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Oilfield cannibals: to save cash, U.S. drillers strip idle rigs

Cam Hewell runs Premium Oilfield Technologies, a small company that makes equipment and spare parts for drilling rigs from North Dakota to Texas. Like his rivals, he is trying to withstand the worst oilfield downturn in six years, but they face a vexing obstacle: cannibals. In a bid to save cash, rig owners are cannibalizing parts such as motors and drill pipe from idled rigs to fix 800 active ones in the U.S. when stuff breaks. In good times, they would buy new equipment from companies like Hewell’s or industry leader National Oilwell Varco Inc when parts fail. Now, they just pick over any of about 1,100 rigs idled by the price crash. Cannibalization is so widespread in this downturn that services companies and others say even after oil prices recover it will take six months or more to see a significant rebound in drilling and production – a […]

Posted On : Published By : Tom Whipple
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Oil Drillers Hunker Down for More Pain One Year Into Bear Market

A year after oil sank into a bear market, the industry is still hunkering down for a long period of low prices, with Europe’s biggest producer seeing only the first glimpses of a recovery. In the last five months, U.S. production sank by 590,000 barrels a day, or more than 6 percent. The bad news: Drillers are cutting costs with a speed and brutality not seen in decades, enabling many to continue producing at a high level even as prices remain low. Goldman Sachs Group Inc. sees crude falling by another $10 a barrel as storage tanks fill up in the coming months. “I see the first mixed signs for recovery,” said Ben Van Beurden, Royal Dutch Shell Plc’s chief executive officer, speaking at the Oil & Money conference in London. Still, the company is planning for a long period of low prices, he said: “With U.S. shale oil […]

Posted On : Published By : Tom Whipple
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US EIA Sees Tighter 2016 Oil Market As Demand Accelerates

Global oil demand will grow by the most in six years in 2016 while non-OPEC supply stalls, according to a monthly U.S. energy report that suggests a surplus of crude is easing more quickly than expected. Total world supply is expected to rise to 95.98 million barrels a day in 2016, 0.1 percent less than forecast last month, according to the U.S. Energy Information Administration’s Short Term Energy Outlook. Demand is expected to rise 270,000 bpd to 95.2 million barrels a day, up 0.3 percent from September’s forecast due in part to an outlook for stronger demand growth from China. The tightening market balance comes as U.S. production starts to decline, although the EIA’s latest forecasts suggest a smaller fall-off in annual output than previously expected. U.S. oil output is expected to fall from an average of 9.25 million bpd in 2015 to 8.86 million bpd in 2016, compared […]

Posted On : Published By : Tom Whipple
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The US Shale Oil Industry Will Simply Vanish

After many years of prosperity, the tough time has come for the US shale industry. Dramatic US oil production decline is inevitable and many shale companies face bankruptcy. Their assets can end up to larger producers, reinforcing market concentration. US energy independence can only be saved by government intervention. US government will remove exports limitation and FED September rate hike suspension is related to the unsustainable debt levels US oil industry is keeping afloat. But that is simply not enough to prevent a collapse of the US oil industry. From our research we learn that cost per barrel declined slightly but decreasing production cost is not enough to compensate for lower oil price. US oil production already declined 400K barrels per day from its April peak. We estimate an other 2 to 3 Million barrels can be wiped out the coming year. A few months ago, when the oil […]

Posted On : Published By : Tom Whipple
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E&P companies using variety of strategies to battle oil, gas price downturn

Exploration-and-production companies, buffeted by low oil and gas commodity prices brought on by robust production from shale plays, are using a variety of strategies to survive the current industry downturn, speakers at an oil and gas conference said Monday in San Francisco. Representatives of upstream companies presenting at the Independent Petroleum Association of American Oil and Gas Investment Symposium said their firms are depending on a combination of belt-tightening efforts, hedging strategies and technology to deal with the economic doldrums. J. Russell Porter, president and CEO of Gastar Exploration, said his company is well-positioned to continue to thrive because it operations are diversified between two significant core assets — the Marcellus/Utica natural gas-centric play of Appalachia and the oilier play in the Midcontinent. Gastar’s acreage position in the Appalachian Basin is about 60,000 net acres in West Virginia and to a lesser extent Pennsylvania. Although the bulk of the […]

Posted On : Published By : Tom Whipple
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In Canada, Miniature Heavy-Oil Sites Overcome Slump in Crude Prices

EDAM, Saskatchewan—In a muddy field where rows of canola stood just three months ago, a miniature oil-sands plant is rapidly being assembled by a small crew of workers. What’s unusual about this project is the speed with which it is being built—in a matter of months—and its compact, football field-size. Oil-sands sites typically take years to build and require hundreds or thousands of acres of land. At a time when slumping crude-oil prices have shelved most new oil-sands projects in neighboring Alberta and halted drilling for all but the most productive shale oil wells in the Bakken formation on both sides of the border, pint-size sites are proliferating in Saskatchewan’s oil patch. About a mile away from the construction site, down a rural highway in western Saskatchewan, three other similarly size heavy-oil projects are rising on a landscape filled with cattle pastures and duck ponds. The miniboom along Highway […]

Posted On : Published By : Tom Whipple
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North Dakota rig count drops

North Dakota rig count down about 4 percent from the previous week, indicating continuing weakness in the energy sector. Photo by Lilac Mountain/Shutterstock BISMARCK, N.D., Oct. 5 (UPI) — North Dakota nearly erased recent gains in the number of rigs deployed in exploration and production in the shale-rich state, losing three from last week. State data show 68 rigs actively engaged in exploration and production as of Monday , down 4 percent from last week and 64 percent lower year-on-year. The shale-rich state bucked an industry trend last week by adding more rigs to it reserve basins. Rig counts serve as a barometer for the health of an energy sector in recession because of the low price of crude oil, down more than 50 percent from last year. Compared with other states , North Dakota is in the middle of the pack in terms of rig count variances. For […]

Posted On : Published By : Tom Whipple
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Suncor launches hostile bid for Canadian Oil Sands

Steve Williams, president and CEO of Suncor Energy Inc., speaks at their annual general meeting in Edmonton April 29, 2014. Suncor Energy Inc launched a hostile bid for Canadian Oil Sands Ltd on Monday as the slump in oil prices encourages consolidation in Canada’s oil sands industry, which has some of the world’s highest operating costs and lowest prices. Canadian Oil Sands and Suncor are among stakeholders in Canada’s largest synthetic crude project, Syncrude, in northern Alberta. Alberta’s oil sands are the world’s third-largest crude reserves after Saudi Arabia and Venezuela and a leading source of U.S. crude imports. Suncor’s all-stock offer for Canadian Oil Sands is valued at about C$4.3 billion ($3.29 billion). Suncor shares were down 2 percent at C$34.67 and Canadian Oil Sands shares were up 48 percent at C$9.15 on the Toronto Stock Exchange on Monday morning. Canadian Oil Sands was not immediately available for […]

Posted On : Published By : Tom Whipple
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Frackers Face Mass Extinction

Awareness is gradually seeping into the financial press that the Great American Oil Revolution has been over for months — witness the current Fortune headline, “Frackers Could Soon Face Mass Extinction. ” If the general media had any grasp of what was happening in America, or what it meant, CNN would be doing wall-to-wall coverage of the deserted man-camps in North Dakota, the unemployment lines in Texas, the equipment yards stacked with idle derricks, the spreading panic in the junk-bond, bond and stock markets. Instead we get Donald’s beautiful tax plan, Hillary’s elusive emails and Carly’s mythical video tapes. Today is the last day of the rest of the frackers’ lives. That’s because it is the last day of the third quarter of the year, the day after which banks audit their loans, assessing anew the value of the assets held as collateral. Frackers pledge their oil reserves, and […]

Posted On : Published By : Tom Whipple
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Shell’s Alaskan oil plan makes long-term sense amid questions over shale’s longevity

Shell announced this week that it was abandoning efforts to develop oil from the Alaska’s outer continental shelf (OCS). The company had drilled a well in the Burger prospect in the Chukchi Sea this past summer, but the results were disappointing. Although the company found hydrocarbons, the flows were insufficient to warrant further exploration. With that, Shell decided to suspend activities in Alaskan waters indefinitely. Shell had such high hopes. If all went well, it would have produced an average of 650,000 barrels of oil for 35 years from the OCS. From 2025 until 2060, the OCS would power Alaska’s economy and contribute up to 10 per cent of domestic US oil production. The project, which we estimated would cost more than US$300 billion in total, would have represented the largest infrastructure project in the United States in the next 15 years. There was no more visionary initiative anywhere […]

Posted On : Published By : ASPO-USA