Tag Archives: #TheFrackers

On Saudi Pledge Oil Climbs To 17-Month High

Bloomberg: Non-OPEC Producers Join Deal to Cut Production

Introduction:  Largest oil producers strengthen commitment to tighten supply, Non-OPEC countries agree to trim output 558,000 barrel per day next year.

Oil advanced to the highest since July 2015 after Saudi Arabia signaled it’s ready to cut output more than earlier agreed and non-OPEC countries including Russia pledged to pump less next year.  WTI closed Monday at $52.83 P/B.

Futures climbed 2.6 percent in New York and 2.5 percent in London. Saudi Energy Minister Khalid Al-Falih said Saturday the biggest crude exporter will “cut substantially to be below” the target agreed on last month with members of OPEC. His comments followed a deal by 11 non-OPEC countries to join forces with the group and trim output by 558,000 barrels a day next year, the first pact between the rivals in 15 years.

U.S. oil futures have gained almost 20 percent since the Organization of Petroleum Exporting Countries agreed on Nov. 30 to cut output for the first time in eight years. Saudi Arabia, which initiated OPEC’s decision in 2014 to pump without limits, is leading efforts to regain control of the market. The OPEC and non-OPEC plan encompasses countries that produce about 60 percent of the world’s crude.

OPEC Collaboration…”The main impact of the non-OPEC collaboration is to pull the global market into balance, if not in deficit, in the second quarter of 2017, rather than in the third quarter,” said Sarah Emerson, managing director of ESAI Energy in Wakefield, Massachusetts. “On an annual average basis, this pushed the global balance into a 200,000 to 300,000 barrel-a-day deficit for the year.”

Oil prices at $60 a barrel would be “ideal” for OPEC as higher levels risk sparking a recovery in competing supplies from the U.S., Nigerian Minister of State for Petroleum Emmanuel Kachikwu said in a Bloomberg Television interview.

Conclusion…U.S. exporters rushed back to the shale patch with the largest weekly addition of oil rigs since July 2015 according to Baker Hughes.  OPEC deal cous drain almots half of the global oil surplus.

Sources:  Mark Shenk, Oil Climbs to 17-Month High on Saudi Pledge, Non-OPEC Output Cut, Bloomberg, December 11, 2016; Gran Smith, OPEC-Russia Deal Could Drain Almost Half the Global Oil Surplus, Bloomberg December 12, 2016; Non-OPEC oil producer to cut output 558,000 barrels a day, CNBC, December 10, 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

New Shale Boom On Horizon?

w-texas-oil-boom Oil Shale Boom?

OPEC surprised the markets when for the first time in eight years’ oil production limits will be put in place at its November meeting. The September 29th announcement from OPEC sent markets up by almost $3 per barrel.   The rally continued with the WTI week closing at $48.24.

Hundreds of oil and gas bankruptcies are an ugly background for recent predictions for continued records inventory levels.

The projected changes would be caused by an unprecedented agreement between arch-rivals Saudi Arabia and Iran.

In its announcement, OPEC stated:

“In the last two years, the global oil market has witnessed many challenges, originating mainly from the supply side. As a result, prices have more than halved, while volatility has increased. Oil-exporting countries’ and oil companies’ revenues have dramatically declined, putting strains on their fiscal position and hindering their economic growth. The oil industry faced deep cuts in investment and massive layoffs, leading to a potential risk that oil supply may not meet demand in the future, with a detrimental effect on security of supply.”

“The Conference opted for an OPEC-14 production target ranging between 32.5 and 33.0 mb/d, in order to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward.”

“What we are looking at here at the very least is a freeze,” Paul Sankey host of the conference call said. “We were looking for more OPEC production growth but now we no longer think so.”

Why did OPEC do it?

“With weaker demand predicted through 2017 they could see a rough market coming,” the analyst theorized. “Being a cartel the economics were overpowering: a 10 percent cut could give as much as a 30 percent rise in oil prices.

In conclusion...If a 30% oil price rise is realized, then oil shale could boom again.

Reference:  September 30, 2016, Will The OPEC Deal Lead To A New Shale Boom? Oil & Gas 360, www.oilandgas360.com

Crude Drops After Producers’ Fail To Cut Output

Forget Doha

Almost 60% of the world’s oil producers gathered in Doha on Aril 17 to discuss freezing their production output at January levels in effort to stabilize prices.  Russia, Saudi Arabia, Qatar, and Venezuela made a preliminary deal in February and were seeking to add more producers and extend the recent price recovery.

The oil producers failed to reach an agreement to freeze production.  Just after the futures market opened Monday. April 18th around 6 P.M. ET, West Texas Intermediate fell 6% to a low of $39.02. However, by the close on Monday he price had risen to $40.36 or producing only a 4% decline since April 12th recent high.

Some of the headlines said, “Crude Crashes…” or “Crude Oil Plunges…”  A 4% drop to $40.36 from the April 12th high, hardly seems like a crash, but the news must be sold.

A several mediating factors may be at work.

  1. Striking oil workers disable 60% of Kuwait’s production
  2. U.S. production drops below 9 million bpd law week according to EIA
  3. Canada oil industry to see 62% decline in investment
  4. Drop in non-OPEC supply should accelerate through rest of year and into 2017

In conclusion, regardless of what didn’t happen in Doha, the market is starting to rebalance.  And read the news, not just the headline.

The Water Contamination By Fracking Myth

YaleStudy

The Myth Has Been Disproved

Yale researchers have confirmed that hydraulic fracturing – also known as “fracking” – does not contaminate drinking water.

The process of extracting natural gas from deep underground wells using water has been given a bad reputation when it comes to the impact it has on water resources but Yale researchers recently disproved this myth in a new study that confirms a previous report by the Environmental Protection Agency (EPA) conducted earlier this year.

After analyzing 64 samples of groundwater collected from private residences in northeastern Pennsylvania, researchers determined that groundwater contamination was more closely related to surface toxins seeping down into the water than from fracking operations seeping upwards. Their findings were recently published in the journal Proceedings of the National Academy of Science.

Researchers from Duke University also recently gave people a reason to trust fracking companies. In a study published in Environmental Science & Technology Letters, scientists explained that hydraulic fracturing accounts for less than one percent of water used nationwide for industrial purposes. This suggested that the natural gas extraction processes are far less water-intensive than we previously thought.

It’s hoped that these studies will help people better understand the safety of fracking.

In conclusion, underground drinking water contamination myth has been disproved by the Yale researchers which confirmed a previous report by the Environmental Protection Agency.

Oil Pricing Heads To Bear Market?

Screenshot 2015-07-26 13.19.42Crude oil slipped back into a bear market Thursday, disappointing U.S. shale drillers that pinned their hopes on higher prices.

West Texas Intermediate, the benchmark U.S. contract, tumbled 22 per cent since June 10 to US$48.14 a barrel on Friday, erasing more than US$100 billion in market value from the companies in the Bloomberg Intelligence North America Independent Explorers and Producers Index.

Crude oil pricing are down roughly 55% from their peak of nearly $107 in June of last year and have lost about 27% from the $66.15 low in November, which at the time was the lowest settlement in 5 years

Crude’s recovery fizzled amid a worldwide glut that shows little sign of abating. U.S. production remains near the highest level in four decades, output from Saudi Arabia and Iraq surged to record levels, and Iran is focused on resuming exports after reaching a nuclear agreement with world powers.

“Just when you thought it was safe to go back into the oil patch.”   Phil Flynn, senior market analyst for Price Futures Group Inc., said by phone from Chicago.   “The bear market is definitely putting another round of fear into the shale patch and the bankers of the shale patch.”

Source: “Oil reverts back to bear market, erasing more than US$100 billion for shale drillers,” Financial Post, Asjylyn Loder and Dan Murtaugh, Bloomberg News | July 24, 2015; “It’s bad-news bear market for crude oil,”  Market Watch by Myra P. Saefong, July 24, 2015; “Sudden Drop in Crude-Oil Prices Roils U.S. Energy Firms, Major job cuts, asset sales are expected: layoffs texted to engineers and scientists,” Wall Street Journal by Lynn Cook, July 26. 2015

U.S. Oil Production At 45-Year High

Screen Shot 2015-07-13 at 5.38.12 PMBig Dog Drilling Rig

U.S. oil production has peaked…at least for now.

“Even if production growth comes to a halt, it comes in at higher level than analysts expected earlier this year,”  said Jim Burkhard, head of global market research for IHS.

Despite the slowdown in U.S. oil patch, producers are expected to pump more oil in 2015 than in 45 years.  Expected average production is 9.5 million barrels per this year.  This equals about 40,000 more barrels per day than the EIA projected last month.

The domestic benchmark is expected to average $55 per barrel the rest of the year, which still allows the Bakken, Eagle Ford, Niobara, and Permian Basins to remain economically viable to support development and drilling.  The rigs and wells are becoming more efficient and productive, and the cost to drill and complete continue to fall allowing onshore drilling to grow again in 2016.

The EIA expects oil prices at $62 per barrel next year.

Sources: “EIA Confirms: Oil Production Peaked,” By Nick Cunningham, Oil Price.com, July 12, 2015; “U.S. oil output still barreling toward 45-year record,” by Rhiannon Meyers, Houston Chronicle, July 7, 2015;

Shale Producers Not Bowing To OPEC

Gualalupe Pass Drilling Rig

Introduction…Even though our President has chosen to bow to foreign dignitaries, so far our U.S. shale producers have not bowed to OPEC.

Saudi Arabia’s attack… When Saudi Arabia launched a global oil-price war last year, many assumed that America’s high-cost shale producers would be the first to retreat.

American companies were quick to idle drilling rigs and lay off workers, but U.S. onshore oil production has gone up since last fall, not down.

As oil minister from OPEC counties met last week, they were grappling with the fact that the world’s new swing producer is different animal from traditional competition.

The new swing producers…Shale producers have more in common with technology start-ups in Silicon Valley than big, often state-controlled, integrated oil companies that dominate the global oil markets.  They are much smaller, more nimble, take more risks and are more tied to the ebb and flow of the capital markets.

One consultant who often speaks with Saudi officials says, “they were surprised at how fast oil prices fell and how resilient shale producers were.”

U.S. Producers are different…In an industry dominated by behemoths, the U.S. oil industry stands out due to fragmentation.  It takes 77 companies to generate 77% of the American crude oil and related liquids.  Combined, this is more production than the world’s 20 largest producers, according to Rystad Energy, a consulting firm.  Only Canada and the U.K. are similarly fragmented.

In contrast, in Russia there are four companies, China three, Brazil one.  In Saudi Arabia, Iran, Mexico, and Kuwait, one state owned company controls 100% of total output.

In conclusion...If you think big government controlled companies are the best way to produce crude oil, then most of the Middle East, Russia,  and China agree.  On the other hand, if you think free enterprise and the American Spirit is the best way to produce crude oil, then Texas, U.S., Canada, and U.K. would agree with you.

If you are inclined to venture into projects that produce current cash flow as compared to future capital gains, drop me a note.
Sources: “Shale Upends OPEC Bloc Party,” Wall Street Journal by Greg Ip. Saefong, June 4, 2015

U.S. DOE To Invest $32 Million In Solar Jobs

solarenergy  Indiana Solar Energy System

Introduction…The U.S. Department of Energy (DOE) is trying to move the market to solar, green energy.

Department of Energy’s intentions…DOE is setting aside $32 million to promote new jobs in research in the effort to accelerate the transition to cleaner energy.  Part of the money, $12 million, wil be to train other professionals in related fields such as real estate,  insurance, finance, and fire and safety.

Currently, there are more jobs in installing solar panels than jobs in the coal industry.  But, the abundance of cheap natural gas as a result of Fracking has reduced the demand for coal, not solar energy.

The Government’s solar track record…Our taxpayer $500 million support of the now bankrupt California startup Solundra embarrassed the Obama administration.  We all want clean energy.  But, the problem with solar is that the sun does not shine 24 hours a day and you can’t store electricity.  So, we always need a second energy source, greatly increasing the consumers’ cost of energy.

In conclusion…It seems to me that the DOE has not produced one barrel of oil or one kilowatt of electricty.  Maybe they should stick to regulations.

Bill Moist

BillBioPhoto

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 Account (ret), Master of Science real estate tax expert, and Investor/Developer with 70+ successful projects. He can be reached on LinkedIn, billmoist.com, and billmoist.ws

Sources: “U.S. Energy Department To Invest $32 Million In Solar Jobs,” OilPrice by Andy Tully, May 28, 2015

The Russians Are Coming, The Russians Are Coming

Screen Shot 2015-03-19 at 3.50.00 PM

Introduction…Well, not all of the Russians are comping to Texas. But, one Russian billionaire, Roman Abramovich, who just invested $15 million in new fracking technology is here.  So, why would Abramovich invest in technology after Vladimir Putin, President of Russia, denounced it publicly?

Previous Anti-Frackers?...When the anti-fracking campaign started to heat up late last year in Denton, Texas—the heart of the shale revolution—conspiracy theories were spread within the pro-fracking community that the Russians were behind the whole thing. <!–There’s more!–>The logic was that the American shale revolution threatened Russia’s market share.  In a recent press conference Putin became visibly angry when the question of Fracking was asked as to its impact on Russia.

Clean Plasma Fracking Technology… Roman Abramovich has invested $15 million in Houston-based Propell Technologies Group, Inc. (OTC:PROP) and its new fracking technology from wholly owned subsidiary Novas Energy. Significantly, this new enhanced oil recovery (EOR) technology enables ‘clean’ hydraulic micro/nano fracturing of oil reservoirs—that is, without water, without polluting chemicals and without earthquakes.

According to Propell, the Plasma Pulse patented downhole tool creates a controlled plasma arc within a vertical well, generating a tremendous amount of heat for a fraction of a second. The subsequent high-speed hydraulic impulse wave emitted is strong enough to remove any clogged sedimentation from the perforation zone without damaging steel. The series of impulse waves/vibrations also penetrate deep into the reservoir causing nano fractures in the matrix which increase reservoir permeability for up to a year per treatment.

It may or may not be a coincidence that Propell’s Plasma Pulse Technology is licensed from Novas Energy, a venture capital-backed Russian energy technology company.

There is also another Russian element to this: PPT has been very successfully employed in Russian injector wells. This is perhaps the most significant aspect to consider. Russia does not have draconian fracking regulations pressuring companies to use environmentally friendly technology. Instead, they are using PPT to improve enhanced oil recovery (EOR) and reduce production costs.

Where Is Abramovich Going With This Investment?… This will not merely be a $15 million investment,” said one source close to the deal. “You have to read between the lines here. Abramovich doesn’t do anything small. He’ll get the infrastructure in place and then look to acquire a significant position in the US oil sector at today’s fire sale prices. We’ll probably be looking at hundreds of millions in investment at the end of the day.”

I n Conclusion...What an irony that a Russian billionaire is investing in clean Fracking technology that started in Texas?  We have already seen Chinese money move into Texas oil patch.  This very well could mean we will see more Russian money coming to Texas.

P.S.  While the Putin was apposed to U.S. Fracking, it could be another Russian who helps remove the environmental concerns over Fracking.
Sources: “Roman Abramovich Invests $15M In New US Fracking Technology,” OilPrice.com by By James Stafford, February 24, 2015