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The Shale Boom Has Already Gone Bust – At Least For Now

Andrew J. Hall, Chief Executive Officer of Astenbeck Capital Management LLC. Photographer: Amanda Gordon/Bloomberg The meteoric rise in U.S. oil production has ended, easing a global glut and driving a rebound in crude prices from below $50 a barrel, according to crude trader and hedge fund manager Andrew J. Hall. Oil production from Texas to North Dakota peaked at almost 10 million barrels a day in February and has been falling since then, Hall said in a letter Friday to investors in Astenbeck Capital Management LLC, his commodities hedge fund. A drastic reduction in drilling rigs is starting to shrink U.S. oil output, according to U.S. government data cited by Hall. That’s helped drive a 36 percent rally in the past six weeks, and prices will continue to rise because it will be harder for producers to ramp up than it was to cut back, Hall said in his […]

Posted On : Published By : Tom Whipple
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Greenlight’s Einhorn slams oil frackers at Sohn conference

NEW YORK (Reuters) – Billionaire hedge fund manager David Einhorn, who often moves a stock simply by speaking its name, on Monday kicked off the year’s most prominent investment conference by laying out a case against oil frackers, arguing these companies drill "lots and lots of holes" and burn through plenty of cash. Einhorn, who often unveils so-called short-bets against companies at these events, cited Pioneer Natural Resources Co ( PXD.N ) as a particular offender at the 20th annual Sohn Investment Conference. "We call it the motherfracker," he said, prompting investors to kick the share price down as much as 5.3 percent. The company should trade closer to $78 a share, he said, not the $166.50 the stock is trading at now. "Pioneer is burning cash and its reserves are not growing," said Einhorn, who runs $11 billion Greenlight Capital, adding "Pioneer ought to stop touting estimates based […]

Posted On : Published By : Tom Whipple
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Another rig company stumbles

Diamond Offshore, one of the largest rig companies in the world, is the latest in a long list of those in the energy industry to take a loss in a weak market. File Photo by project1photography/Shutterstock HOUSTON, May 4 (UPI) — One of the largest rig services companies in the world, Diamond Offshore Drilling, said Monday it lost $256 million during the first quarter of the year. Crude oil is trading in a bear market, forcing most major energy companies to spend less on exploration and production. That’s led to major profit losses for rig services companies ranging from Schlumberger to Halliburton. Diamond said Monday its net loss of $256 million for the first quarter compared to a net income of $146 million year-on-year. Three of its rigs are to be retired and scrapped. "We have continued to implement cost savings measures while maintaining our focus on safe operations […]

Posted On : Published By : Tom Whipple
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Rig data show Oklahoma beats North Dakota

Oklahoma has more rigs in active service than North Dakota, a state at the heart of the U.S. shale oil boom. File Photo by Calin Tatu/Shutterstock. BISMARCK, N.D., May 4 (UPI) — Oklahoma has 20 percent more rigs in active service than North Dakota as shale activity in the United States evolves, state data show. XTO Energy, a subsidiary of Exxon Mobil, is the largest operator of active wells in North Dakota, with 14 percent of the 86 active wells in the state at the heart of the nation’s oil boom. Overall, the number of rigs in service in North Dakota is down 7.5 percent since the start of April. Last year, XTO said it owned 531,000 net acres in North Dakota and gross production in February 2014 was 44,516 barrels of oil per day. Federal data show state oil production in February 2014 was 953,000 bpd, about 24 […]

Posted On : Published By : Tom Whipple
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Oil slump tempers Bakken drillers’ worries over new rail rules

NEW YORK (Reuters) – In the first part of 2014, U.S. shale drillers watched with growing alarm as rail regulators contemplated tough new oil-by-rail rules, fearing rapid changes might slow shipments from North Dakota’s Bakken fields and force them to curtail production due to a lack of new pipelines. What a difference a year makes. Now, with beat-down oil prices slamming the brakes on the shale industry’s breakneck growth, even tough new rules on phasing out older oil-tank cars and speed restrictions announced Friday are unlikely to thwart new production, experts say. The deceleration of growth in the shale plays has taken the pressure off rail operators to make up for a shortfall in pipeline capacity, particularly from North Dakota’s Bakken region, which relies on trains to ship as much as 60 percent of its output, according to state figures. "Oil producers have more to worry about than new […]

Posted On : Published By : Tom Whipple
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California Crops raised with oil field water

Here in California’s thirsty farm belt, where pumpjacks nod amid neat rows of crops, it’s a proposition that seems to make sense: using treated oil field wastewater to irrigate crops. Oil giant Chevron recycles 21 million gallons of that water each day and sells it to farmers who use it on about 45,000 acres of crops, about 10% of Kern County’s farmland. State and local officials praise the 2-decade-old program as a national model for coping with the region’s water shortages. As California’s four-year drought lingers and authorities scramble to conserve every drop, agricultural officials have said that more companies are seeking permits to begin similar programs. The heightened interest in recycling oil field wastewater has raised concern over the adequacy of safety measures in place to prevent contamination from toxic oil production chemicals. Recycling oil field wastewater Until now, government authorities have only required limited testing of recycled […]

Posted On : Published By : Tom Whipple
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North Dakota still on track for oil tax break

WILLISTON, N.D. (Reuters) – The clock kept ticking in April on a suspension of North Dakota’s oil extraction tax after a state-calculated average of the month’s crude price fell below $52.59 per barrel for a fourth straight month. The tax break, enacted in the 1980s, had the potential to be worth more than $5 billion to oil producers over a two-year period. However, sweeping tax changes signed into law late Wednesday by Governor Jack Dalrymple effectively ended that boon for the oil industry, though the new law also lowered the overall permanent tax rate. The tax break would be triggered if crude fell below $52.29 for fifth straight month, but it would only continue through November because of new legislation. The state waives its 6.5 percent oil extraction tax if the monthly price of benchmark West Texas Intermediate (WTI) crude at the Cushing, Oklahoma, transport hub falls below an […]

Posted On : Published By : Tom Whipple
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Bakken Rig Count Increases by One

Crude and Natural Gas Prices on the Rise The Bakken-Three Forks rig count increased this week to 80 rigs running across our coverage area by midday Friday. In recent Bakken news, North Dakota lawmakers cleared the way to change a 30 year old tax structure that gave some tax breaks for the oil industry have been linked to a price “trigger.”  Debate in North Dakota’s House was fierce and ended in a 66-26 vote in favor of cutting the state’s oil tax rate from 11.5 percent to 10 percent. Read more: Lower Oil Tax for North Dakota The U.S. rig count fell again this week by 27 ending, ending with 905 rigs running by midday Friday.  A total of 222 rigs were targeting natural gas (and decrease of three from the previous week) and 679 were targeting oil in the U.S. (24 less than the previous week). The remainder […]

Posted On : Published By : Tom Whipple
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How Shale Is Becoming The Dot-Com Bubble Of The 21st Century

As I review the financials of one of the largest shale producers in the United States, Whiting Petroleum (WLL), I can’t help but notice the parallels to the .COM era of 1999 which, to some extent, has already returned to the technology and biotech sectors of today . Back then, the faster you burned cash to capture customers regardless of earnings to drive your topline, the higher your valuation. The theory was that after capturing the customers (in energy today, it is the wells) spending would slow and so would customer additions allowing companies to generate cash. By the way, a classic recent case is none other than Netflix (NFLX) which, in the past was exposed for accounting gimmicks that continue even today. It is still following this path of burning cash for the sake of customer additions, while never generating any cash in its entire existence. Cash was […]

Posted On : Published By : Tom Whipple
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North Dakota gas capturing up for Whiting

Whiting Petroleum said the amount of gas flared, or burned off, in North Dakota is less than the state requires. Photo by Steve Oehlenschlager/Shutterstock DENVER, April 30 (UPI) — It’s cheaper to drill and the amount of natural gas captured from North Dakota oil beat state requirements by nearly 10 percent, Whiting Petroleum said. U.S. Interior Secretary Sally Jewell said in March her department was considering federal standards meant to cut emissions and reduce the amount of gas wasted during flaring . While the Interior Department will do its part, the secretary said part of the onus lies with industry and state leaders. North Dakota, a state at the heart of the shale oil boom in the United States, requires operators to capture at least 77 percent of the natural gas associated with oil deposits in the state rather than burn it off. Whiting, which has headquarters in Denver, […]

Posted On : Published By : Tom Whipple