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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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Oil Drillers Bet Choking Wells Will Keep Shale From Going Bust

Encana Corp. wants to ensure the shale-oil boom keeps booming. The Canadian producer is among a growing number of companies that are restricting initial output — a process known as choking back — in basins from North Dakota to Texas. They’re conceding huge up-front gushers of crude in exchange for smaller production declines over time so that the wells ultimately generate more oil. The strategy sacrifices one of the biggest benefits from shale. The early gushers paid back investments fast, allowing companies to pour capital into new projects. Instead, Encana and others envision a future with a more stable flow from wells, so that they don’t always have to keep drilling simply to maintain output. “You’re losing a barrel today to get two or three barrels tomorrow,” said Allen Gilmer, chief executive officer of consultant Drilling Info Inc. in Austin. “It’s not a zero-sum game.” Red Queen Curbing initial […]

Posted On : Published By : Tom Whipple
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Miller Energy Files for Bankruptcy in Deal With Apollo, Highbridge

Like a number of other independent oil-company executives who have been forced to put their companies into bankruptcy in recent month, Miller Chief Executive Carl Giesler blamed his company’s financial woes in part on plummeting oil prices. The price of global benchmark Brent crude fell to less than $45 a barrel this summer from more than $100 a barrel a year ago. Miller Energy, a former Tennessee company that shifted its oil and gas drilling to Alaska in recent years, has also been beset by other problems. The Securities and Exchange Commission has accused the company of accounting fraud and in August, a group of companies that said they were owed millions from Miller’s Alaska subsidiary moved to push the unit into bankruptcy. Company officials had recently been in talks with a prospective lender for $165 million capital infusion, Mr. Giesler said in an interview on Friday with The […]

Posted On : Published By : Tom Whipple
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Chesapeake Wins Bank Reprieve at Higher Risk to Bondholders

Chesapeake Energy Corp. negotiated a reprieve from its banks that comes at the expense of its bondholders. Under a new financing agreement the embattled oil and gas producer’s unsecured $4 billion revolver will be converted into a secured credit line, according to a company statement. Chesapeake also will be able to raise as much as $2 billion in junior-lien debt, pushing its unsecured creditors further down the pecking order in extracting recoveries during a default. The announcement sparked a selloff in the company’s bonds, erasing as much as $285 million in market value. The “junior lien provision provides a liquidity lifeline –- despite further priming for unsecured holders,” Goldman Sachs Group Inc. analyst Jason Gilbert wrote in a report Thursday. The company would still need to “monetize” more than $2 billion of assets to “address upcoming maturities and (maintain) an adequate liquidity cushion,” he said. Prior to the move, […]

Posted On : Published By : Tom Whipple
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Why America’s Oil Output Refuses to Collapse

Sand moves along a conveyor belt to a winter stockpile in Barron, Wisconsin. Hydraulic-fracking drillers find more sand means more oil Somewhere amid the maze of wells that Murphy Oil Corp. has scattered across Texas’s sprawling Eagle Ford shale formation, Brett Pennington is carrying out a little experiment. What will happen, the exploration chief wants to know, when he jams huge quantities of sand down the narrow mouth of one of these wells. Will more crude seep out? Or, rather, will he smother the opening and choke off the flow? For the experiment, he’s amped up the sand meter all the way to 3,000 pounds per foot, almost double the average that each well in the Eagle Ford gets nowadays. If Pennington’s project seems a bit extreme, it also serves to underscore a trend spreading rapidly across a shale industry that’s scrambling to remain profitable after oil prices sank […]

Posted On : Published By : Tom Whipple
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Oil Drillers Spared More Misery by U.S. Judge’s Fracking Ruling

A U.S. judge in Wyoming has blocked new rules that tighten controls over fracking on federal lands, granting a measure of relief to producers who would have faced higher costs at a time when profits already are strangled by low crude prices. The order by U.S. District Judge Scott Skavdahl puts a temporary hold on the most closely-watched effort by the Obama administration to ensure that hydraulic fracturing doesn’t contaminate water supplies. While the rules apply only to federal lands, they are designed to spur states to follow suit, magnifying the impact and potentially slowing development of oil and natural gas resources. Skavdahl said the government’s Bureau of Land Management lacks the authority to control fracking. Republican Rob Bishop, chairman of the House Committee on Natural Resources, approved of the ruling as “the right decision because it stops the Obama Administration from shoving this harmful policy down the states’ […]

Posted On : Published By : Tom Whipple
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Chesapeake latest oil price casualty

Weak commodity market prompts staff reduction from U.S. shale player Chesapeake Energy. Photo by photostock77/Shutterstock OKLAHOMA CITY, Sept. 30 (UPI) — U.S. shale player Chesapeake Energy said it was cutting its workforce in order to cope with the long slump in commodity prices. The company, which has headquarters in Oklahoma, said in a filing with the Securities and Exchange Commission it was cutting 15 percent of its workforce, or around 750 employees . "Chesapeake Energy Corp. implemented a workforce reduction initiative as part of an overall plan to reduce costs and better align its workforce with the needs of the business and current oil and natural gas commodity prices," the company said in its filing. Energy consultant group IHS warned in August the depressed crude oil market could limit the borrowing options for North American exploration and production companies like Chesapeake. The price for West Texas Intermediate crude oil, […]

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North Dakota Revenues Drop $41.7 million

North Dakota Revenues Fall North Dakota revenues have taken a deep dive this year but the state still ranks as a fiscal model. Low oil prices and fewer drilling rigs are being blamed for a drop in North Dakota’s general revenues that fell to $41.7 million during July and August. But with prudent spending by lawmakers and a continued surplus, this is not devastating news. Rather, House Majority Leader Al Carlson framed it as a “real wake-up call.” This week, the Chicago-based think tank, Truth in Accounting, named North Dakota the nation’s second-best fiscal health in 2014. The agency reports that the taxpayer surplus has more than tripled since 2009, from $8,300 to $28,400 per taxpayer. State Office of Management and Budget Director Pam Sharp commented, “We have a really strong amount of reserves that are available, and the budget that we have for 2015-17, we really took into […]

Posted On : Published By : Tom Whipple
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Federal Court Blocks Obama Administration’s Fracking Rule

A federal judge in Wyoming on Wednesday blocked Interior Department rules setting stricter standards for hydraulic fracturing on public lands, the second set of major regulations from the Obama administration to be faulted in court in as many months. U.S. District Judge Scott Skavdahl issued a preliminary injunction barring implementation of the rules, saying the Interior Department lacked the authority to issue them. The rules , issued by department’s Bureau of Land Management in March, apply to oil and gas drilling on federal lands, which produce 11% of the natural gas consumed in the U.S. and 5% of the oil, according to government data. Much of this drilling is concentrated in Western states, such as Colorado and Wyoming, two of the states challenging the standards. More than 90% of new land-based wells in the U.S. use hydraulic fracturing, known as fracking. “Congress has not authorized or delegated to the […]

Posted On : Published By : Tom Whipple
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Industry Needs Better Understanding of Cost-Cutting Consequences

Oil, Gas Industry Needs Better Understanding of Cost-Cutting Consequences Cost cuts are necessary as the oil and gas industry weathers its current downturn, but industry needs to measure and better understand the long-term consequences of these costs. The results of these cuts come at a price that isn’t seen right away: the reliability of equipment performance, said Shauna Noonan, completions technology manager with ConocoPhillips in Houston, during a panel discussion Sept. 29 at the Society of Petroleum Engineers’ 2015 Annual Technical Conference and Exhibition. The discussion by a panel of industry experts focused on how to manage the future impact that the current round of cost-cutting will have on the global oil and gas industry. “We as management and engineers, don’t know what the ultimate price is when we cut costs,” said Noonan. “Historically, we haven’t documented what we have done; we just publicize the upfront cost savings.” When […]

Posted On : Published By : Tom Whipple