News From The Oil Patch 6/20/2016

Baker Hughes reported a big jump in active rigs last week, 424 total, up ten, including an increase in nine rigs drilling for oil and one drilling for natural gas.  The count in Canada was 69 rigs, up four. Independent Oil & Gas Service reported five rigs east of Wichita last week, up one, and fourteen in western Kansas, also up one.  Two more rigs were stacked last week, leaving 169 total inactive rigs across Kansas.
 
There were 16 drilling permits issued across Kansas last week, 385 so far this year.  There were nine permits filed for drilling at new locations in eastern Kansas and seven west of Wichita.
 
Independent Oil & Gas Service reported 20 new well completions across the state last week, including three dry holes.  There were 14 newly-completed wells east of Wichita and six in western Kansas.
 
While many areas of the oil patch will see increases in drilling activity at $50 per barrel,  crude prices would need to rise to near $60 to spawn a spike in the Mississippian Lime play. which is largely being blamed for a spike in earthquakes in southern Kansas and northern Oklahoma.  The increased cost of finding alternative means of disposing of wastewater is blamed, according to new analysis from Reuters.  The managing partner at Ponderosa Advisors says that if the water-handling requires trucking it away, it would increase the break-evens by between $3 and $7. Bernadette Johnson tells Reuters that all depends on the size of the operator, the amount of water and the distance it needs to be shipped.
 
Data released by OPEC showed that Venezuela suffered its largest monthly oil-production decline in a decade last month. A decline of 120,000 barrels a day, to 2.37 million barrels a day.  The state-owned energy company has failed to maintain oil-industry investments.  According to the Wall Street Journal, the region’s largest petroleum exporter suffers from a debilitating cash crunch, widespread food shortages and civil unrest. 
 
North Dakota Wednesday reported the largest month-to-month oil production decline in the state's history, April's 1.04 million barrels per day was down more than 70 thousand barrels per day from March.  Department of Mineral Resources Director Lynn Helms says the all time high was in December of 2014 when North Dakota produced more than 1.22 million barrels per day.
 
The oil and gas industry will cut $1 trillion from planned spending on exploration and development because of the slump in prices, leading to slower growth in production.  Consultant Wood Mackenzie says worldwide investment in the development of oil and gas resources from 2015 to 2020 will be 22 percent, or $740 billion, lower than anticipated before prices plunged in 2014. Bloomberg says the deepest cuts were in the U.S.  The consultant says another $300 billion will be eliminated from exploration spending and global production this year will be 3 percent lower than previously forecast.
 
That wildfire in Alberta, Canada will prove to be very expensive for oil-sands giant Suncor, but a company officials say the return to operations is "going as planned."  The Web site oil-price-dot-com quotes unnamed company employees placing the losses at one billion dollars or more, Canadian, which is about 760 million U.S. dollars. They're still counting costs attributed to worker transportation and lodging.  Energy companies Husky and Cenovus, which resumed operations last week, did not expect their wildfire losses to be substantial, but did not provide a dollar estimate.
 
The Brits are abuzz about Goodluck Jonathan, the former president of Nigeria, who bought a 12,000 square foot house in a posh English neighborhood, for upwards of 21 million US dollars.  The president in exile claims he's been at the forefront of the fight against his country's corrupt oil connections, but several of his top aides are now in jail awaiting trial, and groups of children are coming to the forefront, begging the  Niger Delta Avengers rebel group to stop its ongoing campaign of sabotage on oil operations.
 
The CEO at BP says that company will not be investing in the IPO of Saudi Aramco.  Chief Executive Bob Dudley also told reporters the global oil industry needs to readjust costs based on an oil price of around $50 per barrel.
 
Marathon Oil agreed to buy PayRock Energy Holdings, a portfolio company focusing on Oklahoma and Kansas.  The deal improves Marathon's already huge Oklahoma presence, adding about 9,000 net barrels of oil equivalent per day in Oklahoma's STACK play.
 
The Federal Reserve Bank in Dallas issued a report saying banks in Texas, Louisiana and New Mexico are setting aside more money to guard against loan losses, as energy companies struggle with low prices.  The regional Fed bank's president, Robert Kaplan, said in the report that loan growth slowed down "markedly" in 2015 , that the region’s banks remain profitable, but its bankers are setting aside more in provision expense to cover possible loan losses in the energy sector.
 
In west Texas, they call them the "Wink Sinks," and they're getting bigger.  Two giant sinkholes between the towns of Wink and Kermit, Texas have been around for quite a while, but scientists now say they're unstable and are likely to grow larger. SMU geophysicists say radar images of the sinkholes over the last seven years show they're still sinking, and areas near the Wink Sinks are also sinking, by about five inches per year.  The sinkholes are the after-affect of a lot of oil production there some 60 years ago, but the instability originally caused by oil drilling is now being compounded by changing groundwater levels.