Shale Oil

Growing Shale Output Drags Oil Prices Lower

18 Aug 2017   Shale Oil

Oil prices flipped from losses to slight gains Thursday morning as the market rebounded from three week lows. U.S. crude futures were recently up 8 cents, or 0.17%, at $46.86 a barrel on the New York Mercantile Exchange. Brent, the global benchmark, rose 18 cents, or 0.36%, to $50.45 a barrel on ICE Futures Europe. “It just looks like a bounce off the recent weakness,” said Donald Morton, senior vice president at Herbert J. Sims & Co., who oversees an energy trading desk. Oil prices have been on a three day downward slide. Data released Wednesday showing that U.S. crude output to 9.502 million barrels a day last week weighed on the market. The prospect of rising oil output in the U.S. “took the wind out of the sails” of more bullish data also released Wednesday, which showed a further drawdown in U.S. oil stocks, said Gene McGillian, research […]

Citi: U.S. Shale Beats OPEC At $40 Oil

18 Aug 2017   Shale Oil

Citigroup has said that U.S. shale will prevail over OPEC because of its higher resilience to low prices and OPEC’s losing strategy of cutting output and losing revenues and market share. Citigroup’s head of commodity research, Ed Morse, told Bloomberg in an interview that OPEC and its partners cannot sustain their current strategy over a longer term, while shale producers have adapted to low prices and can break even at WTI as low as US$40 a barrel. “In the end, the markets are going to win, and it’s going to be shale. If we’re in a $40 to $45 world, we’ll have enough drilling to add to the surplus in the world as a whole,” Morse said. So far this year, trends have supported the suggestion that cutting production to restore prices to at least some of their previous glory leaves a lot to be desired. Brent is still […]

Are Investors Bailing On U.S. Shale?

18 Aug 2017   Shale Oil

U.S. oil production continues to grow, with the EIA reporting a shocking jump in output last week. Total U.S. production rose to 9.5 million barrels per day (mb/d) for the week ending on August 11, up 79,000 bpd from a week earlier. That puts U.S. output at the highest level in nearly two and a half years. The U.S. shale industry has been adding new supply pretty much uninterrupted since late last year, despite volatile swings in oil prices over the course of 2017. In fact, the gains continued even through the price downturn in June, which saw WTI flirt with the $40 per barrel threshold, which, at first glance, suggests that the shale industry is doing just fine. To be sure, some shale drillers have breakeven prices well below the prevailing market price, allowing them to make money even during those tough times. But in the aggregate, the […]

Pullback in U.S. fracking sand use pressures producers

16 Aug 2017   Shale Oil

U.S. shale oil companies are pulling back on the amount of sand they use to hydraulically fracture new wells, responding to rising prices of the material that are driving up costs. Investors worry a slowdown in sand use, combined with new mining capacity coming online, could lead to a glut of the material and bring down prices. The worries have pressured shares of sand companies. Sand prices soared in the last year as oil companies ramped up shale drilling and production. But with crude LCoC1CLC1 prices below where they started the year, oil producers are employing new well designs and chemical agents that lessen the use of sand that represents around 12 percent of the cost of drilling and fracturing. The price of frack sand is expected to rise 62 percent this year to average $47 a ton, according to researcher IHS Markit. That is expected to […]

Anadarko shale basin lands Oklahoma on EIA map

16 Aug 2017   Shale Oil

With more than 10 percent of the new wells drilled in U.S. shale basins, Oklahoma has earned a place in new monthly data reporting, the government said. The U.S. Energy Information Administration said it was adding the Anadarko region to its monthly drilling report. The shale basin covers 24 counties in Oklahoma and five in Texas. “The Anadarko region accounts for approximately 450,000 barrels per day of oil production, 5.7 billion cubic feet per day of natural gas production, 13 percent of new wells drilled, and 13 percent of drilled but uncompleted wells as of July 2017,” EIA reported. Oklahoma is home to about 4 percent of the total petroleum reserves in the country and accounts for as much as 5 […]

U.S. Oil Drillers Keep Pressure on OPEC With Record Shale Output

15 Aug 2017   Shale Oil

EIA expands monthly shale forecasts to include Anadarko region September oil output seen at record 6.15 million barrels a day Oil output from major U.S. shale plays is poised to reach a fresh record next month, further complicating OPEC’s efforts to support prices. The gain is being led by the oil-rich Permian basin of Texas and New Mexico, where production has risen steadily over the past two years. The Energy Information Administration projects Permian output to rise by 64,000 barrels in September, reaching a record of 2.6 million barrels a day. The forecast comes just as Saudi Arabia and Iraq , the two biggest producers of the Organization of Petroleum Exporting Countries promised to strengthen their commitment to cutting production. Crude output in the U.S. meanwhile has climbed in nine of the last 10 months. Prices declined to a three-week low Monday as the growing U.S. output and signs […]

U.S. shale output seen posting ninth straight monthly rise: EIA

15 Aug 2017   Shale Oil

U.S. shale oil production for September which includes a new regional data input, is forecast to rise by 117,000 barrels per day to 6.15 million bpd, its ninth consecutive monthly rise, the U.S. Energy Information Administration said on Monday. The total forecast figure has expanded to include the Anadarko region, a growing and prolific shale play that has the second-most operating rigs, at 129, after the Permian’s 373, according to the EIA’s monthly drilling productivity report. The EIA added that the region has become “the target of many producers using improved drilling and completion technology to this already well-established oil and gas producing basin.” Meanwhile, the EIA is combining the Marcellus and Utica regions into a new Appalachia region to help the precision of its productivity estimates. Without the addition, total shale output for September would have been forecast to rise by 106,000 bpd to […]

Can The Permian Push Prices Down To $40?

15 Aug 2017   Shale Oil

Two analyst firms have revised upwards their production growth forecasts for the Permian, expecting oil output there to be 300,000 bpd higher by the end of this year. The firms are none other than Wood Mackenzie, whose analysts expect 300,000 bpd more in Permian output by end-2017—a 200,000-bpd increase to its year-end forecast—and Rystad, which sees the cumulative increase for June-December at 300,000 bpd. That’s the kind of consensus market players like to see, especially when it comes a couple of days after reports that investors are pulling out from the Permian after Pioneer Resources reported the share of natural gas and gas liquids in its overall output has been rising at the expense of oil. Investors love their crude, after all, and are much less excited about gas. Amid the worry, which some say is not as widespread as it may seem, the upbeat forecasts of these analysts […]

Oklahoma shale production could increase

15 Aug 2017   Shale Oil

After mixed results for the second quarter, U.S. shale player BNK Petroleum said it was anticipating more production from its assets in Oklahoma. BNK Petroleum Inc., which has headquarters in California, said Monday it completed the hydraulic fracturing process at a well in the SCOOP shale basin in Oklahoma and expects stable flows by next month. “We anticipate that this will lead to a highly productive well,” President and CEO Wolf Regener said in a statement . Oklahoma is home to about 4 percent of the total petroleum reserves in the country and accounts for as much as 5 percent of the total crude oil production in the United States. BNK reported net average production for the second quarter was 16 […]

U.S. shale output poised to keep rising despite investor concerns

12 Aug 2017   Shale Oil

Shale production in the largest U.S. oilfield should rise by as much as 300,000 barrels per day by December, according to updated forecasts following the industry’s latest quarterly results. The higher outlooks, amid worries the recent breakneck pace of gains may not be sustained, come on the heels of one high-profile Permian Basin producer’s oil output miss last quarter and decisions by several other energy companies to trim annual budgets. Oil production from the Permian Basin of West Texas and New Mexico is closely watched because its low costs and rapid growth have pressured efforts by the Organization of the Petroleum Exporting Countries to drain a global crude supply glut. Consultancy Wood Mackenzie sees another 300,000 barrels per day (bpd) coming from […]

North Dakota oil production slips about 1 percent in June

12 Aug 2017   Shale Oil

North Dakota’s oil output slipped about 1 percent in June but should remain above 1 million barrels per day for the foreseeable future, state officials said on Friday. The optimistic outlook comes as the state’s shale producers have found a way to survive low oil prices with new technology and process improvements. North Dakota, the No. 2 U.S. oil-producing state, has largely taken a back seat in the past year as companies in the Permian Basin of Texas and New Mexico – the largest U.S. oilfield – battle with the Organization of the Petroleum Exporting Countries for global energy market dominance. “That’s two elephants fighting it out and North Dakota gets caught in the middle,” Lynn Helms, head of the North Dakota Department of Mineral Resources, said on a Friday conference call with reporters. The state pumped 1.03 million barrels of oil per day in June, down […]

U.S. drillers add oil rigs for second week in three: Baker Hughes

12 Aug 2017   Shale Oil

U.S. energy companies added oil rigs for a second time in the last three weeks, extending a 15-month drilling recovery, but the pace of additions has slowed in recent months as firms cut spending plans in reaction to declining crude prices. Drillers added 3 oil rigs in the week to Aug. 11 bringing the total count up to 768, the most since April 2015. General Electric Co’s Baker Hughes energy services firm said in its closely followed report on Friday. That compares with 396 active oil rigs during the same week a year ago. Drillers have added rigs in 56 of the past 63 weeks since the start of June 2016. The rig count is an early indicator of future output. U.S. production is expected to rise to […]

Texas rig permitting nearly doubles from 2016

12 Aug 2017   Shale Oil

Accounting for about half of all the active rigs in the United States, the energy regulator in Texas said total drilling permits nearly doubled from last year. The Railroad Commission of Texas, the state energy regulator, said it issued 1,011 original drilling permits last month, compared with the 631 issued in July 2016. Of those, 893 were for drilling new oil or natural gas wells. According to the U.S. Energy Information Administration, Texas shale is the most productive in the nation. Based on its latest drilling productivity report, the EIA expects production from the Permian shale basin to increase 2.5 percent from July for about 2.5 million barrels per day. Eagle Ford production would increase 2 percent to 1.38 million barrels per […]

Oil Rig Count Rises Despite Ballooning Shale Debt

12 Aug 2017   Shale Oil

The number of active oil and gas rigs in the United States rose this week by 5 rigs as drillers in the United States continue to add rigs in defiance of low oil prices, albeit at a slower rate. Combined, the total oil and gas rig count in the US now stands at 949 rigs, up 468 rigs from the year prior, with oil rigs in the United States increasing by 3 and gas rigs declining by 8. Oil rigs in the United States now number 768—372 rigs above this time last year. Canada, which lost 3 oil and gas rigs last week, gained three this week—all three oil—for a total of 220 oil and gas rigs—94 above the year ago levels. Prices fell on Thursday and Friday as the weak stock market and word of OPEC’s faltering compliance battered the unstable oil market. Despite Friday’s jawboning from Saudi […]

Continental Resources says it will do more with less

10 Aug 2017   Shale Oil

Continental Resources, one of the larger U.S. shale players, said it would be cash neutral in the current market, but raised its forecast for annual production. Continental is active in the Bakken shale oil basin, centered mostly in North Dakota, the No. 2 oil producer in the nation behind Texas. CEO Harold Hamm said the company took a disciplined approach during the second quarter, which saw oil prices hold in the mid- to upper-$40 range per barrel. “The results have been exceptional, raising our production guidance for 2017 and lowering our guidance for operating costs,” he said in a statement . “We now expect to exit 2017 with production up 24 percent to 31 percent over the […]

Investors Question Oil Output in Permian Basin, America’s Fastest-Growing Field

10 Aug 2017   Shale Oil

Investors helped turn West Texas’ Permian Basin into America’s fastest-growing oil field, but their confidence is cracking over whether drillers can keep production rising.  Questions mounted last week after Pioneer Natural Resources Co. PXD 1.60% reported that its Permian wells are producing more gas and natural gas liquids such as propane than expected. That worried investors, who care a lot more about oil.  Shares of Pioneer and other Permian producers tumbled as a result. Pioneer ended the week down 16%, while Parsley Energy Inc. PE -0.78% and Concho Resources Inc.CXO 0.76% both declined more than 9% over that stretch  The main issue for Wall Street is whether the Permian, where nearly half the rigs drilling for oil in the U.S. are located, will continue apace or will fall short of the expectations of investors, who in recent years crowded into companies drilling there.  “The Permian is going to have some growing pains,” Scott Hanold, an analyst at RBC Capital Markets, said this week.

The concerns aren’t universal, and some say they are overblown. “I don’t think anything has changed in the Permian. It’s the lowest cost, best basin to be in, with the best rock,” said Bill Costello, portfolio manager at investment firm Westwood Holdings Group. “If people are going to give me the opportunity to buy more, I’m going to buy more all day long.”  Some Permian stocks have partly recovered since last week’s plunge. Cimarex Energy Co.was the S&P 500’s biggest gainer Wednesday, rising about 7.5% after it reported more oil production than expected.  But the selloff, and analyst notes that followed, reveal that some investors are questioning whether they were overly confident in the resilience of the Permian, and perhaps overpaid for it.

Big Oil Might Be In Better Shape Than U.S. Shale

10 Aug 2017   Shale Oil

For much of the past three years, the oil majors have struggled to adapt to the new reality of low oil prices, while at the same time, their smaller and nimbler rivals deftly pivoted to the ebbs and flows of oil price movements. Big Oil, it has been said, was ill-equipped to deal with $50 oil, dragged down by the enormous expenses on their billion-dollar megaprojects. Shale, on the other hand, was the future, and production surged in places like the Permian Basin. The oil majors finally saw the writing on the wall, and followed their smaller competitors by pouring money into the shale patch . But, ironically, the outlook for the oil majors looks better – at least in the short run – than it does for some shale drillers. The recently released second quarter numbers were relatively strong for the largest oil companies, most of which emerged […]

Kemp: US Shale Breakeven Price Revealed Around $50

10 Aug 2017   Prices, Shale Oil

U.S. shale producers need a WTI oil price around $50 per barrel to break even, according to an analysis of financial statements for the second quarter. Fifteen of the largest shale oil and gas producers reported total net losses of $470 million for the three months between April and June when benchmark WTI prices averaged $48. Total losses were down from $3.7 billion in the first three months of the year and $7.4 billion in the same period in 2016, according to earnings statements published in the last week ( ). Nine of the companies in the sample reported positive net income in the second quarter, down […]

Shale-rich Oklahoma sees widespread economic growth

9 Aug 2017   Shale Oil

Oklahoma reports broad economic gains, with tax receipts from oil and gas up more than 25 percent from last year. File photo by Jim Parkin/Shutterstock Aug. 8 (UPI) — Gross domestic product and production taxes from oil and gas in Oklahoma reveal the state economy is expanding, the state treasurer said. In its latest estimate, the federal Bureau of Economic Analysis reported gross domestic product increased in Oklahoma for the second quarter in a year, following four straight quarters of contraction. “The body of evidence supporting economic recovery is growing,” State Treasurer Ken Miller said in a statement . “Gross receipts show ongoing expansion, as do employment reports and broader measurements.” Oklahoma accounts for as much as 5 percent of the total national output of crude oil and is the fifth-largest shale natural gas producer in the country, making it one of the more shale-rich states. The slump in […]

Continental becomes latest U.S. shale producer to cut budget

9 Aug 2017   Shale Oil

Continental Resources Inc ( CLR.N ) cut its 2017 capital budget on Tuesday, the latest U.S. shale oil producer to cut back on drilling and fracking equipment amid tepid crude prices. The company, which is majority controlled by Chief Executive Harold Hamm, said it would spend $1.75 billion to $1.95 billion this year, down from a prior $1.95 billion target. Continental said it can be cash flow neutral – that is, spend as much as it makes – with oil prices CLc1 between $45 and $51 per barrel. By cutting its budget, Continental is following the direction of many of its U.S. shale peers, who have already cut more than $1.2 billion from their spending plans for the year. Shares of Continental rose 1.1 percent to $32.80 in after-hours trading. Yet even as it cut spending and said it would use fewer drilling rigs and fracking crews […]

‘Nothing To See Here’ – Frackers Ignore Rising Well Decline Rates

7 Aug 2017   Shale Oil

Shale wells suffer from steep decline rates. A rush of output occurs at first, but almost immediately after the well comes online, the flow rate drops off precipitously. And within just a few months the well is a shadow of its former self. That is typical. But putting a bunch of wells close to each other can induce even steeper decline rates than normal because they can rob pressure from each other. If that occurs, the wells can suffer irreparable damage, and ultimately, the volume of oil and gas that can eventually be recovered could potentially be permanently diminished. Such a scenario appears to be playing out in the U.S. shale patch, with the white-hot Permian, in particular, falling victim to what is a byproduct of such a massive boom in activity. Bloomberg reports that the decline rate from “legacy” wells – those already online – is accelerating rapidly, […]

Shale Producers Hedge At Much Lower Prices

7 Aug 2017   Prices, Shale Oil

Shale oil producers are hedging again – this is the latest message coming from investment banks and analytical firms, according to Bloomberg . After hedging largely died down when WTI fell into a bearish market in June, now the risk-curbing activity is again on the rise. There is, however, a difference from the last hedging spree that took place after OPEC and Russia struck their output cut deal. Now, some E&Ps are hedging at prices as low as US$45 a barrel. Last December, shale boomers rushed to lock-in higher prices for their future output encouraged by the quick rise in Brent and WTI on expectations that the cut deal would take care of the global glut. This didn’t happen, however, and prices have been declining relatively steadily since February. Over the last two weeks, though, crude has enjoyed a rally on the back of renewed hopes for the success […]

Is The Shale Rebound Causing A Return Of Flaring?

7 Aug 2017   Shale Oil

Underneath the surface of North Dakota is the Bakken Formation, which is part of the Williston Basin that also lies underneath parts of South Dakota, Montana, southwestern Manitoba and southern Saskatchewan. Last week I was in Bismarck, North Dakota at the 2017 Bakken Conference and Expo . I spoke about my company’s efforts to eliminate natural gas flaring in oil fields and then drove around the state to observe the most recent drilling activity there. The Bakken was known to contain oil for many years, but it just wasn’t economical to produce. Hydraulic fracturing and horizontal drilling changed that. Up until about 2008, North Dakota hadn’t produced much more than 100,000 barrels per day (BPD). But in 2008 the shale oil boom started to pay dividends. In late 2008, North Dakota’s oil production reached 200,000 BPD and then climbed steadily to a peak of 1.2 million BPD in late […]

Poll: Shale drilling a new concept to the British public

British polling data show only a handful of respondents claim to know much about hydraulic fracturing. Photo courtesy of Cuadrilla Resources Aug. 3 (UPI) — With shale drilling about ready to go for the first time ever in the country, British opponents said public sentiment was moving against the practice. Cuadrilla Resources said the drilling rig used to tap wells at a shale basin in Lancashire arrived at its destination in late July . The industry is in its infancy in the country, though the British government estimates there may be enough natural gas locked in shale to offset gas imports on pace to increase from 45 percent of demand in 2011 to 76 percent by 2030. Polling data from the British government found only about 13 percent of those responding to its surveys said they knew “a lot” about hydraulic fracturing, also known as fracking. Support and opposition […]

U.S. Shale Heavyweights To Boost Production This Year

3 Aug 2017   Shale Oil

In a sign that the U.S. shale patch is boosting output that has been keeping a lid on oil prices, four U.S. shale companies reported second-quarter production that beat targets and increased their respective full-year output growth guidance. EOG Resources reported on Tuesday Q2 total crude oil volumes rising 25 percent to 334,700 barrels of oil per day, setting a company oil production record. The company raised its full-year 2017 U.S. crude oil growth target to 20 percent from 18 percent and total company production growth target to seven percent from five percent, keeping capital spending plans intact. “EOG can continue to grow at strong rates within cash flow,” Chairman and CEO Bill Thomas said. Devon Energy beat its midpoint guidance with Q2 net production averaging 536,000 oil-equivalent barrels per day, and said that it was on track to achieve its full-year 2017 production targets. The company cut full-year […]

Drilling Consultant Believes Reported Layoff Numbers Too Low

2 Aug 2017   Shale Oil

The devastation in the form of industry job loss due to the downturn may be higher than reported, says a pair of industry professionals. The last time Rigzone reported global layoff numbers due to the oil and gas industry’s downturn was Feb. 2017 . At the time, the world had seen more than 440,000 layoffs (441,371 to be exact), according to Graves & Co., a Houston-based consulting firm. But there’s at least a couple of industry professionals who think those numbers are a bit conservative and maintain that they have numbers that are “closer to the truth.” Citing email threads with supporting sources and references, Robin A. Davies, worldwide drilling consultant; drilling supervisor and DWOC fluids specialist, said he and his friend Alan Fortune have compiled a figure of around 688,000 publicized global oil and gas layoffs since 2014. The pair also believe that nearly 1.2 million jobs have […]

Shale Drillers Aren’t As Safe As You May Think

1 Aug 2017   Shale Oil

It’s been the main headwind for OPEC’s oil output cut deal. Rising shale oil production in the U.S. has been making headlines for almost a year now. While initially the trend was met with understandable enthusiasm by lenders exposed to the industry, now both banks and analysts are beginning to worry about a repeat of what happened in 2014 and 2015 to shale oil, when unsustainable debt levels sank a lot of companies in the field. CNBC’s Tom DiChristopher reports that the average debt level of 38 U.S. drillers has fallen from more than 8 times EBITDA in the second quarter of last year to about 3 times EBITDA in Q2 2017, which is no doubt great news – but it doesn’t appear to have convinced analysts that the danger of more bankruptcies is behind us. DiChristopher quotes Stifel analysts as cautioning in a note from last week that […]

Investors Eager to Hear Shale Companies’ Plans for Rest of 2017

31 Jul 2017   Shale Oil

Some American oil producers may be pumping the brakes on new drilling, but as the leading shale players get set to report earnings this week, investors will be watching closely to see how much the industry is really slowing its ambitious plans for growth. Investors and analysts are eager to hear management teams at Pioneer Natural Resources Co., EOG Resources Inc. and other shale companies detail their plans for the second half of…

U.S. Shale Is Determined Not To Kill This Rally

31 Jul 2017   Shale Oil

Oil prices moved closer to a two-month high on Friday, closing out the week with some of the strongest gains in 2017. Market sentiment has turned “cautiously optimistic,” as Goldman Sachs put it, with rebalancing efforts starting to become more clear. Crude oil inventories continue to decline, and the latest EIA figures show a massive 7.2 million-barrel drawdown for the week ending on July 21, suddenly plunging U.S. inventories back into the upper end of the five-year average range. Data from the past month or so has dispelled fears that the oil market was poised to suffer another meltdown, perhaps below $40 per barrel. Instead, Brent is back up above $50 per barrel for the first time in two months, and WTI is hovering just below that range as well. “While OPEC’s production path remains uncertain, recent fundamental oil data have come in even better than we had expected,” […]

U.S. Shale Slashes Capex As Low Oil Prices Bite

31 Jul 2017   Shale Oil

Seven months into the OPEC production cut deal, oil prices are not higher than they were at the end of last year, as the stubborn global inventory overhang and rising U.S. output have been offsetting price gains. Now, one week into second-quarter earnings releases, U.S. shale drillers started announcing cuts in capital budgets for this year, citing lower-for-longer oil prices. After a booming drilling start to the year—encouraged by a short-lived oil price rise—some U.S. producers are now trying to show anxious investors that they will be spending within their means after the oil price recovery stumbled in the second quarter and failed to materialize, contrary to the optimistic expectations at the beginning of this year. On the one hand, the latest capex cuts are the answer to the failed oil price recovery. On the other hand, by scaling back budgets, U.S. producers are showing the market and investors […]

U.S. Shale Has Set An Example For Oil Majors

31 Jul 2017   Shale Oil

It took the oil supermajors quite a while to come to terms with the new oil price realities. The blow from the 2014 price crash was so severe and apparently unexpected that they needed two years to start changing their tack. Luckily, Big Oil had a good example to follow: shale boomers. True, a lot of independents active in the U.S. shale patch went under during the crisis. True, production costs are not exactly the same as Saudi Arabia’s, even for the lowest-cost producers in the shale patch. And true, these production costs are now rising for shale producers as oilfield service providers get back on their feet after two years of offering cut-my-own-throat discounts to the producers just to keep going. It’s difficult to find a reliable estimate for production costs in the shale patch. Some sources, such as the Wall Street Journal, peg the average at US$23 […]

Drilling set to begin in British shale

With its drilling rig on site, a British shale gas explorer said it expects to address offshore production declines with onshore operations by year’s end. Cuadrilla Resources said the drilling rig used to tap wells at a shale basin have arrived at their destination in Lancashire. “With the decline of North Sea gas and our ever increasing reliance on gas imports, including shale gas imported from the United States, developing an indigenous source of natural gas is critical for U.K. energy security, our economy, jobs and the environment,” Cuadrilla CEO Francis Egan said in a statement . “We are proud as a Lancashire company to be at the forefront of that effort.” The British government estimates shale […]

U.S. oilfield service firms eye pricing gains despite rangebound crude

28 Jul 2017   Shale Oil

Oilfield service companies do not expect their businesses will get a major activity boost from oil prices in the second half of this year, but demand is robust enough that they will be able to raise fees, executives said. “We are well structured for the $45 to $55 a barrel range,” Andy Hendricks, chief executive of drilling and fracking services provider Patterson-UTI Energy (PTEN.O), said in a phone interview on Thursday. “We expect the rig count for us to go up slightly throughout the year.” Patterson is upgrading seven rigs at a cost of $8 million, an expense justified by contracted rates of slightly above $20,000 per day. One rig already has been delivered, and the remaining six will be delivered by December. Rival Helmerich & Payne Inc (HP.N) expects oil CLc1 to remain below $50 a barrel through year-end, but still sees opportunities to increase […]

Has fracking reached peak sand?

27 Jul 2017   Shale Oil

Texas oil is booming, and so are the sand mines needed for fracking the wells. But hydraulic fracturing leader Halliburton is warning that its surging sand use is finally topping out, and maybe even falling. Fairmount Santrol, an Ohio company, announced this week it will build yet another sand mine in the Permian Basin to churn out more Texas sand, which is mixed with water and chemicals to crack open the shale rock and release the crude oil. With several new mines proposed, frac sand production Texas could more than double within two years, adding about 30 million tons annually. As drillers have pushed to become more efficient in producing oil, wells have become deeper and longer, and the amount of sand used to frac each well has surged. The largest wells now consume up to 25,000 tons – 50 million pounds – of sand each, up from 1,500 […]

New Regulations May Come As A Rude Awakening For Oil Companies

26 Jul 2017   Shale Oil

An agency little-known outside accounting circles recently issued draft rules to change the standards which govern the verification of the year-end oil and gas reserves of public companies. The change would increase the burden of an audit, but the agency sees the need to tighten the scrutiny of such estimates. If they are right, then some companies will see downward revisions of reserves, their single greatest asset, as the rules become effective over about the next two years. The Public Company Accounting Oversight Board ( PCAOB ) governs the auditors which validate the financial filings of public companies in the U.S. It was created along with Sarbanes-Oxley reforms and endowed with the power to license, discipline and revoke licenses for the auditors themselves, and it has become the official gate-keeper of one set generally accepted accounting practices. Both the public companies and the PCAOB answer to the U.S. Securities […]

Anadarko Blinks First In The Shale Standoff

26 Jul 2017   Shale Oil

As a reminder, in his latest letter to investors , Clark said that “the rising decline rates of major US shale basins, and the increasing incidents of frac hits (also a cause of rising decline rates) have convinced me that US shale producers are not only losing competitiveness against other oil drillers, but they will find it hard to make money…. at some point debt investors start to worry that they will not get their capital back and cut lending to the industry. Even a small reduction in capital, would likely lead to a steep fall in US oil production. If new drilling stopped today, daily US oil production would fall by 350 thousand barrels a day over the next month.” What I also find extraordinary, is that it seems to me shale drilling is a very unprofitable industry, and becoming more so. And yet, many businesses in the […]

While Oil Patch Bleeds, Gas Drillers Race to Unleash Wells

26 Jul 2017   Shale Oil

Backlog of unused wells in Northeast plunges and output soars Price gains, new pipes have gas drillers letting wells loose Oil prices have been lousy for so long that U.S. producers are hoarding unfinished wells rather than pumping crude out of them. In the natural gas patch, just the opposite is happening. While the energy slump has idled lots of wells for both commodities, their economics have diverged. Oil remains at half its price in 2014, leading to a record backlog of drilled-but-uncompleted wells spread across shale formations where fracking brought on a surge in crude production. Meanwhile, gas futures are almost double last year’s low, and the so-called fracklog of wells in the Marcellus gas fields of Pennsylvania and West Virginia is shrinking as drillers there unleash supplies to take advantage of higher prices. By the end of June, the fracklog in the Marcellus was the smallest in […]

Shortage Of Fracking Crews Slows The Shale Boom

26 Jul 2017   Shale Oil

The resurgence in shale drilling and production could be bumping up against some limits, with output expected to fall far short of market expectations for this year and next, according to a new study. Some of the constraints that shale companies will run into are on the access to oilfield services (OFS), including rigs, equipment and personnel, according to Kayrros, a French research firm backed by the former CEO of OFS giant Schlumberger, and reported on by the FT . Over the past three years, the oil market downturn led to sharp cutbacks in drilling and spending, with OFS companies bearing the brunt of the contraction. Oil producers demanded sharply lower prices for rigs, equipment and completion services, which translated into plunging revenues for OFS companies. But the rebound is tightening that market, with backlogs for completion services reported in places like the Permian basin. Oil producers had hoped […]

Devon reports record rate for STACK well

26 Jul 2017   Shale Oil

Devon Energy Corp., Oklahoma City, reported a production rate of 6,000 boe/d from a well drilled in southwest Kingfisher County, Okla.  The company said it’s a record rate for initial production for a well in the STACK play (Sooner Trend, Anadarko, Canadian, Kingfisher), based on its comparison with publicly available data. The company said the rate was facility constrained.  The Privott 17-H well is expected to recover more than 2 million boe. Initial production was 50% oil.  The well was drilled with a 10,000-ft lateral and landed in the upper Meramec interval near the company’s Showboat development. Devon will spud the Showboat development in the third quarter and has plans for about 25 wells across four landing zones.  Devon said it also brought online four other high-rate Meramec wells in the over-pressured oil window during the second quarter. The company has more than 600,000 net acres by formation in the STACK play (OGJ Online, Sept. 7, 2016). “Devon will continue to test development concepts including well density, multilayer well stacking, intralayer well staggering, and further completion design improvements,” said Wade Hutchings, senior vice-president, exploration and production.

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Permian Oil Reserves Are Grossly Exaggerated

20 Jul 2017   Shale Oil

We are entering a new age of American energy dominance according to Energy Secretary Rick Perry . President Trump reflected that view in comments he made last week that “…we’ve got underneath us more oil than anybody, and nobody knew it until five years ago.” Trump was referring to tight oil production and today, that means the Permian basin. Global energy dominance by the United States is somewhere between aspirational and absurd. So far in 2017, the U.S. has imported more than 9 million barrels of crude oil per day, and net imports have averaged more than 7.3 million barrels per day. How exactly can the world’s biggest importer of oil become the supplier upon which other countries depend? The recently released BP Statistical Review Of World Energy 2017 places the United States 10th in the global ranking of oil reserve holders between Libya and Nigeria (Figure 1). That’s […]

U.S. uncompleted well backlog hangs over oil market: Kemp

19 Jul 2017   Shale Oil

 U.S. oil and gas exploration and production companies are drilling new wells faster than they can be fractured and hooked up to gathering systems, creating a growing backlog of drilled but uncompleted oil and gas wells. By June, the number of drilled but uncompleted oil and gas wells across the seven largest shale plays had topped 6,000, according to estimates from the U.S. Energy Information Administration. The estimated number of uncompleted wells across the seven plays has risen by more 1,000 since December 2016, the agency reported on Monday (“Drilling productivity report”, EIA, July 2017). The problem is concentrated in the Permian Basin of Texas and New Mexico, where the number of uncompleted wells has risen by more than 800 since December and more than 1,000 since June 2016. In most other shale plays, the estimated number of drilled but uncompleted wells has been broadly stable […]

U.S. Shale Output Just Reached A New Record

19 Jul 2017   Shale Oil

One month ago, we reported that based on recent data , June oil output from shale producers would post the first double-digit production growth since July of 2015, when oil prices tumbled and a substantial portion of U.S. production was briefly taken offline. While the final data has yet to be tabulated, it is safe to say that this is now the case. (Click to enlarge) Indicatively, while over the past year total U.S. production was up roughly 525kb/d, virtually all of it, or 98.5 percent, was the result of horizontal rig production in the Permian Basin, where output rose by just over half a million barrels per day. The Permian basin has been leading the increase in horizontal oil rig count (+184 percent) Also of note is that while U.S. rig shows no signs of slowing yet, in its latest Weekly Oil Rig Monitor, Goldman predicted that $45/bbl […]

Are More Bankruptcies On The Way For U.S. Oil?

18 Jul 2017   Shale Oil

Something that’s been whispered about in the last few months is now being talked about loudly: U.S. oil drillers’ debts. There have been a few notable warnings that shale boomers might want to slow down their production boost lest they bring on another price crash, but the truth seems to be that they can’t do it: they have debts to service. Now that international oil prices are once again on a downward spiral, drillers are facing a new challenge, according to Bloomberg : their bondholders are no longer optimistic. Shareholders were the first to start doubting the recovery as it became increasingly evident that OPEC’s production cut agreement is failing to have the effect that everyone—or almost everyone—expected. Energy stocks have generally been on a slide since the start of the year. Now creditors are joining shareholders. In June, Bloomberg data shows, junk bonds in the energy industry lost […]

From $2 Billion to Zero: A Private-Equity Fund Goes Bust in the Oil Patch

17 Jul 2017   Shale Oil

A $2 billion private-equity fund that borrowed heavily to buy oil and gas wells before energy prices plunged is now worth essentially nothing, an unusual debacle that is wiping out investments by major pensions, endowments and charitable foundations. EnerVest Ltd., a Houston private-equity firm that focuses on energy investments, manages the fund. The firm raised and started investing money in 2013, when oil was trading at more than double the current price of about $45 a barrel. But the fund added $1.3 billion of…

U.S. drilling costs start to rise as rig count climbs: Kemp

15 Jul 2017   Shale Oil

U.S. oil and gas exploration and production companies are paying more to hire drilling rigs as the number of rigs still idle after the slump declines. Drilling costs were up by 8 percent in June 2017 compared with their recent low in November 2016, according to preliminary data from the U.S. Bureau of Labor Statistics published on Thursday. The rise in drilling costs has barely started to reverse the previous 34 percent decline reported between March 2014 and November 2016, but it does mark an important turning point in the oilfield services costs cycle. Drilling costs have been rising year-on-year since March and in June were almost 3 percent higher than in the corresponding month a year earlier ( Services costs are cyclical and follow changes in the rig count with a lag of a few months, but so far cost increases have been very modest […]

API Reports 62% Jump In Oil, Gas Drilling In Q2

14 Jul 2017   Oil Supply, Shale Oil, USA

The American Petroleum Institute reported a 62-percent annual increase in oil and gas drilling in the second quarter of 2017 in the United States. For oil, well completions shot up by 81 percent in April-June 2017 from a year earlier, according to API estimates, and also rose by 19 percent from the first quarter of the year. Gas well completions were estimated to be 41 percent higher in the second quarter of 2017 than in the same period a year earlier. The data reflects EIA reports of rising U.S. oil and gas production and an intensification of this rise. For the first quarter of the year, the API reported a 35-percent increase in oil and gas well completions, which was not a huge surprise, given that these completions in Q1 2016 were down by 59% on an annual basis. According to EIA data, crude oil production in the U.S. […]

Is Wall Street Funding A Shale Failure?

13 Jul 2017   Shale Oil

The latest figures from the EIA show that despite some hiccups, the shale rebound is still on track. Last week, the sharp drawdown in inventories made headlines, but buried within the weekly figures was a bounce back in oil production, reigniting fears that the market will take much longer to balance. (Click to enlarge) The U.S. shale industry has already added almost a half million barrels per day since the end of last year, taking production up to 9.3 million barrels per day (mb/d). But production is expected to continue to grow rapidly, with projections putting output at a record-high 10 mb/d by next year. The coming wave of new supply will only be possible with the generous help of Wall Street. According to the Wall Street Journal , major banks and investors have showered the industry with credit and equity, pouring an estimated $57 billion into the sector […]

Shale Investment Booms, But Global Oil Has A Big Problem

12 Jul 2017   IEA, Oil Supply, Shale Oil

The IEA’s World Energy Investment 2017 report predicts a slight increase in oil and gas investment this year, rising by 3 percent. That comes after a plunge of 44 percent between 2014 and 2016, a steep drop off due to the crash in oil prices. In 2016 alone, spending on oil and gas fell by 26 percent from a year earlier, dropping to $650 billion. This year’s expected increase will halt the slide in spending. However, things are not all well. The only reason the industry might avoid another year of spending contraction is almost entirely due to U.S. shale, which will see investment increase by 53 percent. Investment in the Middle East and Russia is “resilient,” but the global oil industry on the whole is retreating from complex megaprojects that, while expensive, represent consistent sources of supply over the long run. Instead, oil companies are focusing on short-cycle […]

World’s Biggest Oil Traders Zero In On Shale Hot Spots

12 Jul 2017   Shale Oil

U.S. shale oil is in the spotlight once again, this time not as a deterrent to a price improvement, but as the future of the global oil industry. It’s just like the early days of the shale revolution, when enthusiasm was high and everyone rushed to drill in the shale patch. Now, the world’s top commodity traders have gone on a shale rush. Crude oil exports were banned in the U.S. until 2015, when the shale boom finally convinced lawmakers that it would make sense to export some of the crude that the shale patch was yielding. Although tentatively at first, total U.S. oil exports hit 1.3 million bpd at the end of May. Now, shale exports are set for further increases as global oil traders turn to the U.S. to satisfy their clients’ demand for the commodity. Bloomberg’s Andy Hoffman recently wrote a piece on traders such as […]

IEA Says Spending in U.S. Shale Drives Global Oil Investment Recovery

11 Jul 2017   IEA, Shale Oil

Global investments in oil and gas fields are likely to rebound modestly this year thanks to a sharp uptick in spending by U.S. shale producers, the International Energy Agency said in a report Tuesday. The 3% increase in fossil-fuel development foreseen by the IEA in 2017 represents a positive note for an industry that went through the longest period of retrenchment on spending in half a century after the oil-price crash…