The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 20th January 2015

Todd Erickson
Contributor: Todd Erickson
Posted: 01/19/2015

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

Note - Baker Hughes provided no updates from the previous week

Select states

This Week

Change from last week

3 months ago

One year ago

Alaska

11

0

7

11

Arkansas

11

-2

10

12

California onshore

17

-4

42

32

Colorado

64

-1

76

61

Kansas

24

-2

25

29

Mississippi

12

-2

17

13

N. Louisiana

30

+1

32

24

New Mexico

92

-3

98

77

North Dakota

156

-6

181

168

Ohio

48

+1

42

36

Oklahoma

201

-5

204

186

Pennsylvania

51

0

55

56

Texas

766

-44

898

841

Utah

17

-1

24

26

West Virginia

26

-2

33

34

Wyoming

47

-4

63

53

Total US

1676

-74

1918

1777

Total Canada land

437

+74

417

564

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

48.27

81.26

94.51

Brent

49.93

85.64

108.01

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.01

3.56

4.61

General News

Wood Mackenzie expects significant cost reductions as North American operators cut 2015 capex budgets

The prominent oil & gas analyst Wood Mackenzie recently published an article with 15 things to watch for in the upstream sector in 2015. Notably, they predict that operators could see cost reductions of up to 40% as demand for services falls. Woodmac expects a 40% decline in the horizontal rig count, with day rates for these rigs falling by 30% or more as the market becomes filled with idled rigs. These falling costs mean lower breakeven oil prices, with the Eagle Ford remaining among the most economic of the shale plays. Woodmac also expects dry gas plays to make a comeback as gas-directed projects become comparatively competitive with liquids-rich projects, including the Haynesville. Interestingly, they also expect Gulf of Mexico activity to actually increase by 30% from last year, as the larger, better financed operators ramp up development drilling and also drill to hold leases. Overall, expect 2015 to be a year of many changes from the past four or five as new well economics re-balance the landscape. Article here

Schlumberger and Apache lay off workers

Last Thursday, Schlumberger announced it would lay off 9,000 workers due to lower crude prices and the subsequent E&P cutbacks. Apache also plans to lay off 5% of its Houston workforce due to the soft price environment. "The decision to part with employees is always a very difficult one, and it's a step we took after pursuing other measures including a slowdown in activity and reduction in budgets given the current price environment," an Apache spokesperson noted. Halliburton has also recently announced it plans to make cuts to its Houston workforce, but has not released details. Article here

Unconventional Oil & Gas News

Bakken and Eagle Ford production still rising

Between the two plays, production was up by 45,000 barrels per day in December over the previous month. For the year, the Eagle Ford was up 40% to its current 1,600,000 bpd, while the Bakken was up 296,000 bpd from the previous year to 1,200,000 bpd. Expect increases to continue, even as operators cut capex budgets in both plays. Marginal production areas are typically the first to go, leaving the focus on the most efficient, core production areas providing the best returns in the current pricing environment. Article here

Top five producers in the Eagle Ford Shale

Based on production figures in publicly available reports, the following are estimated to be the largest producers in the play:

1. EOG Resources, producing about 170,000 bpd

2. BHP Billiton, producing about 75,000 bpd

3. ConocoPhillips, produces a total of 212,000 bpd between the Bakken and the Eagle Ford

4. Chesapeake Energy, produces 101,000 between the Eagle Ford and its other southern assets

5. Marathon Oil, produces about 75,000 bpd

Article here

Bentek ranks shale play profitability in new pricing environment

With crude prices dropping below $50 a barrel, and natural gas slipping below $3 per MMBtu, internal rates of return (IRRs) have taken a big hit for producers. Analyst Bentek ranks the 24 largest US shale plays by IRR, with the most profitable the Anadarko Cleveland and the least the Piceance. Rankings here

Environment and Safety News

Pennsylvania DEP releases study: little environmental threat from radiation in drilling waste

In what is billed as the most thorough study ever on radioactive materials associate with oil and gas extraction, the state's Department of Environmental Protection concluded "there is little potential for harm to workers or the public from radiation exposure due to oil and gas development." Water and soil from deep underground typically contain low levels of naturally-occurring radiation. The DEPs study extensively sampled sites throughout the oilfield and compared radiation levels in this water and soil waste with US EPA standards to make its conclusion. Along with the report, the DEP included its sampling data and comments for six experts who peer-reviewed the study. Article here

Mergers and Acquisitions News

NGP Energy Capital closes on $5 billion fund focused on the oil & gas industry

The private equity fund took over one year to raise a total of $5.325 billion and has already made its first investment for $100 million. Despite crashing commodity prices, it appears that the financial world still sees opportunity in the oil & gas market, perhaps now more than ever as asset prices will surely drop in a soft market. Article here

Todd Erickson
Contributor: Todd Erickson
Posted: 01/19/2015

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