Daily Reports

News From The Oil Patch 12/1/2014

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There was a dramatic drop in oil prices last week. At NCRA on Friday Kansas Common dropped to $56/bbl.  That's the lowest price in McPherson since September, 2009.  
 
Baker Hughes reported 1,917 active drilling rigs this week, down 12.  Canada had 438 +4, and the count in Kansas was 21, down four.  Independent Oil & Gas Service reported 121 active rigs statewide and 33 pending their next assignment. There were 36 in eastern Kansas and 85 west of Wichita, both unchanged.
 
Independent Oil & Gas reported 76 drilling permits issued last week in new locations across Kansas and 6,716 thus far this year.  There were 34 east of Wichita, and 42 in western Kansas, including five in Barton County, one in Ellis County, and three in Russell County.
 
There were 131 new well completions across Kansas, for a year-to-date total of 5,364.  Of the 70 completions located in western Kansas, 8 were dry holes.  There were 61 east of Wichita.
 
Eighty percent of Texas voters approved a measure this month to increase transportation funding without raising taxes or fees. Proposition 1 is expected to add billions to the state highway fund by dedicating some of the tax revenue from the oil boom to road construction and maintenance.  Now they have to decide how to spend that windfall.  The first payment, an estimated $1.7 billion, is likely to be deposited in the state highway fund next month.
 
Another Texas town is taking steps to ban fracking.  Reno, Texas, west of Dallas, was shaken by its first recorded earthquake last year, and has had hundreds since then.  Reno took the first step toward what could become an outright ban by passing a law in April limiting disposal well activity to operators who can prove the injections won't cause earthquakes, a tall order.  The City of Denton passed a fracking ban earlier this year, but it is still unclear whether cities can regulate oil and gas drilling in Texas.   That ban is scheduled to take effect Tuesday, but a court hearing on a proposed injunction against Denton's ban is pending.  Under state law, property rights are separate from mineral rights, making it possible to own one but not the other. 
 
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The Kansas Geological Survey and the Wichita oil firm Berexco plan to drill an injection well between two nearly played-out oil wells near Wellington, with the intention of injecting compressed CO2. Senior Scientific Fellow Lynn Watney at the KGS tells us their goals are twofold: two enhance production in the nearby oil wells, and to sequester the carbon dioxide underground.
 
Before the drilling can begin, Watney says they are setting up the oil field for scientific observation, installing monitoring equipment prior to the injection of the carbon in a "pilot scale."
 
"This is not a full-field scale, but it's to monitor the injection of the CO2, to learn about its effectiveness to recover oil in this kind of formation," Watney said. "This particular project is public information that we'll be sharing with oil companies, with others that are interested in the effectiveness.  And with the techniques that we're employing to monitor we hope to learn specifics about recovery factors and efficiencies that are going to ultimately effect the economics."
 
Watney says the compressed, liquid CO2 will create a "miscible flood," that will act a lot like a dry-cleaning fluid, where it reduces the stickiness of the oil to release it from small pores in the rock formation and create a bank of oil that will be pumped to the surface by the nearby wells.
 
It is actually an inefficiency that keeps the CO2 underground.
 
"What happens to that CO2 is that it either goes into solution in the brine, it becomes trapped in the pore spaces, or it can react with the rock," Watney said. "Where the CO2 isn't doing the work to release the oil it's getting trapped in everything else.  The idea that, once the oil is being produced, and you exhaust the mechanism to release that oil, the rest of the CO2 would stay in the ground."
 
Watney says they'll inject about eight truckloads a day for a period of nine months, or 26,000 tons of CO2 total.  The drilling is scheduled to begin this spring.

News From The Oil Patch 11/24/2014

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Baker Hughes reported 1,929 active oil and gas rigs on Friday, up one, and 434 in Canada, up 32. There were 25 in Kansas, down two.  Independent Oil & Gas reports 121 active drilling rigs across Kansas, 36 east of Wichita, down one, and 85 west of Wichita unchanged.  There were 33 rigs listed as pending their next assignment.
 
Independent Oil & Gas Service reports 162 drilling permits issued for new locations in Kansas last week.  There were 104 east of Wichita, and 58 in western Kansas, including six in Barton County, one in Ellis County, two in Russell County and one in Stafford County.  
 
There were 127 newly-completed wells across Kansas last week.  There were 61 in eastern Kansas, and 66 west of Wichita, including one in Ellis County, and 15 dry holes. 
 
Bloomberg reported that if oil, as predicted, averages $75 per barrel early next year, 19 US shale regions would no longer be profitable. Among them, the Eaglebine and Eagle Ford plays, which together pumped about 413,000 barrels per day.  The expansion of U.S. oil supply to more than 9 million barrels a day is contributing to a global glut, driving down prices by as much as 32 percent since June. 
 
Operators in North Dakota are pushing back against pending state rules to condition Bakken crude oil before it is shipped by rail.  According to reporting by Platts, the industry estimates increased costs of tens of millions of dollars, increased risk to pipeline a gathering infrastructure, and increased conflict with federal regulations.  Some big players: Hess, Marathon Oil and Continental Resources among them, reject requirements to require dramatically reduced "Reid Vapor Pressure," a measure of the volatility of the product.  Just testing crude for so-called "Reid Vapor Pressure" would cost one service hub an estimated $96,000 per day, plus $1.2 million for the new equipment, according to reporting by Platts.  They also warn of increased flaring and emissions, overheating of crude oil, increased fire risk, and temperature requirements that go beyond design specs for some pipelines.
 
The FBI is opening a permanent office in western North Dakota's oil patch to help the area deal with rising crime that has followed the state's oil boom. Police have found themselves dealing with human and drug trafficking, organized crime and homicides.  Staff for Sen. John Hoeven said there is no firm timeline for the office to open. The FBI is looking for places to lease at the moment.  Hoeven said he anticipates that the office will have four FBI agents, an analyst and clerical staff.
 
The Kansas Geological Survey is moving into a new phase of a multiyear study to test the safety and efficacy of injecting carbon dioxide from industrial sources into the ground to produce hard-to-reach oil and to permanently store CO2 deep underground.  The U.S. Department of Energy has given the green light to proceed with plans that include drilling wells for enhanced oil recovery and sequestration of CO2 in the Wellington oil and gas field southwest of Wichita. DOE has provided $11.5 million since 2009 to the KGS for CO2 projects. This phase of activity will involve another $11.2 million investment by DOE.  Wichita-based Berexco will begin drilling the wells this spring.

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.