The Weekly USA Oil & Gas Update: 15th September 2015

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

IEA expects rebalance in supply/demand in second half of 2016

According to the International Energy Agency (IEA), large drops in crude oil production over the next 12 months, along with continued increases in demand, will bring about crude oil price increases some time in 2016. The agency sees non-OPEC production dropping substantially over this period, including US tight oil which it expects to shrink by 0.4 million bpd next year. At the same time, low oil prices will stimulate demand, which the IEA expects to rise by 1.7 million bpd over the next 12 months. Prices will take a while to increase though, since there is a substantial amount of crude in storage, including Iran's 44 million barrels currently in offshore oil tankers. The wild card here is Iran's anticipated production increase after sanctions are lifted, which could account for an additional 1 million bpd in 2016 and soak up a lot of the additional demand. Article here

Rig count at its lowest since January 2003

The Baker Hughes rig count ended the week at 876 US drilling rigs, down 1,083 rigs year-over-year and at its lowest point since January 17, 2003. Oil directed rigs make up 652 of this total; the rest are drilling for natural gas. Article here

Unconventional Oil & Gas News

Six ethane crackers under construction in the US

According to the American Chemistry Council, the petrochemical industry has six facilities currently under construction to 'crack' ethane into ethylene, a primary feedstock for plastics. This is good news for natural gas producers, since ethane is a significant portion of the hydrocarbons produced in many natural gas wells, and no new crackers have been built since 2001. With limited markets, companies have been re-injecting ethane back into the natural gas stream rather than selling it as a natural gas liquid. Additional markets for ethane may help to increase total returns on wet natural gas wells, especially important in portions of the Marcellus and Utica plays. Unfortunately for these northeastern producers, all six crackers are going up in Texas and Louisiana, and transportation infrastructure to access these markets from the northeast is limited. Article here

Environment and Safety News

Vandalism at Ohio well site causes 3,300 gallon crude oil spill

Someone apparently removed a 3-inch valve allowing crude oil from two tanks to run onto the ground at a Dart Oil well site near Mineral City. Marissa Lautzenheiser, coordinator of the Middle Tuscarawas River Watershed said "this would not have happened if not for vandalism." Bob Timmerman with Dart Oil estimated the clean up costs at $100,000 or more. Lautzenheiser said that the oil ran into a wetland and into Huff Run. She praised Dart's clean up efforst so far, which are being monitored by the Ohio Department of Natural Resources Division of Oil and Gas and the Ohio Environmental Protection Agency. Article here

Mergers and Acquisitions News

Acquisitions running at record pace in 2015
Writer Joel Lewin says that $321 billion has been spent on acquisition activity in oil and gas so far this year, surpassing the previous year-to-date record of $227 billion set in 2010, and about double that of last year's $162 billion year-to-date. The biggest deal so far has been Shell's acquisition of BG Group at 47 billion pounds. The US has seen the most activity, with $159 billion in acquisitions so far this year. As prices remain low and credit is further squeezed for companies with marginal balance sheets, this pace could yet increase. Article here