Tag Archives: #EnergyInformationAdministration

Texas Fifth Straight Double-Digit Jump

The boom continues in The Permian Basin

Introduction: The US drilling rig count rose by double digits for the fifth consecutive week during the week ended Feb. 17.

Data from Baker Hughes Inc. shows the tally of active rigs gained 10 units to 751, an increase of 347 units since a modern era nadir of 404 touched last May 27 (OGJ Online, Feb. 10, 2017). In the last 2 months alone, the count has risen by 114 units.

Onshore rigs climbed by 13 to 730, with horizontal units up 7 to 614 and directional units up 6 to 72. The horizontal count has expanded by 300 since May 27.

The US offshore count dropped 3 units to 18 as it approaches lows not seen since the aftermath of the Macondo deepwater well blowout and crude oil spill. Three rigs remain drilling in inland waters.

Given the Permian’s overall increased drilling activity, the US Energy Information Administration forecasts Permian oil production to rise 70,000 b/d month-over-month in March to 2.25 million b/d (OGJ Online, Feb. 13, 2017). As of January, the basin boasted a suite of 1,757 drilled but uncompleted (DUC) wells, an increase of 84 from the December total.

EIA projects the Eagle Ford to record a 14,000-b/d month-over-month increase in March to 1.077 million b/d, marking the South Texas region’s first rise in Drilling Productivity Report data since late 2015. Its tally of DUC wells during January gained 11 month-over-month to 1,255.

In summary for Texas:  Texas is the only oil- and gas-producing state to record an increase with the exception Utah during the week, rising 1 unit to 6. The Permian Basin is driving much of the new drilling activity in Texas and the U.S.

Source: Matt Zborowski, “BHI: US rig count makes fifth straight double-digit jump, Oil & Gas Journal, 17 Feb. 2017

Three Keys To Successful CSWD Facility

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CSWD Facility

Introduction...Last week we discussed here The Surprising Discovery Of One Oil Executive.    This week we want to continue that discussion by getting into the Three Keys To Successful Commercial Salt Water Disposal (CSWD) Facility.  The ATM of the oil patch as described by insiders.

  • Location – The proximity of the CSWD to producing fields is critical, as the cost of transporting produced water to a disposal facility is one of the larger recurring expenses that an operator incurs. Our next facility is located approximately three miles from one of the larger producing fields in area. This producer disposes of approximately 325,000  barrels of water per month in the county. A larger portion of this producer’s water is produced in close proximity to our next facility, as way of illustration.  This producer wiill commit a large portion of their produced water to us.
  • Water Commitment – The commitment of water directly from the operator / producer is important to the our next facility. This allows the management to contract the water either directly with our preferred trucking company. Our preferred trucking company will base a number of their trucks at the facility and haul all water they have access to within a 20-mile radius.
  • Commitment to the Customer – The management of our next facility also operates producing properties.  The management understands  the other issues that concern an operator as it relates to choosing their disposal partner.  These Issues such include safety, ease and speed of off-loading.  Accurate and readily available reporting is important to the trucking company.  The facility will aslo provide driver amenities such as clean restrooms, cold water, and snacks.

Conclusion: The steady cash flow that is not dependent on oil pricing or new discovery makes prime CSWD properties a valuable asset.  That is one reason these ATM’s of the oil patch rarely come up for sale.  However, we have found a seller that has good facilities that can be acquired.  Drop me an email if you desire additonal information on this discovery.

This has been Bill Moist, MS, CPA reporting today Three Keys To Susccessful CSWD facility.

Oil Price Spike Inescapable

offshorerig

Bill’s note: We’ve been reporting in the oilandgasinsider.com since the beginning of 2016, that the massive cuts in new capital expenditiures for oil and gas exploration would lead to oil price hikes.  Now the results of those expenditiure cuts are appearing in new oil discoveries.

 CASUAL ATTIRE

Oil price spike inescapable and here’s the facts…

  • 2015 new oil discoveries are 1/10th annual average dating all the way back to 1947
  • 2015 Oil industry new discoveries are only 2.7 billion barrels
  • 2015 worldwide oil consumption at 35 billion barrels

Click here to watch the 3 minute video Oil Price Spike Inescapable.

Why do we have the largest oil consumption deficit in 69 years?

  1. Oil at less than $50 a barrel makes many fields around the world uneconomical to explore
  2. The oil industry has slashed $1 trillion in new investment from 2015 to 2026
  3. EIA expects oil demand to expand to 105 million barrels per day by 2026 up from the current demand of 94 mb/d
  4. Large scale high volume drilling like deepwater projects have been scraped
  5. Large scale projects take years to be productive

In conclusion…Supply could  fall 1.5 billion barrels short per year by 2018 to 2020.  If this does play out, then…

Oil Price Spike Is Inescapable

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References; Wood Mckeszie, Energy Information Agency, , Oil Price Spike Inevitable, By Nick Cunningham, OilPrice.com, August 30, 2016

Click here to watch the 3 minute video Oil Price Spike Inescapable.

Possible OPEC Production Freeze

OPEC Counries

Oil prices enjoyed a bump last week,…thanks in part to a weakened dollar and some geopolitical tensions in the Persian Gulf. But a large factor in the recent rally has been the return of a possible OPEC production freeze, a subject that was last tossed around before the organization’s much-publicized, and ultimately unproductive, meeting in Doha last April. The likelihood of a freeze sent markets up on Thursday, though some less-than-confident comments from the Saudi oil minister sent them dropping back on Friday.

Whether a freeze occurs or not is likely to be the trending gossip among speculators for the next month, at a time when such talk is exerting greater-than-average pull on the crude price. But a question worth asking is whether a freeze is even possible, given the state of OPEC and the increasingly divergent interests of its fourteen members.

This new attempt at a production freeze comes as Saudi Arabia, OPEC’s largest producer and de facto leader, reaches a new production record of 10.67 million barrels, more than 400,000 more than when the last freeze was discussed, while its oil revenues continue to plummet. OPEC profits have fallen 55 percent since 2014, according to the EIA. Ecuador, Kuwait and other Gulf producers want the price to recover past $50 a barrel. If a production freeze is on the cards, it will be discussed in late September during an informal meeting of the OPEC states at the International Energy Forum in Algeria.

Iraq and Iran, OPEC’s number two and three producers, respectively, have offered tacit acceptance of a production freeze, with important caveats. S

Conclusion…So, if there is a freeze, where will production be “frozen,” exactly?  What is possible, however, is that continued talk of a freeze will continue to exert influence over the market, which has see-sawed between bearish and bullish for weeks now.

Reference: Is An Oil Production Freeze Even Remotely Possible, Oil Price, by Gregory Brew, August 29, 2016

Oil Price Spike Close?

WTI Crude Pricing

We are beginning to see the first real signs of the global oil markets moving rapidly back into balance. OPEC, which produces approximately 40 percent of the world’s oil supply, cannot meet future oil demand on their own.

Supporting data follows that supports the analysis that oil price spike may be close:

  • On May 11th the U.S. Energy Information Administration (EIA) reported that U.S. crude oil production declined by 206,000 barrels per day over the six weeks ending May 5, 2016.
  • U.S. crude oil inventories unexpectedly fell by 3.41 million barrels during the week ending May 6, 2016
  • Gasoline inventories declined by 1.231 million barrels’=
  • Distillate stockpiles fell by 1.647 million barrels
  • The International Energy Agency (IEA) say the annual summer spike in demand for transportation fuels has begun.
  • On Friday, May 13 an explosion closed a second Chevron facility in Nigeria, Africa’s biggest oil producer
  • Exxon Mobil also reported on May 13 that a drilling rig damaged a pipeline, shutting off more production of crude. Nigeria’s oil production was already down 600,000 barrels per day before these two incidents, primarily the result of militant attacks.
  • Latin American oil production is now down close to 500,000 bpd from year ago levels.

In conclusion…If history repeats itself, the demand spike will be even larger. In 2010, the final year of the last major oil price cycle, the IEA began the year forecasting a 1.0 million barrel per day increase that year. Actual demand growth was 3.3 million barrels per day. The forecast error made in 2010 was that IEA’s formula for calculating demand, did not consider the impact of lower fuel prices on demand. IEA may have made the same mistake this time around.

Prices Stabilize On Oil Production Freeze

TexasOilPriceStabelize

West Texas Oil Production

“Since the Saudis and Russia reached an agreement to freeze output, volatility in the market has eased and oil prices have stabilized with the focus shifting back to fundamentals,” said Hong Shug Ki, a senior analyst at Samsung Futures, Inc.  “More stable oil prices are expected in the coming months, possibly up to the $40 level…”

West Texas Intermediate crude climbed more than 30 percent since dropping to lowest level in 12 years.  The pricing on Monday was just short of $36 per barrel.

A contributing factor may be that U.S. production slid for the sixth straight week ended February 26 to 9.08 million barrels a day, the lowest level since November 2014, according to the Energy Information Administration.

Key members of OPEC intend to meet with other producers in Russia this month to renew talks on the freeze deal according to Emmanuel Kachikwu, Nigerian Minister For Petroleum Resources.

West Texas Oil Production More Stable Than Saudi Arabia?

PumpingRigWTexas Pumping Rig In West Texas

Introduction…Oil production increasing in west Texas Permian Basin,  the largest U.S. shale-oil region, as the  Bakken and Eagle Ford are experiencing production declines.

West Texas two-lane county roads are congested with trucks as energy companies are searching for deals even though the oil markets are in the worst condition of decades.

On October 26, 2015 we reported (http://oilandgasinsider.com/?p=449) a Chinese investment holding company signed a letter of intent to purchase West Texas oil fields in Howard and Borden Counties for $1.3 billion.

Companies like Exxon Mobile, Corp. to Anadarko Petroleum Corp. have also searched for assets in this region the size of Syria.  Exxon purchased 48,000 acres in two deals in August and is reportedly looking for additional acquisitions.

“We’re already seeing companies targeting the Permian,” said Alen Gilmer, chief executive officer of Austin-based Drilling Info.  “If you were to look for the most stable area today to do anything, it’s going to be there.  Today you might even argue it’s more stable than Saudia Arabia.”

In summary…Oil production in the Permian is forecasted by the  EIA to rise 0.6% in December to 2.02 million barrels a day evan as drillers idled 59 percent of rigs.  The rival shale fields, the Bakken and Eagle Ford, have fallen 12 percent and 25 per cent respectively.

Source: “Oil Producers Hungary for Deals Drool Over West Texas Tiramisu,” BloombergBusiness by Dan Wethe, November 15, 2015.

U.S. Oil Production Decline Accelerates

Midland County Drilling

New EIA data shows deeper contraction in U.S. oil production than previously expected.

The EIA reported that the United States produced much less oil than expected in the first half of 2015. On the whole, the country produced 40,000 to 100,000 fewer barrels than previously reported between January and May. The August report also showed that U.S. oil production peaked in April at 9.6 million barrels per day (mb/d), before falling to just 9.3 mb/d in June.

The declines suggested that the contraction in the U.S. shale industry was deeper than the world had initially thought. And one can only assume that the decline either kept up at a similar rate, or even accelerated in the intervening months since June.

Global supplies could actually increase between now and the end of next year, despite a significant pullback in U.S. oil production. Put in this context, it appears that OPEC’s strategy of pursuing market share by forcing higher cost producers to cutback could bear some fruit. Even if it takes longer and the adjustment is not as sharp as expected, Saudi Arabia will maintain its grip on the market, pushing U.S. shale to contract.

Who is Bill Moist?

Bill Moist is President & Founder of Professional Equities, Inc., a funder of real estate; oil and gas; business projects; and trains others to take advantage of Crowdfunding. Mr. Moist is professional lecturer at Graduate Business Schools and professional organizations. In addition, he is Texas Real Estate Broker, Certified Public Accountant, Master of Science real estate tax expert, and Investor/Developer with 70+ successful projects. He can be reached on LinkedIn and ModernFundRaising.info

 

 

Sources: “Decline In U.S. Oil Production Accelerates,” OilPrice, by Nick Cunningham, September 10, 2015: “Short-Term Energy Outlook,” U.S. Energy Administration, September 9, 2015

It’s Not A Matter If Oil Prices Will Head Upwards, But When

US Shale Oil Boom…

Looking solely at US Shale Oil production since 2007, it is no wonder that OPEC was caught off-guard by the pace of Shale Oil production growth. Production grew from just over a million barrels per day in 2007 to around 5.5 mmbbls/day at its peak earlier in April this year.

U.S. Shale Oil Production

US Shale Supply To Decline…

Shale production decline is a reality. Overall decline rates in the Bakken Shale are around 50%, Eagleford Shale 55% and the Permian is around 25% and the US rig-count has now fallen by over a half. So why have we not witnessed anything yet?

Well the answer to that is a mixed and somewhat cloudy one. Delays in completing some wells are clouding the decline picture as are delays in actual hard production data. The answer to the delays in both cases is around 4 months. We have to wait around 4 months to get the actual data for what is happening now, and quite often wells are not completed until some 4 months after they have been spudded.

Some have asked why oil companies in the US have not colluded to shut-in production and wait for higher prices. The simple answer, many smaller oil companies must continue producing to keep paying-off the loans that financed the well in the first place. A fact that the banks and bond-holders that have financed some of the more risky ventures are about to find out to their cost.

Iranian Crude Supply Fears Are Misdirected…

Despite the worries of extra supply coming back onto the table from Iran, perhaps as early as November, the expectations are perhaps a little exaggerated. Indeed Iran may have millions of barrels in storage ready to supply the market. However, as for immediate production abilities, that will take a little longer. Any production that Iran has shut-in over a long-period of time will take perhaps as much as 18 months to get back to full-swing. Beyond this, it is unlikely Iran will be able to increase its oil production much higher than 3.5 mmbbls/day without the aid of Western technology and know-how.

Worldwide Demand Trend Upwards…

Oil demand has resurged anew with the oil price currently below $50/bbl for both WTI and Brent. The IEA has had to revise its demand figures upwards again for this year and next with its forecast of 1.6 mmbbls/day growth this year. In fact, the underlying rate of demand growth is at just over 1.4 mmbbls/day year on year.

More recently, evidence of what exactly the low-oil-price-scenario has done for the world economy can be seen in the latest GDP releases. US GDP was reported at 3.7% last week, much higher than analysts were expecting. World GDP is likely to be above 3% this year and is forecast above 3% next year and into 2018, according to the World Bank group.

World Oil Supply vs. Demand

In conclusion…

As the commodities expert, Jim Rogers said last week, “The cure for low prices is low prices.” The decline in supply and the rise in demand is happening right now. It’s not a matter of if the oil price will head back upwards, but when?

Sources: Opinion: Why The Crude Oil Doom-Merchants Have Got It All Wrong, Oil Pro by Andy Douglas, September 3, 2015: Oil To Drop Again Before Sanity Can Return, Oil & Energy Insider by Evan Kelly, September 4, 2015

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.