News From The Oil Patch 2/16/2015
17 February 2015
The head of the Federal Reserve in Dallas told a gathering in New York that Saudi Arabia is largely responsible for the dramatic fall in oil and gas prices in recent months. In fact, Richard Fisher says "the Saudis have engineered" the oil crisis. Fisher is the most prominent U.S. official to pin the blame largely on Saudi Arabia. The Saudis have denied being responsible, but noted that it is US shale producers who are taking the heat for the price meltdown.
Bloomberg reports oil producers outside OPEC and the US shale fields are getting caught in the crossfire of the current price war. According to analysts, high-cost regions from aging North Sea fields, to untapped resources in eastern Siberia and deep-water projects off Latin America will suffer the most from the clash. Citigroup's head of European energy research sayd "probably the biggest impact on supply is going to come from” maintenance reductions in other parts of the world.
The US oil boom is now slowing down in response to low prices. The Wall Street Journal reported producers drilled 28% fewer oil wells in January across the continental U.S. than they did last June. But those wells are only producing 8.5% less than the June plays.
Baker Hughes reports another huge drop in the number of rigs actively drilling for oil and gas. The weekly count was 1,358 Friday, down 98 rigs from the week before. The count in Canada was up one at 382. In Kansas the count was unchanged at 18. The broader count from Independent Oil & Gas Service was also lower. There were 58 active rigs statewide, 13 east of Wichita, down three, and 45 in western Kansas, up one. Across Kansas there are 47 drilling rigs listed as pending their next location assignment.
More bad news on rig counts comes from a major player in Kansas. SandRidge Energy plans to slash its rig count in Oklahoma and Kansas by nearly 75 percent in what is arguably the most significant pullback in well drilling by a publicly traded shale oil company since crude prices started to slide. According to a document obtained by Reuters, SandRidge plans to cut the number of rigs drilling in the Mississippian Lime formation in March and early April to eight, from 28. The company had 30 active rigs in November. The document makes no mention of rigs in West Texas, where the company also has acreage. It laid off 25 workers in West Texas in January, state data shows.
According to Goldman Sachs, the sharp drop in U.S. oil rig counts has helped lift crude prices but it won't slow production or alleviate oversupply. In a note Tuesday the firm said the decline rig-count decline remains well short of the level required to slow US shale oil production to levels consistent with a balanced global market.
The Moody's Investor Service says lower oil prices will be sustained throughout 2015, but the company said that will not translate to global growth. Moody's global growth outlook predicts just 3% growth this year and next for the G-20 nations, based on an average price for Brent crude of $55/bbl.
There were 41 permits issued at new locations across Kansas last week, 266 so far this year. There were 19 new permits east of Wichita, and 22 in western Kansas, including one each in Stafford and Barton counties. For the month of January there were 209 new permits, 91 in eastern Kansas and 118 west of Wichita, including 12 in Barton County, two in Ellis County, two in Russell County and one in Stafford County.
Independent Oil & Gas Service reports just 47 new well completions statewide, 635 so far this year, including 21 in eastern Kansas and 26 west of Wichita. There were 406 new well completions across the state in January including one each in Barton and Russell counties.
Officials recognized and named fourteen new oil and gas fields in Kansas at a meeting of the nomenclature committee February 10th, bringing the total for this year to 143, 24 less than the same period last year. There was one new field in Barton County, named the Clarence West field. FB Holl is the operator. Also in Barton County, the Boyd Field is listed as a new infield discovery, and the Wondra Field now boasts a new pay source.
Texas Congressman Joe Barton and others introduced a bill that would remove nearly 50-year-old restrictions on the export of crude oil. House Resolution 702 would remove those restrictions. Producers are already exporting ultra-light crude, or "condensate."
The world's largest energy drilling services firm announced at least 5,000 layoffs in response to the falling price of crude oil. Halliburton will lay off up to 8 percent of its staff in all areas of operations. Officials say the move is not related to its pending acquisition of competitor Baker Hughes. Another competitor Schlumberger will eliminate 9,000 jobs in response to falling oil prices. The number of job cuts in the energy industry worldwide is now over 100,000 according to Bloomberg, quoting an international staffing firm.
A lawsuit filed in 2013 by a Louisiana flood board that sought billions in damages from scores of oil, gas and pipeline companies was thrown out Friday evening by a federal judge. The plaintiffs say this is not going to be the last word. The Southeast Louisiana Flood Protection Authority claimed coastal drilling and dredging activities contributed to the loss of a natural hurricane protection buffer for New Orleans.
The Tulsa World newspaper series on Oklahoma's earthquake swarm is critical of state officials. According to the reporting of Ziva Branstetter and Curtis Killman, the Oklahoma Geological Survey has not issued final studies on the quakes, and has shelved a plan for public comment on best practices, because of pressure from the energy industry. The newspaper reports at least five insurance carriers are now excluding from their policies earthquakes triggered by oil patch practices. The majority of the claims filed for earthquake damage last year have not been paid. The newspaper also quoted a research geophysicist for the US Geological Survey who said the increased seismicity in Oklahoma and Texas is related to recent changes in the way oil and gas are being produced.
A judge in Nebraska halted the condemnation of private land for the Keystone Pipeline expansion as legal challenges by landowners make their way through the courts. Lawyers for TransCanada agreed to the injunction issued Thursday in hopes of getting an accelerated trial schedule. Nearly 70 landowners hope to block TransCanada from using eminent domain to secure right-of-way for the controversial oil pipeline. Holt County District Judge Mark Kozisek ordered a stop to land acquisition until the landowners’ lawsuit is resolved.
In North Dakota, producers set another record for crude-oil production even as the rig counts continue dropping. The state produced 1.23 million barrels per day in December, beating the November record of 1.19 million barrels per day. The drilling rig count dropped from 188 in November to 181 in December, according to the state's Mineral Resources Department.