Weekly USA Oil & Gas Update for 3rd May 2016: Halliburton and Baker Hughes scrap $35 billion merger

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

Schlumberger considering quitting US market

After posting its first North American loss since at least the turn of the century, the largest oil and gas services company in the world is considering leaving the market to stem losses. "Activity is coming down to basically critical-mass type of levels," said company CEO Paal Kibsgaard. "What's the benefit of taking losses versus shutting down and then making the investments later on to start back up again?" Analysts echo Schlumberger's negative outlook. "It's a pretty dire situation right now in the oil services market," said Barclays analyst J. David Anderson. "The next step here is literally shutting down operations." It's not only sales volume that has plunged, but also prices which have fallen. The prices for fracking operations have declined by an estimated 40% since the beginning of the downturn in the third quarter of 2014. "They can't cut costs any more," said Anderson. "You're at the muscle and the bone. If I cut from here, I'm impairing myself on the upside."  Article here

Unconventional Oil & Gas News

US natural gas production declines in March 

According to the US Energy Information Administration, natural gas production in the lower 48 fell by 1 billion cubic feet per day in March from the previous month, to 72.2 bcf/d. "Following a US gas production record-setting month of February, production volumes in March dwindled," said Platts analyst Sami Yahya. "Most major basin contributed to the production decline in some way. However, the two main culprits were the Northeast and Texas, where production drops in each were roughly 0.5 bcf/d month on month." Yahya cited flooding in Texas as having a considerable effect on its decline, while the Northeast was due to multiple factors, including lower prices, maintenance, and warm temperatures.  Article here 

Hess Corp would add rigs in the Bakken at $60 oil

Like other producers across the country, Hess has drastically slashed its capital budget. But the company said that in the event prices returned to $60 per barrel, continued investment into new wells would be warranted in its Bakken operation. The company admitted that the Bakken has challenges in relation to other regions, with higher costs to transport oil to remote markets, but aggressive cost cutting has enabled it to deliver a lower than expected quarterly loss. Pioneer, who has major operations in the Permian Basin, recently said its price number add rigs would be $50 per barrel. Article here

Environment and Safety News

Fracking stopped on Pennsylvania well after small earthquake nearby

Hilcorp Energy stopped its fracking operations on two wells in western Pennsylvania while state regulators investigate a small earthquake.  The state's seismic monitoring network detected the earthquake in Lawrence County early last Monday, at a 1.9 magnitude. Department of Environmental Protection spokesperson Melanie Williams said she saw no link between Hilcorp's activities and the seismic event, but the department would continue investigating in conjunction with the Pennsylvania Department of Conservation and Natural Resources. Article here

Mergers and Acquisitions News

Halliburton and Baker Hughes scrap $35 billion merger
The two companies have been discussing the merger for a year and half, which would have made the combined company the largest oil services firm in the world. A combination of difficulties in obtaining regulatory approval and the steep decline in the market have led to a termination of the deal however. Article here