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The Weekly Oil and Gas Update

The Weekly US Oil & Gas Update: 22 October 2013

Contributor: Todd Erickson
Posted: 10/21/2013

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

11

11

8

12

Arkansas

11

-1

13

17

California onshore

38

0

40

34

Colorado

73

+3

68

63

Kansas

23

-1

28

30

Montana

11

0

9

25

N. Louisiana

23

-1

23

25

New Mexico

75

0

80

87

North Dakota

171

+1

174

179

Ohio

33

-2

34

23

Oklahoma

176

-2

171

189

Pennsylvania

57

-1

54

66

Texas

817

-5

845

867

Utah

29

0

32

36

West Virginia

31

+1

26

26

Wyoming

49

0

53

50

Total US

1739

-4

1770

1839

Total Canada land

385

+32

322

355

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

100.81

106.61

88.30

Brent

109.94

108.10

109.62

Natural Gas - USD/mmbtu

NYMEX

3.76

3.67

3.35

General News

US produces more oil than Saudi Arabia and Russia when natural gas liquids taken into account

The U.S. is projected to produce an average of 12.1 million barrels a day of liquids in 2013, 300,000 barrels a day higher than Saudi Arabia and 1.6 million more than Russia, according to data presented at PIRA's Retainer Client Seminar held in New York. Credit shale plays for most of this growth. The U.S. is forecast to pump 7.4 million barrels a day of crude and condensate, 2.5 million of natural gas liquids and 1 million of biofuels, and the amount keeps growing. This number should continue to rise for some time, as long as oil prices stay above $80/barrel. Article here

Unconventional Oil & Gas News

Bakken continues its rapid production increase, pushing North Dakota's total production rate to 911,242 barrels per day in August

This is an increase fro 875,736 the previous month. At this rate, the state should exceed 1 million barrels per day by the year end, consolidating its position as the number two state in US oil production, only behind Texas. Production comes from a record 9,452 wells. Article here

Lawsuits over natural gas flaring in North Dakota

Almost a third of the wells producing in North Dakota's Bakken play are flaring their natural gas production, a necessary practice to keep producing oil at a well that does not have pipeline capacity to take the associated natural gas production. The value of this gas exceeds $100 million each month, which has prompted royalty owners to file a series of class action suits against the area's leading producers for economic loss. The defendants include Continental Resources, XTO Energy, SM Energy and Marathon Oil. The industry recognizes the problem, but pipeline and processing capicity has been unable to keep up with the rapid expansion, partly due to the lower returns from depressed natural gas prices. Article here

Environment and Safety News

Ohio shows six water quality incidents, but all from older vertical wells

Concerns around impacts to water quality form oil and gas development is probably the most significant issue for the general public as unconventional exploration and production continues to expand. The concerns are typically not focused in the right area though. As an example: the Ohio Department of Natural Resources reported that over the last four years, it received 183 water well complaints, with only six connected to oil & gas development. All six of these were associated with old vertical wells from Ohio's legacy oil & gas development, with none associated with hydraulic fracturing. Typically, if there is a problem, it comes from surface spills, or even more commonly, a water quality problem that already existed, independand of oil & gas activity in the area. The classic example is the big scene in Gasland where a Colorado homeowner lights natural gas from his kitchen fawcet on fire, implying it was the cause of nearby oil & gas activity. The State's deparment of health noted that he had been able to do that before there was any drilling activity in his area, and the state attributes this to gas naturally occuring in his water aquafer, a not-uncommon condition in water wells across the country. Bottom line; newly drilled and fracked wells, with their state-of-the-art well bore integrity and enhanced fluid handling procedures present an extremely remote chance for water contamination. Older wells, or sloppy fluid handling procedures do have some risks. These are manageable however, and focus should be applied to best practices around these relatively low risks. Article here

Mergers and Acquisitions News

Oxy's board approves streamlining measures; expect lots of asset sales

The company's board approved asset sales and other moves as part of "a strategic review to streamline and focus operations." This could include

pursuing the sale of a minority interest in operations in the Middle East and North Africa; going after "strategic alternatives" for specific Mid-Continent assets, including interests in the Williston basin in North Dakota's Bakken, Hugoton natural gas field, the Piceance basin, and elsewhere in the Rocky Mountains; and the sale of part of a 35% investment in the general partner of Plains All-American Pipeline, Ltd. Article here

Contributor: Todd Erickson