The Weekly Update: 25th June 2012
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| GENERAL NEWS |
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With oil prices falling, will domestic drilling activity fall too?
As natural gas prices tumbled over the last year, we saw hundreds of drilling rigs switch from gas drilling to oil. Even with this target switching, activity and capital spending continued its high pace. Now, oil has dropped below $80 in the face of speculation of a global economic slowdown--can we expect drilling activity, and all its associated services, to slow down too? This linked article speculates on a slowdown of drilling in Texas: Article here while the analyst in the following article anticipates a slowdown in the services market over the next 18 months as the North American rig count drops by 500. Article here ExxonMobil may have pulled out of Poland as much for the red tape as the lack of commercial gas production from its exploratory wells The Wall Street Journal and Bloomberg reported that ExxonMobil, and other upstream companies are very frustrated dealing with Poland's Environment Ministry. Perhaps enough that the extra costs experienced from unnecessary regulatory delays made the decision easier for them to pull out of Poland. Expect this and other European obstructionism to further push capital investment into the predictable North American market. Article here
OPEC threatened by US shale oil expansion There was tension at OPEC's recent meeting in Vienna between Saudi Arabia and other producers, according to observers. Insiders report that the Saudi's want to keep prices low, punishing Russia for Syrian government support, and Iran for its rogue nuclear development. Low prices would also benefit all OPEC members by impeding tight oil E&P expansion in the US, since most US shale oil plays require $70+ to remain economically viable. Other OPEC members require higher oil prices to finance their fiscal spending, including Iran and Iraq. Expect Saudi Arabia to continue producing 10 million bpd as oil prices continue their slide. Article here |
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| OIL & GAS PRICES |
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| This Week | 12 weeks ago | 1 year ago | |
| Oil | |||
| Nymex Crude Future | 79.76 | ||
| Brent Spot | 90.37 | ||
| WTI Cushing Spot | 79.36 | 107.07 | 90.65 |
| Natural Gas | |||
| Henry Hub Future | 2.63 | ||
| Henry Hub Spot | 2.50 | 2.25 | 4.2 |
| NYC Gate Spot | 2.61 |
SHALE NEWS
EnCana sees success drilling into the Mancos Shale in the San Juan Basin
With a 30-day IP rate of 440 bpd, EnCana was encouraged enough with the results of their first well to keep drilling for a total of 12 wells this year. The first well has a 4,100' lateral with a total cost of $4.3 million, located in Sandoval County in New Mexico. Economic viability depends on the decline rate, which remains to be seen. EnCana owns 174,000 net acres in the play. Article here
U.S. Silica and BNSF Railway jointly develop Eagle Ford frac sand facility in San Antonio
The facililty will store up to 15,000 tons of white sand for hydraulic fracturing, delivered from U.S. Silica's Ottawa, Illinois mines four times a month. The facility will be finished and operating in 2013. Article here
ENVIRONMENT & SAFETY NEWS
Chesapeake pays $2.5 million for problems with Marcellus wells
Failing to perform baseline studies cost Chesapeake $900,000 in fines and an additional $1.6 million buying homes from three Pennsylvania families who claim Chesapeake's wells polluted their water. Chesapeake claims that the methane was already present in the water system before drilling activities, based on preliminary tests, but the company failed to perform a comprehensive baseline study to establish water quality before drilling began. Article here
ACQUISITIONS & MERGERS NEWS
Cabot adds JV partner Osaka Gas Company of Japan to its Pearsall Shale project in S Texas
Osaka will pay $125 million now, and $125 million of future drilling costs for a 35% non-operating share of Cabot's 50,000 acres. Two rigs will begin drilling in 2012, with a third in 2013 and a fourth in 2014. The price per acre of $14,000 appears steep, but nearby wells have seen great results. Cabot will retain the rights to the Eagle Ford shale, which lies above the Pearsall. Article here
RIG COUNT
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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
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