Daily Reports

News From The Oil Patch 4/14/2015

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The Kansas Corporation Commission last month implemented new limits on how much saltwater Kansas oil & gas producers can inject into disposal wells in Harper and Sumner County, linking increases in wastewater injection to an increase in earthquakes in the area.  Based on year-end data we requested via the Kansas Open Records Act from the KCC, there was a dramatic increase in wastewater injections last year across Kansas, in Harper and Sumner Counties, and by one company in particular.  The KCC reports a total of 983.5 million barrels of Saltwater Disposal in Kansas last year, compared to 798.6 million barrels the year before.  That's an increase of 18% over 2013 totals.
 
SandRidge Exploration & Production LLC last year disposed of more wastewater than any other operator in Kansas, injecting about the same amount of produced brine as the next three leading operators combined: more than 125 million barrels. That's 12.7% of the Kansas total, or one out of every eight barrels statewide. SandRidge is currently the tenth leading cumulative wastewater injector of all time in Kansas.  They're just getting started. Through the end of 2013, they weren't in the top fifty.  If their growth continues, they'll be sixth next year, all time.
 
In Harper County, where Saltwater Disposal wells were placed under strict new limits by the KCC last month, disposal of wastewater from oil and gas production last year more than doubled to a whopping 109.4 million barrels.  That's 11% of the statewide total.  18.5 million barrels of that can be attributed to SandRidge E&P.
 
There were 56 drilling permits filed for new locations in Kansas last week, raising the total so far this year to 729.  There were 31 east of Wichita and 25 in western Kansas, including one in Barton County, two in Ellis County, one in Russell County, and one in Stafford County.  For the month of March there were 259 new permits filed.
 
Independent Oil & Gas Service reports 96 new well completions across Kansas, for a year-to-date total of 1,596.  There were 486 completions recording during the month of March.  Last week's total includeds 65 completions in eastern Kansas and 31 west of Wichita, including three in Barton County, one in Ellis County and three in Stafford County.  Out of 31 completions in western Kansas last week, six were dry holes.
 
Baker Hughes reported another big drop in the number of active drilling rigs last week.  There were just 988 nationwide, down 40.  The count in Canada was off one at 99 rigs.  The company reported 13 in Kansas, which was up one from last week.  The broad count from Independent Oil & Gas Service was 47 active rigs in Kansas, 14 east of Wichita (down three), and 33 in western Kansas (down one).  58 rigs were listed as pending their next location assignment and 112 were stacked or idle.
 
According to the latest data from the Kansas Geological Survey, Ellis County produced 3.25 million barrels of crude oil last year, down from 3.53 million bbl in 2013.  The figure in Barton County was 2.19 million barrels last year, compared to 2.2 million the year before.  In Russell County, operators pumped 2.05 million barrels in 2014, which is an increase over the previous years 2.044 million barrels.  Stafford County production also increased, from 1.325 million barrels in 2013, to 1.329 million barrels last year.
 
If officials in Washington state wind up not allowing Shell to base its Arctic drilling fleet in Seattle because of environmental concerns, members of the Alaska Legislature suggest another business decision for its neighbor to the south.  A resolution, from Alaska House Speaker Mike Chenault, suggests public officials in Washington consider closing the Boeing production plant if they are truly concerned with carbon dioxide emissions from commercial activity.  As you might expect, the resolution also invites Shell to put its home port in Alaska if the Seattle lease is terminated.  Environmental groups say the Port of Seattle broke state law signing a lease for one of its terminals as a home port for an Arctic oil-drilling fleet.

News from the Oil Patch 4/6/2015

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The Kansas Corporation Commission reports 263 intent-to-drill notices filed across Kansas in March. There were four intents filed in Barton County last month (23 so far this year), one in Ellis County (five so far this year),  three in Russell County (five so far this year), and five in Stafford County (12 so far this year).
 
Independent Oil & Gas Service reports 106 well completions in Kansas last week for a year-to-date total of 1,500.  There were 64 completions east of Wichita and 42 in western Kansas.  That includes three dry holes.  There was one new well completion in Barton County and three in Stafford County last week.
 
There were just 52 drilling permits issued for new locations in Kansas last week, which marks 673 so far this year.  There were 36 new permits issued in eastern Kansas, and 16 west of Wichita including one each in Ellis and Russell counties. 
 
There were 1,028 active drilling rigs nationwide over the last week, down 20.  The count in Canada dropped by 20 rigs to 100.  Baker Hughes reports 12 rigs actively drilling for oil and gas across Kansas, down one.  The Independent Oil & Gas Service count was 52 active rigs across Kansas, 17 east of Wichita, down one, and 35 in western Kansas, which is unchanged from last week.  There were 54 drilling rigs listed as pending their next location assignment.  There are now 114 rigs listed as stacked or idle, up one. 
 
The North Dakota Oil and Gas Division has ordered five oil companies to reduce their production at 30 wells in the state as a penalty for flaring more gas than allowed.  That's the largest number of companies and wells the state has sanctioned since new restrictions took effect on Jan. 1. The new rules require companies to capture at least 77 percent of natural gas produced during oil production.  The five companies were ordered this month to reduce production to 100 barrels per day at certain wells or risk facing daily penalties.  *
 
Officials at Mexico's state-run oil company say they are searching for three missing workers from a platform fire that killed four others, and are beginning to restore production at the damaged gulf facility.  Exploration and production director Gustavo Hernandez says Pemex has help from the Navy in the search and rescue, and expects to restore 80 percent of production over the next week.  Hernandez said Sunday the estimated production of 646,000 barrels of crude a day and 1.4 billion cubic feet of gas in the region won't be affected by the fireball that hit the processing platform Wednesday.  Some 301 workers were evacuated and 45 sought medical attention.  There was no significant oil spill because the feeder lines could be turned off. Pemex is still investigating the cause.
 
North Dakota will join Wyoming in a lawsuit challenging new federal rules about hydraulic fracturing on US government land.  The states are challenging rules that, among other things, require disclosure of the chemicals used.  The lawsuit alleges that the Bureau of Land Management oversepped its jurisdiction.  It also asserts that the new rules are in conflict with state regulations and with the Federal Safe Drinking Water Act. 

News From The Oil Patch 3/31/2015

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The Kansas Geological Survey reports the fifth consecutive year of increased oil production in the Sunflower State, a whopping 49.5 million barrels. That's a 20-year high.  For record production, you have to go back more than fifty years, when production topped 120 million barrels.  Natural gas production continues a string of annual declines dating back to 2008. 
 
Preliminary state data show crude oil production in Texas rose in January, though drilling permits for February are down 45 percent year-on-year.  The Railroad Commission of Texas, the state energy regulator, reports total crude oil production for January was 2.2 million barrels per day, a 15 percent increase over January 2014.  Texas is the No. 1 oil producer in the nation. About half of all rigs actively exploring for or producing oil in the United States are in Texas.
 
Oil-industry experts are crying foul over the much anticipated oil-by-rail safety rules in North Dakota. Reuters reports the new regs to cap vapor pressure fail to account for how the crude oil behaves in transit.  The new rules, scheduled to take effect April 1, aim to contain the danger of explosion by spot-checking the vapor pressure of crude before loading.  The plan relies on a widely-used test for measuring pressure at the wellhead, but safety experts say gas levels can climb inside the nearly-full tankers, so they say the checks are a poor indicator of explosion risks.
 
There were just 34 drilling permits filed for new locations in Kansas last week.  There were 21 east of Wichita and 13 in western Kansas including one in Barton County.
 
Independent Oil & Gas Service reports 143 well completions across the state.  There were 69 in eastern Kansas.  Of the 74 west of Wichita there were three in Barton County, one in Ellis County, two in Russell County and four in Stafford County. Eleven of those completions in western Kansas were dry holes.
 
Baker Hughes reported 1,048 rigs actively drilling for oil and gas in the US on Friday.  That's down 21 rigs for the week.  The number dropped by 20 in Canada to 120 active rigs.  Independent Oil & Gas Service reported 53 active rigs statewide, 53 east of wichita, up three, and 35 in western Kansas down four.  There were 48 rigs listed as pending their next location assignment and 113 rigs were stacked, unchanged from last week.
 
The number of drill rigs in western North Dakota's oil patch slipped below 100 for the first time in five years due to the sagging price of crude.  There were 98 rigs drilling in North Dakota on Wednesday. That's 100 fewer than on the same day one year ago. It's the lowest since March 2010. North Dakota produced about 1.2 million barrels of oil per day according to the most recent monthly report.  Industry officials say about 115 rigs need to be drilling to keep that level of production.
 
Palmer Manufacturing and Tank of Garden City is cutting its workforce by about 40% or 80 jobs.  The parent company, Ohio-based Worthington Industries, is cutting 245 jobs nationwide and shuttering its plant in Florence, South Carolina. The company blames reduced demand because of low oil prices.
 
There is growing angst in the oil patch and the investment community about increasing debt among oil and gas production firms.  The headline in Forbes Magazine sums it up: "Stop Propping Up Zombie Oil Companies."  Forbes staff reporter Christopher Helman quotes a Houston broker who has lived through three oil slumps who says the city is in a deep state of denial.  The broker says everyone seems to think it's going to be different this time, that the city is more diversified than it used to be.  But he says oil still supports everything there. Examples cited are the $1 billion equity commitment from Quantum QTM to Linn Energy, and Whiting Petroleum's announcement of a $1.9 billion equity offering. Encana offered $1.5 billion in new equity.  Laredo Petroleum raised $750 million, Concho Resources $650 million, Oasis Petroleum $400 million and Rosetta Resources $200 million. A hedge fund manager calls it "a leading indicator of an underappreciation of risk," warning of the effect on the broader economy should there be a wave of high-yield bond defaults.
 
An Energy Department advisory council study being released last week concludes that it's time to move ahead with Arctic oil drilling. The study says lack of action carries the risk of a renewed reliance on imported oil. The U.S. has an enormous trove of oil in the Arctic waters off of Alaska. The government predicts that the current shale boom, which has transformed the U.S. into the world's biggest producer, won't last much beyond the next decade.
 
In Nigeria, where tens of millions of barrels of crude oil have spilled because of oil thefts from pipelines, the price is so low it's not worth stealing anymore. The Wall Street Journal reports that with prices low, the risk of getting caught now outweighs the rewards.  Some of that oil was being smuggled onto international markets, and some was sold off a gallon at a time by locals unable to earn a living. Experts don't know exactly how much was being stolen or spilled, but today they brag that the number is down to 50,000 barrels per day. Advocacy groups say that with the theft level this low, the time has come to tackle the problem
 
Investor Carl Icahn increased his stake in Chesapeake Energy amid the stock’s worst quarterly performance since 2008.  Three of Icahn's limited partnerships bought 6.6 million shares on March 11th, bringing the investor's total stake to 11%.  Chesapeake is the second-largest US producer of natural gas, but the Oklahoma City company has been hamstrung by low prices, and internal struggles.  
 
Bloomberg reports Halliburton and Baker Hughes plan to begin seeking buyers for as much as $10 billion in assets that the oil-services companies need to sell in order to complete their merger.  The companies are planning to unload at least four batches of overlapping business lines in order to win approval from the U.S. Justice Department for their $34.6 billion merger. The divestments are needed to satisfy antitrust concerns.  Halliburton and Baker Hughes are the world’s second- and third-largest oilfield services companies, but Schlumberger would still be about twice the size of the combined company.

News From The Oil Patch 3/24/2015

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The Kansas Corporation Commission last week issued new rules to reduce the amount of wastewater injected into disposal wells in Sumner and Harper counties in Kansas.  The commission and the Kansas Geological Survey are looking at Class-II disposal wells as a likely cause of an increase in the number of earthquakes in the area. We reported that, based on the latest data available (2013), only three wells and one operator would be affected by the new limits, which start at 16,000 barrels per day this week, and drop to 8,000 barrels per day by this summer.  But there are other new rules contained in the order.  And officials say there was a dramatic increase in the amount of water injected in that area in 2014. Amy Gilbert of the KCC staff tells us that from now on, no wells in Sumner or Harper County will be allowed to inject water into the Arbuckle formation in excess of 25,000 barrels per day.  Ms Gilbert says that portion of the commission's order will affect 22 wells in the two counties.  The KCC will no longer issue new permits for large-volume Arbuckle injection wells located in Harper or Sumner County.  We expect to receive the complete reports on injection wells from 2014 in about three weeks, and we will report back at that time.  You can find the order on the commission's Web site at http://kcc.ks.gov under the heading "What's New")
 
The number of stacked drilling rigs in Kansas is on the increase, but slowly.  A year ago there were 76 rigs listed as stacked or idle.  On January 16th, there were 89.  Today Independent Oil & Gas reports that number is 113.  Independent listed 54 active rigs statewide last week, with 15 in the eastern half of the state, up one, and 39 in western Kansas, down two.  
 
The national rig count from Baker Hughes was 1,069 active drilling rigs, down 56 for the week.  In Canada there were 140 active rigs, down 80 from last week.  
 
A report from earlier this month on oil supplies at the Cushing tank farm is raising an alarm in some quarters amid speculation that prices could drop further as the nation's storage tanks fill up.  The amount of oil stored at Cushing has soared 69% so far this year as domestic production reached its highest level in thirty years.  The Energy Information Administration said Cushing stockpiles rose 2.87 million barrels in the week ending March 14 to 54.4 million barrels total.  That's the highest level since EIA began tracking inventories in 2004.
 
The Obama Administration unveiled the nation's first major federal regulations on hydraulic fracturing on federal public lands.  The rules would cover about 100,000 wells, but does not change the rules on private property, where the vast majority of fracking is done.  When they go into effect in 90 days, federal workers will inspect the cement barriers that line the well bore, and require companies to publicly disclose the chemicals used in fracturing.  They will also set new safety standards for how companies can store used fracking chemicals and submit detailed information on well geology to the government.
 
Independent Oil & Gas Service reports 105 new well completions last week, for a year-to-date total of 1,251.  There were 68 completions in eastern Kansas.  West of Wichita, there were 37 completions reported, including 12 dry holes. There were two completions in Barton County, one in Ellis County and one in Stafford County.
 
There were just 77 drilling permits issued last week for new locations across Kansas, 58 in eastern Kansas, and 19 west of Wichita, including one in Barton County, three in Ellis County and two in Stafford County.
 
According to the government, some, but not all of the nation's largest oil plays are showing declines in production.  The Eagle Ford Shale in south Texas showed the largest decline, down 10,000 barrels a day in February.  The Dallas Business Journal reports average well data showing new wells going into production are expected to pump about 20 barrels more per well.  The Bakken Shale in North Dakota and Montana is down 8,000 barrels per day, but new wells are producing 15 barrels per day more in the Bakken.  In the Permian Basin of Texas and New Mexico, production is growing by about 21,000 barrels per day.  Average production per well is up 38 barrels per day.
 
The downturn in oil prices is having a dramatic impact on another job sector in the patch, at least in Texas.  Bloomberg reports land managers, or "land men" in the Lone Star State are "taking pay cuts, working part time, or being laid off.  According to a recent report from the Federal Reserve Bank of Dallas, as many as 140,000 oil-patch jobs in Texas are at risk.  A report from the Federal Reserve in Kansas City indicates that the energy sector in Oklahoma,  will likely take a big hit in the months to come as well.  For the entire Midwest region, a survey of employers showed that many of them expect either a slight decline or slight growth in employment, but about one fourth anticipated significant job cuts this year.
 
Oklahoma, the fifth-largest oil-producing state, has frozen state hiring and salaries and is considering tapping fiscal reserves to address shortfalls caused by the free fall in crude oil prices.  Revenue projections dwindled by more than $300 million from December to February.  That's expected to more than double the state's expected budget deficit to $611 million.  Lawmakers must plug that budget gap by July 1.
 
The vice chairman of China's biggest state-owned oil producer, PetroChina Ltd., is under investigation by the ruling Communist Party amid an anti-graft probe of the company for possible "serious violations of the law." A company statement said he was suspected of what the party calls "violating discipline," a term for corruption.  PetroChina has been a focus of an anti-corruption campaign led by the Chinese President. 
 
Brazilian prosecutors have charged the treasurer of the ruling Workers Party with corruption in connection to a sprawling graft scheme at state-run oil company Petrobras.  Workers' Party Treasurer Joao Vaccari Neto was accused of disguising over $1.2 million in bribes as campaign contributions between 2008 and 2010.  Over 100 people are facing charges in what's being called the biggest corruption scheme ever in Brazil.

News From The Oil Patch 3/16/2015

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After rising for 40 days in a row, Triple A says the national average price for regular unleaded gasoline has now fallen for nine straight days to Monday’s average of $2.42 per gallon.  That's down a half cent on the day, and nearly $1.10 lower than last year at this time.  The average in Kansas is $2.336.  Prices are down to $2.19 across Great Bend, and Hays is holding steady at $2.25/gallon.
 
Another big drop in a key oil & gas production barometer.  Baker Hughes reports just 1,125 active drilling rigs nationwide, down 67 rigs from last week.  In Canada, the count dropped 80 rigs at 200. Fourteen rigs were reported actively drilling for oil and gas in Kansas.  The broad count from Independent Oil & Gas Service was 55 rigs, 14 east of Wichita, down 2, and 41 in western Kansas, down three.  48 rigs are listed as pending their next location, and 113 rigs were stacked or idle, up from 76 a week ago.
 
There were just 69 drilling permits issued for new locations across Kansas last week, for a year-to-date total of 510.  There were 46 new permits east of Wichita and 23 in western Kansas, including one each in Ellis and Stafford counties.
 
There were just 201 new drilling permits filed across the state in the month of February.  By the end of February last year there were more than double that number at 943.  There were 90 new permits filed in eastern Kansas and 111 west of Wichita including seven in Barton County, one in Ellis County and five in Stafford County.
 
Independent Oil & Gas Service reports 123 well-completions across Kansas last week, 1,146 so far this year.  There were 67 new comple6tionsw in eastern Kansas, and 56 west of Wichita, which included 14 dry holes, and eight completions in Barton County, two in Ellis County, one in Russell County and one in Stafford County.
 
There were 502 well completions in Kansas last month, up from last month but more than 200 lower than a year ago.  The 267 completions in western Kansas last month included 62 dry holes.  There were 18 wells completed in Barton County last month, 12 in Ellis County, seven in Russell County and five in Stafford County. 
 
The United Steelworkers union reached an agreement with Shell that was expected to lead to the end of a six-week strike that has affected 12 U.S. refineries. Union workers were expected to return to work as their local chapters reach agreements with individual refineries.
 
Legislation that prohibits cities and other local governments from regulating oil and natural gas drilling operations has been approved by Oklahoma lawmakers in both chambers. Both measures give exclusive regulatory authority to the Oklahoma Corporation Commission.  Lawmakers still need to reconcile the two bills, and they're still trying to figure out if local governments should have such authority near rural homes.
 
Dune Energy Inc., a Houston-based oil and gas explorer with operations in Texas and Louisiana, sought bankruptcy protection following a failed merger, making the company the latest victim of falling oil prices. The Chapter 11 filing was triggered by a sharp drop in revenue and a deal to merge with competitor Eos Petro Inc. that fell through, according to court filings Monday in Austin, Texas. Eos backed out of the deal on March 4, Dune said.
 
At a legislative committee hearing in Texas, all three of the state's top oil & gas regulators said they favor a resolution urging Congress to lift the ban on US oil exports.  Texas Railroad Commissioner Christi Craddick called the ban a "threat to future production."   Commissioner Ryan Sitton testified that oil wells in Texas produce light sweet crude, which is in high demand in Asia and Europe but not used as much in the US, although he did say at least one refinery is refitting to accept the lighter domestic crude.
 
Brazilian police began serving a new round of 18 arrest warrants in the corruption scandal at Petrobras.  Federal police fanned out across Sao Paulo and Rio de Janeiro to arrest suspects in the ten-year run of kickbacks and political payoffs that has cost Brazil some $3.8 billion.  On Sunday, an estimated 1.5 million people took to the streets across the country to protest the corruption.  Many called for the impeachment of the Brazilian president.
 
An actor who grew up in Wichita, who moved to California to become famous for a series about Miami is now set to play the lead in a series about North Dakota.  Don Johnson has locked down and will be executive producer of the ABC Signature Studios series "Boom," about the Bakken shale discovery.  Set in a modern-day "Wild West," the potential series tracks the pilgrimage of a young, ambitious couple, seeking a better life, to the oilfields of the Bakken, where they come across roughnecks, grifters, oil barons, criminals and fellow prospectors. Johnson will play Hap, described as a smart, tough, patriarchal figure in a small town in the North Dakota oil patch.

News From The Oil Patch 3/9/2015

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The closely watched rotary rig count from Baker Hughes dropped by nearly six percent, down 75 to 1,192 rigs actively drilling in the United States.  The count in Canada was off 30 rigs at 300.  The company's count in Kansas was down two at 15 rigs. Independent Oil & Gas Service reports 60 active rigs across Kansas last week, down from 119 a year ago.  There were 16 east of Wichita, up one, and 44 in western Kansas, down seven rigs.  
 
Intent to drill notices filed with the Kansas Corporation Commission so far this year have fallen by more than half compared to last year. There were just 209 intents filed in January, compared to 459 a year earlier, and 201 in February, down from 489 in February of last year. Over the last 90 days there have been just 21 intents filed in Barton County, six in Ellis County, 7 in Russell County, and 15 in Stafford County.
 
There were just 78 permits issued last week to drill wells in new locations in Kansas, for a year-to-date total of 441.  Independent Oil & Gas reports 51 new permits east of Wichita, and just 25 west of Wichita, including three new permits in Barton County, one in Russell County and two in Stafford County.
 
Producers completed 115 wells last week, or 1,023 so far this year across the state.  There were 76 completions in eastern Kansas.  Of 39 completions west of Wichita, eight were dry holes.
 
It appears U.S. refiners and striking union steelworkers are digging in for a protracted battle that could last through the spring.  The two sides were expected to resume bargaining on Monday. Some refinery operators say they are training replacement employees to take over for union workers at their plants.  Royal Dutch Shell PLC said that by midsummer its Texas fuel-making plant southeast of Houston will be operating at normal staff levels with newly trained employees who aren't affiliated with the United Steelworkers.
 
Only half the oil tankers booked two months ago to hold crude oil at sea are still earmarked for storage. The rally in prices prompted trading companies to sell off their oil stored at sea.  At least 12 vessels are currently booked for floating storage, mainly Very Large Crude Carriers each capable of carrying 2 million barrels of oil.   That's around 25 million barrels of crude, down from around 50 million barrels in the first few weeks of this year. 
 
The U.S. Senate failed to override President Barack Obama’s veto of a bill forcing approval of the Keystone pipeline expansion.  Supporters fell short of the two-thirds super majority needed to overcome the veto by Obama, who said the bill circumvented his administration’s review. The vote was 62-37.
 
The U.S. Securities and Exchange Commission requires drillers to calculate the value of their oil reserves every year using average prices from the first trading days in each of the previous 12 months. Bloomberg points out that because oil prices didn’t start their freefall until late November, companies in their latest regulatory filings used $95 a barrel to figure out how much their produceable oil was worth.  We can expect a lot of corporate writedowns when their first-quarter numbers are announced next month.  The SEC introduced first-trading-day-of-every-month calculation in 2009 as part of wider changes in how the regulator required drillers to report reserves. Prior to the shift, the value of the reserves was measured based on the oil price on the last day of the year, which also caused distortions.
 
Oil prices in February remained below the legal trigger for a 2nd month in a row, so the clock is still ticking on on a huge tax break for the North Dakota oil industry.  The state waives its 6.5 percent oil extraction tax if the monthly benchmark price falls below an inflation-adjusted limit for five consecutive months.  If the price remains low, that translates to a $5 billion plus tax incentive in May.