The Weekly Oil and Gas Update

The Weekly US Oil & Gas Update: 19 November 2013

Todd Erickson
Contributor: Todd Erickson
Posted: 11/18/2013

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

13

7

Arkansas

12

0

13

17

California onshore

40

0

40

34

Colorado

69

-1

71

58

Kansas

27

+2

25

31

Montana

13

-1

8

18

N. Louisiana

23

0

27

24

New Mexico

81

+1

76

76

North Dakota

165

+2

172

178

Ohio

34

0

36

26

Oklahoma

176

+4

169

189

Pennsylvania

57

+1

51

66

Texas

825

-9

846

851

Utah

28

0

31

33

West Virginia

32

+1

37

27

Wyoming

55

0

52

51

Total US

1762

+8

1791

1809

Total Canada land

399

+23

355

384

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

93.38

105.88

89.05

Brent

107.85

112.23

110.06

Natural Gas-USD/mmbtu

NYMEX

3.70

3.55

3.63

General News

Starting next spring, Wyoming will require groundwater sampling for drillers

The Wyoming Oil and Gas Conservation Commission voted to approve the regulations for groundwater sampling, to begin March 1, 2014. The required practice will include pre-drilling sampling of at least four existing wells and streams within a half-mile radius of the proposed drilling activity to establish a baseline, followed by two sampling events post-drilling to measure for any changes in groundwater quality. Any measured spikes above certain thresholds outlined in the rule will require re-testing and analysis to determine if a problem exists, and if so, its origin. What still remains to be figured out is what happens if a contaminant is identified. "How the state reacts to minor changes that could very easily be attributed to a natural change in groundwater, and how that's handled is really the big test going forward," said John Robitaille, vice president of the Petroleum Association of Wyoming. With this rule, Wyoming joins Colorado as the only two states to require pre and post drilling water sampling. Jon Goldstein, the senior energy policy manager at he Environmental Defense Fund was positive about the new regulation. "It sets a new national standard for groundwater base-line testing and monitoring related to oil and gas activity," Goldstein said. "The open, inclusive approach the state took in formulating this proposal has led to a strong, scientifically valid groundwater testing program. This rule will give Wyoming residents important information about the quality of their water." Article here

Gulf of Mexico offshore drilling seeing a resurgence

Not too long ago, the GoM was an afterthought, with declining production from legacy wells. New technology in seismic and drilling have changed all that. Consultant Wood Mackenzie says that the deepest parts of the GoM will produce 1.5 mllion boepd in 2014, a 15% increase from this year. By 2020, they expect that number to rise to 1.9 million boepd. "Investors should not sleep on the Gulf of Mexico," says Brian Youngberg, an analyst with Edward Jones in St. Louis. "Onshore shale is obviously the main driver in the growth in U.S. production, but going forward, the Gulf of Mexico should start contributing to that." Article here

Permian basin still the king of US drilling activity

With all the news about new shale plays such as the Bakken and the Eagle Ford, people tend to forget about the Permian Basin in west Texas. The old field has lots of new activity however, and with 380 drilling rigs operating, has more activity than any other basin. In fact, the Permian's 380 rigs is more than all the rigs operating in North Dakota and Oklahoma put together. Credit new horizontal drilling and multi-stage completions methods which have turned legacy fields from the last century into some of the most economically productive in the country. Article here

Unconventional Oil & Gas News

Bakken to surpass 1 million barrels per day in December

This news comes from the EIS's November report. The mark will mean that the Bakken will be providing one tenth of total US oil production, joining the Gulf of Mexico, the Permian Basin and the Eagle Ford which all surpass 1 million bpd. Drilling and completions is also becoming more efficient in the Bakken, with the average well rising from 481 bpd to 496 bpd, the most of any US shale play. Article here

Environment and Safety News

Black Elk Energy and contractors cited for safety violations leading to offshore fatality

As the result of "incidents of non-compliance" leading to an explosion on an offshore platform that killed three and spilled oil into the Gulf of Mexico, the Bureau of Safety and Environmental Enforcement issued 41 citations to Black Elk and four of its contractors, including Wood Group PSN of Aberdeen, Scotland; Compass Engineering & Consultants of Lafayette, La.; and Grand Isle Shipyard of Galliano, La. It appears that inadequate precautions were taken for welding activities, which led to the fatal explosion. Article here

You can read the full report by the BSEE at this link: BSEE Panel Report

Utica Shale research study: no methane from drilling in water wells

The study looked at acidity, conductivity, methane concentration and methane isotopes in water wells in Carroll County, the most heavily drilled county in Ohio. According to Amy Townsend-Small, assistant professor of geology at the University of Cincinnati, "You have very good quality water . . . There's no evidence of problems from drilling." At least one of the water wells sampled showed high levels of methane, but the methane was identified as naturally occurring and not from drilling, a common occurrence in many water wells. The$20,000 study was funded by the Deer Creek Foundation, the Weston Foundation, the National Science Foundation and the Environmental Defense. Article here

Frack water recycling has an uphill battle in the Bakken due to regulatory barriers

With the high volumes of fresh water that go to hydraulic fracturing activities in the major shale plays, recycling flowback and produced water looks like an obvious way to cut back on impact from water use. The North Dakota Industrial Commission, for the most part, feels that the risks don't warrent the gain however. Re-use of frack water also means storage and transportation of hundreds of thousands of barrels of salty water for each frack job, a risk the NDIC feels compelled to regulate robustly. Statoil is one company trying to mitigate these risks, by storing the water in a tank within another tank, and has asked the NDIC for a permit to pilot its water conservation process. Even if this works, don't expect to see a lot of recycling right away--each application of this sort will require its own public hearing. Article here

Mergers and Acquisitions News

EnerVest spends $1.4 billion on seven acquisitions

The company announced that since August, it acquired, or will acquire by year end, acquisitions totaling over $1.4 billion. Purchases include acreage in Utah's Uinta Basin from Bill Barrett, as well as purchases for mid-continent acreage from SM Energy and Laredo. This marks the fourth year in a row that EverVest has spent over $1 billion on acquisitions. Article here

Comstock Resources buys into the Tuscaloosa Marine Shale

With a deal to buy 55,000 acres in Mississippi and Louisiana for $55 million, Comstock believes the TMS provides an opportunity, based on recent success of wells drilled by other near by TMS participants. Article here

Todd Erickson
Contributor: Todd Erickson
Posted: 11/18/2013

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