Everyone knows that shale drilling is a house of cards, right? Just look at shale gas drillers in the northeast. Company stock prices down 90% over the past 5-10 years. Yuck. And don’t even get us started talking about shale oil companies (filthy monsters). Their balance sheets and share prices are even *worse* than shale gas drilling companies! They NEVER make any money. EVER! Shale oil companies just keep getting new investors to invest so they can pay off old investors, like a Bernie Madoff Ponzi scheme. Except–what if the media narrative pounded into your head day in and day out isn’t true? What if shale companies are actually (gasp) making money?
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Category: Crude Oil
Are Shale Drillers Headed for Oblivion?
Are oil (and gas) drillers on a precipice, about ready to go over the edge into oblivion? Become extinct? According to the article below, yes they are. The author is not necessarily rooting for that outcome, but simply recognizing that with market capitalizations in the toilet (down 90% or more), and the price of oil remaining low, many companies will not be in business in the next few years. That’s his thesis. Is he right?
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US Passes Russia to Become World’s Biggest Crude Oil Producer
For a number of years the United States has been the #1 producer of natural gas in the world, bumping Russia off that perch. Vladimir Putin didn’t like it. And now, as of this year (according to the U.S. Energy Information Administration), the good ole US of A is the #1 producer of crude oil, dethroning Russia from that perch too. Vlad really doesn’t like that! No wonder Russia is funding Big Green groups like the Sierra Club to smear shale energy and fracking. Here’s the good news from our favorite government agency, the EIA…
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Crude Oil Truck Drivers Needed in Ohio Utica
While the Marcellus Shale play is mostly about natural gas, with some natural gas liquids in the southwestern part of the play, the Utica play in Ohio is a different story. Yes, a lot of natgas and NGLs get produced in the Utica, but the Utica also has a lot of oil coming out of the ground. Crude oil. Straight from the Utica/Point Pleasant rock layer. Something that hadn’t dawned on us (until now) is this question: How do Utica drillers get their crude to refineries? With natgas and even NGLs, it’s done mostly via pipelines. When’s the last time you heard about a “gathering pipeline” running to a well pad for crude oil? Yeah, never. So how do drillers get all that oil to refineries? They truck it. Another interesting factoid: those Pilot Flying J truck stops don’t only sell refined petroleum (diesel) to truckers, some of those operations also truck raw crude to refineries. The Pilot Flying J in Canton, OH is one such operation–and they currently have a shortage of truck drivers to haul Utica crude. It’s a “trucker’s market” right now. If you have a Class A commercial driver’s license with Hazmat (hazardous materials) and tanker endorsements, Flying J wants to talk to you, stat…
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Is Private Equity About to Return to Oil/Gas Drilling in Big Way?
In our headline we pose a question asking if private equity (PE) money is about to be lavished on the oil and gas sector once again. The short answer, according to an analyst who writes about these things, is YES! Anthony Mirhaydari, a senior financial writer at PitchBook, says because of the current high price of oil, “After a drought of investment as management teams aggressively trimmed expenses to stay afloat, an aggressive ramp-up in spending is needed.” According to Deloitte, the oil and gas industry will need to spend on the order of $3 trillion in capital expenditures from now until 2020 (two short years away). Some of that money comes from profits or is already in hand from other sources. But, according to Deloitte, “there is a funding gap of $750 billion to $2 trillion that will need to be met with outside capital.” That trillion dollar delta is where private equity comes in–private investors once again opening up their wallets so more oil and gas drilling can happen. And that’s good news for the entire industry, including the Marcellus/Utica region. More money = more drilling…
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Canadian Civil War Previews What’s Coming in NY re Pipelines
Two Canadian provinces that share a border, Alberta and British Columbia (BC), are in the midst of a heated argument/conflict/civil war(?)–over a pipeline. We’ve not covered the conflict, until now. The short version is this: Alberta has a rich deposit of oil in what are called oil sands. In order to get more of the bountiful supply of oil to new markets, in Asia, Alberta needs a new pipeline. Kinder Morgan operates the Trans Mountain Pipeline system and previously proposed expanding Trans Mountain–from Alberta through British Columbia to the shore where the oil can be loaded on tankers and sailed to other continents. BC has blocked the new pipeline, and so now Alberta has passed a law that allows them to stop existing oil and gas flows into BC. If that happens, it will bring BC to its metaphorical knees from lack of energy sources. Yes, it’s getting nasty. The Canadian federal government is also involved, attempting to pressure BC to allow the pipeline. What does that have to do with the Marcellus/Utica? If we were to say “Constitution” or “Northern Access”–perhaps the light bulb will go off. You see, we have a parallel situation here in the states. New York State is blocking gas pipelines critical to PA (as supplier) and to the New England states (as demand centers). At some point, it’s not beyond the realm of possibility that PA will begin to turn off existing natgas flows into NY–and then what will we do? We New Yorkers would be royally screwed. Gov. Cuomo pay attention to our neighbors to the north. What’s happening up there is coming in your direction, if you don’t change course…
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Peak Oil Theorist Art Berman Predicts Doom & Gloom for Shale
Month after month and year after year America’s shale plays produce ever more oil and gas (see today’s story about the latest EIA Drilling Productivity Report). But don’t tell that to Art Berman. Why anyone continues to listen to Berman, the world’s preeminent “peak oil” theorist, is beyond us. For nearly 20 years Berman has predicted that the world is running out of oil and natural gas. And yet the opposite is true. But that doesn’t stop Art from pedaling his particular brand of insanity. Last Thursday at the Texas Energy Council’s annual gathering in Dallas, Berman told attendees that the Permian Basin has another seven years, at most, and then it’s done–out of oil. Oh, and the Eagle Ford, about 350 miles from the Permian–that’s toast too. Why the Texas Energy Council would invite Art to pedal his nonsense is beyond us, except maybe they enjoy a circus side show. In contrast to Berman’s wild fantasies of Permian oil drying up, we have analysis (below) from Richard Zeits, founder of Zeits Oil Analytics, who says the Permian is only just getting started…
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Clash of the Titans: PA Marcellus Gas Competes with TX Permian
Last week MDN editor Jim Willis attended Hart Energy’s Marcellus-Utica Midstream conference in Pittsburgh (a series of stories are coming this week from that event). One of the stray comments Jim heard at the event was this: The chief rival or competitor to the Marcellus with respect to natural gas production is not, as you might assume (we sure did) the Haynesville Shale in Louisiana. No. The chief competitor, producing more and more volumes of natgas, is…the Permian! That’s right, an oil play! Why? When you drill for oil, you get other hydrocarbons out of the ground along with the oil. Primarily methane, or natural gas. It’s called “associated gas.” Even though most of what comes out of a Permian well is oil and not gas, because there are so darned many oil wells in the Permian (with more being drilled all the time), the total volume of gas coming from the Permian is going up, dramatically. The problem is, some Marcellus/Utica gas heads to the Gulf Coast to be used by petrochemical companies or to be exported. However, gas produced right there in the region is less expensive to get to market (shorter distance), so that Permian-sourced gas is competing, and increasingly crowding out, Marcellus/Utica gas. Investors have noticed and have, in a sense, “punished” some of the biggest of the big Marcellus/Utica producers by selling their shares, leading to a loss in share value. Among the hardest hit have been Southwestern Energy, Gulfport Energy, and Range Resources. The stock price for those three companies is down, since Jan. 1st, 33%, 30% and 25% respectively. A Bloomberg article says the stocks for those companies have been “mauled.” Indeed. Here’s some insight into how the Marcellus/Utica is increasingly going up against the oil giant Permian Basin, sometimes getting mauled…
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Cuomo Shafts NY State Yet Again; Bans Oil Barge Storage on Hudson
Freedom in New York State is all but gone–snuffed out by a corrupt dictator by the name of Andrew Cuomo. Warning to other states: Be careful who you elect in high office. Cuomo is not content to simply destroy the drilling industry in NY–he wants to destroy anything to do with fossil fuels. Crude oil from the Bakken in North Dakota has, for some time, arrived in New York’s capitol city of Albany via rail cars where the oil is loaded on barges at the Port of Albany for a quick trip down the Hudson River. Cuomo went after those rail shipments, trying to slow them down or stop them altogether (see NY’s “Progress” to Control Bakken Crude Trains Passing Through). Somehow those oil trains continue to roll into the Empire State, over the objections of Cuomo & company. The Port of New York/New Jersey, the American Waterways Operators, and the Hudson River Pilots’ Association floated a plan earlier this year to allow up to 43 barges filed with crude oil to temporarily anchor along a 70-mile stretch of the Hudson River, south of Albany, between Kingston and Yonkers NYC. The barges could add capacity and transport more oil down the river to NJ refineries than is currently possible. Yet enviro Nazis rose up and pressured the state legislature into passing a bill to (essentially) prohibit the oil barge plan. Cuomo gleefully signed the bill in October, cutting NY out of yet more commerce it could have had. All because of an irrational hatred of fossil fuels…
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How U.S. Shale Changed the World Geopolitcally
American shale has fundamentally transformed the world geopolitically. How? Just think about. #1 – Saudi Arabia and Iran are on the brink of all-out war. For decades Saudia Arabia has been the world’s leading oil producing country. Iran has been in the top five oil producing counties. #2 – Venezuela, the country with the world’s largest oil reserves, is rumored to have defaulted on its foreign debt. Either situation, #1 or #2, hint at the potential for the flow of oil to be disrupted. Both happening at the same time is an oil cataclysm. A decade ago such news would have resulted in oil hitting $100, perhaps even $150 per barrel. The price of gas at the pump would have soared, overnight, to more than $5/gallon. Yet what has happened to the price of oil with this recent geopolitical news? Nothing. If anything, the price has gone down! The only reason oil prices are not through the roof is because of the abundance of American shale oil. An occasional guest blogger here on MDN is Daniel Markind, a partner with law firm Weir & Partners. Dan recently sent along what we consider masterful insight into how shale energy has literally changed the world. As a bonus, Dan asks a probing and relevant question of those who want to stop the use of all fossil fuels…
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OPEC Report: US Shale Dominates Until 2025, then OPEC Rises Again
Even OPEC–the Organization of the Petroleum Exporting Countries–now admits that U.S. shale energy is here to stay. At least for the foreseeable future. For OPEC, the foreseeable future is until 2025. Yesterday OPEC released its annual “World Oil Outlook 2040” (copy below). The massive 364-page report predicts that U.S. shale oil will continue to grow, and dominate the oil markets–until 2025 (eight years from now). At that point OPEC says shale oil will peak and following that, OPEC will once again be in the driver’s seat–ready, willing and able to screw Americans and everyone else who buys their oil. We think OPEC is smoking some good stuff…
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Recent Drilling Downturn Created “The A-Team” of Rig Fleets
According to a recent column on WorldOil.com, you can thank the recent downturn in oil and gas prices with producing the lean, mean drilling machines we have today. Because of the downturn, only the “most mechanically sharp, efficient and best-equipped drilling rigs and crews were left operating in the downturn.” The result? It created “the A-Team.” The rigs and crews operating now drill twice as fast at half the cost of just a few years ago. According to Chesapeake CEO Doug “the ax” Lawler, “We don’t need to run 175 rigs anymore. Forty or 50 rigs can deliver the same volume today.” Our point: Today we have far fewer rigs operating, but they’re producing far more oil and gas than they ever have. Welcome to the world shale created…
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Fracking Comes to Kentucky – Encore Drills First Horizontal Oil Wells
Kentucky is an interesting state with respect to the oil and gas industry. Historically there has been a fair amount of conventional (vertical only) drilling for oil and gas in the state. Over the past few years there have been a number of gas and petrochemical projects in the state (see our Kentucky stories here). However, the state also has a liberal tilt, at least when it comes to fracking and pipelines. A few years ago Kentucky pretty much single-handedly axed the Bluegrass NGL (natural gas liquids) pipeline, a $1.5 billion project that would have stretched from the Utica/Marcellus all the way to Gulf Coast (see Kentucky House Votes to End Eminent Domain for Bluegrass Pipeline). As for fracking, in 2015 the Kentucky Oil and Gas Conservation Commission, a group that “rarely meets” (previous meeting was in 2006) held a meeting to consider granting Kentucky’s very first deep horizontal natural gas drilling permit (see Kentucky Fracking One Step Closer: Commission Considers 1st Permit). The permit under consideration was to drill in the Rogerville Shale, by an affiliate of EQT. So when we spotted a press release/article about Encore Energy currently drilling its first (of four) horizontal oil wells in the Berea in Kentucky, wells that will be fracked…that’s big news! No, it’s not the Marcellus/Utica, but it’s close to us, and it’s in the Appalachian region. And it’s fracking a horizontal well in a state that has not been overly friendly in approving such activities. Here’s the low down on Encore…
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Oil & Gas DUCs Now Flying in Different Directions
A quick oil & gas lesson, for new MDN readers. A DUC is a Drilled but UnCompleted well. Many times drillers will drill the initial hole in the ground, but then not “complete” (or frack) the well. Why do that? For a variety of reasons. The biggest reason is usually because the commodity price of gas (or oil, depending on the well) is not favorable. Rather than lose the lease a company paid good money for, they will begin the process by drilling, and then leaving, the well–only to return later to complete it when prices go up again. Keeping an eye on DUC inventories tells you a lot about the economics of a commodity–what drillers believe will happen in the near-term with the price for that commodity. Once upon a time both the oil and natural gas industries tracked together. When there was more drilling (and production) for oil, there was also more drilling and production for gas. The prices for both oil and gas tracked along the same path. What is now obvious–has been obvious for some time–is that “tracking together” is no longer the case. Each commodity, oil and gas, now have their own economics, driven by different factors. What makes it evident that oil and gas economics have now separated are DUCs. Right now oil drillers are drilling but not completing wells like crazy, piling up a high DUC inventory, saving wells for later, when prices improve. However, DUCs for natural gas are going down, especially in the Marcellus/Utica region, which means drillers believe prices will soon go higher for natgas. The fewer DUCs there are, the more new drilling there will be…
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Watch Out Marcellus/Utica, Here Comes Gas from the Permian
The Wall Street Journal has an interesting article appearing in today’s edition that points out the Permian Basin shale play (in West Texas) may, in a few years, “rival new gas output” from the mighty Marcellus Shale. Really? Where did that come from?! It makes a great deal of sense. The Permian is an oil-focused play. Drillers can’t stand enough rigs in the Permian fast enough. Drilling for oil in the Permian at $50/barrel is profitable–for everyone. So where does natural gas come in? Ever read about “associated gas” here on MDN? We’ve talked about it a fair deal over the years. Whenever you drill for one hydrocarbon–like oil–you get other hydrocarbons coming out of the borehole too. Like natural gas, and gas liquids (propane, ethane, butane, etc.). The converse is also true. Drillers targeting natural gas sometimes get oil and NGLs. In the Permian, an “oil play,” there is a LOT of associated gas coming out of the holes drilled, along with the oil. And the massive drilling program under way there means overall output from the Permian may, at some point, rival (or come close to) the output in the Marcellus. What does that mean for Marcellus drillers and landowners?…
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Pilgrim Pipeline Takes Arrows from Radical Antis – Project Dead?
In November 2015, MDN told you about Pilgrim Pipeline Holdings, developing an East Coast pipeline to carry refined petroleum products such as gasoline, diesel, heating oil, and jet and aviation fuel northbound from Linden, New Jersey to Albany, New York (178 miles). In addition, a second Pilgrim pipeline will carry crude oil from Albany south to NJ and other locations. Two pipelines, side by side, different liquids flowing through them in different directions (see Will Pilgrim Pipeline be Allowed to Settle in the NY World?). The oil that would flow south from Albany comes from trains delivering crude from the Bakken Shale play–a double evil in the sight of radical anti-fossil fuelers. Antis from both New York and New Jersey have vigorously opposed the project from the beginning. We told you about a meeting in Bergen County, NJ last year where the antis “got rowdy” (see NJ Residents “Get Rowdy” in Opposition to NY-NJ Pilgrim Pipeline). Pilgrim has been working hard to accommodate concerns about the pipeline. Most recently, Pilgrim adjusted its route in NJ. The radicals at the New Jersey Sierra Club are encouraged by the route change–encouraged that the project is now on life support and the Clubbers are itching to pull the plug…
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