News From The Oil Patch 12/8/2014
The oil price plunge continues. At NCRA on Monday, the price for a barrel of Kansas Common Crude was $52.75. We had to go back to July of 2009 to find it at that price or cheaper.
In North Dakota a barrel of crude oil is bring less than $50. The price for Bakken crude fell below $50/bbl for some producers on November 28th. That's nearly 30% cheaper than the price of Brent Crude on London's ICE exchange. Bloomberg reports difficulties for some producers getting their product to refining hubs. At least one analyst says if you're selling at the wellhead, you're getting a very low price compared to West Texas Intermediate Crude. North Dakota produces more than one million barrels per day, but pipeline capacity is currently just 583,000 barrels. That's expected to grow significantly by the end of the year.
Also from North Dakota: slipping prices already means fewer rigs operating in that state's Bakken Shale, according to the Associated Press. The rig count during the last weekend in November was 185 for the entire state, down from 191 for the same date a year earlier.
How many ways are there to say "North Dakota oil boom"? Here's one more. Reported income by all North Dakotans has more than doubled to a record $30.4 billion since the infancy of the state's oil boom in 2006. Tax Department figures released to the Associated Press show the number of taxpayers in the state has jumped 37 percent since the state's oil bonanza began, from 339,000 in 2006 to 466,000 in 2013. Slightly more than 440,000 tax returns were filed in 2012.
Analysts are offering a wide range of opinions about how falling oil prices will affect production in the US. The Wall Street Journal reported that OPEC's decision last week NOT to cut production to prop up prices may not affect American output anytime soon. Experts tell the journal that come companies loaded with debt or operating in fringe locations could face big trouble if US prices remain at $65 to $70 per barrel for long. But many shale drillers are likely to cut spending while still pumping from cheap-to-produce ares like the Eagle Ford and Permian Basin plays in Texas. Some other companies have oil-price hedges in place that will buoy profits even if crude continues selling at four-year lows.
T. Boone Pickens predicted last week that prices would rebound to $100 a barrel in the next 12 to 18 months. Pickens also said he expects the Organization of the Petroleum Exporting Countries will eventually move to slash oil production, possibly in the first half of 2015.
Exxon Mobil's CEO Rex Tillerson tells CNBC the firm can weather the downturn in oil prices even if prices sink to $40 per barrel. He says massive projects in liquefied natural gas and deepwater drilling are decade-long investments, and says they have been tested to perform across a broad range of price ranges, from $40 to $120 per barrel.
Baker Hughes reports 1,920 active drilling rigs nationwide, up three, and 422 in Canada, down 16. The count in Kansas was 26 rigs actively drilling for oil and gas, five higher than last week. Independent Oil & Gas reports 115 active rigs in Kansas. There were 30 east of Wichita, down six and 85 in western Kansas, unchanged. 38 were listed as pending.
Kansas operators filed 93 drilling permits for new locations across Kansas last week, 6,809 year-to-date. There were 52 new permits filed in eastern Kansas, and 38 west of Wichita, including four in Barton County, two in Ellis County, and one in Stafford County.
Independent Oil & Gas Service reports 67 newly-completed wells in Kansas last week, for ayear-to-date total of 5,431. Of the 15 completions in western Kansas six were dry holes. There were 52 completions east of Wichita last week.
Houston-based Kinder Morgan is rekindling discussions aimed at opening an oil pipeline from Texas's Permian Basin to southwestern Kern County, California. The proposal would then tie into an existing oil pipeline to access refineries in northern and southern California. No oil pipelines currently cross the Rocky Mountains. According to reporting by the Bakersfield Californian newspaper, the project would transit 200,000 barrels of crude per day to California, plus 100,000 barrels per day of liquid petroleum condensate for export to Asia.