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Crude Ambition Crashes as Price Slump Exposes Risk Takers

Dangerous and difficult oil fields that looked like goldmines when crude fetched more than $100 a barrel have turned into money pits as oil crashes to multiyear lows. Collapsing oil prices not only shrink profits for producers and imperil dividend payouts prized by investors, they can cripple a company’s future growth by starving it of cash needed to find, drill, assess and equip discoveries. A spending halt in deep-water fields and Canada ’s oil sands could disrupt the chain of new projects needed to keep the world supplied as older wells dry up. For the biggest explorers, the impacts of slumping prices are dramatic. Every $10 price drop erases $2.8 billion in annual cash flow for Exxon Mobil Corp., according to analysts at Barclays Plc. (BARC) For Chevron Corp. (CVX) , which is more crude-dependent than its bigger rival, a $10 change translates to $3.85 billion in cash flow. […]

Posted On : Published By : Tom Whipple
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Shale Producers in U.S. Cutting Rigs Loose Early Amid Oil Slump

U.S. oil producers are bailing out of long-term contracts for drilling rigs as crude prices sink below $50, another signal that the nation’s shale boom is slowing. Yesterday, Helmerich & Payne Inc. (HP) , the biggest rig operator in the U.S., said it had received early termination notices for four contracts. Today, a second contract driller, Pioneer Energy Services Corp. (PES) , said four rigs had been canceled early. Producers may cut short another 50 to 60 agreements, according to Bloomberg Intelligence analyst Andrew Cosgrove. Companies are paying to cancel rigs rather than keep drilling in the face of a 55 percent plunge in prices. Mounting rig cutbacks imperil the unprecedented boom in U.S. output that’s contributed to a global glut of oil and helped sustain a price war among the world’s largest suppliers. “This is just the beginning,” R.T. Dukes, an upstream analyst at Wood Mackenzie Ltd., said […]

Posted On : Published By : Tom Whipple
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U.S. oil production holding steady

Government data show U.S. oil production holding steady despite slump in oil prices. UPI/Gary C. Caskey WASHINGTON, Jan. 8 (UPI) — U.S. crude oil production increased slightly for the week ending Jan. 2 despite a decline in rig activity and slumping prices, government data show. The U.S. Energy Information Administration said in a weekly petroleum status report total U.S. oil production was 9.13 million barrels per day for the week ending Jan. 2, up about 11,000 bpd from the previous week. Production from the Lower 48 was behind the entire gain as output from Alaska was unchanged from the previous week. Oil prices are at the point where some companies working in U.S. shale basins and elsewhere in North America are cutting back on spending programs. Oil services company Baker Hughes in its latest assessment of the exploration and production sector in the United States found rig activity was […]

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Oil price slump hits Canadian producer

Canadian oil company Arc Resources to unload shares to help fund operations during low oil price conditions. (UPI Photo/Roger L. Wollenberg) CALGARY, Alberta, Jan. 8 (UPI) — Canadian energy company ARC Resources Ltd. said it plans to sell more than 15 million shares to raise capital to fund operations in the slumping oil market. ARC in mid-2014 rolled out an $875 million capital program for this year that envisioned oil priced at around $80 per barrel, about 35 percent higher than the current market price. In a statement Wednesday, the company said it plans to sell 15.5 million shares to raise around $350 million to fund developments in 2015 . "ARC plans to execute a $750 million capital program in 2015, reduced from the previously announced $875 million capital budget, due to the continued deterioration in commodity prices," it said. The company last year set a production target of […]

Posted On : Published By : Tom Whipple
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Shale explorer Sanchez Energy cuts spending

Sanchez Energy keeps tight focus on Eagle Ford shale in Texas, but trims capital plans in response to low oil prices. Photo by Calin Tatu/Shutterstock HOUSTON, Jan. 8 (UPI) — U.S. shale explorer Sanchez Energy said it’s the latest to cut its capital plans for 2015 because of slumping oil prices. "In response to the deteriorating commodity price environment, Sanchez Energy has elected to further reduce its 2015 capital plan to a range of $600 million to $650 million," President and Chief Executive Officer Tony Sanchez said in a statement. The range is nearly 30 percent less than the capital plan announced in November, which the CEO said itself was less than the $1.15 billion envisioned before oil prices started their decline in June. Several international energy companies have reduced their spending plans for the year in response to the bear market for crude oil. Oil prices have lost […]

Posted On : Published By : Tom Whipple
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In Low Gasoline Prices, an Opening Emerges for Higher Taxes

ENLARGE The sharp drop in gasoline prices over the past few months is providing a rare political opening for state and federal officials who want to raise gasoline taxes to repair highways and boost construction jobs. In Iowa, Republican Gov. Terry Branstad is gauging lawmakers’ support for the first state gas-tax increase since 1989, among other options to raise transportation funds. In Michigan, the GOP-controlled legislature approved a plan last month for a ballot initiative to boost the gas tax for road repairs. In Utah, Republican leaders in the state House signaled this week they are moving to raise the gas tax to cover a transportation-funding shortfall. In the nation’s capital, several top Senate Republicans—supported by some Democrats—are signaling an openness to raising the federal levy from the 18.4 cents a gallon it’s been at since 1993. The backers include business groups and corporate leaders who want to see […]

Posted On : Published By : Tom Whipple
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Oil-Price Drop Takes Shine Off Steel Town

ENLARGE Lorain, Ohio, is starting to feel pressure from the sharp drop in oil prices. Above, Republic Steel’s plant along Black River in Lorain supplies metal used to make oil pipes and tubing. Steve Manheim/The Chronicle-Telegram LORAIN, Ohio—The collapse of oil prices in the last six months is threatening to end a recent industrial revival in manufacturing centers like this town of 64,000 on the banks of Lake Erie. The U.S. shale drilling boom lifted Midwest manufacturing economies, enriched property owners with mineral rights and even brought back the fat blue-collar paychecks that once were harder to find. But as drilling and exploration for new oil and gas slow with the drop in energy prices, cutbacks at heavy-industry companies are cropping up. The U.S. Steel Corp. plant here, which depends heavily on oil and gas companies to buy its steel pipe and tubes, warned on Monday it might have […]

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Power generation to be biggest demand driver for natural gas: API

Houston (Platts)–8Jan2015/245 pm EST/1945 GMT A continued increase in demand for natural gas for use in power generation is expected to be the biggest driver for US gas demand in the coming year, the chief economist of the American Petroleum Institute said. "The biggest trend is probably what we’ve seen in previous years and that’s more natural gas in power generation, as we see more coal plants shut down, primarily for environmental regulations," John Felmy said in an interview Wednesday. "You may see some increases in industry use as the economy improves and perhaps some commercial [demand], but I think electric power is going to be the biggest growth." According to the "The State of American Energy Report 2015," API’s annual outlook on US energy trends for the new year released earlier this week, "The United States has vaulted past Russia to become the world’s largest natural gas producer […]

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Canada PM: Resilient Oil Industry Will Survive Low Prices Shock

Canadian Prime Minister Stephen Harper says the country’s energy industry was resilient and could survive the stresses caused by plunging crude oil prices. DELTA, British Columbia, Jan 8 (Reuters) – Canadian Prime Minister Stephen Harper on Thursday said the country’s energy industry was resilient and would survive the stresses caused by plunging crude oil prices. Harper also told reporters that while lower prices would have a significant impact on oil-producing provinces, consumers would enjoy the benefit. Benchmark prices for crude have halved over the past six months, posing a particular challenge for oil producers. "As rapid a negative a change that this is for the industry, the industry, even in my lifetime, has lived through changes this extreme and more on many occasions," Harper told reporters during an event in British Columbia. "This not without precedent. It’s a resilient industry and it will see its way clear to a […]

Posted On : Published By : Tom Whipple
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Shale Producers in U.S. Cutting Rigs Loose Early Amid Oil Slump

U.S. oil producers are bailing out of long-term contracts for drilling rigs as crude prices sink below $50, another signal that the nation’s shale boom is slowing. Yesterday, Helmerich & Payne Inc. (HP) , the biggest rig operator in the U.S., said it had received early termination notices for four contracts. Today, a second contract driller, Pioneer Energy Services Corp. (PES) , said four rigs had been canceled early. Producers may cut short another 50 to 60 agreements, according to Bloomberg Intelligence analyst Andrew Cosgrove. Companies are paying to cancel rigs rather than keep drilling in the face of a 55 percent plunge in prices. Mounting rig cutbacks imperil the unprecedented boom in U.S. output that’s contributed to a global glut of oil and helped sustain a price war among the world’s largest suppliers. “This is just the beginning,” R.T. Dukes, an upstream analyst at Wood Mackenzie Ltd., said […]

Posted On : Published By : Tom Whipple