The Weekly US Oil & Gas Update: 29 October 2013

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

New EIA report - shale development becoming more productive

Some have characterized the shale revolution in the US as a bubble, with increases only coming from a massive volume of expensive-to-drill wells which decline rapidly. This argument is only successful if you believe that well productivity will decline, as core acreage gets drilled up and producers move to less productive locations. The recent report by the US Energy Information Administration provides information however, that goes a long way to deflating this bubble theory. The study looked at the six major shale formations driving the expansion in oil & gas production, and show that five of the six are experiencing rapid growth, and more interestingly, production per rig has been rising even more impressively. This means that each well is likely to produce more than the last one, not less as critics have argued. This is because producers are still perfecting the technology of horizontal drilling and hydraulic fracturing, a complex activity happening thousands of feet below the surface. As they continue to perfect these techniques, (and I hear about significant advancements all the time) expect these efficiencies to continue to increase, as more oil and gas can be extracted with the same level of activity. Article here

Anadarko and Noble swap acreage in Colorado's DJ Basin

Each party contributed 50,000 acres to the deal, which will enable each to consolidate their contiguous acreage. Each company utilizes pipelines to carry fresh and produced water, eliminating the impact of high-volume truck traffic, and the swap makes these activities more efficient as both continue to develop their acreage. Both Noble and Anadarko are spending around $1.7 billion in 2013 capex on the play. Article here

Unconventional Oil & Gas News

The Eagle Ford beats the Bakken to 1 million barrels per day

According to the EIA, the Eagle Ford hit 1 million bpd production mark in August. The Bakken had the earlier start, with drilling beginning to 2003, but a tremendous amount of capital invested into the Eagle Ford since its initial wells in 2009 have resulted in a more rapid rise in total production. This marks the first time the EIA has issued such data from the major shale plays, and take note that the EIA's information often differs, sometimes dramatically, from that issued from state regulators and agencies. Article here

Environment and Safety News

The EIA says carbon emissions dropped substantially over the last year, and credits natural gas; not everyone happy though

On the surface, this news looks all good. According to the EIA, domestic carbon-related emissions dropped by 3.8% from 2011 to 2012, despite a rise in GDP over that same period, and specifically credits the increased use of natural gas for power generation as the reason. The drop in carbon emissions since 2007 is 12 percent, about the same time the natural gas revolution started, and carbon emissions are now at their lowest level since 1994. This came about because natural gas has rapidly been replacing coal as the primary fuel to generate electricity, and gas emits about half the carbon as coal per kilowatt generated. Here's an interesting fact; the US is the only major industrialized country to have met its Kyoto Treaty targets for carbon reduction, and of course we didn't even sign the treaty. Moreover, the availability of cheap energy is expected to provide a big boost to the US economy. Although this all sounds like good news, not everyone is celebrating. According to environmental activists and some experts, inexpensive natural gas delays the move to a purely renewable future, while an increase in GDP results in higher per-capita consumption, further delaying a future of a significantly-decreased human footprint. Personally I am impressed by natural gas's immediate impacts on our well-being, and I am hesitant to trade this for a distant, as yet undefined utopia where no fossil fuels are burned. Article here

Mergers and Acquisitions News

Bill Barrett sells Uinta Basin natural gas asset for $371 million

The deal convey's Bill Barrett's West Tavaputs asset to an undisclosed buyer. Barrett CEO and President Scot Woodall said that the asset sold for 5.6 times cash flow, and approximately $5,450 per thousand cubic feet of flowing production. Article here

Ultra Petroleum spends $650 million to acquire oil-producing Uinta acreage

The Denver-based company has focused on dry gas acreage since its inception, but this acquisition will enable it to develop oil into its mix. The asset currently includes 38 wells producing 4,000 bpd, and has 575 future drilling locations, with net risked reserves exceeding 90 million bbls of oil. Article here

Pioneer Natural Resources sells equity in Alaska subsidiary to focus on its Permian assets

The company sold its equity in Natural Resources Alaska Inc. to Caelus Energy Alaska LLC for $550 million. Pioneer will use the proceeds to increase its rig count in its Spraberry-Woldcamp asset in the Permian Basin from 5 to 8 horizontal rigs, and could reach 10 rigs by the end of 2014. Pioneer is the largest acreage holder in the Spraberry with 900,000 gross 730,000 net acres. Article here

Newfield sells Malaysian assets for $898 million

The Woodlands, TX based company will sell its 3.3 million offshore acres as it divests international assets to focus on its domestic liquids production. Article here