News From The Oil Patch 5/23/2016

Kansas Common Crude closed the week Friday (5/20) at $38/bbl at CHS in McPherson.  That's up $1.50 from a week earlier and up $1.75 from the first of the month.
 
Independent Oil & Gas Service reported drilling underway at one site in Stafford County and drilling ahead at another.  The total active rig count for Kansas was up 9.1% on the week, 14.5% higher than a month ago but still 50% lower than a year ago.  There were nine active rigs east of Wichita, up three, and fifteen in western Kansas, down one. Baker Hughes reported 404 active drilling rigs nationwide, down two.  The count in Canada was up one to 44 active drilling rigs.
 
There were just 18 drilling permits filed for new locations across Kansas last week, bringing the total so far this year to 311.  There were 14 permits filed in eastern Kansas and four west of Wichita.
 
Independent Oil and Gas Service reported 19 new well completions last week across the state, seven in eastern Kansas and 12 west of Wichita including two in Russell County and one in Stafford County. So far this year there have been just 538 wells completed across Kansas, of those, 74, or 13.7% have been dry holes.
 
There were just 80 new intent-to-drill notices filed with the Kansas Corporation Commission last month.  That's up from the 66 intents filed in March, but much less than the 263 intents filed in April of last year.  There were three intents filed last month in Barton County, three in Ellis County, one new intent filed in Russell County.
 
A new study argues that as many as nine in ten of the earthquakes in the past 40 years in Texas were manmade.  But Ryan Sitton of the Texas Railroad Commission says the study relies on what he called "very aggressive assumptions" that he says you would not normally accept in a scientific study. University of Texas researcher Cliff Frohlich, the lead author of Wednesday's study, said Texas regulators have been too slow to acknowledge a link.  Studies like Frohlich's have been criticized by the Railroad Commission and industry groups for relying too heavily on correlations between the spacing and timing of earthquakes and disposal wells and not enough on subsurface pressure data.
 
Counties in Kansas received significant revenue last year from the so-called  Oil Depletion Trust Fund, which was repealed one year after it was created.  Steve Stotts of the Department of Revenue tells us that fund was intended to protect counties from a downturn in production, which in fact went up.  "The counties got about 12.5% of severance tax money that went back to an oil depletion trust fund," Stotts said in an interview,  "so that the counties would have some money there when the oil production starts to tail off and they start to lose that property tax money.  This was there to bridge that gap."  But the package was repealed after just one year in operation.  Barton County received more than $165-thousand dollars from the fund. Ellis County received 247-thousand.  Russell count received $118 thousand and Stafford County received $113-thousand. 
 
The Oklahoma Senate voted to eliminate a controversial program of tax credits for at-risk oil wells altogether, but the House of Representatives pushed through an amendment that would put a cap of $25 million on the program.  In the past, the rebates cost the state about ten million per year. But with prices plummeting, lawmakers were faced with the possibility next year of $130 million in tax rebates for oil wells that were no longer profitable.
 
The biggest oil producer in Kansas, and the biggest disposer of the wastewater believed to be causing earthquakes along our southern border, is now seeking bankruptcy protection.  SandRidge Energy filed bankruptcy Monday, saying it hopes to convert $3.7 billion of long-term debt into equity while allowing the company to keep its operations going. SandRidge officials said the company has the support of creditors who hold more than two-thirds of its $4.1 billion in total debt. The company asked the court for permission to continue day-to-day operations, and to continue paying wages, royalties and interest as well as vendor obligations without interruption.
 
TransCanada plans to dig up and replace sections of its Keystone pipeline found to not meet federal strength standards so the company can begin pumping oil at higher pressure.  The work, slated to begin this month and extend through 2017, will happen in Nebraska, South Dakota, Kansas, Illinois and Missouri. The 30-inch pipeline first went into operation in June 2010.
 
Plains All American Pipeline company and one of its employees now face a federal indictment listing 46 criminal counts after a pipeline ruptured last year, spilling about 140,000 gallons of crude oil along the California coastline near Santa Barbara. Four of the counts are felonies, including one charge of knowingly discharging a pollutant into state waters.  Santa Barbara County District Attorney Joyce Dudley identified the employee who was charged as environmental and regulatory compliance specialist James Buchanan. Buchanan was not named in any of the four felony charges and faces up to three years in the county jail.  The company is likely facing fines of "over $1 million," according to Ms Dudley, who added that Plains was "not cooperative."