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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 14th October 2014

Contributor: Todd Erickson
Posted: 10/13/2014

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

9

0

12

11

Arkansas

11

-1

11

12

California onshore

43

-1

44

38

Colorado

76

0

68

70

Kansas

25

+1

31

24

Mississippi

17

+4

15

7

N. Louisiana

31

-1

25

24

New Mexico

102

+3

92

75

North Dakota

182

-7

172

170

Ohio

42

+2

42

35

Oklahoma

211

-1

198

178

Pennsylvania

55

-2

56

58

Texas

896

+1

898

822

Utah

24

+1

27

29

West Virginia

32

+2

26

30

Wyoming

62

+2

52

49

Total US

1930

+2

1875

1743

Total Canada land

420

-10

313

353

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

84.79

105.34

102.46

Brent

88.44

105.71

110.13

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.85

3.87

3.82

General News

US natural gas production up 7.4% last month, breaking record

With an average rate of 69.1 Bcf/d in September, the US broke its production record for the 9th straight month. And this production growth appears to be continuing. "After a month of lower trajectory growth, natural gas production is poised to shatter existing records through the end of the year," said Jack Weixel, director of energy analysis for Bentek Energy. Article here

TransCanada may drop Keystone XL after numerous delays, and instead build Energy East to Canadian east coast, bypassing US

After years of frustration waiting for approvals from the US government, TransCanada may have found an alternative to the Keystone XL pipeline that was to carry Canadian crude into the US. The alternative it is considering is the Energy East pipeline, a 2,800 mile line that would transport Alberta-sourced crude to Canada's east coast at Saint John, New Brunswick, where the crude would be put on tankers and sold into international markets. If the pipeline deal goes, it would make Keystone XL largely irrelevant, foregoing US markets for the crude and instead selling to international buyers such as India. At this stage, TransCanada feels the $10.7 billion project has a high likelihood of being built. Article here

Unconventional Oil & Gas News

Startup raises $700 million for enhanced oil recovery

Windy Cove Energy plans to extract oil from aging wells utilizing CO2 injections, and private equity heavyweight Blackstone is willing to invest $700 million in equity behind the plan. Enhanced oil recovery typically takes place in older fields after production has declined significantly. "We're focusing on what's being left behind by the rush," said Windy Cove CEO Chuck Fox, who left his post as vice president of Kinder Morgan CO2 Co. last year to form the new company. "A lot of companies that are investing in shale plays may also have older conventional properties they no longer want." Look for more of these types of deals as aging tight-oil plays begin to move down the production curve. Article here

Study says US refiners can quickly ramp capacity to process more light crude

Several decades ago, US refiners made considerable capital investments to handle heavy crude from international markets. As sources for crude have shifted to domestic light, tight-oil, many fear that US refiners will not have adequate capacity to handle all the domestic crude. A recent study by Baker & O'Brien Inc. says that current estimates are incorrect and that refiners either have the capacity, or can quickly re-tool to make the capacity to handle these lighter crudes. "For relatively moderate capital, it is expected that many refiners could debottleneck their facilities to process 10-20% more naphtha and lighter material," the study said. Article here

Environment and Safety News

BP refinery ways it will only take Bakken crude shipped in newer tank cars

Public concern over potentially volitale crude oil shipped by rail car has prompted BP's Cherry Point refinery in Washington state to only take crude shipped in newer cars meeting the CPC-1232s standard. It says it will reject the older DOT-111 rail cars which have been involved in several recent derailments that resulted in fires, one killing 47 people in Canada. Coastal refineries traditionally bought their crude from Alaska or international sources shipped in by tanker or pipeline, but now the refiners need the cheaper shale-sourced crude oil to remain competitive--it is typically priced far below international crude it displaces, enabling lower production costs. With a limited pipeline infrastructure to carry shale-sourced crude and a public strongly resisting efforts to build new pipelines, this means the crude must make its way to the refineries via rail. "It's completely turned the industry on its head," said BP spokesman Bill Kidd. "Without access to crude by rail, this refinery cannot compete." Article here

Canadian crude train derails and catches fire

No people were hurt as the 100-railcar train derailed near Clair, Saskatchewan and caught fire last week. Eyewitnesses said flames from the fire reached 100 feet in the air. Article here

Mergers and Acquisitions News

Oxy looking to sell Bakken assets for $3 billion

Tudor Pickering Holt & Co. have been asked by Oxy to sell its North Dakota assets, including 335,000 net acres in the Bakken, for $3 billion. The acreage has been less successful than Oxy had hoped, and the company has chosen to instead focus on other assets, including the Permian Basin. "This is mostly undeveloped acreage," Pavel Molchanov, an analyst at Raymond James & Associates Inc. "In the context of Occidental, this is definitely not core acreage. The company has not historically played in the Bakken." Article here

Encana sells Canadian assets for $541 million

Continuing its restructuring from a natural gas to a crude oil and NGL focused company, Encana shed further natural gas assets last week as it sold 1.1 million acres in its Clearwater play to Ember Resources. With this transaction, as well as several other recent ones, Encana expects to achieve 75% of its operating cash flow from liquids production by 2015. Article here

Contributor: Todd Erickson