The Weekly USA Oil & Gas Update: 26th January 2015



Todd Erickson
01/26/2015

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

Select states

This Week

Change from last week

3 months ago

One year ago

Alaska

11

0

8

11

Arkansas

12

+1

12

12

California onshore

14

-3

44

31

Colorado

64

0

75

62

Kansas

23

-1

21

31

Mississippi

9

-3

16

13

N. Louisiana

30

0

32

24

New Mexico

89

-3

103

79

North Dakota

147

-9

180

169

Ohio

44

-4

44

36

Oklahoma

193

-8

204

187

Pennsylvania

53

+2

52

55

Texas

753

-13

906

839

Utah

15

-2

23

26

West Virginia

25

-1

36

33

Wyoming

46

-1

61

53

Total US

1633

-43

1927

1777

Total Canada land

429

-8

426

590

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

45.00

78.77

95.82

Brent

48.08

84.90

108.72

Natural Gas-USD/mmbtu

NYMEX Henry Hub

2.87

3.82

5.66

General News

The glut continues: US crude oil inventories at highest seasonal levels in 80 years

The EIA reported last week that crude oil inventories rose at their highest rate in 14 years, which created the largest seasonal level in 8 decades. Most didn't see this coming. "The magnitude of the build in crude came as a surprise," said Andrew Lipow, president of Lipow Oil Associates. Domestic prices reacted by falling again. Article here

Low prices could result in stripper well shut-ins

One in every ten barrels of oil produced in the US comes from stripper wells; wells producing fewer than 15 bpd which typically have relatively high per-barrel operating costs. According to Wood Mackenzie, prices below $50 a barrel results in financial losses for a large percentage of these wells. "Once the oil price reaches these levels, producers have a sometimes complex decision to continue producing, losing money on every barrel produced, or to halt production, which will reduce supply," said Robert Plummer, analyst at Wood Mackenzie. "U.S. onshore ultra-low production volume stripper wells could be the first to be cut." The problem with this is once many of these stripper wells are shut in, they will not be started back up. Water and sand accumulation after shut in raise the cost of startup above the value of the production. Article here

Unconventional Oil & Gas News

Low crude prices mean high financial risk for some Bakken producers

According to a financial risk assessment performed by Cost & Capital Partners, LLC, several Bakken pure-play producers (those with over 90% of their total production coming from the Bakken) have a critical risk of defaulting on debt in the next four quarters. According to Tom Bokoway, Partner with Cost & Capital Partners, "you've got Emerald Oil, you've got Whiting and you've got Oasis," Bokowy said. "Those three are probably in the worst shape." Bokoway explained that the risk didn't necessarily threaten ongoing operations, just the loss of access to capital, which could impact capital spending and growth. Article here

Environment and Safety News

Pipeline spills crude into Montana's Yellowstone River

The 12" Poplar pipeline that transports Bakken crude oil spilled an estimated 1,200 barrels of oil in to the Yellowstone River near Glendive, Montana. "This is a significant spill, and the coordination of various response activities at the spill site, the city of Glendive, and at downstream locations will be a priority over the next several days," said Richard Mylott of the EPA. The Montana Governor declared a state of emergency since the river provides municipal water to several towns downstream. Article here

Mergers and Acquisitions News

Kinder Morgan acquires Hiland Partners for $3 billion

The deal enables the US's largest pipeline company to enter the Bakken market. "The Bakken is the one producing basin in which Kinder Morgan doesn't have a large presence," Chief Executive Rich Kinder told analysts on Wednesday. "We are in the Tier 1 sweet spot of the Bakken. Otherwise we wouldn't have done the deal." Hiland was founded by Continental's Harold Hamm. Article here