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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 28th April 2015

Contributor: Todd Erickson
Posted: 04/26/2015

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

-1

11

9

Arkansas

9

+1

12

12

California land

13

+1

14

40

Colorado

37

+1

64

64

Kansas

12

+1

23

31

Mississippi

4

0

9

13

N. Louisiana

29

+3

30

26

New Mexico

48

-1

89

91

North Dakota

78

-5

147

179

Ohio

25

0

44

35

Oklahoma

115

-3

193

192

Pennsylvania

49

+1

53

61

Texas

393

-19

753

894

Utah

7

0

15

27

West Virginia

21

-1

25

27

Wyoming

23

0

46

50

Total US

932

-22

1633

1861

Total Canada land

78

+1

429

165

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

57.15

49.80

101.13

Brent

65.28

51.74

109.12

Natural Gas-USD/mmbtu

NYMEX Henry Hub

2.56

2.88

4.72

General News

US crude oil production takes a dive in January

According to the EIA, US crude oil production fell at least 135,000 barrels per day (bpd) in January, compared to December 2014. North Dakota's Bakken took the biggest hit, falling 41,000 bpd, with significant declines also reported in California, offshore Gulf of Mexico, Alaska, and Wyoming. It appears that supply has begun to rebalance in a material way with demand following recent rig reductions. Article here

Drilled but uncompleted wells, known as the Fracklog, would be as high as 4,731 wells

This number comes from a recent Bloomberg Intelligence analysis. Halliburton puts the number at 3,000 while analyst IHS puts it around 4,000. Regardless, the number is much higher than ever before as operators wait on completing drilled wells to save capital, and wait for prices to recover before turning on high-decline shale wells. Many analysts believe that this massive backlog of wells, which can quickly become producing wells, will keep prices from rising much above $60 to $65 a barrel in the short term since supply can so quickly be ramped up. The Permian Basin has the highest fracklog, with 1,540 wells waiting for completion. The Eagle Ford has the second highest number at 1,250, and the Bakken has 632. Article here

Operator's costs for hydraulic fracturing falling faster than expected

Analysts at IHS CERA expect the costs for hydraulic fracturing to fall by 32% this year, much more than its original forecast of 24%. Operators have reported significant declines in drilling costs as well, reported down generally about 20% form last year's prices. "This represents significant savings for operators", said IHS analyst Christopher Robart, who cautioned that these savings would not be repeatable in 2016. These falling costs have improved Pioneer Natural Resource's economics enough that they have announced the addition of drilling rigs this June. Article here

Unconventional Oil & Gas News

EIA says Marcellus top producing natural gas field in the US

The Marcellus Shale in Pennsylvania and West Virginia produced 2.86 trillion cubic feet (tcf) of gas in 2013, far outpacing the second place producer, the Barnett Shale in Texas, which produced 1.95 tcf. The EIA estimates the total gas in place in the Marcellus at 64.9 tcf, while the Barnett has 26.0 tcf. Given the Marcellus' increasing production due to its status as the low-cost field in the US, we can expect to see continued production increases in future years. Article here

Environment and Safety News

Texas wants to shut down Barnett waste water injection wells for earthquake fears

The state's regulator of oil & gas activity, the Texas Railroad Commission,said it will consider shutting down two wells operated by XTO Energy and EnerVest Operating unless they can "show cause" at June hearings why their permits should not be cancelled. The problems is that nearby towns of Azle and Reno have experienced a spate of earthquake activity lately, in an area that had no previous record of seismic activity before the injection wells.

"The Railroad Commission has in place strong rules addressing the issue of seismicity and disposal well activity, and it is incumbent upon us to apply these rules where and when appropriate for the protection of public safety and our natural environment," Chairman Christi Craddick said. Article here

Mergers and Acquisitions News

Encana looking to sell its Haynesville natural gas assets

People with knowledge on the matter have reported that Encana has hired Citigroup to find a buyer for its 350,000 acres in Louisiana's Haynesville Shale, which could be valued as high as $1 billion. This is part of a broader reorganization of the company as it continues its pivot away from natural gas production towards more liquids. In 2015,the company plans to spend 80% of its capex budget in four areas: the Eagle Ford and Permian in Texas, and the Montney and Duverney Shale basins in Canada. Article here

Contributor: Todd Erickson