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Oil Megaprojects Won’t Stay On The Shelf For Long

One casualty of the oil price downturn could be the megaproject. For years, as conventional oil reserves depleted and became increasingly hard to find, oil companies ventured into far-flung locales to find new sources of production. Extracting oil from these frontier areas required more advanced technology and a lot more capital: Ultra deepwater, Arctic offshore, heavy oil sands, and increasingly, the Lower Tertiary. Often these megaprojects projects were only the purview of the largest oil companies, as smaller players did not have the resources – financial or technological – to make them work. Meanwhile, smaller drillers, at least in North America, turned to shale, which required less upfront cash and could be turned around on a quick timetable. The collapse of oil prices, however, could kill off the megaproject. The oil majors are scrambling to cut costs, and large-scale projects with high costs and long time-horizons are not making […]

Posted On : Published By : Tom Whipple
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Continental Resources expects to produce more

Oversupplied market no deterrent to shale-player Continental Resources, which said it expects to produce even more during the market downturn. Photo by David Gaylor/Shutterstock OKLAHOMA CITY, Nov. 5 (UPI) — Continental Resources, one of the largest oil and gas producers in U.S. shale basins, said it expects output to increase despite market downturn pressures. Continental, one of the premier leaseholders in the oil-rich Bakken shale in North Dakota, reported total crude oil production for the three months ending Sept. 30 increased 15 percent from the same period last year to an average 147,472 barrels per day. Gas production increased 48 percent year-on-year to 484,834 million cubic feet per day on average. Based on what the company said was strong operational performance during the third quarter, Continental said it was increasing its production forecast for full-year 2015 to between 24 to 26 percent, compared with a previous range of 19-23 […]

Posted On : Published By : Tom Whipple
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Bakken Bankruptcies on the Rise

More Bakken Bankruptcies More energy companies are exiting the Bakken Shale Play as they struggle to adapt to the prolonged low oil prices. Related: Occidental to Leave the Bakken Samson Resources and American Eagle Energy plan to sell off their Bakken assets in order to pay back what they owe as part of a restructuring under Chapter 11. These companies are among almost two dozen oil and gas companies who have succumbed to the stress of low crude prices by filing for bankruptcy in the past year. Samson Resources Corporation filed in mid September after selling off 400,000 acres in the Bakken to Continental Resources for $650 million. Potential debtors have until November 20th to make a claim against the company. “The steps we are taking will allow our company to maximize future opportunities and compete more effectively with significantly less debt on our balance sheet,” Samson CEO Randy […]

Posted On : Published By : Tom Whipple
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US Oil Producer Apache Raises Production Forecast

Nov 5 (Reuters) – Apache Corp reported a much smaller-than-expected quarterly loss and joined a growing list of U.S. oil producers in raising full-year production forecast even as many of them cut spending. Increased efficiencies, a drop in service costs and low break-even levels in core U.S. shale fields are all helping U.S. oil companies increase production on reduced budgets. U.S. producers ranging from Oasis Petroleum Inc to Devon Energy Corp have forecast higher production in their latest quarterly reports. Apache on Thursday raised its full-year North American onshore production forecast to 307,000-309,000 barrels of oil equivalent per day (boepd), from 305,000-308,000 boepd. The company also increased its international and offshore production forecast to 172,000-174,000 boepd, from 164,000- 168,000 boepd. "As we turn to 2016, prudent capital allocation will continue to be our primary focus…," Chief Executive John Christmann said in a statement. Oil producers are keeping a tight […]

Posted On : Published By : Tom Whipple
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Bank Regulators See Quadrupling of Substandard Oil & Gas Loans

Souring energy loans quadrupled to $34.2 billion since 2014 as oil prices tumbled, according to a report released today by regulators led by the Federal Reserve. Loans deemed substandard, doubtful or a loss account for 12 percent of the banking industry’s $276.5 billion oil and gas portfolio, according to the report from the Fed, Federal Deposit Insurance Corp. and Office of the Comptroller of the Currency. The review is designed to assess the risk of $3.9 trillion in loans shared by multiple financial institutions. "Companies incurred significant debt to fund drilling programs, and their capital structures became unsustainable in the face of lower oil prices," the regulators wrote in the report. The Oseberg A offshore gas platform operated by Statoil ASA stands in the Oseberg North Sea oil field 140kms from Bergen, Norway.

Posted On : Published By : Tom Whipple
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Oil Slump Forces Deep Cuts by Service Providers

Oil-field service companies are slashing costs amid an industry-rattling fall in crude prices, and no cut is too small—such as using white paint instead of yellow on underwater equipment. “It’s not big money,” said Hallvard Hasselknippe, president of subsea at Technip SA, TKPPY -2.80 % noting that adding pigment to make the industry standard yellow paint is more expensive. “There are many examples like this.” The French energy engineering and construction company has been forced to take more drastic measures as well, saying in July it would cut 6,000 jobs. But scouring for even small cost savings marks a significant shift for the oil industry, which is renowned for its giant, customized projects that over the past decade became ever more complex and expensive. Such moves come amid upheaval in the oil-field services industry, which finds itself competing for a shrinking number of oil projects with crude now trading […]

Posted On : Published By : Tom Whipple
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Transocean hobbled by weak market

Offshore rig company Transocean reports weak results for the third quarter as market slump continues. Photo by Kyle Waters/Shutterstock ZUG, Switzerland, Nov. 5 (UPI) — Offshore rig company Transocean reported an adjusted net income for the third quarter that was more than 20 percent less than the previous quarter. Total revenues for the rig company were $1.61 billion, down 14 percent from the previous quarter. Adjusted net income of $316 million was 22.5 percent lower than second quarter 2015. Lower crude oil prices means energy companies have less capital to invest in oil and gas exploration, a trend reflected in a decline in the number of rigs actively engaged in exploration and production in the United States. In early 2015, Transocean announced plans to scrap four of its offshore rigs . Of those, only Transocean Legend was active this year. It was last leased by ConocoPhillips for exploration off […]

Posted On : Published By : Tom Whipple
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‘Peak demand’ means world may never see oil at $100 a barrel again

Just as the energy industry has brushed aside concerns that the world could run out of oil, industry executives now say they believe it is demand, rather than supply, that is nearing its apex. In 1985, Ian Taylor, today the chief executive of the world’s largest oil trader Vitol, was part of a team at Royal Dutch Shell that forecast oil prices would rise five fold to $125 a barrel in 2015 as global reserves were expected to become more scarce. Now he says it is unlikely to ever reach those levels again. Oil today stands at around $50 a barrel, having more than halved since June 2014 after global supplies dramatically rose due in large part to the U.S. shale oil boom but also due to the unlocking of huge offshore reserves in Brazil, Africa and Asia. "We all talk about ‘peak supply’ and maybe with shale that […]

Posted On : Published By : Tom Whipple
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Peak Oil Open Thread

North Dakota Spuds hit 5 year low . Not since January of 2010 have spuds been below 77, the point they hit in September. Indonesia: Missing pieces needed to revive oil and gas sector The future of Indonesia’s oil and gas industry is in peril. Since the early 2000s, the resource-rich country has been experiencing a persistent annual oil production decline of 4 percent , significantly under performing relative to most producing countries. The continued oil-production decline is mainly down to fields maturing and a downtrend in discoveries of new reserves. Indonesian oil production only is around 800,000 barrels per day (bpd), barely half the 1.4 million bpd production in 2000. The reserves-replacement ratio is even more worrisome, averaging merely 75 percent over the same period, which means a quarter of oil produced is not replaced. Projecting the future from these numbers alone, oil production will tumble to around […]

Posted On : Published By : Tom Whipple
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Chesapeake Cuts Budget Again On Weak Oil And Gas Prices

Chesapeake cuts its 2015 capital budget for the second time this year to cope with a slump in oil and gas prices, but raises its production forecast. Nov 4 (Reuters) – Chesapeake Energy Corp cut its 2015 capital budget for the second time this year to cope with low oil and gas prices and swung to a large quarterly net loss as the second largest U.S. producer of natural gas wrote down the value of assets. The Oklahoma City, Oklahoma company’s shares fell 5 percent to $7.25 in morning New York Stock Exchange trading, as third-quarter cash flow fell short of Wall Street estimates. U.S. oil and gas producers are slashing budgets, costs and streamlining operations as a near 60 percent drop in global oil prices since June last year saps profitability. In response, Chesapeake has so far cut about 15 percent of its workforce and suspended its dividend. […]

Posted On : Published By : Tom Whipple