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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 09th December 2014

Contributor: Todd Erickson
Posted: 12/08/2014
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The Oil & Gas Weekly is compiled by Todd Erickson. Todd is a veteran executive manager in the North American E&P market.

He has management experience in high-growth oil & gas service organizations performing a leadership role in operations, strategy, and corporate development with a track record of identifying opportunities and best-practices, creating execution plans, then developing effective teams and leaders to execute them.

Learn more about Todd here

Rig Counts - select states with key plays

Select states

This Week

Change from last week

3 months ago

One year ago

Alaska

11

+2

7

9

Arkansas

12

+2

12

11

California onshore

41

+1

44

35

Colorado

70

-2

74

66

Kansas

26

+5

23

30

Mississippi

15

+2

13

9

N. Louisiana

29

-2

29

26

New Mexico

100

+1

96

78

North Dakota

180

0

183

167

Ohio

45

+1

41

35

Oklahoma

211

-3

213

180

Pennsylvania

55

-1

57

53

Texas

896

-5

907

842

Utah

23

0

23

28

West Virginia

31

0

29

35

Wyoming

59

-1

57

57

Total US

1920

+3

1925

1775

Total Canada land

420

-16

412

400

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

64.60

92.86

97.10

Brent

67.33

96.43

110.07

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.68

3.92

4.24

General News

EIA: US natural gas and crude oil reserves increase over last year

According to the US Energy Information Administration (EIA), reserves for crude oil rose by 9.3% from 2012 to 2013 to 36.5 billion barrels, while natural gas reserves over that same period rose 9.7% to 354 trillion cubic feet. Proved crude oil reserves in North Dakota overtook the Gulf of Mexico, making North Dakota the number two state for crude oil reserves behind only Texas. The Bakken/Three Forks play also moved into the top spot as the largest tight oil play in the US. While reserves were rising, imports were dropping; crude oil imports fell by 10% from the previous year, while natural gas imports declined by 8%. Article here

Investment bank predicts rig count will drop by 500 rigs in 2015

Simmons & Company forecast last week that the rig count will drop 27% from its current level. Most experts believe that many of the core areas of the major plays remain profitable at prices as low as $40 a barrel, but marginal plays, and fringe areas in established plays often require prices above $70 a barrel to provide competitive returns on investments. As a consequence, some areas have seen applications for new drilling permits drop by 50% over the last few months, indicating a coming slowdown in activity. Many believe that this drop in rig count won't affect the total output very much though, as operators continue to get more out of their drilling in the sweet spots. "What really matters now is not the number of rigs or wells, but the number of lateral feet drilled and productivity per foot," says Vikas Dwivedi, global oil and gas strategist at the investment bank Macquarie. Article here

Oil at the wellhead in North Dakota drops below $50

Although WTI is still around $65 a barrel, regional discounts due to shipping costs and quality variations can impact the price producers receive at the wellhead. For wellhead prices in North Dakota, the marketing arm of Plains All American Pipeline LP reported that price fell to $49.69 on November 28, down 47% from its peak in June. "You have gathering fees, trucking, terminalling, pipeline and rail fees," said Andy Lipow, president of Lipow Oil Associates LLC. "If you're selling at the wellhead, you're getting a very low number relative to WTI." Due to takeaway constraints, oil produced in both Colorado and Wyoming also sees significant discounts. There is hope however for improvements for producers in these regions. A number of pipelines are slated to be built in these areas, which will lower transportation costs, resulting in smaller discounts. In the meantime, producers will continue to utilize rail transportation, which can cost $10 to $15 a barrel. Article here

Unconventional Oil & Gas News

Utica sees huge production increase in third quarter

According to the Ohio Department of Natural Resources, during the third quarter of 2014, production rates increased by 49% over the previous quarter. Carroll County holds the largest number of wells and also the highest production rates, with Harrison County in second. Article here

Environment and Safety News

Explosion and spill in Pennsylvania results in $120,000 fine

The state's Department of Environmental Protection said last week that it fined Cabot Oil and Gas for the explosion of a wastewater tank at a well site which resulted in a worker injury and a spill of 2,800 gallons of wastewater. Apparently, the worker checking the fluid level used the flashlight app on his cell phone to illuminate the inside of the tank, causing the vapors to ignite. Article here

Mergers and Acquisitions News

Southwestern Energy to buy Marcellus acreage from WPX

The transaction will provide 46,700 acres in northeast Pennsylvania to Southwestern in exchange for $300 million. This is a further expansion of their holdings in the play for Southwestern, who acquired 413,000 net acres and 1,500 producing wells from Chesapeake in October. Article here

Contributor: Todd Erickson