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Oil Booms and Busts

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http://pmd.cdn.turner.com/money/big/investing/2016/02/19/oil-history-timeline.cnnmoney_1024x576.mp4   Video courtesy of http://money.cnn.com/2017/03/20/

Hurricane Harvey and Texas Strong

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Hurricane to Cost Tens of Billions, but a Quick Recovery Is Expected (courtesy of http://www.nytimes.com) https://nyti.ms/2waUd25 The brutal storm pummeling the Houston area is likely to rank as one of the nation’s costliest natural disasters, with tens of billions in lost economic activity and property damage across a region crucial to the energy, chemical and shipping industries. … Read more

What are Blowout Preventers’ (BOP’s)

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BOP stands for Blow-Out Preventer, and these are placed at the top of the well. It is a valve that can be turned off remotely in most cases, so that the drilling crew may regain control. Then measures can be taken to restore the correct density and stabilize the pressure of the reservoir. Blow-Out Preventers … Read more

Trump, reversing Obama, will push to expand drilling in the Arctic and Atlantic

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https://www.washingtonpost.com/politics/trump-reversing-obama-will-push-to-expand-drilling-in-the-arctic-and-atlantic/2017/04/27/757fa06c-2aae-11e7-b605-33413c691853_story.html?utm_term=.c59a8b746edf By Juliet Eilperin and Brady Dennis April 27, 2017 President Trump will take a major step Friday to expand oil and gas drilling off U.S. shores, directing the Interior Department to lift restrictions that President Barack Obama imposed in the Arctic and Atlantic oceans. But local political considerations and the global energy market are likely to influence … Read more

Trump Opens Doors on Oil Exploration, but Deeper Reforms Still Needed — DonnyFerguson.com

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In another move to free up domestic energy supplies, President Donald Trump signed an executive order Friday aimed at lifting the Obama administration’s offshore drilling restrictions. For decades, bad policies have blocked access to America’s abundance of domestic resources, yet America has still managed to be a global energy leader. Trump’s executive order, “Implementing an […] … Read more

Crude Prices Up Despite Small Withdrawal – Drillinginfo

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US crude oil stocks decreased by 3.3 MMBbl last week. Gasoline stocks were down 1.2 MMBbl while distillate inventories remained unchanged. Yesterday afternoon, API had reported a crude oil draw of 3.6 MMBbl while reporting distillate and gasoline builds of 2.0 MMBbl and 1.4 MMBbl respectively. Analysts were expecting a crude withdrawal of 3.7 MMBbl. The most important number to keep an eye on, total petroleum inventories, stayed at the same level as last week.  For a summary of the crude oil and petroleum product stock movements, see table below.

US production was estimated to be up 26 MBbl/d from last week per EIA’s estimate. Lower 48 production was reported to be up 12 MBbl/d, while Alaska production increased by 14 MBbl/d. Imports were up by 664 MBbl/d last week to an average of 8.8 MMBbl/d. Refinery inputs averaged 17.5 MMBbl/d (104 MBbl/d less than last week), leading to a utilization rate of 95.4%. Despite smaller than expected crude withdrawal and total stocks remaining unchanged, prices are up due to higher than expected gasoline withdrawal. WTI prices are up $0.21/Bbl to $48.04/Bbl at the time of writing.

Crude prices have been rangebound between $47-49/Bbl. Prices spiked to $48.51 on Friday following Baker Hughes reporting a drop in the total US rig count for the 3rd consecutive week. However, this rally was short lived, as a Reuters report showed OPEC compliance has fallen to 94% in July, compared to 98% in June. IEA also showed lower OPEC compliance in July at 75%, compared to 77% in June.

The latest compliance data has increased bearish sentiment to the market. US production is continuing its growth trajectory even though prices have not increased since the proposed cuts by OPEC. Libya is currently working on reopening their largest oil field, Sharara, which has produced 280 MBbl/d in recent weeks, but is currently offline because of a pipeline blockade.  Although the Sharara field production may already be baked in to prices, the possibility of Libya increasing production further and bringing more crude online should negatively weigh on prices. Increasing US production as well as the possibility of Nigeria and Libya increasing their crude output will keep a lid on prices.

While price volatility is expected to continue in the short term, OPEC recently announced that the fate of the current agreement would be discussed in their November meeting. Kuwaits’s oil minister Essa al-Marzouq mentioned that a decision would be made either to extend or terminate the production cuts in the November OPEC meeting. Until the November meeting, the market will pay close attention to OPEC compliance levels.

As stated here previously, without continued high compliance with production quotas and concurrent realization of the demand growth projected by IEA, there is little chance for the inventory normalization this year. Without inventory normalization, there can be no sustained price recovery. The trade has now confirmed the well-defined resistance above $50/Bbl. DrillingInfo expects prices to trade near the $45 range in the near-term due to continued lack of data regarding the pace and trajectory of inventory normalization as well as increasing bearish sentiment in the market.

Crude Prices Up Despite Small Withdrawal – Drillinginfo

Shale Drillers

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Shale Drillers Head North As The Permian Fills Up

By Nick Cunningham – Aug 22, 2017, 5:00 PM CDT

 

Just as the Permian Basin is showing some wear and tear, there is growing interest in a separate shale play to the Permian’s north.

The Anadarko shale region, located mostly in Oklahoma, has seen a sharp increase in investment and drilling activity in recent years. The expanding presence of shale players in the Anadarko has resulted in the EIA including the region in its monthly Drilling Productivity Report alongside more well-known places such as the Permian, Eagle Ford and the Bakken.

The Anadarko produces more than 450,000 barrels of oil per day, but the region is increasingly becoming known for its surging natural gas production, which is set to top 6 billion cubic feet per day (bcf/d) in September, according to the EIA.The EIA noted in its DPR that the Anadarko is second only to the Permian Basin in the number of active rigs – the Anadarko had 129 as of July, while the Permian had 373. The Anadarko region is “well-established,” the EIA says, but improved drilling and completion technology has led to a resurgence in interest for the region. The shale layers in the Anadarko tend to be rather deep, but also thicker than in the Bakken, for example.

The region is comprised largely of the STACK (Sooner Trend Anadarko Canadian and Kingfisher) and the SCOOP (South Central Oklahoma Oil Province) plays, two areas that have seen a surge of investment from shale E&Ps in the past few years.

 

Rising interest in the Anadarko comes as the market for oil in the Permian is starting to look a little frothy, with high land prices, a shortage of oilfield services, and some production hiccups.

Another important takeaway from the inclusion of the Anadarko in the EIA’s monthly roundup is that natural gas production continues to rise in places that are home to interest from oil producers. Shale producers tend to extract natural gas as a byproduct when targeting oil, and almost half of the U.S.’ natural gas production is now coming from oil plays, according to Bloomberg.

“This is again telling us why we are in a perpetual bear market in natty gas,” Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania, told Bloomberg in an interview. “We are finding more and more gas. It’s giving the bears more ammo.” Gas production is rising quickly, and not just in the Anadarko. Output in September is expected to jump across all major shale basins, including the Marcellus, Bakken, Eagle Ford, Haynesville, Permian and Niobrara. That will keep a lid on natural gas prices.

In addition, the Anadarko offers shale companies another option for oil and gas exploration if they find the Permian a little too crowded. The Wall Street Journal recently profiled Jim Hackett, the former CEO of Anadarko Petroleum, who has set up a new company that will target the STACK play. The SCOOP and STACK have the best well economics out of any other shale basin after the Permian, according to RBN Energy.

Hackett’s company, Silver Run Acquisition Corp. II, is taking over two other STACK-based companies, and the combined outfit will be called Alta Mesa Resources Inc., with a market cap of $3.8 billion. The efforts of Hackett mark a major investment – and a large bet – on the STACK play. “There are one or two careers worth of opportunities just in the Stack,” Hackett told the WSJ in mid-August. Intriguingly, Hackett says the STACK is attractive because “the Permian Basin has been picked over pretty well.”

Alta Mesa will ramp up drilling in the STACK over the next year and a half while also investing in pipelines, storage facilities and gas processing plants, according to the WSJ. Hackett says the company’s wells will have a breakeven price of around $25 per barrel.

If true, that is a remarkable figure given the fact that so many shale companies are still burning through cash with oil prices at $50 per barrel. While some companies are doing well, the shale industry in the aggregate is still struggling to turn a profit. The news that Oklahoma’s Anadarko region is suddenly a hot item comes just as companies are starting to spurn the Permian, which has suffered from sky-high land prices and a crowded playing field.

By Nick Cunningham of Oilprice.com

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