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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 16th December 2014

Contributor: Todd Erickson
Posted: 12/15/2014
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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

10

-1

10

9

Arkansas

9

-3

12

11

California onshore

43

+2

43

34

Colorado

68

-2

75

70

Kansas

28

+2

25

31

Mississippi

15

0

14

10

N. Louisiana

28

-1

29

25

New Mexico

101

+1

98

78

North Dakota

179

-1

185

174

Ohio

47

+2

42

35

Oklahoma

211

0

213

174

Pennsylvania

54

-1

58

54

Texas

872

-24

905

848

Utah

23

0

23

23

West Virginia

33

+2

29

34

Wyoming

58

-1

57

56

Total US

1893

-27

1931

1782

Total Canada land

429

+9

403

424

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

56.40

91.46

97.18

Brent

61.23

95.37

110.30

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.74

3.88

4.21

General News

Analyst report: onshore shale likely cut before other projects

On December 9th, Gaffney, Cline & Associates (GCA) released a report that indicates onshore shale operations are the most vulnerable to capital cuts for US oil and gas projects. "Whilst high cost environments such as the deepwater Gulf of Mexico would appear to be vulnerable, and undeniably cuts should be expected there, economic rationality suggests that the brunt of cuts should be directed at onshore unconventional investments," said Bob George with GCA. The reason: onshore shale operations are much easier to scale up or down than other types of operations, especially offshore deepwater, and many operators in onshore shale plays are small with limited balance sheets. Majors and large independents dominate the offshore world, and have multi-year plans with billion dollar budgets. Article here

Halliburton to lay off 1,000 Eastern Hemisphere workers

The layoff will be effective immediately, according to a Halliburton spokesperson. In a recent email, Emily Mir with Halliburton said "we believe these job eliminations are necessary in order to work through this market environment." Article here

Unconventional Oil & Gas News

Report: crude by rail to peak in 2016

Shale plays in the central US have been relying heavily on rail transport to provide markets for their light crude, displacing Brent-priced imported crude at coastal refineries. A new report from IHS states that crude by rail should peak in 2016 at 1.5 million barrels shipped per day. This is up from 20,000 barrels per day just 5 years ago. Crude by rail still faces challenges though, as recent train derailments of crude have resulted in spills and fires, creating a groundswell of public resistance to the practice. Article here

Several shale producers announce capex cuts

Oasis Petroleum, a Houston-based E&P company with significant Bakken operations, last week announced a 50% reduction in its capital expenditures. ConocoPhillips also cut its spending by 20%, with cuts directed at its operations in the Niobrara and Permian Basin. Goodrich Petroleum also announced a 50% cut, focused on the marginal Tuscaloosa Marine Shale. Article here

Environment and Safety News

Study blames gas migration on poor well construction, not hydraulic fracturing

The study conducted in the Barnett and Marcellus shale plays concluded that gas migration into water wells was likely the result of poor casing and other well-integrity issues, not hydraulic fracturing. "Fracing doesn't create gas migration ... that's not really a revelation," said geoscientist Fred Baldassare. The study was published in the September issue of The Proceedings of the National Academy of Sciences. A recent study by the US Department of Energy offered a similar conclusion. Legacy wells are another likely cause for gas migration in developed fields as the old well bores provide a conduit for gas to rise to aquifers near the surface. "The bad news is, in a small subset of water wells, there is some evidence of stray gas contamination but, if you take the optimistic viewpoint, the good news is; It's not fracking causing the problems. It's well integrity. We've known about it [well integrity] for a while and future improvements in well integrity can eliminate a lot of the problems we're seeing," said Thomas Darrah, leader of the study. Article here

Mergers and Acquisitions News

Wood Group buys fabricator/construction company Swaggart Brothers

The $36 million deal will provide Wood Group with Swaggart's three US, including Idaho and New Mexico, along with its 200 employees. Article here

Contributor: Todd Erickson