Category:

Shale Drillers Idle Rigs From Texas to Utah Amid Oil Rout

The shale-oil drilling boom in the U.S. is showing early signs of cracking. Rigs targeting oil sank by 14 to 1,568 this week, the lowest since Aug. 22, Baker Hughes Inc. (BHI) said yesterday. The Eagle Ford shale formation in south Texas lost the most, dropping nine to 197. The nation’s oil rig count is down from a peak of 1,609 on Oct. 10. Drillers are slowing down as crude prices tumbled 24 percent in the past four months. Transocean Ltd. (RIG) said yesterday that its earnings would take a hit by a drop in fees and demand for its rigs. The slide threatens to curb a production boom in U.S. shale formations that has helped bring prices at the pump below $3 a gallon for the first time since 2010 and shrink the nation’s dependence on foreign oil imports. “We are officially seeing the slowdown in oil drilling,” […]

Posted On : Published By : Tom Whipple
Category:

Sapping the sweet spots: How long will US energy boom last?

In his 2012 State of the Union address, President Barack Obama said that the U.S. had a supply of natural gas “that can last America nearly 100 years.” But that unbridled optimism, shared by the natural gas industry as well as politicians who want to see the U.S. become more energy independent,is worrying a growing group of activists and analysts who say U.S. oil and gas production may start declining in a matter of years as drillers run out of sweet spots in U.S. shale reserves and are forced to explore less productive — and less lucrative — regions. “Most of the wells right now are going into sweet spots,” said David Hughes, who authored a report released this week on the future of oil and gas production from the Post Carbon Institute, a green energy think tank. “You’re going to have to go into other parts of the […]

Posted On : Published By : Tom Whipple
Category:

Shale Drillers Idle Rigs From Texas to Utah Amid Oil Rout

The shale-oil drilling boom in the U.S. is showing early signs of cracking. Rigs targeting oil sank by 14 to 1,568 this week, the lowest since Aug. 22, Baker Hughes Inc. (BHI) said yesterday. The Eagle Ford shale formation in south Texas lost the most, dropping nine to 197. The nation’s oil rig count is down from a peak of 1,609 on Oct. 10. Drillers are slowing down as crude prices tumbled 24 percent in the past four months. Transocean Ltd. (RIG) said yesterday that its earnings would take a hit by a drop in fees and demand for its rigs. The slide threatens to curb a production boom in U.S. shale formations that has helped bring prices at the pump below $3 a gallon for the first time since 2010 and shrink the nation’s dependence on foreign oil imports. “We are officially seeing the slowdown in oil drilling,” […]

Posted On : Published By : Tom Whipple
Category:

California Oil-by-Rail Drops as Canada Faces Competition

California , the nation’s largest gasoline market, received the least amount of oil by rail in 17 months as cheaper in-state supplies and imports eliminated the need for Canadian supplies. The most populous U.S. state took 11,612 barrels a day by rail in September, a 7.5 percent drop from a month earlier and down from a peak of 38,086 barrels a day in December, California Energy Commission data show. Shipments from Canada, which made up 76 percent of California’s oil-by-rail receipts last November, tumbled to zero, the agency said on its website . The slide in Canadian shipments highlights how competition is growing to supply the western U.S. as refining markets elsewhere in the nation drive out imports by processing more domestic shale oil. Exxon Mobil Corp. (XOM) ’s Torrance refinery near Los Angeles was said to shut a crude unit in September, cutting the cost of oil from […]

Posted On : Published By : Tom Whipple
Category:

Going Out On A Limb, North Dakota Oil Titan Scraps Hedges

WILLISTON, N.D., Nov 6 (Reuters) – Harold Hamm, chief executive of Continental Resources Inc, stunned a bearish crude market by scrapping all of the North Dakota energy producer’s oil hedges, betting that prices will recover soon after sinking 25 percent in recent months. With the move, Hamm, who last month called OPEC a "toothless tiger," appears to be heading into a price war with Saudi Arabia, the world’s biggest oil exporter, without any protection from a prolonged downturn that some analysts say is looming. Saudi Arabia and 14 other OPEC members have shown no sign yet of moving to cut production, a step that would lift prices. The conventional wisdom is that the country, frustrated by a global supply glut caused by soaring United States output, is prepared to let prices fall to squeeze U.S. shale oil producers out of the market. But Hamm, striking a defiant tone, told […]

Posted On : Published By : Tom Whipple
Category:

Denton frack ban challenged in Texas court

Texas oil and gas group files suit against Denton ban on hydraulic fracturing. UPI/Kevin Dietsch AUSTIN, Texas, Nov. 6 (UPI) — The Texas Oil and Gas Association said it filed a case against the city of Denton after voters backed an initiative to ban hydraulic fracturing. Denton voters passed a special measure on the midterm ballot that prohibits hydraulic fracturing within city limits. It’s one of the first such local measures in the country to get voter approval. Denton sits on top the Barnett shale play in Texas, which at the end of 2013 was in the top tier in terms of production from shale basins in the United States. Thomas Phillips, former chief justice of the Texas Supreme Court and now a lawyer representing the Texas Oil and Gas Association, said a suit was filed in Denton County district court against the measure. "The association does not believe […]

Posted On : Published By : Tom Whipple
Category:

Emerald Oil May Scale Back Bakken Drilling Program in Q1 2015

Emerald Oil Bakken Acreage Map|Click to Enlarge Emerald Oil, Inc. could cut its Bakken drilling program the first quarter of next year if the price of oil continues to drop. Emerald’s CEO McAndrew Rudisill announced the company’s plans in a conference call for investors this week. With WTI now below $80, we could see the first shoes begin to drop among some Bakken producers. According to the consultancy Wood Mackenzie, breakeven oil prices range from $60 to $80 per barrel in North Dakota’s Bakken. Emerald’s current three-rig drilling program is slated to continue in the Bakken through the end of the year, but the contract for one of its rigs expires in the first quarter of next year (March 15, 2015), and the company may not renew it. According to Rudisill, the company’s decision will be determined largely by what is happening with WTI crude oil price.”We have to respond to large changes in the price of crude oil, […]

Posted On : Published By : Tom Whipple
Category:

FRACTIONAL FLOW

The saying is that hindsight (always) provides 20/20 vision. In this post I present a retrospective look at my prediction from 2012 published on The Oil Drum (The “Red Queen” series) where I predicted that Light Tight Oil (LTO) extraction from Bakken in North Dakota would not move much above 0.7 Mb/d. Profitable drilling in Bakken for LTO extraction has been, is and will continue to be dependent on an oil price above a certain threshold, now about $68/Bbl at the wellhead (or around $80/Bbl [WTI]) on a point forward basis. (The profitability threshold depends on the individual well’s productivity and companies’ return requirements.) Complete analysis of developments to LTO extraction should encompass the resilience of the oil companies’ balance sheets and their return requirements. Figure 01: The chart above shows development in Light Tight Oil (LTO) extraction from January 2009 and as of August 2014 in Bakken North […]

Posted On : Published By : Tom Whipple