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Exxon Said to Be on the Hunt for West Texas Shale Bargains

Exxon Mobil Corp. is adjusting the way it structures shale acquisitions as the global energy giant expands in West Texas, the largest U.S. oil-producing region. Executives with Exxon’s shale-drilling unit, XTO Energy, are meeting with small, closely held producers in the Permian Basin to negotiate possible purchases and joint ventures, according to three people familiar with the talks. The company is expanding its use of a new strategy first deployed in the region last year that offers operators a cut of future proceeds rather than big upfront stock or cash payouts, say the people, who asked not to be named because the meetings were private. Stung by the 58 percent plunge in U.S. oil prices since June 2014, many drillers face stark choices: shut down rigs to conserve capital and wait out the bust, or surrender some independence to a deep-pocketed savior in exchange for a shot at a […]

Posted On : Published By : Tom Whipple
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Rig numbers not a strong production indicator

Shale oil production in the United States as companies wait for market conditions to improve, analysis finds. File photo by Gary C. Caskey/UPI DENVER, Sept. 18 (UPI) — Even if rig numbers across U.S. shale oil basins hold steady, current economics means production could start to decline, a forecasting unit of Platts reported. Low crude oil prices, down about 50 percent year-on-year, means energy companies have less capital to invest in exploration and production. In Texas, the No. 1 oil producer in the nation, the state energy regulator said the 864 drilling permits awarded in August was 64 percent lower year-on-year. The rig count in North Dakota, the No. 2 oil producer, of 67 is 66 percent lower than this date in 2014. Sami Yahya, an analyst with Bentek, the forecasting unit for Platts, said energy companies are figuring out ways to save money by either drilling en masse […]

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Debt service uses a rising share of U.S. onshore oil producers’ operating cash flow

graph of U.S. onshore oil producers’ debt service as a share of operating cash flow, as explained in the article text Source: U.S. Energy Information Administration, based on Evaluate Energy Note: Each quarter represents a rolling four-quarter sum. Results from second-quarter 2015 financial statements of a number of U.S. companies with onshore oil operations suggest continued financial strain for some companies. Low oil prices have significantly reduced cash flow for U.S. oil producers, and to adjust to lower cash flows, companies have reduced capital expenditures and raised more cash from debt and equity. Because of the large amount of debt accumulated from past years, a higher percentage of operating cash flow is being devoted to servicing debt. Debt service payments consist of principal repayment to creditors and typically are fixed in both amount and frequency, agreed upon before a company receives a bank loan or issues a bond. Some […]

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September cargoes help stabilize US West Coast gasoline inventories

With rising imports offsetting depleted production, sources say West Coast gasoline supply is showing signs of stabilization. The US Energy Information Administration reported gasoline imports into the US West Coast rose 48,000 b/d to 111,000 b/d for the week ended September 11. According to cFlow, Platts trade flow software, at least seven gasoline cargoes were in the Los Angeles area or en route for delivery over the past week. That helped offset sagging production and stocks in the region. Weekly production of CARBOB fell 6.7% to 6.79 million barrels for the week ended September 11, according to the California Energy Commission. CARBOB stocks fell 7.2% to 5.1 million barrels. However, one source said the supply problems that have hampered the West Coast all summer seem to have dissipated, at least for now. "The differentials seem stable," he said. "Not much trading going on." The differential for Los Angeles CARBOB […]

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An Oklahoma of Oil at Risk as Debt Shackles U.S. Shale Drillers

Photographer: Brittany Sowacke/Bloomberg As much as 400,000 barrels a day of oil production is at risk as U.S. shale companies like Samson Resources Co. run out of money and are forced to slow drilling. Total debt for half of the companies in a Bloomberg index of more than 60 producers has risen to a level that represents 40 percent of their enterprise value. It’s a sign of distress that shows equity values falling in the face of oil’s crash, said Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $15.6 billion. The companies facing high debt loads, which include Encana Corp. and Chesapeake Energy Corp., produced 1.1 million barrels of oil a day in the second quarter of this year, according to data compiled by Bloomberg. If more companies file for bankruptcy as Samson did Wednesday, or embrace the kinds of draconian […]

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Falling production is underpinning U.S. oil prices: Kemp

An oil pump jack can be seen in Cisco, Texas, August 23, 2015. U.S. crude oil production is falling sharply, helping put a floor beneath U.S. domestic crude prices and causing them to rise relative to the international marker Brent. In the face of lower prices, the U.S. oil boom has stalled and the industry is facing the sharpest setback in production for decades, excluding hurricane periods ( link.reuters.com/kyj65w ). According to the U.S. Energy Information Administration (EIA), U.S. crude and condensate output peaked at 9.612 million barrels per day (bpd) in April and had declined by 316,000 bpd by June. Production continued to rise in North Dakota (36,000 bpd) but in most other states and offshore areas output turned down ( link.reuters.com/vuj65w ). The largest declines were reported in Texas (129,000 bpd), the Gulf of Mexico (90,000 bpd), West Coast offshore (28,000), Alaska (27,000 bpd) and California (18,000 […]

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Robert Rapier: Peak Oil is a Function of Oil Price

The Origins of Peak Oil Awareness The scientific study of peak oil began in the 1950′s, when Shell geophysicist M. King Hubbert reported on the evolution of production rates in oil and gas fields. In a 1956 paper Hubbert suggested that oil production in a particular region would approximate a bell curve, increasing exponentially during the early stages of production before eventually slowing, reaching a peak when approximately half of a field had been extracted, and then going into terminal production decline. Hubbert applied his methodology to oil production for the Lower 48 US states and offshore areas. He estimated that the ultimate potential reserve of the Lower 48 US states and offshore areas was 150 billion barrels of oil. Based on that reserve estimate, the 6.6 million barrels per day (bpd) extraction rate in 1955, and the 52.5 billion barrels of oil that had been previously produced in […]

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Conditions seen worsening for majors until late 2016

Fundamental business conditions for integrated oil and gas companies will worsen before signs of improvement appear late next year, according to a Moody’s Investors Service assessment based on reduced expectations for crude oil and natural gas prices ( OGJ Online, Aug. 7, 2015 ). Moody’s expects earnings before interest, taxes, depreciation, and amortization (EBITDA) for the global integrated oil and gas industry to contract by 20% or more this year and to recover only modestly in 2016. “This view is based on our expectations of revenue and cash flow declines and a negative free cash flow profile for the industry in 2015,” the firm says. “We expect the industry’s free cash flow to remain negative in 2016.” Free cash flow is the difference between cash flow from operations and investments. Moody’s expects total free cash flow for the integrated companies it rates to be negative by as much as […]

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KKR’s Samson Resources Files Bankruptcy as Shale Bet Sours

Oil and gas driller Samson Resources Corp. filed for bankruptcy in Delaware Wednesday night, undone by a collapse in energy prices and billions in debt that KKR & Co. and other investors piled on to fund a 2011 takeover. Tulsa, Oklahoma-based Samson and its owners were stung by the price drop that put money into the pockets of consumers through lower gasoline and heating costs, while driving other producers, such as Sabine Oil & Gas Corp. and Quicksilver Resources Inc., into Chapter 11. Samson’s filing is among the biggest energy bankruptcies in the U.S. this year, but it probably won’t be the last. The shale-oil driller is, in a way, a victim of its own success. Samson and other producers have rushed to use hydraulic fracturing and horizontal drilling to tap previously hard-to-reach oil and gas deposits in shale formations, triggering a production boom that helped send prices tumbling. […]

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Continental Sidelines Bakken Rigs

Continental Resources Announces More Reductions Continental Resources continues to showcase their flexibility, announcing this week it will be sidelining rigs in the Bakken while reducing its CAPEX once again. Three week after reporting the “excellent results’ of their second quarter, Continental Resources, Inc. says it now plans to spend approximately $300 to $350 million less than its previously approved capital budget for 2015 in order to deal with the current crude pricing environment. This adjusted spending will be $2.35 billion to $2.40 billion. Harold Hamm, Chairman and Chief Executive Officer commented, “While we do not believe today’s low commodity prices are sustainable long term, we are committed to living within cash flow until they recover. We are reducing capital expenditures to protect our balance sheet and to preserve the value of our world-class assets until commodity prices improve.” Continental will also join other producers who are sidelining their rigs […]

Posted On : Published By : Tom Whipple