The Weekly Oil and Gas Update

The Weekly Update: 2nd July 2012

Todd Erickson
Contributor: Todd Erickson
Posted: 07/02/2012

Catch up with his week's industry news, oil and gas prices and the North American rig count.
GENERAL NEWS

The EIA predicts that tight oil production in the US will exceed 5.5 million bpd by 2035, more than oil produced from all US sources in 2011

Other notable trends predicted by the EIA; enhanced oil recovery (EOR) utilizing carbon dioxide will rise sharply after 2020 as current tight oil plays begin a substantial decline, and a large expansion in domestic natural gas production as LNG terminals for export come on line. Article here

Oklahoma ranked worlds best place for oil & gas investment

In the annual Global Petroleum Survey by the Fraser Institute, oil & gas executives were asked to rank jurisdictions in order of their attractiveness for investment, based on regulatory, environmental, legal system, political, and tax characteristics. The US placed 7 of its states in the top ten, also including Oklahoma, Mississippi, Texas, North Dakota, New Mexico, Kansas, and West Virginia. The two lowest-ranked states in the US were Alaska at 61st and New York, at 68th. Article here

ExxonMobil CEO: We are "losing our shirts" on natural gas in the US

Low prices due to excess production have affected all the natural gas producers, even the country's largest, ExxonMobil. In a recent press conference CEO Rex Tillerson also proclaimed that there was enough domestic natural gas to supply the country into the next century. This glut of domestic gas, along with world prices at three and four times that in the US, have a number of companies, including ExxonMobil, looking to LNG export options. Article here

Construction and maintenance costs still rising in upstream activity

According to IHS, the costs for building and maintaining upstream facilities rose by 2.3% over the last quarter of 2011 and the first of 2012. This was largely driven by the continued expansion in capex and opex budgets by E&P companies worldwide. IHS said that capex will rise from $586 billion in 2011 to $642 billion in 2012, while opex rises from $457 billion to $500 billion in the same time frame. The research organization expects upstream capital and operating costs to continue to rise in 2012 driven by increased costs in rig day rates, equipment and oilfield services. Article here

Gas rig count falls by seven this week to lowest level in 13 years

The number of rigs drilling for oil remained the same, but the number of drilling rigs seeking natural gas continues to fall, as supplies keep growing despite languishing prices. Article here
OIL & GAS PRICES


This Week

12 weeks ago

1 year ago

Oil

Nymex Crude Future

83.56

Brent Spot

95.86

WTI Cushing Spot

83.81

105.25

94.81

Natural Gas

Henry Hub Future

2.77

Henry Hub Spot

2.74

1.89

4.27

NYC Gate Spot

2.96



SHALE NEWS

Eagle Ford soon to pass Bakken as most prolific tight oil play

In April 2012, the Eagle Ford produced 520,000 bpd to the Bakken's 542,000. With the Eagle Ford's lower well costs ($5.5 million compared to $8 million in the Bakken) and better proximity to transportation and end-markets, expect it to soon pass the Bakken. The article linked below also has an excellent graph comparing production volume of all the leading tight oil plays in the US, and their growth over the last ten years. Article here

Pennsylvania legislature approves drilling ban for shale gas in several of the state's eastern counties that could last until 2018

The special carve-out of Bucks and Montgomery counties will put on hold any drilling until studies over the effects of drilling have been completed, or 2018, whichever comes first. The ban includes parts of the promising South Newark Basin, although not much activity has been planned in this area for the near future. Article here

ENVIRONMENT & SAFETY NEWS


One dead and two injured in compressor station explosion

The blast happened at a BP compressor in the San Juan Basin in Colorado. The accident is still being investigated at this time. Article here

ACQUISITIONS & MERGERS NEWS

LINN Energy buys BP's Jonah Field assets in Wyoming for $1 billion

The transaction includes 750 producing wells in the western Wyoming field. These wells feature a low decline rate, and with LINN's hedging strategies, will experience strong cash flow of $160 million annually, making the transaction accretive. This transaction puts LINN's total for the year at $3 billion. Article here

RIG COUNT

This Week

Change from last week

12 weeks ago

One year ago

Arkansas

18

0

26

34

California

53

0

45

46

Colorado

68

+2

66

70

Kansas

30

+2

32

31

Montana

20

0

20

10

N. Louisiana

28

0

47

94

New Mexico

85

0

83

80

North Dakota

192

-8

198

156

Ohio

19

-2

11

11

Oklahoma

200

+10

198

173

Pennsylvania

75

-5

100

116

Texas

929

-9

922

853

Utah

39

0

40

29

West Virginia

26

0

28

20

Wyoming

42

+1

41

50

Total US

1959

- 7

1979

1886

Total Canada land

259

+24

256

239



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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Todd Erickson
Contributor: Todd Erickson
Posted: 07/02/2012

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