The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 28th October 2014

Todd Erickson
Contributor: Todd Erickson
Posted: 10/27/2014

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

8

+1

5

12

Arkansas

12

+2

11

12

California onshore

44

+2

45

40

Colorado

75

-1

69

73

Kansas

21

-4

30

23

Mississippi

16

-1

15

6

N. Louisiana

32

0

29

23

New Mexico

103

+5

94

75

North Dakota

180

-1

178

171

Ohio

44

+2

43

34

Oklahoma

204

0

204

175

Pennsylvania

52

-3

53

58

Texas

906

+8

886

812

Utah

23

-1

27

29

West Virginia

36

+3

27

30

Wyoming

61

-2

52

49

Total US

1927

+9

1883

1738

Total Canada land

426

+9

392

401

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

80.32

98.26

98.74

Brent

85.23

103.63

108.29

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.59

3.87

3.61

General News

Wood Mackenzie study: US to become energy independent by 2025

Both higher production and lower demand will combine to make the US a net exporter of energy for the first time since 1952, according to the recent report. The rise in production comes from the newly-added 3 million barrels per day of crude from tight oil, along with an additional 27.5 billion cf/d of natural gas, representing a 42% increase in production over the last 7 years. Production numbers could rise even more quickly if the ban on US crude exports were lifted. "If crude oil exports resulted in U.S. producers receiving an additional $5 per barrel, production could increase by 350 to 450 thousand barrels per day," Wood Mackenzie reported. If enhanced oil recovery (EOR) techniques undergoes additional technological advancement, production could experience additional increases. "EOR techniques currently being tested are especially promising and early indicators suggest recovery rates could double," said Wood Mackenzie. Article here

Oxy CEO expects service providers to cut fees as oil prices drop

In a conference call with analysts, Oxy CEO Stephen Chazen said he doesn't expect production margins to drop severely based on recent oil price reductions because service providers will have to cut fees to retain customers. "We expect, since the service competitors were happy to raise prices when oil was going up, that they will be just as happy to have their prices lower in the future." Baker Hughes still thinks oil prices need to drop more for producers to begin to cut spending, expecting fees to stay firm until commodity prices dropped to $75 a barrel for several months or more. Article here

Unconventional Oil & Gas News

Study shows that Bakken could double production over next 5 years

In order to help it better understand impacts from oilfield growth, the North Dakota state legislature hired KLJ Engineering, along with help from the North Dakota Sate University and the North Dakota Energy and Environmental Research Center, to conduct a study to provide view of the future of oil development in the state. According to KLJ project manager Mike Wamboldt, "[t]hey wanted us to address the effect of technological advances, especially in CO2-based enhanced oil recovery, the maturation of the oilfield's development and the impact of infrastructure and environment." The study concluded that the state has the potential to add 18,000 barrels of daily oil production per month for the next five years, putting total output to 2 million bpd at the end of this period, a number it called "highly probable". Falling oil prices are not expected to have a significant impact on the forecasted production rise, with some areas of the play estimated to remain profitable at $35 a barrel. Article here

Environment and Safety News

Evidence is clear - safest way to transport oil is by pipeline

With the rise in US crude oil production, transportation to market has become a critical issue. The general public has been resistant to the construction of new pipelines; witness the delays in approving the Keystone XL pipeline. This has left rail and truck to pick up the slack in takeaway capacity as production overwhelms the current pipeline system. In North Dakota's Bakken, rail accounts for up to 70% of crude transported out of the play. New information suggests that the general public however, has not critically analyzed the environmental and safety risks from delaying construction of pipelines. According to a report published by the Manhattan Institute, pipelines are safer than alternative transportation methods by a factor of 30 to 1, resulting in far fewer spills or injuries per barrel shipped. The Canadian-based Fraser Institute came to the same conclusion, stating that the resistance to pipeline transportation is forcing oil to its markets "by modes of transport that pose higher risks of spills and personal injuries such as rail and road transport." Article here

Mergers and Acquisitions News

Chesapeake withdraws its IPO plans for oilfield services unit

The Oklahoma-based company has been planning to spin off its oilfield services unit for some time, but appears to have changed these plans. The company just filed to withdraw its IPO request from the SEC. No word has been given on Chesapeake's plans for the unit. Article here

Todd Erickson
Contributor: Todd Erickson
Posted: 10/27/2014

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