from Jan. 1 lifted prices but also encouraged U.S. firms to boost supplies. “It became evident that U.S. shale oil output has become and will remain a new global oil price regulator […]

Can The Permian Outgrow The Giant Saudi Ghawar Field?

10 Mar 2017   Shale Oil

When the Permian Basin in West Texas—which has been pumping oil for nearly a century—was fueling the U.S. and Allied forces in World War II, currently the world’s biggest conventional oil field, Saudi Arabia’s Ghawar, had not even been discovered. Ghawar, discovered in 1948, was put in production in the 1950s, and is now thought to be producing oil at a rate of 5 million barrels per day. Meanwhile, the Permian had been set for a decline in output until a decade or so ago. Hydraulic fracturing technologies allowed drillers to start fracking through shale formations which gave new life to the basin, whose current production is around 2.2 million bpd of oil. Now, a shale patch executive believes that the Permian can outgrow Ghawar in terms of oil production, thanks to substantially increased efficiency and lowered breakeven costs. Scott Sheffield, the founder of one of the companies with […]

Marathon Oil to buy Permian acreage for $1.1 billion

10 Mar 2017   Shale Oil

Marathon Oil Corp. has agreed to acquire 70,000 net surface acres in the Permian basin from BC Operating Inc., Midland, Tex., and other entities for $1.1 billion in cash.The deal, effective Jan. 1 and expected to close in the second quarter, includes 51,500 acres in the northern Delaware basin of New Mexico and current production of 5,000 net boe/d.Marathon will receive as many as 10 target benches within 5,000 ft of stacked pay and 900 million boe of total resource potential with 1,700 total upside locations from both tighter density and secondary targets.

Primary targets on the acreage are in Wolfcamp and Bone Spring areas. The leasehold has one operated rig drilling, and there are plans to add a second rig midyear. The firm also envisions further opportunities for growth from acquired acreage in the Northwest Shelf as well as further bolt-on acquisitions.“The northern Delaware basin features outstanding well economics that compete at the top of our organic portfolio and is experiencing a positive rate of change in well performance unrivaled in US unconventional basins,” commented Lee Tillman, Marathon Oil president and chief executive officer.Marathon also reported Mar. 9 that it has agreed to sell its Canadian subsidiary, which includes its 20% non-operated interest in the Athabasca Oil Sands Project (AOSP), to Royal Dutch Shell PLC and Canadian Natural Resources Ltd. for $2.5 billion in cash (OGJ Online, Mar. 9, 2017).

Bakken January Production Data

10 Mar 2017   Shale Oil

North Dakota has published January production data for the Bakken and for all North Dakota . Bakken production was up 37,617 bpd to 932,817 bpd while all North Dakota’s production was up 37,972 to 980,294 bpd. Bakken bpd per well was up 3 to 86 while the average bpd per well for all North Dakota wells was up 4 to 76. The North Dakota stats have “Wells Producing” dropping by 189 in December and dropping another 35 in January for a total decline of 224 over the two months. The total number of producing wells in North Dakota in January stood at 12,976. You will notice these numbers differ quite a bit from Lynn Helms’ numbers below. I have no explanation for this. From the Director’s Cut : Oil Production December 29,211,993 barrels = 942,322 barrels/day January 30,389,117 barrels = 980,294 barrels/day(preliminary) (all-time high was Dec 2014 at 1,227,483 […]

CERAWeek: North American producers find adaptation key in challenging environment

10 Mar 2017   Shale Oil

North American producers such as EQT and BHP Billiton have had to adjust strategies to continue operating in challenging economic times, squeezing out operational efficiencies or shifting focus to concentrate on different regions or commodities, speakers said Wednesday at CERAWeek by IHS Market. Appalachian-focused producer EQT has concentrated on achieving efficiency gains as the company developed its assets in the Marcellus and Utica shales, Blue Jenkins, chief commercial officer of the Pittsburgh-based company, said at the energy conference. EQT, an early entrant into the Appalachian Basin play, has seen its production in the basin increase about fivefold, to about 2.2 Bcf/d in 2017 from 500,000 Mcf/d in 2011, making it the fifth-largest US gas producer, Jenkins said. Article continues below… Your source for actionable intelligence across the entire gas marketplace: Market commentary recaps prior day’s spot and futures trading activity Natural gas news, including FERC rulings and insights Price […]

Harold Hamm: U.S. Shale Spending Binge Could Destroy Oil Market

10 Mar 2017   Prices, Shale Oil

In a rather unconventional warning, Continental Resources chief executive Harold Hamm said on Wednesday that should the U.S. oil industry embark on another spending spree, it could “kill” the market. Speaking at the CERAWeek conference in Houston – one of the largest gatherings of oil executives and ministers, including this year Saudi Arabia’s oil minister Khalid Al-Falih – Hamm said that U.S. crude oil output “could go pretty high”. But Hamm was quick to add, as quoted by Bloomberg : “But it’s going to have to be done in a measured way, or else we kill the market.” The warning of Hamm came on the day in which WTI prices plunged 5 percent, to below US$50 for the first time since December amid concerns over record-breaking inventories in the U.S. Many U.S. companies have announced higher spending plans for this year, having seen prices stable above US$50. Hamm’s Continental […]

U.S. shale firms lift reserves while oil majors take Canada hit

10 Mar 2017   Shale Oil

Top shale oil producers are lifting their crude and gas reserve estimates for the first time in two years – even as many major oil companies are cutting the same projections and taking write downs on more expensive fields. Rising confidence in the growth prospects of the U.S. shale patch is in striking contrast to the retreat of the world’s top oil firms from the high-cost oil sands of Canada. The increase in reported shale reserves is driven by new drilling efficiencies, leaner operations and improved well completion techniques, industry experts said. “Many wells that were not profitable a year ago have become profitable” because those advances have cut the cost of producing from shale, said Per Magnus Nysveen, a senior partner at consultancy Rystad Energy. The top 20 U.S. shale firms – […]

U.S. shale plots production growth despite OPEC’s warning

9 Mar 2017   Shale Oil

U.S. shale oil producers are plotting ambitious production growth outside the red-hot Permian Basin in Texas, widening a resurgence that could confound OPEC’s strategy to tighten global supplies. As shale firms rebound from a two-year price war with OPEC, many are planning to expand production in North Dakota, Oklahoma and other shale regions. The Permian – America’s largest oilfield – has already seen output jump in the past six months. Hess Corp, Chesapeake Energy Corp, Continental Resources Inc and other firms detailed their growth plans at an energy conference in Houston this week. The projects they outlined would result in a steady supply of American crude exports through the next decade. Rising U.S. energy clout has frustrated efforts by the Organization of the Petroleum Exporting Countries to control global oil prices […]

OPEC Offers Olive Branch To U.S. Shale

9 Mar 2017   OPEC, Shale Oil

Anybody who is anybody in the world of oil is gathering in Houston this week for the IHS CERAWeek Conference, an annual get-together of top industry analysts, executives and government ministers. The mood in Houston is notably different from a year ago, when oil prices languished in the $30s per barrel. Everyone can thank OPEC for the renewed sense of optimism. At the conference, OPEC said that it would continue to be the “only catalyst” for balancing the market, a comment meant to emphasize OPEC’s significance after several years of infighting. But it was also a welcome assurance for shale producers hoping that OPEC will intervene for the sake of market stability. OPEC also tried to assure the markets that compliance on the production cut deal has been high and will continue to rise. Russian officials added that in the coming weeks they will fully comply with the 300,000 […]

Shale Billionaire Hamm Says Industry Binge Can ‘Kill’ Oil Market

9 Mar 2017   Shale Oil

Harold Hamm, the billionaire shale oilman, said the U.S. industry could “kill” the oil market if it embarks into another spending binge, a rare warning in a business focused on fast growth to compete with OPEC. The statement, at an energy conference in Houston on Wednesday, comes as top shale companies announce large increases in spending for this year, and the U.S. government says domestic oil output next year will surpass the record high set in 1970. OPEC ministers have said they are keeping a close watch on shale production to decide in late May whether to extend their oil-supply cuts into the second half of the year. Oil prices plunged 5 percent on Wednesday to their lowest level this year, falling just above $50 a barrel, on investor concerns about unbridled growth in America’s shale basins swelling U.S. inventories. U.S. production “could […]

Can U.S. Shale Fight Off Rising Costs?

9 Mar 2017   Shale Oil

Shale drilling has become a lot cheaper over the past three years, with new drilling techniques, efficiency gains and learning-by-doing helping to lower breakeven costs. The IEA says that U.S. shale has achieved cost reductions on the order of 30 percent in 2015 and another 22 percent in 2016, although individual shale basins have seen much larger cost declines. Still, some of the “efficiency gains” could be temporary, as I have discussed in previous articles. As drilling picks up, the supply of oilfield services and equipment will tighten, putting upward pressure on the cost of contractors for oil producers. Rystad Energy sees cost inflation of about 10 to 15 percent this year. There are more signs of this phenomenon playing out. Bloomberg reports that some Permian oil producers are having trouble hiring workers, even when their job listings advertise an enticing salary of $80,000 per year for truckers. “It’s […]

Shale Helped Offset Some Global Declines in Oil Production, OPEC Leader Says

8 Mar 2017   OPEC, Shale Oil

Without the U.S. shale revolution, the global economy probably would have been mired in deep crisis, said Mohammad Barkindo, secretary-general of the Organization of the Petroleum Exporting Countries, on Tuesday. When American drillers began using advanced technologies to tap new wells from Texas to North Dakota, a lot of global oil production was in peril, with output falling in Nigeria, Iran, Libya and other hot spots. …

Exxon’s $20 Billion Spending Plan Points to U.S. Energy Surge

Exxon Mobil Corp. plans to spend about $20 billion on refineries, petrochemical plants and other projects in and around the Gulf of Mexico, Chief Executive Darren Woods said Monday, underscoring how the giants of the global energy industry are turning to America. Mr. Woods outlined the 11-project spending plan, largely aimed at creating new outlets for U.S. natural gas, in a speech at the annual CERAWeek conference. It came…

Shell accelerates plan to boost U.S. shale output: exec

8 Mar 2017   Shale Oil, USA

Royal Dutch Shell is ramping its North American shale output earlier than planned to lock in quick returns from what has become one of its most profitable businesses, the head of Shell’s unconventional energy business said. The Anglo-Dutch company plans to make shale oil and gas in the United States, Canada and Argentina a key engine of growth in the next decade, targeting output of around 500,000 barrels of oil equivalent per day (boepd), Greg Guidry told Reuters in an interview. A drive to cut the cost of producing oil and gas from U.S. shale deposits has proven so effective that Shell has accelerated development plans, Guidry said on the sidelines of the CERAWeek industry conference in Houston. It aims to boost […]

Chesapeake CEO: Downturn Challenges Helped Oil, Gas Companies

8 Mar 2017   Prices, Shale Oil

Doug Lawler, chief at shale gas forerunner Chesapeake Corp., tells CERAWeek audience the commodity price downturn forced independent upstream companies to become stronger. The dramatic price downturn that bankrupted more than 100 exploration and production (E&P) companies forced those the rest to become stronger, according to Chesapeake Corp. CEO Doug Lawler. “It’s definitely been a challenging time for the independent sector and Chesapeake in particular,” Lawler told a CERAWeek by IHS Markit audience in Houston on Monday. “But looking back, it’s actually best thing that could’ve happened to us.” Lawler explained the downturn put things into perspective for independent oil and gas companies. They needed to make material improvements in balance sheets and capital efficiency, he said during a panel discussing investment during uncertain times. A dismal prospect actually prepared those companies that survived to thrive in the future. “When you look at the U.S., I don’t believe you […]

Oil And Gas IPOs Return Amid Oil Price Recovery

7 Mar 2017   Shale Oil, USA

The oil price crash has left energy companies scrambling to shore up balance sheets and streamline costs. But the recent recovery of crude prices has instilled cautious confidence among oil and gas firms that they might be able to raise capital for expansion via initial public offerings (IPOs). After two years of near zero activity in the energy IPO market, new research by Simmons & Co has shown that there are plans for more than 20 oil and gas share listings, The Street reports. With the price of oil holding above US$50 for more than three months now, it looks like institutional investors and private equity firms believe the time has come to return to financing growth in the oil and gas sector, which has had a rough two years in the downturn. It took the industry two years and two months to see the first exploration and production […]

The Cheap Resource That Worries Oil Shale Drillers

7 Mar 2017   Shale Oil

Most Silicon Valley companies would kill for the sorts of gains made by sellers of plain old silicon. Even after a recent selloff, leading producers of sand used by oil and gas producers—companies like Hi-Crush Partners and U.S. Silica Holdings—are up between 170% and 380% over the past year. Their gain is turning into oil producers’ pain, though, and could affect the global energy market. Used after shale formations have been…

The Future of US Light Tight Oil (LTO)

7 Mar 2017   Shale Oil

The future output from the light tight oil (LTO) sector of the US oil industry is the subject of much speculation. Above I present some possible future output scenarios based on a simple model of US LTO, the scenarios are compared with the EIA’s 2017 Annual Energy Outlook (AEO) reference scenario with cumulative output of 82 Gb from 2001 to 2050. The cumulative output of the model scenarios is for the same period (2001-2050). The models all use the same well profiles from 2006 to 2016 and are based on data gathered from Enno Peters excellent blog, shaleprofile.com . A preliminary hyperbolic profile was fit to the average LTO well data and then the parameters were fit using least squares and solver in Excel so that the model matched the data for output and number of wells added each month over the period from 2011 to 2015. The data […]

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

3 Mar 2017   Shale Oil

U.S. crude oil production appears to be rising strongly thanks to increased shale drilling as well as rising offshore output from the Gulf of Mexico. Production averaged almost 9 million barrels per day (bpd) in the four weeks to Feb. 24, according to the latest weekly estimates published by the Energy Information Administration. Production has been on an upward trend since hitting a cyclical low of 8.5 million bpd in September (“Weekly Petroleum Status Report”, EIA, March 1). Weekly production numbers are estimates based on a combination of hard data and modeling so there is some uncertainty around them (“Weekly Petroleum Status Report: Explanatory Notes and Details Methods”, EIA). But the weekly estimates normally provide an accurate indicator for trends in the more comprehensive monthly data ( tmsnrt.rs/2mcZphb […]

A Fit U.S. Shale Industry Challenges OPEC Once Again

3 Mar 2017   Shale Oil

When the who’s who of the oil industry met a year ago in Houston, Saudi Arabia ’s energy minister had harsh words for U.S. shale drillers struggling with the worst price crash in a generation. “Lower costs, borrow cash or liquidate,” said Ali Naimi, who managed the world’s largest oil-exporting business for more than two decades. In the year since, the drillers have largely taken Naimi’s advice. While more than 100 have gone bankrupt since the start of 2015, the companies that survived have reshaped themselves into fitter, leaner and faster versions that can thrive with oil at $50 a barrel. Now, it’s OPEC that’s seeking solutions, desperate to drive prices up even further in a push to repair the economies of the countries it serves. “The shale business is rejuvenated because of the difficulties it has been through,” Ben van Beurden, the chief executive officer of Royal Dutch […]

Exxon Betting Big On U.S. Shale

3 Mar 2017   Shale Oil

ExxonMobil’s new CEO Darren Woods announced a dramatic shift towards shale drilling this week, a new strategy that will prioritize drilling thousands of smaller wells while reducing spending on the massive projects that the oil major has long been accustomed to pursuing. Mr. Woods gave a presentation to investors on March 1, selling his vision after recently taking over from Rex Tillerson, who left to become U.S. Secretary of State. Exxon will now ramp up spending on shale drilling, after watching dozens of smaller companies profit from the surge in production in Texas, North Dakota and elsewhere over the past decade. Exxon will dedicate a quarter of its 2017 spending budget on shale, putting $5.5 billion into the effort. “More than one quarter of the planned spending this year will be made in high-value, short-cycle opportunities, including in the Permian and Bakken basins,” Exxon wrote in a March 1 […]

Why Investors Should Beware Of The Bakken

2 Mar 2017   Shale Oil

It’s the beginning of the end for the Bakken Shale play. The decline in Bakken oil production that started in January 2015 is probably not reversible. New well performance has deteriorated, gas-oil ratios have increased and water cuts are rising. Much of the reservoir energy from gas expansion is depleted and decline rates should accelerate. More drilling may increase daily output for awhile but won’t resolve the underlying problem of poorer well performance and declining per-well reserves. December 2016 production fell 92,000 barrels per day (b/d)–a whopping 9 percent single-month drop (Figure 1). Over the past two years, output has fallen 285,000 b/d (23 percent). This was despite an increase in the number of producing wells that reached an all-time high of 13,520 in November. That number fell by 183 wells in December. (Click to enlarge) Figure 1. Bakken Production Declined 92,000 bopd (9 percent) in December. Source: North […]

Exxon Mobil Turns to U.S. Shale Basins for Growth

2 Mar 2017   Shale Oil

Exxon Mobil Corp. on Wednesday outlined an ambitious plan to turn to prolific U.S. shale basins for growth, showcasing how the oil giant now sees American production as a key to its future. The company plans to spend about a fourth of its 2017 budget—about $5.5 billion—drilling in Texas, New Mexico and North Dakota, tapping a vast inventory of wells that can turn a profit at a price of $40 a barrel. The U.S. increasingly…

Exxon’s New CEO Shifts Investments to Quick-Earning Shale Oil

2 Mar 2017   Shale Oil

Exxon Mobil Corp. is trading in long-term projects that pump oil over decades for U.S. shale drilling that can be switched on or off as crude prices change. Long a world leader in multi-billion dollar oil and natural gas developments that take years to build and even longer to profit, Exxon is diverting about one-third of its drilling budget this year to shale fields that will deliver cash flow in as little as three years, said Chairman and Chief Executive Officer Darren Woods. Darren Woods Source: Exxon Mobil Next year, U.S. shale will absorb 50 percent of Exxon’s worldwide drilling budget, Woods said Wednesday during his first public appearance since succeeding Rex Tillerson in January. Output from shale wells will grow an average of 20 percent annually through 2025 as Woods intensifies the company’s focus on the Americas. “The shift from long to short is really a reflection of […]

Exxon Mobil Turns to U.S. Shale Basins for Growth

2 Mar 2017   Shale Oil

Exxon Mobil Corp. on Wednesday outlined an ambitious plan to turn to prolific U.S. shale basins for growth, showcasing how the oil giant now sees American production as a key to its future. The company plans to spend about a fourth of its 2017 budget—about $5.5 billion—drilling in Texas, New Mexico and North Dakota, tapping a vast inventory of wells that can turn a profit at a price of $40 a barrel. The U.S. increasingly…

U.S. Shale Surge Threatens OPEC Strategy

28 Feb 2017   Shale Oil

Could U.S. Oil Production Derail OPEC Deal? OPEC’s Nov. 30 output agreement to cut production by 1.2 million barrels a day may have put a floor under the oil price, but has also awakened U.S. shale. Exploration and production companies have added 77 rigs this year to Feb. 24, according to the latest figures from Baker Hughes, while U.S shale production is forecast to reach about 4.87 million barrels a day in March, according to the Energy Information Administration’s latest Drilling Productivity Report. That’s the highest since May 2016. Estimates of just how much shale will be added over this year range from as high as 900,000 barrels a day by Macquarie and Rystad Energy to a more modest 400,000 barrels a day by JP Morgan Asset Management. E&Ps are also gaining access to capital in 2017. “The combination of a […]

Russia sees U.S. oil production as a lid on oil prices

28 Feb 2017   Prices, Russia, Shale Oil

Gains in oil production from the United States should establish a ceiling over crude oil prices on the global market, the head of Russia’s Lukoil said Monday. Russia is coordinating with members of the Organization of Petroleum Exporting Countries on a production arrangement aimed at pulling an over-supplied market for crude oil back to balance. After dropping below $30 per barrel in early 2016, oil prices since OPEC’s agreement surfaced in November have been steady above $50 per barrel. U.S. shale oil production gains helped saturate the markets and output from the Lower 48 states has proved more resilient than expected to crude oil prices that are still about half what they were three […]

Is OPEC Lying To The Oil Markets?

25 Feb 2017   Prices, Shale Oil

Has no-one really done a ‘getting riggy with it’ pun yet? Ok then, here it goes. We’ve made it to Friday, which means we get a couple of data points to hold our attention at the tail-end of the trading week. First we get the Baker Hughes report, which will once again likely be getting riggy with it (Ta-dah!), as prices in fifty-dollardom continue to incentivize drilling activity. After that we get CFTC data, which will likely show an ongoing overcrowded tilt towards the bulls. But for now, hark, here are five things to consider in oil markets today: 1) The more we look at OPEC loadings, the more that Jack Nicholson movies come to mind. After we mused that last month’s loadings were ‘ As Good As It Gets ‘, our focus this month has switched to ‘ Something’s Gotta Give ‘, given the current status of net […]

OPEC Chief Sees No U.S. Threat as Shale Production Rises

22 Feb 2017   OPEC, Shale Oil

OPEC’s most senior official said he would meet U.S. shale producers next month, as he sought to allay fears his cartel could be hurt by resurgent American output and the policies of President Donald Trump. The number of U.S. rigs has increased in recent weeks, encouraged by rising oil prices resulting from production cuts by the Organization of the Petroleum Exporting Countries. In addition, Mr. Trump has said he plans to reduce the…

Wood Group Cuts Workforce by 36% in 2-Year Period

22 Feb 2017   Oil Supply, Shale Oil

John Wood Group plc has cut its workforce by 36 percent over a two year period, the oilfield services company revealed Tuesday.  “Following a sustainable overhead cost reduction of $148 million in 2015, we reduced overhead costs by a further $96 million in 2016,” Wood Group Chief Executive Robin Watson said in a statement.  “This has meant further tough decisions which directly impact our people. Underlying headcount, excluding acquisitions, is down 36 percent over a two year period,” he added.  Watson, who believes the savings achieved are sustainable into 2017, suggested that the market environment will remain tough for the company for the rest of the year.  “Overall, the oil and gas market continues to present challenges in 2017,” he said.  “We anticipate modest recovery only in markets such as U.S. onshore and greenfield offshore projects,” he added.  Wood Group CFO David Kemp said in December 2016 that the company showed modest recovery in its U.S. shale and offshore oil exploration and drilling businesses.

Mexico turns to the Jurassic era for shale oil

21 Feb 2017   Mexico, Shale Oil

Mexico’s plans to develop its shale oil resources have finally taken a step forward following years of largely fruitless efforts by the state owned company Pemex. Canada’s Renaissance Oil and Russia’s Lukoil are joining forces to develop the Amatitlan block of the Chicontepec region. They aren’t interested in the shallower tight oil, but in the stack’s deeper Pimienta shale formation, which is what they consider Mexico’s Eagle Ford. Renaissance and Lukoil agreed to a $60 million accelerated development plan for the Amatitlan block for 2017, which will include workovers of existing wells, and the drilling of new wells. The Pimienta formation, located in the Upper Jurassic layer of the Chicontepec, is an important play for the future production of Mexico, as output has been trending lower. Renaissance estimates original oil in place in the Amatitlan block at 4.2 billion barrels of oil equivalent, and estimated the Pimienta section at […]

Did The Bakken Fall Too Far Too Fast?

21 Feb 2017   Shale Oil

While the Permian field has enjoyed a continued boom, with a rising rig count and an increase in investment activity, other U.S. onshore shale and tight oil fields haven’t been so lucky. Higher costs, declining investment and tougher competition have hit the Bakken field harder than the Permian. A slight recovery might be in progress, coming in the wake of OPEC production cuts and rising industry confidence, despite the on-going presence of bearish fundamentals and an evident supply glut. New pipelines could also lower Bakken costs and allow a faster recovery. But prospects for the region to compete with the surging Permian seem dim, at least in the short term. For the last few years, the news out of North Dakota wasn’t pretty. The Bakken, once the center of a regional energy boom, saw a major slump in activity. Since hitting a peak of 1.23 million bpd in December […]

Texas Oil Fields Rebound From Price Lull, but Jobs Are Left Behind

20 Feb 2017   Shale Oil, USA

In the land where oil jobs were once a guaranteed road to security for blue-collar workers, Eustasio Velazquez’s career has been upended by technology. For 10 years, he laid cables for service companies doing seismic testing in the search for the next big gusher. Then, powerful computer hardware and software replaced cables with wireless data collection, and he lost his job. He found new work connecting pipes on rigs, but lost that job, too, when plunging oil prices in 2015 forced the driller he worked for to replace rig hands with cheaper, more reliable automated tools. “I don’t see a future,” Mr. Velazquez, 44, said on a recent afternoon as he stooped over his shopping cart at a local grocery store. “Pretty soon every rig will have one worker and a robot.” Oil and gas workers have traditionally had some of the highest-paying blue-collar jobs — […]

U.S. shale oil braces for the unfamiliar in 2017: inflation

18 Feb 2017   Shale Oil

U.S. shale producers are facing their first production cost increase in five years in 2017 as industry activity picks up and energy service providers hike fees to take a bigger share of the profits generated by higher oil prices. Drilling innovations over the past decade have generated a dizzying reduction in the cost of pumping oil from shale formations across the United States – the world’s largest energy consumer – triggering an energy revolution and a production boom. When that boom ended with the onset of a two-year global price war in 2014, shale producers responded with even deeper cost cuts. Technological breakthroughs allowed producers to wring more oil from the rock and halved the per-barrel price needed to turn a profit. But […]

Is The Bakken A Bust?

17 Feb 2017   Shale Oil

North Dakota has released December production data for the Bakken and for all North Dakota . They were a little shocking. (Click to enlarge) Bakken production down 86,150 barrels per day 895,330 bpd. North Dakota production down 92,029 bpd to 942,455 bpd. It was noted that this the largest decline ever in North Dakota production. But it should not be overlooked that the October increase in production was also the largest ever increase in North Dakota production. From the Director’s Cut Oil Production November 31,034,520 barrels = 1,034,484 barrels/day December 29,216,093 barrels = 942,455 barrels/day (preliminary) (all-time high was Dec 2014 at 1,227,483 barrels/day Gas Production November 52,785,707 MCF = 1,759,524 MCF/day December 47,679,872 MCF = 1,538,060 MCF/day (preliminary) (all-time high was Nov 2016 at 1,759,524 MCF/day) Producing Wells November 13,520 December 13,337 (preliminary) (all-time high was Nov 2016 at 13,520) 11,449 wells or 86% are now unconventional Bakken […]

How Long Can The Permian Craze Continue?

17 Feb 2017   Shale Oil

The two great dueling forces in the world oil market, OPEC and American production, have created an atmosphere of uncertainty, as prices hover above $50. Last week the EIA reported another record inventory and an increasing rig count , while analysts point to a possible crisis as a market held aloft by buoyant predictions of OPEC cuts slowly faces up to insufficient demand. Crucial to this situation is the state of the U.S. patch, particularly the Permian Basin, which since late last year has been the focus of recovering production. The EIA data for the field is good, with new well production rising sharply and overall production of oil and gas rising sharply in 2017. While some speculate the bubble may burst , prospects for companies already invested in the Permian look positive, even if production costs are rising. The Permian has seen the highest increase in rig count […]

U.S. shale oil output to rise in March by 80,000 bpd: EIA

14 Feb 2017   Shale Oil

U.S. shale oil production for March is expected to rise by the most in five months, government data showed on Monday, as energy companies boost drilling on the back of oil prices that are hovering over $50 a barrel. March oil production is forecast to rise by 79,000 barrels per day to 4.87 million bpd, according to the U.S. Energy Information Administration’s drilling productivity report. That would be the biggest monthly rise since October. In the Permian shale play of West Texas and New Mexico, output is forecast to rise by more than 70,000 bpd to 2.25 million bpd, in what would be the biggest monthly rise since January 2016. Meanwhile, Eagle Ford production in Texas is expected to rise by 14,000 bpd to 1.08 million bpd, the first monthly increase since December 2015, EIA data showed. In North Dakota’s Bakken field, production is forecast to fall by nearly […]

More drilling permits issued in Texas

14 Feb 2017   Shale Oil, USA

The number of new drilling permits issued in Texas last month was more than 80 percent higher than the previous year, state data show. Texas is the No. 1 oil producer in the state and accounts for about half of all the drilling activity in the country. Preliminary data from the Railroad Commission of Texas, the state oil and gas overseer, show 81.5 million barrels of oil produced in November, about 1 million barrels less than the previous month. The Texas energy sector, as well as the state economy , was under pressure for most of last year because of a downturn in crude oil prices. Since late last year, crude oil prices recovered in response to a decision from the […]

Passing On The Permian: Has The Bubble Grown Too Big?

14 Feb 2017   Shale Oil

Has the Permian Basin become too hot? More companies and enormous sums of capital continue to flood into West Texas to take advantage of the most prolific shale basin in North America. Rig counts are showing no sign of slowing down and new deals in the Permian are announced on what seems like a weekly basis. However, will the Permian bubble deflate? ExxonMobil dumped more than $6 billion in January to double its holdings in the Permian, as the oil supermajor decided to ramp up shale drilling instead of taking on more complex megaprojects offshore. But in the past, ExxonMobil has made a play for shale assets at the top of the market. In 2009, Exxon paid more than $30 billion for XTO Energy, a Texas shale gas driller, in what was widely seen in retrospect as an expensive play on a market that had already peaked. With that […]

At $60,000 an Acre, the Permian Basin May Be Too Ritzy

11 Feb 2017   Shale Oil

Record prices for drilling rights in the Permian Basin, the most fertile U.S. shale field, are prompting oil companies and private equity investors to look elsewhere for the next big gushers. Explorers eager to tap the basin’s mile-thick stack of oil-soaked rock layers have paid as much as $60,000 an acre. That marks a 50-fold explosion in deal prices over four years, according to Wood Mackenzie Ltd. It also pushes the cost 10 times higher than in the Bakken of North Dakota. The backlash is just beginning. BP Plc, the U.K.-based supermajor, has focused its shale-drilling efforts on the other end of the hemisphere, in Argentina’s Vaca Muerta region, while Sanchez Energy Corp. has targeted the Eagle Ford of South Texas and Newfield Exploration Co. has acquired rights in the Stack field in northern Oklahoma. As far as the Permian is concerned, “companies that don’t already have a foothold […]

US, Canada Producers Continue to Dominate Shale Production

11 Feb 2017   Shale Oil

Despite having just one-fifth of the world’s shale resources, advantages in the US and Canada mean the countries will continue to monopolize the market, according to a new Raymond James report. Shale producers in the United States and Canada worried their market share will be absorbed by foreigners can rest easy. Your corner on the market is safe – at least for the next few years. While there is little doubt that shale resources exist in abundant quantities around the world, a variety of hurdles preclude their development, analysts at Raymond James & Associates (RayJa) said in a recent report. “The tricky aspect of the emerging plays will be how to achieve cost-effective scale-up, bearing in mind the hurdles in technical know-how, regulatory barriers and other issues,” they wrote. “Shale outside North American may become relevant vis-à-vis global oil and gas supply (and thus prices) beyond 2020, but over […]