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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 26th August 2014

Contributor: Todd Erickson
Posted: 08/25/2014
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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

6

-3

10

13

Arkansas

12

+1

11

13

California onshore

44

-1

47

35

Colorado

74

-1

66

67

Kansas

28

+2

32

26

Mississippi

14

0

10

13

N. Louisiana

30

-1

29

25

New Mexico

94

0

87

76

North Dakota

183

-2

174

169

Ohio

42

0

39

34

Oklahoma

208

-1

191

169

Pennsylvania

50

-1

60

52

Texas

888

-13

889

848

Utah

23

0

27

28

West Virginia

30

+1

25

36

Wyoming

56

+1

45

50

Total US

1896

-17

1857

1776

Total Canada land

401

+4

152

378

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

93.78

103.07

112.23

Brent

102.54

109.34

111.41

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.90

4.49

3.55

General News

Wood Mackenzie analyst provides forecasts on tight oil growth

Phjani Gadde, a senior upstream analyst for Wood Mackenzie delivered his thoughts at the NAPE Business Conference. Overall, he expected development spending for oil and gas worldwide to total $620 billion this year, with on quarter of that in the US. Other pieces of notable information:

  • Tight oil will account for $72 billion in spending this year
  • The Eagle Ford will account for $27 billion of this, followed by the Bakken and the Permian
  • By 2020, tight oil production will hit 5.8 million bpd
  • Of this 5.8 million, the Eagle Ford will account for 2 million, the Bakken 1.7 million, and the Permian 1.1 million
  • Natural gas production growth over the next five years will be dominated by the Utica and Marcellus, accounting for 1/3 of US supply by 2020
  • Article here

Plains All American to build 440-mile crude pipeline from Cushing, OK to Memphis, TN

The oil terminal at Cushing has been the recipient of a lot of the new tight oil supplies, but Plains All American's new 20-inch pipeline will offer an alternative in refining capacity, with the ability to take as much as 200,000 bpd of crude up to Valero's Memphis Refinery. The project's costs is estimated at $900 million with a completion date of January 2016. Article here

Unconventional Oil & Gas News

Oil production up 3.4% in the Bakken and Eagle Ford in July

According to industry experts at Bentek Energy, oil production from North Dakota's Bakken and Texas' Eagle Ford rose 86,000 bpd, or 3.4% last month. This was the highest level of monthly growth seen in the last two years. Compared to one year ago, the Bakken is up 280,000 bpd to a total of 1.2 million bpd in July, while the Eagle Ford is up 411,000 bpd from July 2013 to its current 1.5 million bpd. Article here

Efficiency - The key to the Marcellus' continued growth in gas production

The article provided in the link below authored by Chris Pederson on Oilprice.com paints a clear picture on why the Marcellus continues to surpass most every analysts' expectations in growth. Rig counts have fallen from their highs two years ago, but the play continues to increase production, primarily due to he following factors:

  • Production per rig has increased from 1,208 mcf/d in 2010 to 7,952 mcf/d today
  • Laterals have gotten longer, with more stages
  • EUR's have almost doubled since 2009
  • Cycle times on rigs have been reduced by around 6 days per-well over the last three years

All these factors make the Marcellus the low-cost producer for natural gas in the US, providing the best rates of return to operators. Expect capital to continue to flow towards the Marcellus, even with low prices. Article here

Environment and Safety News

Bakken not the only play suffering from flaring - Eagle Ford struggles as well

In a recent edition, The San Antonio Express News promises a four-part investigative story on the flaring of natural gas in the nearby Eagle Ford oil and gas play. Journalists Jennifer Hiller and John Tedesco are leading the effort. "When you talk to Texas officials, they say flaring is very low in Texas," said Tedesco. "But that didn't match up with what we saw, and so we started out just trying to answer that basic question, how much gas is being lost here?" How much flaring is there? "It's about 39 billion cubic feet," said Tedesco. "Which could meet the needs of every San Antonio household that uses natural gas for an entire year." As in the Bakken, economics is to blame: capital invested into gas gathering and processing does not provide as high a return as capital invested into drilling and producing oil, so the gathering and processing infrastructure for natural gas lags, requiring flaring to enable oil production to continue. Tedesco and Hiller also look into the regulations that allow the practice of flaring. Article here

Contributor: Todd Erickson