Daily Reports

News From The Oil Patch 5/16/2016

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The active drilling rig count from Kansas last week was down 12% according to Independent Oil & Gas Service, with six active Rigs in eastern Kansas, down one, and 16 west of Wichita, down two. Baker Hughes reported the number of rigs nationwide drilling for oil fell by ten rigs.  That total for oil and gas was 406 active rigs last week.  Canada reported 43, a gain of seven rigs.  
 
Independent oil and gas service reports 519 well completions in Kansas so far this year, 16 last week, all of them west of Wichita, including one new comletion in Ellis County.
 
A dry hole in Ellis County completed last week was one of three across Kansas, 74 so far this year statewide, out of 519 completions in 2016
 
Kansas is heading for the lowest 2nd quarter permit total in a long time.  There were 14 new drilling permits filed for new locations across Kansas last week, five east of Wichita and nine in western Kansas.  Barton and Stafford counties each reported a new drilling permit last week.  Across Kansas we've had just 293 drilling permits filed so far this year.  
 
By way of comparison, there were 928 new permits filed a year ago at this time and more than 27-hundred by mid-May of 2014, before the price downturn began. 
 
Independent Oil & Gas Service is offering a 30% discount for new subscriptions to the weekly or monthly Red Top Reports through the end of May. In the Red Top News dated May 20, Independent noted that the offer is a response to the nearly 30% drop in crude prices since this time last year.  Visit them as we do at IOGSI dot com.
 
The U.S. government won't appeal recent court rulings that stripped the lesser prairie chicken of federal protection under the Endangered Species Act. The Justice Department filed a motion Tuesday to dismiss its appeal of the rulings in Texas.  The rulings found the feds failed to make a proper evaluation of a multi-state conservation plan when it listed the lesser prairie chicken as threatened.  Oil and gas groups, including several in Kansas and Oklahoma, opposed the threatened listing, saying it would cost them millions. 
 
Opponents of a proposed oil pipeline slated to run through four Midwestern states have pressed Iowa regulators to keep a Texas-based petroleum company from starting construction before all federal permits are approved.  Developers hoped to begin construction by now on the 1,150-mile Dakota Access pipeline that's designed to carry a half-million barrels of oil a day from the Bakken oil fields in northwest North Dakota to a pipeline and refinery cluster in southwest Illinois.  The company told the Iowa Utilities Board it must begin laying pipe in the state by Tuesday to finish before winter. Iowa requires Dakota Access to obtain all required permits before beginning and the U.S. Army Corps of Engineers hasn't issued its river crossing permits yet.
 
It will cost the oil and gas industry about $530 million over the next ten years, and will only account for a sliver of so-called greenhouse gas emissions, but the Obama Administration says a new rule will bring benefits totalling more than $690 million.  On Thursday, the EPA issued a new rule requiring producers to find and repair leaks at new or modified oil and gas wells, and capture the methane gas that escapes from wells.  The rule is the major element of an administration goal to reduce methane emissions from oil and gas drilling by up to 45 percent by 2025. 
 
The number of oil and natural gas drilling permits issued by Texas regulators in April was down 20% compared to a year earlier.  The Texas Railroad Commission said it issued 683 original drilling permits in April, compared with 848 from the same month one year ago. Most of the permits were for oil-related activities.  In February, the last full month for which state data are available, Texas produced 79.6 million barrels of oil, a figure that was lower year-on-year by around 17 percent.
 
A new study will not play well in the oil patch of North Dakota.  A Duke University study published in Environmental Science and Technology revealed what is described as significant contamination of soil and water the state from radioactive materials, heavy metals and corrosive salts as a result of oil and gas wastewater spills.  The study implications for humans and wildlife from some 3,900 reported brine spills in the region since the rise of shale drilling in 2007.  Some 9,700 wells have been drilled in North Dakota's Bakken shale and Bottineu oilfield region in the last 10 years, Truthout reports.

News From The Oil Patch 5/9/2016

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Two more rigs return to service looking for oil and gas in Kansas last week.  Independent Oil & Gas reports just 162 total inactive rigs.  There are seven active rigs east of Wichita, unchanged, and 18 in western Kansas, up one from the week before. They're moving in completion tools at one site and moving in rotary drilling tools at another in Barton County this week.  An operator is completing a well in Ellis County, and Russell County reports drilling ahead at one site and completion on the way at two more.  Baker Hughes reported 415 active drilling rigs nationalwide.  That's down five with four fewer rigs drilling for oil nationwide.  The rig count across Canada was down one at 36.
 
There were just 15 permits filed last week for new locations across Kansas.  That's 279 new permits so far this year, compared to 858 a year ago.  We spotted one new permit in Barton County and one in Stafford County.  Independent Oil & Gas Service's monthly permit report shows 77 statewide in April.  
 
Independent reported 27 new well completions last week, 503 so far this year with five new completions noted in Barton County. Monthly completions for April showed 84 statewide including one each in Barton Ellis and Russell Counties.  Out of 84 total completions for the month, 12 were dry holes. 
 
A lawsuit against the EPA could force new, national regulations of the way oil & gas producers dispose of waste.  Environmental groups filed suit against the agency, saying the government has failed to adequately regulate disposal of liquid and solid waste generated in the patch. Adam Kron, a lawyer for one of the plaintiffs, says the rules "are almost 30 years overdue."  Kron, the senior attorney for a group called the Environmental Integrity Project, says it's a "more waste-intensive industry than ever before."  The lawsuit asks the court to set strict deadlines for the EPA to adopt updated rules.
 
Monthly tax collections from oil and natural gas in Oklahoma dropped to $20.8 million in April, the lowest monthly total in 17 years.  That represents a 37% decrease from a year ago, and a 12% decline from last month. Total Oklahoma tax receipts for April were down about 11 percent from a year ago.  
 
Timing is everything, especially with capital projects, like that brand new refinery in North Dakota, the first new refinery built in the US since the 1970s.  The MDU Resources/Calumet refinery was constructed just as the current price slide began.  Now the $430 million investment is running at just 75% capacity because of sliding demand for diesel fuel.  Losses over the first quarter of this year were $7.2 million.  Now MDU is looking at options about its ownership interest.
 
We mentioned this last month, and now it's official. The Williston Basin Petroleum Conference in Bismarck, North Dakota will feature GOP presidential hopeful Donald Trump as the keynote speaker.  North Dakota Petroleum Council President Ron Ness says Mr Trump will speak at one pm on May 26th, the final day of the three day conference.
 
Despite better-than-expected first-quarter results, profits at Royal Dutch Shell dropped by 58%.  The company cut its 2016 spending by another 10% after completing the $54 billion acquisition of BG Group.  Total layoffs planned by Shell total more than 10,000.  This is the first quarterly earnings report since the BG deal, which made the company the world's leading producer of Liquified Natural Gas. 
 
The price plunge in the patch has now caught up with the refining sector, which typically basks in increased profit margins during periods of low prices.  Many refining businesses reported earnings for the period that were down roughly by half from a year earlier.  For Valero, the world’s largest stand-alone refiner by output, that translated to its lowest first-quarter profit in four years. According to the Wall Street Journal, there are two trends that explain the apparent disconnect: U.S. crude is no longer trading at a steep discount compared with oil from other parts of the world. And American exports of gasoline and diesel are pushing into increasingly well-supplied foreign markets.

News From The Oil Patch 5/2/2016

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One oil production company drilled nine different disposal wells in the seismic zone in southern Kansas that penetrated beneath the Arbuckle formation into the Pre-Campbrian rock layer beneath it.  This is one of two ways oil-field waste water is being studied as a possible cause of earthquakes.  Last year, the Kansas Corporation Commission ordered total-depth confirmation on all disposal wells within those areas of Harper and Sumner Counties.  Producers were ordered to plug back any such wells that were drilled too deep. Based on information obtained under the Kansas Open Records Act, we have learned that Sand Ridge Exploration and Production has plugged back a total of nine disposal wells under the KCC order. There were an additional six disposal wells that were not subject to the KCC order that were drilled into PreCambrian rock and were plugged back.  The concrete plug backs ranged in length from 19 feet to 499 feet.  
 
Rig Counts were down again last week, nationwide and statewide.   The latest Kansas rig count from Baker Hughes shows just four active drilling rigs across the state, down two.  But Independent Oil & Gas Service last week showed 24 active rigs across the state, seven in eastern Kansas and 17 west of Wichita.  Independent's online reports showed one site being prepared to spud and another where they're moving in rotary drilling tools in Barton County.  They also showed drilling underway at one lease (1-Willson) in Russell County.
 
Completion and permit numbers were way down last week, with just 13 new drilling permits filed statewide, including one in Barton County, and 7 new well completions, one of those was in Russell County.
 
Statistics also show huge declines in new oil and gas field discoveries in Kansas.  The KCC, KGS and the Kansas Geological Society recognized and named five new oil and gas fiels at its meeting April 13.  That's just seven so far this year.  
 
BP reported a nearly half-billion dollar loss for the three months of this year.  Low oil prices and and payouts for the Gulf of Mexico oil spill took the oil company from a $2.1 billion dollar profit for the same period last year, to a $485 million loss this year.  The first quarter losses were still lower than the $2.2bn loss for the three months through December. The oil giant took a $917m charge for the 2010 Gulf spill, taking their total costs to stockholders so far to $56.4 billion.
 
CNN reports the crash in crude prices has caused $67 billion in combined losses by 40 publicly-traded U.S. oil producers last year.  The Energy Information Administration provides research that shows the bleeding is expected to continue at least early this year for many of those companies. The EIA report was focused on the largest on-shore oil companies, so many of the largest firms, with offshore production, were excluded from the report.The losses surpassed $1 billion each from struggling oil companies like EOG Resources, Devon Energy and Linn Energy as well as SandRidge Energy.  SandRidge, the top producer in Kansas, recently admitted it's exploring a bankruptcy filing.
 
We've told you before about CO2-EOR, the practice of injecting carbon dioxide into producing oil wells to boost recovery.  We're learning that some major economic and technological hurdles remain in North Dakota.  The Forum News Service large-scale implementation is probably a decade away, citing a consultant speaking to lawmakers studying possible incentives to encourage the practice. A geologist from Houston-based IHS said if the technique can enhance oil recovery by 5 percent, it could yield a "long-term prize" of billions of additional barrels recovered from the Bakken and Three Forks shale formations beneath North Dakota and Montana.
 
An oil tanker laden with Libyan crude under sanctions from the UN was stranded near Malta, which refused entry.  Now the Wall Street Journal reports that tanker is now heading back to North Africa bearing 650,000 barrels of crude from an oil company by Libya's eastern government.
 
The Supreme Court has rejected an appeal filed by a group of BP shareholders who were hoping to sue the company over the Gulg oil spill.  The group claimed the company overstated the extent of its safety procedures, prompting them to invest in the company, and then lose money when BP's stock prices sank. According to the Web site "The Hill," an appeals court rejected the investors' class action suit in September.  The high court rejected the appeal of that ruling without comment on Monday.
 
Flooding across Texas has inundated oil production facilities, flushing crude oil and chemicals into rivers across the state.  The Texas Railroad Commission, which regulates oil and gas drilling and production sites, said it has responded effectively to those incidents.  But some others are not so sure, calling the situation a "potential disaster."

News From The Oil Patch 4/25/2016

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Independent Oil & Gas Service reported a 16% drop in the active rig count across Kansas, with the count east of Wichita unchanged at six rigs, and the count in western Kansas down four at 15.  There was one producer moving in rotary drilling tools in Russell County.  Baker Hughes reported 431 active drilling rigs nationwide, 343 prospecting for oil down down eight, and 88 gas rigs, down one. There were 40 active drilling rigs reported in Canada last week, which was unchanged.
 
There were 15 drilling permits filed last week for new locations across Kansas, 251 so far this year. There were nine new permits east of Wichita, and six in western Kansas including one new drilling permit filed in Barton County.
 
Independent Oil & Gas reported 42 newly completed wells across the state last week, which brings the year-to-date total up to 469 completions. There were 31 in eastern Kansas and 11 west of Wichita, including one dry hole completed in Ellis County.
 
The United States Geological Survey reported a spike in earthquakes in our part of the country, and they say oil and gas activity is the chief culprit. USGS reported there were 13 quakes in Oklahoma and one in Kansas since last week. The largest were two magnitude-3.5 quakes recorded Tuesday in north-central Oklahoma. Regionally, the report said the disposal of oil and gas-related wastewater is the "primary reason" for the increase in seismic activity in the central United States. Many states, including Oklahoma, have active management plans for wastewater injection as a way to curb tremors.
 
Steve Burrage has resigned as chairman of the Oklahoma Tax Commission  after a little more than a year in office.  Mr. Burrage delivered his resignation letter to Gov. Mary Fallin on Friday, saying he needed to step down because of what he called “unexpected events.”  Burrage is a former Democratic state auditor and inspector who also was appointed by Fallin to the state Board of Corrections.  He previously served on the Oklahoma City branch of the Federal Reserve Board.  The Tax Commission oversees the collection of fees and taxes, and the distribution and apportionment of various state revenues.  It's not clear if his resignation was related to widespread reporting on increasing tax money payouts to oil producers by the commission for what are termed "economically at-risk" wells.
 
At a time when oil production is down in Oklahoma, oil companies are raking in millions in tax rebates for unprofitable wells, and that has some lawmakers fuming.  According to KOCO TV in Oklahoma City, the Oklahoma Tax Commission said this year the state is paying out $41 million in rebates to operators of  oil wells that are no longer profitable at current oil and gas prices.  That number could spike to $158 million next year, from the state's already depleted general fund. State Representative Brian Renegar argues that oil companies shouldn’t be given a break just because they are down in profits.  He called into question continued payouts after funding for education, health care, roads and bridges have been cut.
 
The International Energy Agency now predicts that non-OPEC production will fall this year by the most in a generation.  Reuters reports this should help rebalance a market dogged by oversupply.  IEA chief Fatih Birol said low oil prices had cut investment by about 40 percent over the past two years, with sharp falls in the United States, Canada, Latin America and Russia.
 
Despite what was called the "Doha production talks fiasco," such talks could resume in June.  The meeting April 16 to freeze output at January levels through October in an effort to boost prices was thought to be a slam dunk.  The deal crumbled when  Saudi Arabia demanded Iran join the plan, despite Tehran's repeated assertions it would likely increase production.  But now we hear from oil officials talking to the Wall Street Journal that OPEC could revive the idea at its next meeting in June.  
 
A petroleum tanker laden with 175,000 barrels of North Dakota crude was being offloaded in Europe on Wednesday, the first such overseas shipment of the state's oil since Congress lifted a 40-year ban on crude exports in December.  North Dakota's congressional delegation and industry officials hailed Hess Corp.'s shipment as a milestone that could open more markets in faraway refineries where premium prices are typically fetched based on foreign prices.  Hess spokesman John Roper said the crude originated from Tioga, North Dakota in early April. It was shipped by rail to St. James, Louisiana. There, it was loaded on a tanker with ExxonMobile Corp.'s offshore oil from the Gulf of Mexico. 
 
Drilling companies and royalty owners from the Texas Panhandle to New Mexico's stretch of the Permian Basin are embarking on a grass-roots campaign to limit foreign oil imports, salvaging what they say is a major sector of the U.S. economy.  Tom Cambridge, one of the Panhandle producers leading the campaign says American oil is competing against a cartel of government operators with a stated initiative of driving an American industry out of business.  The grass-roots movement is pushing for the next president of the United States to issue a proclamation setting quotas for imports — something that hasn't been done in more than four decades.
 
North Dakota crude production fell for the third month in a row, dropping four tenths of a percent in February to its lowest level in a year and a half.  Regulators announced this week that production in the state dropped to 1.11 million barrels a day in February from 1.12 million barrels a day in January. The state’s output hasn’t been that low since July 2014. Production has been trending lower of late, with a 2.6$ drop in January and a 2.5% drop in December.  At 29, the rig count in North Dakota down two rigs to its lowest level in more than a decade. There were 93 rigs in active service in North Dakota on this date last year.  Lynn Helms of the state's Department of Mineral Resources, says oil price weakness is the primary reason for the slowdown.  He says operators are committed to running the minimum number of rigs while oil prices remain at current low levels.  

News From The Oil Patch 4/18/2016

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The Kansas Geological Survey has released its year-end estimates for oil production across the state, and as you might expect the numbers are down.  Total oil production for the year 2015 was 45.47 million barrels, a drop of about nine percent from the year before, and the lowest annual production total since 2012. Harper County production continued its rise to the top of the list of counties in Kansas, but that has slowed someone, up to 3.4 million barrels last year.  Ellis County was next at just over three million barrels.  Finney County came in third among countywide oil production totals last year at 2.16 million barrels. Barton County produced 1.97 million, Russell County produced 1.84 million, and then Stafford County with 1.25 million barrels.
 
The national rig count from Baker Hughes dropped by three to 440 active drilling rigs last week.  There were 40 active righs in Canada, down one. Independent Oil & Gas Service reported six active drilling rigs in eastern Kansas last week, up one, and 19 west of Wichita, a gain of seven from the week before. 
 
There were 22 drilling permits issued for new locations across Kansas last week, ten in eastern Kansas and 12 west of Wichita.  Three of those were in Ellis County.
 
Independent Oil & Gas Service reported ten well completions last week, which makes 427 so far this year.  There were two new completions east of Wichita and eight in western Kansas, which included three dry holes.
 
For the month of March, there were 63 new drilling permits issued statewide, thirty in eastern Kansas and 33 west of Wichita.  There was one permit filed in Barton County last month, four in Ellis County, two in Russell County and one in Stafford County.
 
According to the monthly report from Independent Oil & Gas Service, producers completed 121 wells in March, three in Barton County, six in Ellis County and one in Russell County.  Out of 121 completions in March, 21 were dry holes.
 
Independent also report on permits for the first quarter of 2016.  The quarterly total of 200 permits is 391 less than the first quarter of last year, a dip of 66.2%
 
TransCanada has resumed sending oil through the Keystone Pipeline after a weeklong shutdown prompted by a leak and oil spill in southeastern South Dakota. The pipeline came back online Sunday, but with a reduced pressure. The company says it is continuing cleanup and land restoration at the site of the spill. TransCanada estimates about 400 barrels of heavy crude spilled.  The company says there was no significant environmental impact or threat to public safety.  The company has not released estimates on cleanup or repair costs.
 
A number of roadblocks surfaced in Energy Transfer Partners' Dakota Access pipeline proposal.  If completed, the $3.8 billion pipeline would run from the Bakken Shale in western North Dakota through South Dakota, and Iowa to the refining and storage clusters near Patoka, Illinois, carrying half a million barrels of Bakken crude per day.  
***The Standing Rock Sioux has set up a camp in North Dakota to protest the proposed pipeline.  The Bismarck Tribune reports the "spirit camp" at the confluence of the Cannonball and Missouri rivers has been occupied for two weeks.  The tribe opposes the pipeline because it fears a spill could contaminate its drinking water.  The company maintains the pipeline will be a safe and cost-effective way to transport oil, and will create jobs and boost the economy.  
***In Iowa a lawsuit has been filed against the utility regulators for authorizing use of eminent domain to access land for Dakota Access.  The Des Moines Register reports the lawsuit was filed on behalf of the Northwest Iowa Landowners Association and individual landowners.  The lawsuit says Dakota Access does not qualify as a utility and should not have the ability to use eminent domain to build a pipeline.
***The Environmental Protection Agency and two other federal agencies have asked the Army Corps of Engineers to more carefully review and revise its preliminary plan for the project, saying it should pay closer attention to the impact a spill would have on drinking water for Native American tribes as well as the impact on historic sites. 
 
The Washington Post called it the starkest sign yet of the shifting fortunes of the coal industry.  St. Louis-based Peabody Energy, the largest and most storied coal company in the U.S. announced early Wednesday that it was filing for Chapter 11 bankruptcy.  In the filing the company cited an “unprecedented industry downturn,” which it attributed to a range of factors including what it called the “overproduction of domestic shale gas.” Cheap natural gas, driven by the shale boom, has been steadily eating into coal’s share of electricity generation.
 
Chevron Corp. is cutting 655 jobs in Houston as part of previously announced layoffs.  The news comes after a year in which the energy sector lost 95,000 jobs by one estimate. Oil prices have plunged during the last two years because of high supply and weakening global demand.
 
Authorities in Norway say a drilling rig had breached two safety regulations when a huge wave slammed into the offshore platform's living quarters last year, killing one and injuring four.  The agency said Friday "more lives could have been lost" had there been more people in their cabins on Dec. 30 when a huge wave hit the rig.  The Petroleum Safety Authority says its investigation found the "superstructure was not dimensioned to resist horizontal wave loads." 
 
Iran cranked up its pricing competition, hoping to win market share at a time when rival producers are trying to forge a deal on freezing output.  The state run oil company will sell its Forozan Blend crude for May to Asia below the level offered by rival Saudi Aramco for Arab Medium.  This is the third month the Persian Gulf state is giving the discount after setting it at a premium for almost seven years.

News From The Oil Patch 4/4/2016

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Independent Oil & Gas Service reported a 15% drop in the active drilling rig count across Kansas. There were six active rigs east of Wichita, down one, and 11 in western Kansas, down two from last week.  L.D. Drilling is at work at the 1-24 Mull-Heyen site in Stafford County.  Baker Hughes reported just 450 active oil and gas rigs nationwide. The oil-rig count was down ten, while the number of rigs actively drilling for natural gas was down three.  In Canada the rig count droped six to 49 active drilling rigs.
 
There were just six drilling permits issued for new locations across the state last week, two in eastern Kansas and four west of Wichita, for a year-to-date total of 187.  There was one new permit in Russell County last week.
 
Independent Oil & Gas reports just eight new well completions across Kansas last week (all eight were in the western half of the state).  That year to date total is now 392 completions.  There was one new well completed in Barton County. 
 
Texas’ oil and gas regulator has challenged the U.S. Army Corps of Engineers’ authority to ban hydraulic fracturing and limit injection wells near a North Texas dam.  In a letter sent to the corps, Texas Railroad Commission Executive Director Kimberly Corley questioned restrictions the corps announced last week that would ban fracking within 4,000 feet and limit injection wells within five miles of the Joe Pool Lake dam.  The corps cited fears of induced seismicity, or earthquakes triggered by human activity. Corley objected to the corps acting to limit drilling without consulting the Railroad Commission or going through a formal rulemaking process.  Although there is no drilling under way near the dam, Exxon Mobil subsidiary XTO Energy has three existing wells and state permits to drill four more. 
 
International crude futures rose this week as new hopes for agreement among exporters to freeze output propped up crude prices.  But there is still lingering doubt based on persistent global oversupply and Iran's plans to boost production. The oil minister in Kuwait said there were "positive indications" a production agreement would be reached during a meeting scheduled for April 17th.
 
Last week a bearish supply signal from Opec members Saudi Arabia and Kuwait sent prices lower last week.  Reuters reported the two countries would be re-opening the jointly operated 300,000-barrels-per-day Khafji field.  Both are among the largest producers in the Opec cartel and Saudi Arabia is also among a few oil powers that can influence the overall global supply outlook, so the news knocked some analysts' hopes of a deal to rebalance the market
 
Vanguard Natural Resources is shedding some of its Midcontinent assets following an eventful year last year, that saw the Houston company drop about $1.2 billion to acquire two upstream Master Limited Partnerships.  The Web site Oil and Gas Investor dot com notes that the company enterred an agreement to sell assets in Oklahoma's SCOOP and STACK plays to entities managed by Dallas-based Titanium Exploration Partners. The announced purchase price was $280 million.  Last year alone, the region generated about $4 billion in deals, including Devon Energy’s $1.9 billion acquisition in December.
 
The Times of London says that Britain's North Sea oil and gas industry has been a "mainstay of the national economy", since a string of offshore discoveries in 1969 unleashed what they called a "gusher of jobs and investment."  It generates more than $475 billion in taxes and gigantic earnings from exports.  But now, "The Week" reports that with oil prices at historical lows, the industry has been brought to its knees - and some reckon it is in "terminal decline". Despite recent upticks in price, Brent crude, the international benchmark that sets the price for North Sea oil, remains below $40 a barrel. Last year it was estimated that production in the region becomes unprofitable at under $50 a barrel..
 
Just a few years ago, when oil prices were $100 a barrel, banks were lining up to give international oil explorers access to billions of dollars to finance new drilling projects.  Now the money is drying up, as oil prices stay mired in a prolonged funk.  The Wall Street Journal reports executives have been meeting with their bankers for a twice yearly review of the loans that allow them to keep drilling and building out projects. For many European companies, the Journal reports a "nail-biting experience," as banks grow concerned about the growing pile of debt taken on by oil companies with little or no profits. Several companies said they expect their ability to tap credit lines to be diminished after those reviews.