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OPEC’s Gulf core steels for longer wait, lower prices in shale struggle

DUBAI (Reuters) – U.S. shale drilling may be slowing, but not fast enough for OPEC to change policy at its June meeting or to prevent oil prices maybe falling more, in the view of the group’s Gulf members. Actual oil output from the United States could prove harder to beat back, sources in the Gulf say after poring over the latest data with top consultants. The message is, do not underestimate the ability of the oil industry to adapt: there can be cost cuts, restructuring and consolidation and that would take time, the sources said. "These two years, 2015-16, are still a discovery, everybody is talking about the economics of tight oil but nobody is talking with certainty… you have to wait and see," said a source from a Gulf OPEC producer. At its last meeting in November, OPEC kingpin Saudi Arabia persuaded fellow members to keep production unchanged, […]

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Rig data paints mixed oil picture

Mixed pictures emerge on how rig activity may or may not impact oil production in key U.S. shale basins. Photo by UPI/Shutterstock/Calin Tatu. North Dakota state data show 107 active rigs as of Thursday, down 45 percent year-on-year and 3.6 percent less than last week. The rig count of 111 last week was the lowest since April 2010 . Bentek Energy, a forecasting division of energy reporting agency Platts, found crude oil production in and around the Bakken shale formation in North Dakota averaged 1.2 million barrels per day. That is around 276,000 bpd higher than February 2014, despite the drop off. "Producers are countering the decline in rig count with a drive for efficiency gains in drilling and completion techniques and an increased focus on their more productive acreage," Catherine Bernardo, Bentek’s manager of energy analysis, said in a statement. Data from the North Dakota Industrial Commission found […]

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The Economic Impact of Shale Oil

North Dakota Sees $4.4 Billion in Revenues N.D. Economy Booming During a recent event dubbed “Energy Day” in Bismark, N.D. various groups came together to recognize the impact of the oil and gas industry. The day included legislative committee hearings, an education session and facts and figures regarding the industry’s importance to North Dakota’s economy. According to one study, presented by Dean Bangsund of ND University, oil and gas had a $43 billion economic impact on North Dakota in 2013 and affected many parts of the aspects of the state’s economy. Highlights include: Retail trade saw the largest impact, accounting for $11.3 billion of the total. Personal income saw the second-largest impact at $9.3 billion. The finance, insurance and real estate industry ($4.5 billion) overtook the government $4.4 billion in government revenues Researcher Dean Bangsund told Bakken Magazine  “This study helps confirm that the petroleum industry is one of […]

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Fracking Rules Expected to Be Unveiled by Obama Administration Friday

Pump jacks and wells are seen in an oil field near McKittrick, Calif., where gas and oil are being extracted by hydraulic fracturing. Photo: David McNew/Getty Images WASHINGTON—The Obama administration on Friday is expected to issue long-awaited regulations setting new standards for hydraulic fracturing in the oil and natural-gas industries, people familiar with the matter said. The drilling technology has been key to unlocking vast reserves of oil and gas across the U.S., but qualms about its environmental impact have made it controversial. The regulations will set standards for wells and disposal of wastewater—and also require companies to disclose chemicals used, Interior Secretary Sally Jewell said on Tuesday in remarks discussing the rules. “The rule will include measures to protect our nation’s groundwater—requiring operators to construct sound wells, to disclose the chemicals they use, and to safely recover and handle fluids used in the process,” Ms. Jewell said at […]

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Shale Producers Have Found Another Lifeline: Shareholders

(Bloomberg) — U.S. oil producers are issuing new shares of stock at the fastest pace in more than a decade, looking to investors for a cash lifeline to pay down debt and keep drilling as crude prices continue to sink. Tapping equity markets has become the best option for companies such as Dallas-based RSP Permian Inc., which announced March 17 it’s seeking to raise as much as $232 million by selling additional shares. Calgary-based Encana Corp. and Noble Energy Inc. of Houston also have issued shares in the past two months to reduce debt. That brings funds raised in the first three months of the year to about $8 billion, more than 10 times the total in the same period last year. As the continued slide in oil prices further crimps cash flows, banks are pressuring these companies to shore up their capital and reduce debt to lower servicing […]

Posted On : Published By : Tom Whipple
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Oil Prices Will Recover

On St. Patrick’s Day the U.S. Energy Information Administration (EIA) reported that oil production from three of America’s largest shale plays is in decline. The EIA is forecasting that total U.S. oil production will be in decline in the 3rd quarter. The South Texas Eagle Ford, North Dakota’s Bakken/Three Forks and the Niobrara in Colorado & Wyoming are in decline. Since horizontal shale wells have very steep production decline rates (more than 50% in the first year), the oil supply “glut” will be corrected by market forces. Shale plays require continuous drilling or they quickly go on decline. Note: In the EIA chart above, the government’s production forecast is based on an active onshore rig count of 1,300. Baker Hughes reported March 13, 2015 that the land rig count was down to 1,069. I am forecasting the active onshore rig count in the U.S. to fall below 800 by […]

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Non-U.S. Shales Prove Difficult to Crack

After spending more than five years and billions of dollars trying to re-create the U.S. shale boom overseas, some of the world’s biggest oil companies are starting to give up amid a world-wide collapse in crude prices. Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC have packed up nearly all of their hydraulic fracturing wildcatting in Europe, Russia and China. The reasons vary from sanctions in Russia, a ban in France, a moratorium in Germany and poor results in Poland to crude prices below what it can cost to produce a barrel of shale oil. Chevron halted its last European fracking operations in February when it pulled out of Romania. Shell said it is cutting world-wide shale spending by 30% in places including Turkey, Ukraine and Argentina. Exxon has pulled out of Poland and Hungary, and its German fracking operations are on hold. The result: Outside the […]

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U.S. shale oil firms brace for more pain as crude resumes slide

HOUSTON/WILLISTON, N.D. (Reuters) – With the prospect of another plunge in crude prices CLc1LCOc1 looming after two months of stability, U.S. shale oil producers may face another round of spending cuts to conserve cash and survive the downturn. A deeper retrenchment would have far-reaching effects. Additional cutbacks would further gut the already-hemorrhaging oilfield services industry and may heighten expectations for a steeper drop in U.S. crude output later this year. They would also reinforce the United States’ emerging role as the world’s "swing producer," with dozens of independent companies that can quickly ramp up production in good times and dial it back in a downturn. "If I were an oil company today, I would talk about one thing: how far can you cut costs," said Fadel Gheit, an oil analyst at Oppenheimer in New York. "They cannot control anything else." Gheit said he expected a new wave of capital […]

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Bakken production dips, surge expected near June

The Bakken needs to drill and complete 115 wells every month to maintain a production level of 1.2 million barrels of oil per day, according to Helms. PHOTO: OVERLAND PHOTOGRAPHY The current price of oil in conjunction with active or expected North Dakota-imposed tax breaks for oil and gas producers has led to the first major activity slowdown in North Dakota in several months, said Lynn Helms, director of the North Dakota Department of Mineral Resources. According to Helms, the state’s production for January fell by 3 percent compared to the previous month. With the low oil price market, rig count has also dropped. In January, the state’s rig count was down 21 from December, February followed a drop of 27, and today western North Dakota has 111 drilling rigs operating—the lowest since April 2010. The number of uncompleted wells rose from the previous month, totaling roughly 825 wells. […]

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EIA: falling rig counts affecting production in Bakken

Although production has decreased in these three shale plays, the EIA said production for the areas it provides DPR’s for was up in March, reaching 5.6 million barrels per day. PHOTO:U.S. ENERGY INFORMATION ADMINISTRATION The U.S. Energy Information Administration’s recent Drilling Productivity Report indicates a slowdown in oil production growth patterns in three key oil plays in the U.S., including the Bakken, Eagle Ford and Niobrara. The combined plays are down roughly 24,023 barrels of oil per day (bopd). The estimates cover the months of March and April, and include the first projected declines in crude production in these regions since the first issue of DPR appeared in October 2013. The DPR projects the Bakken to be producing 577 bopd in new well oil production per rig in March 2015, and 592 bopd in April 2015, a change of 15 bopd. It also predicted that overall oil production in […]

Posted On : Published By : Tom Whipple