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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 08 April 2014

Contributor: Todd Erickson
Posted: 04/06/2014

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

-3

11

9

Arkansas

12

0

11

15

California onshore

37

-1

32

37

Colorado

62

-1

65

59

Kansas

27

-2

29

25

Montana

7

0

10

10

N. Louisiana

25

-2

25

23

New Mexico

90

+2

79

81

North Dakota

178

0

174

174

Ohio

38

0

35

30

Oklahoma

193

+5

169

179

Pennsylvania

54

+3

56

63

Texas

877

+11

832

825

Utah

27

0

23

28

West Virginia

26

0

32

20

Wyoming

49

-1

53

44

Total US

1818

+9

1751

1738

Total Canada land

233

-63

281

203

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

100.62

91.45

93.36

Brent

105.74

108.02

103.16

Natural Gas-USD/mmbtu

NYMEX

4.50

4.61

4.18

General News

EIA - Five states and Gulf produce over 80% of US crude oil

The big producers, in order, are Texas (35%), North Dakota (12%), California (7%), Alaska (7%), then Oklahoma (4%). The Gulf of Mexico (17%), federal jurisdiction, also contributes significantly. Overall, crude oil production in the US grew 15% last year, with Texas and North Dakota leading the growth with 29% increases. Over three years, Texas' crude oil production has increased 119% and North Dakota's 177%. During this period, the Gulf, Alaska, and California all experienced declines in production. Article here

BNSF Railroad to spend $5 billion in 2014 capex, including infrastructure to ease congestion transporting Bakken crude

Rail transportation carries the majority of crude from North Dakota's Bakken shale play to market, and the increased traffic is causing congestion. BNSF sent 300 additional crew members to its northern region and plans to add 500 locomotives and 5,000 railcars this year to help ease the snarls, according to BNSF CEO Carl Ice. Also in the works is an upgrade to newer, safer tanker cars, especially after recent incidents with derailments and resulting fires involving Bakken crude oil. BNSF would like to see "an aggressive phase-out" of the older tank cars, according to Ice. "The right thing to happen is what we've called the next-generation tank car, at least for our railroad," Ice said. There are about 92,000 tank cars in service hauling oil and ethanol. Of those, only about 14,000 were made after the industry agreed to safety enhancements in 2011, according to the Washington-based Association of American Railroads trade group. Article here

Unconventional Oil & Gas News

Wood Mackenzie - Bakken to grow to 1.7 million bpd by 2020

The field, located in North Dakota and Montana, produces just under 1 million barrels per day right now. "We're very confident on the future of the Bakken," said Jonathan Garrett, an analyst a Wood Mackenzie, who expects the field's life to last another 25 to 30 years. Massive investment drives this growth, with an estimated $15 billion invested into the Bakken in 2014 b exploration and production companies. Article here

Report estimates $18 billion in Utica Shale related projects coming to Ohio

Many of these projects are midstream, such as pipelines and processing plants, but many also include related industries, such as expansions to pipe manufacturers' operations. The remaining investments range from electric generation projects to hotel development to oil and gas workforce training, driven by the booming shale play in the state. Article here

Environment and Safety News

Ohio follows Colorado and Wyoming in regulating fugitive air emissions

The new Ohio state air rules require regular monitoring for releases of methane gas from valves,connectors or other production equipment, known as fugitive emissions. A first attempt at fixing any found leaks must be made within five days, and operators will be required to submit detailed leak detection and repair reports to state regulators on an annual basis. Semi-annual or annual checks will be then be required in subsequent years, if there are few leaks.If the leaks exceed 2 percent, the operators must comply quarterly. "This is serious medicine for a serious problem," said Jack Shaner of the Ohio Environmental Council. The rule also was endorsed by the Environmental Defense Fund. "This is just the latest example of leadership from the Kasich administration in minimizing risk around oil and gas development. It reflects a fast-growing recognition that, if we're going to develop this resource, we have to do it right. It's essential we maintain an unblinking vigilance in driving down harmful emissions," said EDF President Fred Krupp in a statement.

Anadarko settles Tronox clean up suit for $5 billion

The suit was the result of a contingent clean-up liability from when Anadarko acquired Kerr-McGee, an Oklahoma-based energy and chemical company. Anadarko's stock price went up over 14% on the announcement of the settlement terms; investors were fearing a larger award amount and having a final decision removes uncertainty and distractions for Anadarko's management. Article here

Mergers and Acquisitions News

Encana sells Jonah Field assets to TPG Capital for $1.8 billion

The divestiture is part of Encana's broader strategy to restructure away from dry gas and focus on its five core liquid-rich areas: Montney in British Columbia, Duvernay in Alberta, the DJ Basin in Colorado, the San Juan Basin in New Mexico, and the Tuscaloosa Marine Shale in Louisiana and Mississippi. Article here

Deal activity falls as profitability gets squeezed

In the first quarter of 2014, just $33.4 billion in deals were made, down 28% from the last thee years' average. The likely reason is declining profitability in the sector, as normalized profits were down 16% from last year, and 25% from 2011 as operating and development costs continue to rise. Article here

Contributor: Todd Erickson