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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 19th January 2016

Contributor: Todd Erickson
Posted: 01/18/2016
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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

9

0

11

11

Arkansas

0

0

4

11

California land

8

+1

13

17

Colorado

20

-2

30

64

Kansas

12

+1

9

24

Mississippi

5

0

5

12

N. Louisiana

23

-3

27

30

New Mexico

32

-2

41

92

North Dakota

47

-2

63

156

Ohio

13

-1

19

48

Oklahoma

87

+4

89

201

Pennsylvania

26

+1

29

51

Texas

301

-7

351

766

Utah

3

0

5

17

West Virginia

12

0

18

26

Wyoming

15

-1

26

47

Total US

650

-14

787

1676

Total Canada land

226

+61

180

437

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

29.33

43.19

46.06

Brent

28.97

46.57

46.90

Natural Gas-USD/mmbtu

NYMEX Henry Hub

2.09

2.18

2.90

General News

Is $20 per barrel crude oil likely?

Last February, the head of Citigroup's commodities research, Ed Morse, predicted a price as low as $20 per barrel for oil in the coming year, and not too many took the prediction seriously. Now with oil falling below $30 per barrel for the first time in 12 years, Morse's prediction looks more likely. He reiterated his belief last week that oil could still see $20, and people are listening. "The $20 number is something you have to talk about," said Morse. "When you've seen a $10 price slide and WTI is trading just slightly above $30, the likelihood is fairly great." With the continued glut, the US Energy Information Administration has also again cut its price forecast for 2016, down 24% to $38.54 per barrel for the year. The EIA is expecting a re-balance of supply and demand in 2017. Unless prices change for the better quickly, expect a surge in bankruptcies in the domestic E&P sector this year as companies run out of cash and banks tighten up. Article here

Unconventional Oil & Gas News

Despite rig count decline, North Dakota oil output continues to grow

Defying expectations, North Dakota's crude oil output rose by 5,000 barrels per day from October to November, the last month reported. The US Energy Information Administration forecasted a decline of 23,000 barrels per day back in October, yet output remains resilient as producers continue to make gains in efficiency with fewer rigs. Article here

Marcellus Shale gas production declines last month

After a tremendous growth curve to become the US's largest natural gas producing area, the Marcellus Shale has finally hit its peak. According to the US Energy Information Administration, Marcellus gas production declined 1% from the previous month, which was also 1% less than a year ago. As natural gas prices plunged from oversupply, rig counts have been cut in half in the region, finally beginning to re-balance supply and demand in the domestic natural gas market. Article here

Environment and Safety News

Oklahoma asks operators to reduce underground water disposal for fear of earthquakes

In 2014, Oklahoma experienced 585 earthquakes with a magnitude greater than 3.0. That number rose in 2015 to 880, and the Oklahoma Corporation Commission's Oil & Gas Conservation Division believes that oil & gas waste water underground disposal might be the cause. To combat the perceived threat, the OGCD asked owners of 27 disposal wells in the Fairview area to reduce their injection volumes by 18%. There may be more coming as well. According to OGCD Director Tim Baker, "[t]he data available indicates that a much larger approach to the earthquakes in that entire part of northwestern Oklahoma is needed, and we have been working on such a plan." Apparently the 18% reduction is just "part of this ongoing process." Article here

Mergers and Acquisitions News

North American E&P companies face a $102 billion cash shortfall this year
The $102 billion number comes from a study by consultancy AlixPartners, which forecasts the cash shortage for oil producers. "They're quickly beginning to exhaust their options (E&P companies), and that's why you're seeing more bankruptcies," said Dennis Cassidy with AlixPartners. Even with falling prices, the capital markets poured money into the sector in 2015 to keep things solvent. Now, equity and debt markets are reluctant to put anything into the sector. As the losses pile up and cash gets scarcer, many companies will continue to cut expenses and try to sell assets, but for how long? "People are recognizing they're going to have to throw in the towel at some point," said Cassidy. "This is not a drill, this is the real thing." Article here

Contributor: Todd Erickson