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Chesapeake Energy Swings to Loss on Write-Down

ENLARGE A worker walks past equipment at a Chesapeake Energy hydraulic fracturing operation near Carrizo Springs, Texas. Photo: John Davenport/San Antonio Express-News/Zuma Press Chesapeake Energy Corp. CHK -7.82 % swung to a heavy loss in the first quarter as the U.S. shale driller took a $3.6 billion write-down on some properties amid tumbling oil and natural gas prices. Excluding the impairment and other special charges, profit came in above expectations. Earlier this year, Chesapeake announced plans to reduce its rig operations to their lowest level since 2004 amid falling crude-oil and natural gas prices. It said it would reduce capital expenditures by 37% and drop the number of rigs drilling for new oil and gas finds by about 38%. Chesapeake has struggled to recover from years of aggressive spending as the land-grab approach the company pioneered for oil and gas drilling meant it spent more than its wells generated […]

Posted On : Published By : Tom Whipple
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What the Future of Oil Drilling Will Look Like

Much development in the Bakken Shale has been chaotic. Liberty is aiming for a more methodical approach. Photo: Karen Bleier/AFP/Getty Images TIOGA, N.D.—The future of the U.S. oil industry may well be taking shape north of this town on 15 square miles of windswept prairie above the Bakken Shale. It’s about as far from the industry’s wildcatting heritage as is thinkable. “Our idea was to build the world’s greatest oil factory,” says Chris Wright, the chief executive of Liberty Resources LLC. And if the U.S. oil industry is going to overcome several significant challenges, it may have to follow the lead of this small Denver-based company. The U.S. oil industry boomed when crude oil prices were high, but has entered a world where low oil prices may be the norm for a while. Saudi Arabia says it won’t cut production to reduce supply, leaving U.S. companies vulnerable. After years […]

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U.S. shale oil firms say refracking not the best path in downturn

HOUSTON/WILLISTON, N.D. (Reuters) – Refracking, the practice of fracking an oil and gas well a second time, is still too unpredictable to rely on as a way to slash costs and increase output during the oil price slump, top U.S. shale oil executives said on Tuesday. Oilfield service companies, including Schlumberger NV and Baker Hughes Inc., have touted refracking as a cheap way to revive output from existing shale wells. Output from existing wells, measured in barrels per day, normally drops as much as 70 percent in the year of operation. Also, some wells were not thoroughly fracked the first time. But executives from producers say the refracking technology, while promising, remains tricky. "We have not tried any refracks. Our outlook on that is that it is really technical," said Bill Thomas, CEO of EOG Resources Inc., widely regarded as one of the most efficient U.S. shale oil producers. […]

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Marcellus Shale Extraction Fluids Discovered in 3 Water Samples

Chemical compounds used to extract natural gas were found in three water samples from Pennsylvania’s Marcellus Shale region, according to a study published Monday in the Proceedings of the National Academy of Sciences. The contamination occurred at three Bradford County households whose owners settled a lawsuit with Chesapeake Energy Corp. in 2012 after natural gas polluted their well water. The additional chemicals may have mixed with groundwater after a pit leak from a conventional well or when nearby drilling drove them toward the aquifer, according to the study. “We’re not claiming that it’s from hydraulic fracturing,” Garth Llewellyn , a hydrogeologist at Appalachia Hydrogeologic & Environmental Consulting LLC, and the study’s lead author, said in a telephone interview Monday. “We’re not trying to make assertions where we shouldn’t be. We’re looking at all the possibilities.” In hydraulic fracturing, water and chemicals are blasted into rock formations to extract oil […]

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U.S. shale players doing more with less

Companies working in U.S. shale basins are finding costs go down, leading some in the industry to raise their production forecasts for the year. Photo courtesy: Anadarko Petroleum. HOUSTON, May 5 (UPI) — Though net profits and spending are down, companies working in U.S. shale basins are finding well costs going down while production forecasts grow. The low price of oil is forcing energy companies to spend less on exploration and production efforts. Oil field services companies Halliburton and Baker Hughes are merging in an effort to control costs, while others shed numbers from their work force. Anadarko Petroleum said it’s delivered strong production results during the first quarter while spending less. At shale basins in Colorado, the company said it’s saved around $500,000 on drilling operations so far this year. In the Eagle Ford shale basin in Texas, the company said the cost of drilling a well is […]

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New refinery online in North Dakota

New North Dakota refinery is expected to help drive economy in oil-rich state, operator says. Photo by George Spade/Shutterstock DICKINSON, N.D., May 5 (UPI) — A new refinery in North Dakota, the first of its kind in the country in nearly 40 years, will help drive the state’s economy forward, MDU Resources said. MDU Resources and Calumet Specialty Products Partners announced its Dakota Prairie refinery started producing diesel fuel primarily for the state economy. "With more than two-thirds of North Dakota’s diesel fuel currently imported into the state, the Dakota Prairie refinery is well positioned to meet strong regional demand with additional, locally produced supplies of diesel fuel," David Goodin, president and chief executive officer of MDU Resources, said in a statement. "Over time, we expect that this refinery has the potential to be an important contributor to the economic growth of the local and state economy." North Dakota’s […]

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Denbury, Chesapeake Are Beyond the Shale

ENLARGE North Dakota oil drilling is seen here. Greenlight Capital’s David Einhorn has knocked shale-oil drilling as not profitable enough. Photo: Getty Images Talk about throwing the baby out with the frackwater. It seemed like the entire North American hydrocarbon industry was tarred with the same brush on Monday when Greenlight Capital’s David Einhorn presented at the annual Sohn Investment Conference . The hedge-fund manager’s chief target, the “motherfracker” as he dubbed it, was Pioneer Natural Resources Co. PXD -3.14 % The charge: Shale-oil drilling chews up too much cash for too little benefit. Two companies set to report first-quarter results Wednesday, Denbury Resources Inc. DNR -3.62 % and Chesapeake Energy Corp. CHK -3.23 % , bear only a passing resemblance to the accused. But they dipped by 2.8% and 1.6%, respectively, in the minutes after Mr. Einhorn’s comments. Their results certainly won’t be pretty. Analysts see Denbury reporting […]

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Implications of Increasing Light Tight Oil Production for U.S. Refining

1. Background and Analytical Framework Background Recent and projected increases in U.S. crude production have sparked discussion about the implications of current limitations on crude oil exports for prices, including both world and domestic crude oil and petroleum product prices, and for the level of domestic crude production and refining activity. In response to multiple requests, the U.S. Energy Information Administration is developing analyses that shed light on these issues. Studies completed since May 2014 have considered the characteristics of domestic crude production streams, price formation for gasoline and other petroleum products, tools to better track displacement of crude imports by domestic production, and technical options for processing additional light tight crude oil. Given that some responses to the growth in production that has already occurred since 2011, including the like-for-like replacement of crude oil imports comparable in quality to new domestic streams, are inherently limited going forward, the […]

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U.S. Banks Expect Rise in Energy-Sector Loan Defaults

ENLARGE A pumpjack stands near storage containers on the site of an oil well outside Williston, N.D., in February. Photo: Bloomberg News Banks in the U.S. are cutting credit lines to energy companies and forcing firms to cough up more collateral to guard against fallout from the past year’s plunge in oil prices , a Federal Reserve survey found. Banks expect more delinquencies and charge-offs from the sector over the course of this year, “but they indicated that their exposures were small, and that they were undertaking a number of actions to mitigate the risk of loan losses,” senior loan officers at commercial banks told the Fed in a survey tracking changes in loan terms and standards in the first quarter of the year. U.S. oil and gas companies went deep into debt during the energy boom as they looked to cash in on new technologies that allowed sizable […]

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US shale oil drillers move rigs to more productive areas -Goldman Sachs

SINGAPORE May 4 (Reuters) – In an attempt to increase productivity, shale oil drillers in the United States have begun moving rigs to more productive areas of the Permian and Eagle Ford basins, analysts at Goldman Sachs said. Data from oil services firm Baker Hughes Inc showed on Friday that the fall in U.S. oil rig count slowed last week, suggesting the collapse in drilling may be coming to an end as prices recover. "The county level rig data is showing potential signs of high grading with rig increases in some of the more productive counties of the Permian and Eagle Ford plays, despite the aggregate rig count still declining," analysts at Goldman Sachs said in a weekly report. The observation comes after the analysts in the past several weeks have said the rig data showed little evidence of high grading. High grading, with producers eliminating the least efficient […]

Posted On : Published By : Tom Whipple