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News From The Oil Patch 11/17/2014

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Kansas Common Crude at NCRA dropped to its lowest price in five years last Thursday, to $64/bbl. 
 
Within hours of a cluster of earthquakes in southern Kansas last week, including the strongest in the state in recent memory, Governor Sam Brownback announced procurement and funding for a new portable seismic monitoring network.  The seismic monitoring devices were recommended by the Governor’s Task Force on Induced Seismicity in its final report last month.   The state currently has no facility for monitoring earthquakes. The Kansas Geological Survey anticipates the monitoring stations will cost about $85,000 and will be operational in early 2015. The KGS continues to develop a permanent statewide seismic network in addition to the portable network that was partially funded during the last legislative session.
 
Independent Oil & Gas Service reported 114 drilling permits for new locations across Kansas last week, including four in Barton County, two in Ellis County, and one in Russell County.  For the month of October there were 653 new drilling permits issued.
 
There were 129 new well completions reported last week.  Independent Oil & Gas reported 18 dry holes among the 75 completions in western Kansas. There were 54 new well completions last week east of Wichita.  For the month of October, there were 483 completions reported.
 
Baker Hughes reported 1,928 active oil and gas drilling rigs across the US last week, up three. There were 402 in Canada, down eight, and 27 in Kansas, down one.  Independent Oil & Gas Service reported 122 active rigs across Kansas, 37 east of Wichita, down one, and 85 in western Kansas, down two from last week.  There were 30 rigs listed as pending their next assignment.
 
Merger talks continued between Halliburton and Baker Hughes, two of the biggest oilfield services companies.  This is just the latest in a series of consolidations in the O&G services industry, spurred by low prices.
 
Aubrey McClendon continues to make headlines with his new ventures after leaving Chesapeake Energy.  Mr McClendon's American Energy Parners affiliate announced it has closed on the quarter-billion dollar purchase of non-operated working interests with approximately 1,800 barrels of net oil equivalent per day.  The plays are located in southern and central Oklahoma.
 
There was a lot of commentary last week on the election in Denton, Texas in which the town endorsed an ordinance to ban hydraulic fracturing within the city limits.  As it turns out, they city may not have the authority to ban fracking.  Chairwoman Christi Craddick of the Texas Railroad Commission, which regulates the oil and gas industries, said she would not honor the ban.  Craddic asserts she could override the ban because the city does not have authority over drilling activity in the state.
 
State budget officials in North Dakota are wrestling with the possibility that they'll have less money in state coffers because of declining oil prices.  When the Office of Management and Budget's advisory committee convened last summer, it assumed the price of a barrel of North Dakota oil would be $90 at the start of the next two-year budget cycle.  Late last month, when the committee met, it concluded that it would be safer to assume $74 per barrel.  According to the Bismark Tribune, oil taxes, based on the value of oil, accounted for more than a quarter of taxes collected by the state in fiscal year 2014.
 
We've been following the divorce case of Harold Hamm, the head of Continental Resources in Oklahoma City.  Hamm is currently number 33 on Forbes Magazine's list of wealthiest Americans.  He and his ex-wife did not sign a prenuptial agreement.  An Oklahoma judge ordered a settlement that could change the list.  Oklahoma County District Judge Howard Haralson ordered Hamm to pay his ex-wife nearly one BILLION dollars in alimony, including $322 million by the end of this year.  That would drop Mr Hamm down a few notches, and put Sue Ann Hamm on Forbes list of 100 wealthiest American women.'  As it turns out, that's not enough for Sue Ann Hamm, the ex-wife.  She plans an appeal on the grounds that the order "grossly undervalues" the marital wealth to which she's entitled.  Under the ruling, Harold Hamm would be allowed to keep around 94% of the estimated $18 billion rise in his Continental shares during the couple's 26-year marriage.   Hamm says the decision was "not equitable."

News From The Oil Patch 11/10/2014

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Kansas Common Crude at NCRA dropped below $70 per barrel last week for the first time in two and a half years.  Friday's price was $68.50 per barrel.  
 
Ed Cross, the President and spokesman for the Kansas Independent Oil & Gas Association, tells us dropping prices could have an impact on production here, but says different companies will have different bottom lines on whether to drill or not to drill.  "I don't know where oil prices are going, economists are debating where the economy night go from here,  and I know a lot of the producers are looking at pursuing their own risk assessments. There is a little bit of lag time between times when prices go down and whether activity goes down or not, as people evaluate their own cost structures and where they think prices may go in the future. So, I really don't know what individual companies' bottom lines are, but I think they'll all be evaluating that." 
 
The Saudis cut their selling price for oil to the US last week, while raising prices for its oil in other locations.  Analysts say this signals the kingdom's hope to maintain market share in the US.  They've raised prices in Asia, where they'd cut prices earlier.  
 
One of Saudi Arabia's most prominent businessmen is now calling for his government to set up a sovereign wealth fund to protect itself from sliding prices.  Prince Alwaleed bin Talal said Tuesday that the kingdom can earn higher returns from its foreign reserves by putting most of its oil earnings into a new fund.
 
Baker Hughes reported 1,925 active drilling rigs nationwide last week, down four.  The count in Canada was 410, down 19.  They report 28 rigs drilling in Kansas, up two.  Independent Oil & Gas Service reports 123 active drilling rigs statewide, with 36 east of Wichita, down four, 87 in western Kansas, up one, and 30 pending their next assignment
 
Independent Oil & Gas reports 96 new well completions over the last week, or 4,977 so far this year.  Of the 46 completions in western Kansas, 20 were dry holes.  There were 50 new completions east of Wichita.
 
There were 146 drilling permits for new locations issued last week for a year-to-date total of 6,364. There were 72 east of Wichita and 74 new drilling permits in western Kansas, including five in Barton County, one in Ellis County, three in Russell County and one in Stafford County.
 
Unofficial election results show Mark Fox will be the next leader of North Dakota’s oil-rich Mandan, Hidatsa and Arikara Nation. Fox and his opponent Damon Williams ran campaigns that were critical of the way the current administration handled North Dakota’s oil boom.  The Fort Berthold Reservation produces more than 330,000 barrels of crude oil per day.
 
59% of voters in Denton, Texas, voted to become the first city to ban hydraulic fracturing. The process we know today as fracking was developed not far away, in the same Barnett Shale formation that has attracted drilling companies to Denton.  Today, Denton has 272 active wells within its city limits. 
 
The Premier of Alberta says the oil-sands crude in his province will supply Gulf Coast refineries with or without the Keystone Pipeline expansion.  Premier Jim Prentice says developers can use trains or the newly proposed Energy East Pipeline to Canada's Atlantic Coast.  He called the additional cost to ship crude by tanker from Canada's Atlantic Coast is marginal. 
 
BP lost its bid to remove the claims administrator overseeing payouts for the 2010 Gulf of Mexico oil spill.   Patrick Juneau is in charge of the London-based energy company’s $9.2 billion settlement of damage claims stemming from the disaster. BP claimed the lawyer had a conflict of interest because he briefly represented Louisiana in the early days of the spill.  A US judge in charge of the thousands of consolidated lawsuits rejected that request Monday, saying the company should have complained sooner.  BP also faces the final phase of a trial in January in which that judge will determine how much BP must pay in penalties for violations of the U.S. Clean Water Act. 
 
Another energy company will soon sell U.S. oil abroad without explicit permission from the government, another sign that the decades-old federal ban on crude exports is crumbling.  BHP Billiton’s is selling $50 million of ultralight oil from Texas to foreign buyers.

News From The Oil Patch 11/3/2014

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The benchmark West Texas Intermediate and Brent crude prices have fallen more than 25% since mid-June. Instead of cutting production, some OPEC members—including Saudi Arabia—have cut prices, signaling a price war. Some in the kingdom’s top ranks think it is allowing a revenue decline it can’t afford, according to reporting by the Wall Street Journal. Others believe Saudi Arabia should accept the recent oil price fall and concentrate on increasing its market share, particularly in Asia. 
 
Nymex crude contracts for December delivery were six cents lower by midday Monday, at $80.48/bbl.  London Brent prices gaines 31 cents at $86.17/bbl.
 
According to the latest numbers from the Kansas Geological Survey, Kansas operators produced another 4.25 million barrels of oil in July, bringing the total so far this year to 28.36 million barrels.
 
Crude oil production for Texas was up more than 20 percent year-on-year to just over 2.2 million barrels per day, a state regulator said.  The Texas Railroad Commission released preliminary figures for August, saying Wednesday production of 2.23 million bpd was up 24 percent from August 2013.
 
The Kansas Corporation Commission reported 662 intent-to-drill notices filed in October, up from 622 in September and down from 639 in October of last year.  In the last thirty days, the KCC noted 18 new intents filed in Barton County, 14 in Ellis County, eight in Russell County, and seven in Stafford County 
 
Independent Oil & Gas Service last week reported 120 new well completions across Kansas, for a year-to-date total of 4,881.  There were 52 east of Wichita.  Of the 68 in western Kansas, 29 were described as dry holes.
 
There were 142 drilling permits issued for new locations across Kansas last week.  There were 93 in eastern Kansas and 49 in western Kansas, including four new permits in Barton County and seven in Ellis County.
 
Baker Hughes reported 1,929 active drilling rigs across the US Friday, up two for the week.  There were 1,353 horizontal rigs in use, 211 directional rigs and 365 vertical rigs.  The count in Canada was 429, up three for the week.  In Kansas, Baker Hughes reported 26 active rigs, up five. Independent Oil & Gas Service reports, 126 active rigs statewide, 40 east of Wichita, up five, and 86 in western Kansas down two from last week.  There were 26 rigs listed as pending and 82 that were stacked or idle.
 
The oil industry in California is spending a LOT of money to defeat ballot measures in two counties that would ban fracking, steam injection and other "high intensity" drilling processes.  To date, firms such as Chevron and industry groups have chipped in more than $7 million to a campaign to defeat Measure P.  That compares to nearly $300,000 spent so far by the environmental groups supporting the measures.  A spokesman for the "no" campaign says passage of Measure P would effectively shut down all new drilling operations in Santa Barbara County.
 
The oil & gas industry is shelling out big bucks to stop a ballot measure that would earmark five percent of North Dakota's extraction taxes to environmental projects.  The American Petroleum Institute has already shelled out over one million dollars opposing the measure.  The North Dakota Petroleum Council's president says now is not the time to divert oil tax funds without a plan.  Ron Ness says just 16% of the tax monies are already earmarked, and says there's not a lot left to fix roads, bridges, and sewers.
 
The Texas Railroad Commission, which regulates oil and gas activity, has added a new wrinkle to the fracking debate.  Oil & gas companies in Texas must now research a site's seismic history before they can get a permit to use the site for a disposal well of fracking waste and produced water.  The commission adopted new rules Tuesday that require oil and gas companies to include either a printed copy or screenshot of the seismic data for the area in their permit application. That will include instances of previous earthquakes within the 100-square-mile region around the proposed drilling site.
 
A group of oil & gas lawyers announced they've been granted class action status in their lawsuit in Arkansas against SEECO, an independent oil and gas exploration and production company based in Houston.  Their complaint alleges the company skimmed over $100 million from landowners and others by underpaying royalties over the last eight years.
 
American Energy Partners' affiliate in the Permian Basin of Texas has purchased oil assets there and plans an innitial public offering soon. The company, founded by former Chesapeake Energy CEO Aubrey McClendon.  Since July 31, they've bought production of 1,400 barrels of oil equivalent per day, and about 27,000 net acres in leases.  That brings their total to 90,000 net acres.  The company says an IPO for American Energy-Permian Basin will be held within the next year. 
 
Native tribes on the Fort Berthold Indian Reservation plan their own Bakken plays.  The Mandan, Hidatsa and Arikara Nation is planning to drill the first tribe-owned oil wells on its North Dakota reservation next year.  The tribe currently receives a fraction of the money already generated by the 1,300 plus wells on the reservation, but will take home 82% of the cash produced by the four new wells.
 
"There is now no reason for people in Europe to stay cold this winter."  So says the president of the European Commission after witnesses the signing of a deal that will resume Russian natural gas supplies to the Ukraine this winter.  The deal comes after several months of delays during the conflict in Ukraine. 

News From The Oil Patch 10/27/2014

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Kansas Common dropped to $70.25/bbl at NCRA on Wednesday, Oct. 22. That's the lowest price in McPherson since June 28 of 2012, which was also the last time Kansas Common dipped below $70 per barrel.  
 
The national average for a gallon of regular was $3.043, seven tenths lower on the day, more than a nickel lower than last week, and thirty cents cheaper than last month.  The average across Kansas was $2.978, three tenths of a cent lower on the day, but nearly six cents higher than last week.We found gasoline as cheap as $2.86/gallon in Hays and $2.97 in Great Bend.  Gasoline prices in Kansas are at their lowest level since January.  
 
Baker Hughes reported 1,927 active drilling rigs across the US, up nine from last week.  There were 426 in Canada, up nine, and 21 in Kansas, down four.  Independent Oil & Gas Service reported 123 active rigs in Kansas, with 35 east of Wichita, down two, and 88 in western Kansas, up one.  There were 30 rigs pending their next location and 82 were idle or stacked.
 
Independent reported 127 drilling permits at new locations last week, for a year-to-date total of 6,076. There were 61 east of Wichita, and 66 new permits filed in western Kansas.  That includes five in Barton County, one in Russell County and three in Stafford County.  
 
There were 64 well-completions reported last week, 4,761 so far this year.  Of the 40 completions west of Wichita, 19 were dry holes. There were 24 completions recorded east of Wichita.
 
USA Today is reporting a Russian economy being pushed toward recession by falling oil prices.  A drop of $10/bbl costs Russia between 12 and 15 billion dollars a year.  Cheap oil has also devalued Russia's currency by almost 20% this year.  All this is happening as the latest round of sanctions cuts off Russian companies from Western financing.
 
Nelson Bunker Hunt died Tuesday in Dallas at age 88.  He was an oil tycoon, but was perhaps best known for trying to corner the world's silver market with his brothers.  In 1980 their holdings and contracts for purchases — corralling a third to half the world’s deliverable silver — had plunged from a $7 billion value in January to a $1.7 billion loss in March.  Hunt famously commented "a billion dollars ain't what it used to be."  The debacle endangered financial markets and brokerage houses, forcing federal regulators and the nation’s banks to step in with a $1 billion line of credit, a bailout that saved the system from a stampede and the Hunts from an immediate meltdown.  The lawsuits that followed nearly bankrupted the Hunts, but the New York Times reports they managed to salvage millions and were not subjected to criminal charges.
 
New Mexico environmental regulators are considering a proposed rule that would allow the reuse of produced water in oilfield drilling operations.  Environment Department Secretary David Martin says the state is working on the new rule that could help cut fresh water consumption in the patch.  A draft of that rule is expected sometime this month.  Martin says the changes are similar to those used in Texas, where produced water is already being reused in drilling and hydraulic fracturing operations.
 
Trilobite Testing of Hays announces it has acquired Superior Testers Enterprises of Great Bend, effective August 1st.  Trilobite now offers drill stem, wireline and state testing services from 31 trucks in Kansas, Colorado, Oklahoma, Nebraska and the Texas Panhandle.  The company now has six field offices in Great Bend, Hays, Hugoton, Oberlin, Pratt, and Scott City, plus a sales office in Wichita.
 
Argentina is warning of a possible eco-disaster if Britain continus to explore for oil off the coast of the Falkland Islands.  Officials are warning that unilateral British drilling without Argentina's consent are dangerous, and without what he called "continental support," from Argentina, the projects risk a major spill.  Buenos Aires has banned ships carrying the British flag from visiting its ports or carrying out “logistical operations”. Other South American nations including Brazil, Paraguay and Uruguay have followed suit.
 
Oil and gas giant Shell and its New Zealand partner were accused of unlawful offshore drilling in New Zealand, but managed to evade court prosecution and only received a warning letter.  The government said Shell Todd Oil Services violated the law by not applying for a special resolution or marine permission for the offshore play.
 
Ducks Unlimited is among the big backers of a ballot measure in North Dakota that would dedicate a portion of the state's booming energy taxes to promote conservation efforts.  Measure Five will be on the ballot in November.  The oil industry is leading the opposition, contributing nearly half of the $2.2 million raised by foes of the measure. Business groups, farmers and education advocates are also against the plan.

News From The Oil Patch 10/21/2014

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Baker Hughes reported 1,918 active drilling rigs nationwide, down 12 for the week.  There were 417 in Canada, down three, and 25 in Kansas unchanged.  Independent Oil & Gas Service reported 122 active rigs across Kansas, 37 east of Wichita, unchanged, and up two to 87 rigs in western Kansas.  There were 23 rigs listed as pending their next location assignment and 82 that were stacked or idle.
 
There were 100 well completions reported last week, which is 4,687 so far this year. There were 65 east of Wichita.  Of the new well completions 35 in western Kansas last week, six were dry holes. Independent Oil & Gas Service reports 144 drilling permits at new locations in Kansas last week, which is 5,949 so far this year.  There 71 east of Wichita, and 73 in western Kansas, including four in Barton County, three in Ellis County, two is Russell County and one in Stattord County.
 
The Kansas Geological Society recognized and named 25 new oil and gas field in Kansas at it's September 23rd meeting.  Among those new fields were the Hyacinth Northwest and Sack West fields in Ellis County, and the Hart South field in Stafford County.
 
The latest numbers from the KGS put the Sunflower State on track to produce more than 48 million barrels of crude this year, which would be an increase of nearly half a million barrels compared to last year.  Production through June totaled 24.11 million barrels.  
 
Over the past five years, the number of horizontal rigs deployed in the U.S. has almost quadrupled, from 379 in early 2009 to 1,353 last Friday.  Almost all the recent gains in U.S. oil production are the result of horizontal drilling techniques. As the number of horizontal drill rigs has exploded, the number of vertical rigs in the U.S. has gone in the opposite direction, falling almost 70 percent over the past seven years.  Last week that count was down to 370 vertical rigs.
 
The European Union has decided NOT to label Canadian oil sands as dirtier than other forms of crude oil.  This removes a major obstacle to Canadian exports to Europe.  According to the Wall Street Journal, the EU planned legislation to penalize fuels made from the oil sands of Alberta, which are viewed as being more polluting to produce than other varieties.  European refiners wil be freer to import greater volumes of the Canadian bitumen because it has now been placed in the same category as conventional oil.  The change is the result of what the Journal described as "unrelenting lobbying by Canada."
 
North Dakota produced a record 35 million barrels of oil in August, according to figures released Wednesday by the state's Industrial Commission. August also marked the Bakken oil formation's one billionth barrel of production in North Dakota. Production rose to 1.13 million barrels per day in August, an increase of more than 17-thousand barrels per day.
 
August's statewide flaring rate hit 27 percent, up a percentage point from July. The flaring rate on Fort Berthold Indian Reservation, which produces roughly one third of North Dakota's oil, flared at a rate of 35.5 percent rate, boosting the statewide numbers.
 
The state's top oil regulator says North Dakota oil prices have slipped from about $90 a barrel in June to as low as $66.25 in one market on Wednesday, and that could halt drilling in several counties and force the state to reevaluate its budget.
 
Bloomberg is reporting that Occidental Petroleum is trying to sell assets in North Dakota for upwards of three billion dollars.  An investment bank is helping the company sell about 335,000 net drilling acres in the Williston Basin.  According to the report, the Bakken formation has proved less successful for Oxy because of higher costs.  Analysts say it's mostly undeveloped acreage, adding that Occidental is restructuring to focus on its most profitable operations.
 
Texas oil production topped 3.1 million barrels per day in July, the highest number in at least 33 years. If Texas were a country it would rank eighth in the world in terms of oil production.  A year ago, Texas ranked 15th.
 
One of the largest oil and gas producers in the booming Eagle Ford shale formation in south Texas does not for now plan to develop Mexican projects across the border. Anadarko Petroleum's international exploration drilling manager Tim Tirlia first said they were "staying out" of onshore plays in Mexico., but later dialed that back, saying they were still evaluating some onshore projects but are more heavily focused on deep water opportunities. Reuters reports Tirlia declined to comment on whether lawlessness in northern Mexico would make projects too costly.  Another firm, Lewis Energy, says its costs are about 30 percent higher south of the border in part because of additional security needs.
 
The government announced the proposed sale this March of 43.5 million acres in offshore leases near Louisiana, Mississippi and Alabama.  The Oil and Gas Journal reports production could reach 460-894 million bbl of oil and 1.9-3.9 tcf of natural gas. Sites range from three to 230 nautical miles offshore into federal waters up to more than 11,000 feet deep.

News From The Oil Patch 10/6/2014

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Oil prices continued their free fall in early Monday trading.  Mymex contracts lost another 74 cents per barrel at $89.00.  London Brent was down 85 cents at $91.46/bbl.  Friday's closing price for Kansas Common at NCRA was $79.50 per barrel.  The last time that price closed below $80 was on April 23rd of last year.
 
Saudi Aramco cut prices last week by about a dollar per barrel to Asia, and by 40 cents a barrel to the United States.  That sends a strong signal that Saudi Arabia is more interested in maintaining market share than in defending prices. 
 
Baker Hughes reported 1,922 active drilling rigs nationwide, which was down two from last Friday. Canada had 430, down one.  The count in Kansas was 24, down one from last week.  Independent Oil & Gas reported 125 active rigs in Kansas, 31 pending their next location assignment and 78 stacked or idle.  There were 40 active rigs reported in eastern Kansas, up three, and 85 west of Wichita, down one.
 
The Kansas Corporation Commission reported 622 new intent to drill notices during the month of September.  That's up from 588 in August and  574 in September of last year.  There were ten intents filed in Barton County last month, 14 in Ellis County, 12 in Russell County and three in Stafford County. 
 
Independent Oil & Gas Service reported 66 well completions last week, for a year-to-date total of 4,464 across Kansas.  Last week there were 45 completions noted in eastern Kansas, and 21 west of Wichita.
 
There were 141 drilling permits issued for new locations in Kansas last week, bringing the total this year to 5,640.  There were 89 new permits east of Wichita and 52 in western Kansas, including four in Ellis County and two in Russell County.
 
The president of Turkey insists that the fight against the Islamic State is his country's top priority but there is growing evidence Turkey is helping Islamic State smuggle it's oil.  The Turkish Energy Minister says his country wouled never partake in any illegal transactions.  There are no firm numbers for oil being smuggled from Syria, but in the first six months of this year, the Turks have seized more than 486,000 barrels of illicit crude.
 
AP and ABC are reporting on a big crackdown on oil smuggling along Turkey's border with Syria.  What used to be a lucrative sideline for the locals has become big business for Islamic State.  authorities, smugglers and vendors say business was booming until about six months ago. when Turkish authorities ramped up a multi-layered crackdown to disrupt the illicit trade.  According to the AP report, the Turks have beefed up border controls and arrested dozens of smugglers.  They're also reportedly going after consumers with an extensive stop-and-search operation on Turkish highways were fueld tanks are tested for smuggled oil. 
 
The AP reports on a company called Energy Intelligence, whose president wants to expand the use of drone aircraft to monitor oil pipelines in North Dakota.   Currently, pipelines are checked for problems by occasional manned aircraft flyovers, on-the-ground observations by foot or vehicle, and production loss reports...some use fiber-optic early warning systems.  But experts say those methods still "pretty archaic," and often leave underground spills undiscovered for days.  The firm hopes to begin test flights this fall. 
 
The state task force looking at Kansas earthquakes has submitted its action plan to Governor Brownback.  The Seismic Action Plan consists of two major components – a plan for enhanced seismic monitoring and a response plan. The group recommends installation of a strategically-located permanent monitoring network, and a portable seismic array to provide a closer look at localized earthquakes.  The report from Te Kansas Geological Survey, Kansas Department of Health and Environment and the Kansas Corporation Commission provides background from national studies linking seismic activity to fluid injection, but the task force says it has no conclusive evidence linking fluid injection to specific seismic events in Kansas.  Thus far in 2014, the U.S. Geological Survey’s National Earthquake Information Center has recorded 58 earthquakes, ranging from magnitude 1.3 to 3.8, nearly all in Sumner, Harper, and Barber counties.
 
BP is challenging a federal judge's finding of gross negligence in the Gulf Oil Spill, saying he based the ruling on expert testimony he said he wouldn't consider.  The ruling exposes the oil company to as much as $18 billion in fines.  In court documents filed Thursday, the oil company asked the judge to change his finding or grant a new trial.