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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 11 March 2014

Todd Erickson
Contributor: Todd Erickson
Posted: 03/10/2014

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

14

-3

9

10

Arkansas

12

0

11

15

California onshore

39

+5

33

37

Colorado

61

-1

66

57

Kansas

31

+1

30

23

Montana

7

-1

12

11

N. Louisiana

27

+1

26

24

New Mexico

81

-1

78

78

North Dakota

170

+2

167

176

Ohio

41

+1

35

27

Oklahoma

182

+1

180

180

Pennsylvania

53

+1

53

72

Texas

864

+20

842

835

Utah

27

+1

28

29

West Virginia

25

-2

35

22

Wyoming

53

0

57

45

Total US

1792

+23

1775

1752

Total Canada land

587

-39

400

578

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

101.30

97.18

92.07

Brent

108.12

110.30

108.64

Natural Gas-USD/mmbtu

NYMEX

4.69

4.52

3.64

General News

Housing used as a recruitment and retention tool

A recent study by Graham Chandler, Ph.D., entitled Workforce housing as a Recruitment and Retention Strategy in Oil, Gas, Mining and Construction Operations: the other 12 hours, highlighted the challenge that the industry faces in many of its growing plays. Rising demand for workers in rural areas, coupled with large retirement numbers from an aging industry workforce have combined to create the labor squeeze. "There's no relief in sight as oil and gas operations will experience a tight labor market in all sectors: oil and gas services (highest, with turnover up to 50 percent), conventional exploration and production oil sands and pipelines," said Chandler. North Dakota leads in worker housing challenges,with average rents in Williston exceeding New York City and Los Angeles. Chandler maintains that the way for firms to compete in this labor market is to address the housing challenges for potential workers. According to Chandler, "Thus, it behooves those companies to establish a housing edge when competing in the limited talent pool, and to realize the significance of the other 12 hours." Article here

Unconventional Oil & Gas News

Shale development having major economic impact in Ohio

Ohio University's recent study on the impact of oil and gas development on eastern Ohio reveals the dramatic economic impact from area activities. According to Belmont County Commissioner Mark Thomas, "Over the next five years, the impact will create economic changes that no one has ever seen here." The study looked a 17 counties and polled 66 mayors and city managers, 16 county commissioners and 109 township trustees to gauge their impression of the effects. 61.4 percent of local officials found the overall impact "positive," while only 7.8 percent found the cumulative effect "negative." Road maintenance stood out as a leading challenge, especially given that funding falls largely to local governmental entities, along with increasing needs for additional water and sewer capacity. Article here

Natural gas drilling rig count continues to decline

The number of drilling rigs targeting natural gas has fallen 10% from the beginning of 2014, following a 15% drop through 2013. Yet, natural gas production continues to increase, keeping prices relatively flat. The increase in production despite falling rig counts is the result of several factors. Oil activity continues to increase, and natural gas is a by product (associated production), and producers continue to enhance productivity as they produce more gas from a smaller number of wells drilled, keeping them profitable despite languishing prices. This is most evident in the prolific Marcellus play, where economics remain strong for many natural gas producers. Article here

Environment and Safety News

Industry works with NGO's to craft legislation in Colorado

Three of Colorado's most active oil and gas producers, Andarko, EnCana and Noble, worked closely with national environmental advocacy group the Environmental Defense Fund to craft Colorado's new, tougher air quality rules. The process was facilitated by Colorado Governor John Hickenlooper. "It was a lot of hard work, but we came to a good conclusion," said Brad Holly, vice president for the Rocky Mountain region for Anadarko. Noble Energy's Chuck Davidson, President and CEO said "We thought this is a fabulous opportunity to show that we can do things differently," at a recent forum. EnCana's President Doug Suttles said "This was a real dialogue," speaking of the group dynamics in crafting the rules. "The uniqueness here was being able to sit with a regulator, and people like EDF, to find solutions that work for all the parties, not just one of the parties. It gives me hope that they'll be smart regulations and they'll also last." State officials expect the rules to cut methane leaks by 65,000 tons per year and VOC's by 93,500 tons per day, at an industry cost of $42.5 million a year. Article here

North Dakota Water Commission releases report

In 2013, only 5% of North Dakota's water was used for hydraulic fracturing, according to the report, and only 4% in 2012. This compares to 56% that goes to irrigation and 22% to municipal uses in 2013. Additionally, the oil and gas industry has the ability to utilize fairly saline water from groundwater depths below 2,000 feet, which is not useable for drinking or irrigation. The primary challenge to the industry in regards to water from the Missouri River is access; only 10 miles of shoreline in the oil patch can be accessed for water needs. Article here

Mergers and Acquisitions News

Southwestern Energy buys Shell's and Quicksilver's Niobrara assets

For $180 million, Southwestern will acquire 312,000 net acres in northwest Colorado in the Niobrara tight-oil play. Shell recently gave up on the acreage and suspended their drilling effort in the area. Article here

Private equity chases oil and gas; KKR closes $2 billion fund

The oil & gas industry continues to provide one of the most attractive opportunities for investors in the North American market. KKR's newest fund is more evidence of that appetite, as they raise $2 billion to invest into the industry, with he intent of generating income and capital appreciation, while seeking to provide inflation protection through commodity exposure. Article here

Todd Erickson
Contributor: Todd Erickson
Posted: 03/10/2014