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Oil-and-Gas Debt Deals Sting Investors

It is shaping up as a cruel summer for debt investors wagering on a rebound in the oil-and-gas business. The investments may still hold advantages for the funds, despite the sharp declines in oil-related securities in July. The deals generally were struck at terms advantageous to the funds, including giving some preferred treatment in any restructuring, reflecting the intense cash squeeze on many oil producers late last year. The investments appeared well timed earlier this year, when oil prices rebounded as much as 30% after a deep decline in 2014. July’s commodity tumble—front-month crude futures fell 21% last month and another 4.1% Monday, to $45.17 a barrel—has extended the pain already felt around the sector. Exxon Mobil Corp. XOM -1.45 % and Chevron Corp. CVX -3.25 % said Friday they are both slashing stock-buyback programs, while Linn Energy LINE -18.81 % LLC said last week it planned to stop […]

Posted On : Published By : Tom Whipple
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US Oil Production Finally Starting to Decline

There has been very little data to post about recently and as everyone should know by now, I post primarily about data. So if there is no data there is not much to post about. Also I have been very busy for the a week now and have checked in only a couple of times. A few days ago a very racist post was posted on this blog. I completely overlooked it as I seldom scan the posts because I get an email for every post so I just read the posts in the emails. But when there is a guest post, as the one last week was, I get no emails, the guest poster gets them instead. Anyway I deleted the post and banned the poster. I also banned another poster because he accused me of deliberately letting the post stay up. That outraged me. It was the […]

Posted On : Published By : Tom Whipple
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Cracking Open Re-fracking: A Flush Rush or Idle Probing?

Squirting fluid that made hydraulic fracturing work two years ago down the same old fractured well may not be the surest way to make a buck in an industry eager to turn a profit. Then again, the folks in the lab and in the field might be onto something. The desire to charm hydrocarbons from the ground without the expense of additional drilling is strong and has lingered for decades. Re-fracking has been in practice, with mixed results, on vertical wells for years. It’s only in the last few years that engineers have started returning to the source of all those hydraulically fractured wells with re-fracking. Most estimates indicate it costs $8 million to drill and complete a new well. Re-fracking a well costs about 25 percent of that figure, which is enticing some of the largest oilfield services companies into the lab. But exactly what “best practices” might […]

Posted On : Published By : Tom Whipple
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North Dakota oil activity stable

Rig data show slump endures in North Dakota, though energy companies starting to improve operational efficiency. File Photo by UPI/Shutterstock/ekina BISMARCK, N.D., Aug. 3 (UPI) — The number of rigs actively exploring for or producing oil in North Dakota is holding steady, though data show overall production is rebounding slightly. State data show 74 rigs in active service as of Monday , relatively unchanged from one month ago. North Dakota is the second largest oil producer in the nation and, while diversified, its economy depends in part on the surge of oil taken from shale basins in the state. The North Dakota Industrial Commission reported oil production in May, the last full month for which government data are published, at 1.2 million barrels per day, just shy of the all-time record posted in December 2014. More than 90 percent of the oil produced in North Dakota comes from the […]

Posted On : Published By : Tom Whipple
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Hess sees higher 2015 Bakken oil production on fewer rigs

Hess raised its 2015 production forecast for prolific Bakken shale oil formation in North Dakota to 105,000-110,000 boe/d as more efficient well completions counter a lower rig count, CEO John Hess said Wednesday. Earlier this year, Hess had estimated 2015 Bakken production would range at 95,000 boe/d-110,000 boe/d. The company had cut its rig count from the 12 operating in Q1 to the eight currently operating in response to sharply lower crude costs. The price of Bakken from the Clearbrook, Minnesota, oil hub averaged $56.98/b in the second quarter, Platts assessment data showed. So far in the Q3, it has averaged $48.40/b, touching $44.31/b on Tuesday. Crude movements by rail between the Midwest and the East Coast refineries, one of the largest users of Bakken crude, has been falling. It was 12.41 million barrels in April, down from 12.86 million barrels in March, US Energy Information Administration data shows. […]

Posted On : Published By : Tom Whipple
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5 Things To Watch In Friday’s Oil-Supply Report

More than a year after the oil-price slump began, traders are desperate to determine whether U.S. crude-oil production has started to decline in response to low prices. Mixed and delayed data from the federal government have added to the uncertainty. Market watchers are hoping the next monthly government report, which will offer the first data for May, will help clear up some of the confusion. Here are five things to watch when the U.S. Energy Information Administration, the data-gathering arm of the Energy Department, releases its Petroleum Supply Monthly, expected at 2 p.m. EDT on Friday.

Posted On : Published By : Tom Whipple
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Bakken Driller’s Reset Points to More Pressure on Oil

The Bakken-shale-focused oil-and-gas producer uttered the “F” word in its 2016 outlook: Fifty. That is the oil price underpinning its cash-flow and production targets for next year. It is slightly above where the price is now but fully one-fifth below the consensus forecast. Whiting’s shares plunged 6% on Thursday. The bigger story from Whiting’s uncharacteristic display of hunkering down is its bearish implication for oil prices. First, consider that based on $50 oil, Whiting plans to lay out $1 billion on capital expenditure in 2016, equal to projected cash flow. That would be a 53% cut in investment versus guidance for this year, leading to just an expected 10% drop in output. That reflects productivity gains with Whiting reporting output gains of 40% to 50% in some recently completed wells. Second, Whiting also said Thursday that its budget is “flexible.” There is a certain irony in this: The company […]

Posted On : Published By : Tom Whipple
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Mixed Signals on U.S. Oil Output

The most important question in the oil market is whether American production is falling as prices drop. Official oil data aren’t giving a straight answer. Investors, traders and executives who rely on federal data from the Energy Information Administration are tripping over conflicting images of U.S. production that have emerged from separate EIA reports in recent months. At stake are billions of dollars of wagers on the direction of oil prices as well as potential long-term investments by energy companies. Oil prices have swooned by more than 50% over the past year, due largely to a boom in production from U.S. shale-oil fields. Many analysts say prices will only stabilize after less-economical production is squeezed out, spurring a sustained decline in output. Weekly oil-output estimates from the EIA started to show falling production in April. Separate EIA reports on shale-oil drilling have forecast production declines for months. But the […]

Posted On : Published By : Tom Whipple
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Whiting cuts budget less than two weeks after raising it

A trader waits for the opening of Whiting Petroleum’s stock at the post where it is traded on the floor of the New York Stock Exchange March 24, 2015. Whiting Petroleum Corp cut its 2015 budget on Wednesday less than two weeks after raising it, a turnaround that underscores the uncertainty engulfing the energy industry while crude prices sit roughly 50 percent below last year’s levels. The company, North Dakota’s largest oil producer, tends to be seen as a key barometer of the health of the U.S. shale industry. Its spending trepidation is sure to have ripple effects on drilling contractors and other oilfield service providers. Whiting now plans to spend $2.15 billion this year, running eight drilling rigs instead of a previous plan for 11, and mulling small divestments to bolster the company’s balance sheet. Just 12 days ago the company had boosted its budget by 15 percent […]

Posted On : Published By : Tom Whipple
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Chevron and Exxon Get the Plaudits, but Some Smaller Drillers Faring Well

Giant oil companies are weathering the oil slump better than the average shale driller, but even their famous stability is at times being surpassed by much smaller companies that own some of the choicest U.S. oil-and-gas fields. Take Cimarex Energy Co. XEC 3.33 % , which drills in Texas and Oklahoma. The oil producer’s stock price has fared better than that of Chevron Corp. CVX 0.92 % , the second largest American oil company by revenue, since crude-oil prices started crashing last June. Shares of Diamondback Energy Inc., FANG 4.09 % an eight-year-old oil producer with a $4.3 billion market value, have held up almost as well as Exxon Mobil Corp. XOM 0.80 % ’s over that stretch. And as of this week, Cabot Oil & Gas Corp. COG -1.49 % , a Houston-based shale-gas specialist, had bested all the big oil companies in stock-market performance since last summer […]

Posted On : Published By : Tom Whipple