Tag Archives: #1Oil&GasProducer

What State Is The Top Energy Consumer? California, NY, Texas

Issue 105 – Texas Windfarm

Introduction…Texas has many firsts.  Texas is the first in oil and gas production as well number as wind farm producer in the United States.

According to U.S. Department of Energy…Texas produces a third of the nations oil and gas and more than a fourth of all wind power generated in the U.S.

Texas is also number one leading in curde oil refining.

The Texas first you may not have expected, Texas is the top energy consumer in the U.S.  The state’s demand for energy grows every year as its population grows.

The energy required to develop, produce, refine, and bring petroleum products to market is also a large part of that energy usage.  However, that statistic was not available.

One more first…Thirty states adopted energy efficient policies as reported by the U.S. Energy Information Administration.  Texas became the first state with an energy efficiency resource standard (ESSA) in 1999.

In conclusion…Texas is not only number 1 in oil, gas, wind energy production, It is also number one enegy consumer in the United States.  On the green side, it was also the first state to adopt the ESSA.

Past Energy Independence To Global Dominance

 Trump Signs Order To Expand Offshore Driling

Introduction…May 1, 2017 President Trump signs order to expand offshore drilling.  That day the President said, “Our country is blessed incredible natural resources including abundant offshore oil and gas reserves.  But the Federal Government has kept 94% of these reserves closed to exploration. This deprives our country of thousands of jobs and billions of dollars in wealth…This executive order begins the process of opening offshore areas to energy exploration.  It reverses the previous administrations Artic leasing ban…This helps create a much brighter future for our country…This is a very important day.”

U.S. Energy-dominant…The U.S. is in the position to be energy-dominant, not just independent, thanks to fracking and plans to loosen drilling regulations, Interior Secretary Ryan Zinke said (last) Monday.

Oil production across the U.S. may increase by 17 percent to a record 10.24 million barrels a day by the end of next year as companies cut costs and become more efficient in drilling, especially in areas such as West Texas and North Dakota. Domestic output hasn’t surpassed 10 million barrels a day since 1970. At a time when OPEC and other producers are cutting output, U.S. exports surged above 1 million barrels a day for the first time.

In conclusion…“In 1983, I was told we’re going be out of oil and fossil fuels definitively in 2003. That’s not true,” Zinke said at the Offshore Technology Conference in Houston. “And, you know, I always say God’s got a sense of humor — he gave us fracking. And fracking is a game-changer — certainly a global game-changer.”

Source: Laura Blewitt, “Trump’s U.S. Looks Past Energy Independence to Global Dominance,” Blomberg, 1 May 2017

Why Major Oil Company Goes Big On US Shale

 Apache Oil Co. Drilling Near Davis Mountains

Introduction…A major oil company does big on US shale drilling.  Here’s why.

Exxon goes big on U.S. shale. New ExxonMobil (NYSE: XOM) CEO Darren Woods gave his first presentation to investors this week, where he outlined a strategy to step up investment in U.S. shale.

Exxon will allocate a quarter of its 2017 budget to short-cycle shale projects. The move will help the oil major navigate an uncertain market, as cash can be returned to the company much quicker from shale drilling than it can from the major offshore projects that Exxon has long been accustomed to.

Still, Exxon will move forward aggressively on its large offshore discovery in Guyana, hoping to bring it online in the next few years.

Conclusion…It’s quicker positive cash flow that brings ExxonMobil to shale oil production.  Even a company this big wants a quicker return on its capital expenditures.

Trump Presidency Bullish On Oil & Gas Production

PumpingRigWTexas Pumping Rig W Texas

Introduction…While there are some specifics about President-elect Donald Trump‘s energy policy to be worked out, overall his presidency is “very bullish long term for oil and gas,” Warwick Energy CEO Kate Richard told CNBC on Thursday.

Trump has said he wants to roll back regulations and produce more energy, which he believes will create more wealth for America.

Richard thinks Trump’s economic plan could probably spur economic growth and demand for oil.

“I think the market loves Republican administrations and infrastructure is very bullish for crude and natural gas demand,” she said in an interview with “Power Lunch.”

Trump has promised a massive infrastructure spending program, saying in his victory speech early Wednesday morning he’s going to fix highways bridges, tunnels, airports, schools and hospitals — and put millions of people to work to get it done.

While Richard believes Trump’s energy policy is “interesting,” she noted the whole story can’t be put together yet.

For one, she said talk about repealing Environmental Protection Agency regulations are a little hard to understand.

“We haven’t seen a decline in drilling in this country because of EPA regulations. We’ve seen a decline in drilling in this country because of two years of low prices,” she said.

Conclusion…In Texas, the Texas Railroad Commission is primarily responsible for regulating the oil and gas industry.  One could conclude it has done an amazing job of protecting the public health and promoting the industry.  The primary benefit of a Trump Presidency to the industry may be not be a change in regulations.  Rather the increase in economic activity and infrastructure improvement from his intitatives may drive demand for oil related products.  Howevert, it is reassuring to have a President-Elect who understands that a healthy oil and gas industry is important to the overall economic health of the country,

Source: “Trump presidency bullish long term for oil and gas, energy CEO Says, CNBC, Michaelle Fox, 10 Nov 2016

20 Billion Barrels Of Oil North Of Midland Says USGS

wolfcamp-03-jpg-scale-largeThe Wolfcamp Is Largest US Shale Play

Introduction...The Wolfcamp Shale Formation is the largest continuous oil that the USGS has ever assessed in the United States.  Many are calling this discovery just north of Midland and west of Abiliene ‘world class.’

“The Wolfcamp could possibly become the largest oil and gas discovery in the world,” said Scott Sheffield, chief executive officer, Pioneer Natural Resources Co.

The operator is the largest acreage holder in the Spraberry/Wolfcamp field with about 900,000 gross acres (730,000 net acres), the majority of which could be prospective for the horizontal Wolfcamp shale.

Based on Pioneer’s extensive geologic database, petrophysical analysis, and successful drilling results to date, there is significant horizontal Wolfcamp shale resource potential in this acreage.

A vast resource...”The Wolfcamp is interesting because it’s been out there,” said J. Ross Craft, chief executive officer, Approach Resources Inc. Since the onset of Permian development in the early 1920s, operators have drilled through this formation. “Early in my career, we knew the Wolfcamp as a nonproductive shale that would put oil in the pits every once in a while,” Craft said. “That was about it.”

Today, Approach Resources holds 170,000 gross acres (mostly contiguous) in the Permian basin with a reported production of 8.4 MMboe/d as of the first quarter of 2013. In 2012, then company held 95.5 MMboe of proved reserves, with 69% represented by oil and natural gas liquids. “When we first started the company in 2006, we had a $5 million commitment, 0 acres, and 0 reserves,” Craft said.

Both Pioneer and Approach Resources tout Wolfcamp potential as a boon for the industry. According to Sheffield, Pioneer’s Eagle Ford success has provided a smooth transfer into the Wolfcamp. “When comparing phases of development, we see the Wolfcamp trending higher than the Eagle Ford based on activity and production,” he said.

According to Sheffield, the company will test 13 zones within the next 3 years. Sheffield noted that recoverable reserves were based solely on the Wolfcamp A, B, and D shelves and the Jo Mill formation. The potential is enormous, and “more reserves are yet to be discovered,” Sheffield said.

Pioneer combines its Spraberry/Wolfcamp acreage. It operates on the northern end of the play, which is said to contain an estimated 3,500-4,000 ft of shales, which translates to nearly 3 to 4 million acres when considered in 3D space as opposed to surface area. “Compare that to the Eagle Ford shale formation, which is about 300 ft thick and the Spraberry/Wolfcamp shale, with its 50 billion boe, begins to dwarf the Eagle Ford and the Bakken with 27 billion boe and 13 billion boe, respectively,” Sheffield said.

Conclusion…The United States is not running out of oil and gas anytime soon as new application of technology is discovering vast resources.

Take away...Some in the oil and gas industry are saying that the produciton costs of thi new shale play make it uneconomical and this is a just a stock price publicity push for Pioneer and Apache.  Time will tell.

References:  USGS Estimates 20 Billion Barrels of Oil in Texas’ Wolfcamp Shale Formation, USGS.gov., November 15, 2016; Permian’s Wolfcamp formation called biggest shale oil field in U.S., Joe Carroll, Bloomberg News, November 15, 2016

Injection Versus Disposal Wells

Saltwater Disposal Well

Straightforward Operation- Saltwater Disposal Wells

Introduction…Due to our current opportunity in acquiring Saltwater disposal Wells, further discussion of the topic is appropriate.  So, what is the difference between injection wells and disposal wells?

Disposal wells may be used to inject mineralized water produced with oil and gas into underground zones for the purpose of safely and efficiently disposing of the fluid. Typically, the underground interval is one that is not productive of oil and gas. In some cases, however, the disposal interval is a productive zone from which oil or natural gas has been produced or is currently produced. In either case, the disposal interval must be sealed above and below by unbroken, impermeable rock layers.

Injection wells inject fluids into a reservoir for the purpose of enhanced oil recovery from the reservoir. The vast majority of wells in Texas are injection wells. Operators use injection wells to increase or maintain pressure in an oil field that has been depleted by oil production and also to displace or sweep more oil toward producing wells. This type of secondary recovery is sometimes referred to as waterflooding.

Why Texas is so great…Texas is the nation’s number one oil and gas producer with more than 294,543 active oil and gas wells statewide according to oil and gas well proration schedules (as of September 2016). Injection and disposal wells are also located throughout the state to improve oil and gas recovery and to safely dispose of the produced water and hydraulic fracturing flowback fluid from oil and gas wells.

Texas has more than 54,700 permitted oil and gas injection and disposal wells with approximately 35,915 currently active as of September 2016. Of these 35,915 active injection and disposal wells, about 7,482 are wells that are used for disposal, the remainder (about 28,433) are injection wells.

Operators requirements...Operators are required to follow the Texas Railroad Commission (Commission) disposal regulations administered by the agency’s Technical Permitting Section – Underground Injection Control (UIC) Program. Underground Injection Control is a program that is federally delegated by the U.S. Environmental Protection Agency (EPA) to Texas, and it follows national guidelines under the federal Safe Drinking Water Act for surface and groundwater protection. EPA awarded the Commission primary enforcement responsibility over oil and gas injection and disposal wells on April 23, 1982.

In conclusion…Disposal wells ( our current focus)  are not terribly complicated as compared to oil and gas exploration and development.  Nevertheless, certrain requirements of the Texas Railroad Commission are required.  The Commission is oneof the first agencies our team contacts during due dilegence on any future saltwater well purchase is the Commission.

Source: “Injection and Disposal Wells,” Texas Railroad Commission, rrc.state.tx.us

Have You Considered Land Banking?

landbankland-bank-ing is the practice of buying land as an investment, holding it for future use, and making no specific plans for development, says Google.

This is only a partial definition.  I have experience in acquiring over 70 land parcels.  Sometimes the play was to aggregate several parcels to increase value.  However, many times the play was to subdivide into smaller parcels.  We would often work with a land planner before the purchase to know what our exit strategy would be.

Now I have a new definition for land banking.  Purchasing property or mineral interests at today’s low oil and gas prices (WTI $44.66, gas $2.783,) then holding the land or lease with today’s production to get a ROI.  Then when we have future oil price increases sell or develop additional production.

If you don’t think we’ll have oil price increases in the future, the  EIA has confirmed U.S. oil production has peaked…at least for now.

EIA affirms peak production in the second quarter of 2015, the fall in output over the next few quarters should bring supply and demand back into balance, or at least close to it. Supply exceeded demand by more than 2.5 mb/d in the second quarter of this year, but that gap will narrow to 1.6 mb/d in the third quarter and just 500,000 barrels per day in 2016.

The oil majors have cancelled or delayed a combined $200 billion in new projects as they seek to rein in costs, according to Wood Mackenzie of the Wall Street Journal.

So, here is a strategy.  Buy oil properties based on today’s low prices that has sufficient production currently or can be inexpensive to increase production.  Then when prices rebound, develop or sell additional acreage.

This strategy has worked for land investing and developing for decades.  Why not apply it to oil and gas production where we get a current return on our investment.

Crude Oil Prices: 2009 Déjà vu All Over Again

2009Pricing 2015 Crude Tracking July 2009 CNBC

Introduction...Ari Wald, head of technical analysis at Oppenheimer, says crude oil prices today look very similar to price chart of six years ago. “If you look at that surge in February, we see a lot of similarities to the low for crude back in late 2008,” he said.

Price to rise further… Just as it did at this point on the chart in 2009, crude is set to rise further from here, Wald says.

“We’ve been saying that we need crude to start to stabilize. Well, it stabilized, and the most compelling piece of evidence was the breakout above $54.” But wait, there’s more!

U.S. Battles Opec Over Expansion Of Oil Output

H&P Drilling Rig, Midland, Texas

Introduction…American drillers increased oil production at the highest rate in a Century in 2014 despite falling prices.

Opec’s efforts fail… to slow down the pace of growth of America’s oil industry last year, according to new data which revealed that drillers in the US increased production at the highest rate in more than 100 years.

The US government’s Energy Information Administration (EIA) has said that output increased by 1.2 million barrels per day (bpd) last year to reach 8.7 million bpd. This is the largest single increase since records began in the early 1900s.  America’s oil production has surged against a backdrop of volatile markets since the Organization of Petroleum Exporting Countries (Opec) effectively launched a price war in November by agreeing to leave its output quotas unchanged.

But wait, there’s more!