News from the Oil Patch 8/15/2016

Independent Oil & Gas Service reported ten active drilling rigs in eastern Kansas, up two, and 25 west of Wichita, also up two.  There are 167 total inactive rigs across Kansas.  Baker Hughes reported 481 active rigs nationwide, an increase over last week of 15 oil rigs and two drilling for natural gas. Canada reports 126 active rigs, up four. 
 
There were 33 drilling permits filed for new locations across Kansas last week, for a year-to-date total of 598.  There were 22 new permits filed in eastern Kansas and 11 west of Wichita, including one in Barton County.  The monthly numbers show 124 permits filed in July, 57 in eastern Kansas and 67 west of Wichita.  
 
Independent Oil & Gas Service reported eight new well completions across Kansas last week, and 727 so far this year.  All eight completions were west of Wichita, and five of them were dry holes.  IOGSI reports 53 completions statewide in July.  There were 16 completions last month in eastern Kansas and 37 west of Wichita.
 
Of the 53 total completions statewide last month, 12 were dry holes, including one in Barton County and all five July completions in Ellis County
 
The Kansas Corporation Commission reports 146 intent-to-drill notices filed in July across Kansas. That's 55 higher than the 91 filed in June and brings to 539 the total number of intents filed so far this year. There was one new intent filed in Barton County, two in Ellis County and two in Stafford County.  
 
The State of Kansas experienced fewer "felt" earthquakes last year, since regulators placed limits on oilfield saltwater disposal in a seismic zone in Harper and Sumner County.  But the total number of quakes, felt and unfelt, has gone up. So the KCC expanded its order to include SWD limits in other areas of those two counties, plus several areas in Barber, Kingman, and Sedgwick counties. The Commission did bend somewhat for SandRidge and Tapstone Energy, two operators of large volume disposal wells in that area. Commission staff suggested that the 16,000 barrels per day limit might not be enough to prevent increases in seismicity. But staff also pointed out that a limit of 8,000 bpd would potentially adversely impact exporation and production.  The Commission opted to lessen the severity of the limits, from the original staff recommendation of a phased-in limit of 8,000 barrels per day, to 16-thousand barrels per day in the new area.  Those wells within the original specified areas will continue to operate under limits of 8,000 bpd.
 
Kansas has joined a dozen other states in the lawsuit challenging EPA's final rule regulating emissions standards in the patch.  Attorney General Derek Schmidt is asking for judicial review of one of the three new rules regarding methane emissions. He says the rule is illegal because he says the agency skipped past the "endangerment finding" as required by law.  In the petition filed August 2nd, petitioners asked that the rule be vacated until such time as EPA can conduct the required endangerment finding process and cost analysis.
 
The headlines have resumed touting a proposed output agreement involving Russia and Saudi Arabia.  That pumped up prices to their highest level in nearly a month, ten percent higher than at the beginning of the month.  The Russian Energy Minister told a Saudi newspaper that producers are in talks to possibly limit or freeze production.  But the sticking point continues to be Iran, which this week indicated it has made no decision about joining the meeting next month in Algiers.  The statement from an oil- ministry spokeswoman cast doubt on the success of the renewed efforts toward a production freeze. 
 
Saudi Arabia, has told OPEC it pumped a record high of 10.7 million barrels per day of crude oil in July, up by 123,000 b/d from the previous month. According to Platts, the kingdom is increasing use of its own oil at power stations, and has increased exports as well.
 
Chevron has persuaded a federal appeals court to block enforcement in the U.S. of an $8.65 billion pollution judgment in South America that the company said was obtained through bribery and fraud.  The court agreed with that assessment of the plaintiffs in the Ecuadorean rainforest pollution case.  In the 127-page decision, a judge said "even innocent clients may not benefit from the fraud of their attorney."  While not disputing that pollution occurred, Chevron has said attorney Steven Donziger and his associates arranged the ghostwriting of a key environmental report and bribed the presiding judge in Ecuador.  The oil company has also said a 1998 agreement between Texaco and Ecuador absolved it of further liability. It's likely not the end decades-long court case. Donziger's attorney says they will explore all available options for further review.
 
The Oklahoma Energy Index, designed to measure the state's oil and natural gas economy, is showing the first signs of growth in nearly two years.  KWTV-9 in Oklahoma says the data collected in May showed a three-point increase from the previous month. That's the first time the index has shown growth since October 2014.  The Oklahoma Energy Index is a joint project of the Oklahoma Independent Petroleum Association, Bank SNB and researchers at Oklahoma City University.  Despite the growth, Oklahoma City University economist Russell Evans warns that a downturn in commodity prices combined with concerns about the economy in general could hinder growth in the industry.