OGI This Week

Portent: Schlumberger said North American E&P spending could fall by 35% during the remainder of the year. The oil markets are rebalancing, and in some basins pricing has fallen to unsustainable levels.   Lackluster: Lower prices and profits dampened Mexico’s much-anticipated Round One shallow-water Gulf of Mexico oil block auction. Out of 14 up for bidding, eight received no bids and four had bids thrown out.   Haven: With more than $2 billion in debt, Sabine Oil & Gas recently filed for Chapter 11 bankruptcy. Prior to its merger with Sabine last year, Forest Oil Corp. incurred heavy debt.
Analysts’ Outlook: The domestic rig count is stabilizing, mid-year spending from majors to small-caps was cut by more than one-third and energy companies fear a further price drop, according to three surveys. Winter Is Coming: There are 2,577 billion cubic feet of natural gas in storage across the U.S., 35% more for this winter than last year, the Energy Information Administration said. Intellectual Property 101: Charlotte Rutherford, intellectual property expert, discussed the murky world of patents at Hart Energy’s recent DUG Permian conference. There is more than $700 billion in industry intellectual capital, including patents, but capital for patents often sits idle.
Unprecedented: BP will pay about $18.7 billion to more than 400 local government entities, five states and the U.S. government in the largest oil spill settlement agreement of its kind. The Deepwater Horizon payout is subject to court approval. Wary: The global energy industry has become uneasy as surging oil and natural gas production occurs alongside geopolitical unrest, investment banker and author Tom Petrie told attendees at Hart Energy’s recent DUG East conference. The remainder of 2015 and the start of 2016 will be a time of dramatic industry shifts, he said. All In: The Ontario Teachers’ Pension Plan will buy CA$3.3 billion worth of royalty and mineral interests available when Cenovus sells subsidiary Heritage Royalty Ltd. Partnership’s 4.8 million acres of title lands in three Canadian provinces.
Cats And Dogs: Several operators in the Denver-Julesburg Basin in Colorado, including Bonanza Creek Energy, have been affected by road closures and even fallen behind schedule on projects due to very heavy rainfall.  More, Please: Shale gas produced from North America—led by the Marcellus Shale—will be in highest demand outside the continent, according to forecasters, attendees at Hart Energy’s DUG East conference were told. Rolling On: The executive chairman of Burlington Northern Santa Fe LLC discussed the U.S. Department of Transportation’s recent ruling on legacy DOT-111 rail cars used to transport crude oil and ethanol. Electronically controlled pneumatic braking systems must be outfitted by Jan. 1, 2021.
Full Speed: A Harvard Business School/Boston Consulting Group joint project outlined specific ways the U.S. can maximize impact on economy and energy through abundant, low-cost unconventional oil and gas resources.  Legal Matter: A $1 billion deal for Bakken acreage prompted a 2012 class action lawsuit by Native American plaintiffs, which was properly dismissed, the 8th U.S. Circuit Court of Appeals in North Dakota recently ruled. The Squeeze: A value gap between crude oil, NGL and natural gas prices is getting narrower, and it could negatively affect exports, Suzanne Minter, manager of energy analysis for Bentek, told an audience recently.
Sharper: Major U.S. shale plays have seen swift efficiency gains, doubling IP rates and reducing well drilling time and creating a tipping point for production growth as demand lags behind production, according to an expert at a recent symposium.  Steeper: On average, E&Ps spent 16% more during 2014 to achieve aggregate revenue growth of 10% and oil and gas reserves growth of 8% and 7%. Varied: Governments of countries dependent on oil-related revenue are coping differently in the downturn. The U.K. rolled out tax cuts to foster North Sea competition; budgets in Russia and the U.S. fell; and Nigeria considers fiscal amendments with a new president.
E&P Know-how: There is room to improve efficiencies, drive down costs and improve type curves in the Permian Basin. Improving wells in a low-cost environment was discussed by Dan Themig of Packers Plus at Hart Energy’s DUG Permian conference.  Past and Future: The impact on revenue, reserves and production for 2015 is still unknown, but a study found that capex and costs rose during 2014, and techniques like multiwell pad drilling boosted production. M&A’s Potential Impact: Petrie Partners has advised on three all-stock transactions, including Noble Energy’s $3.9 billion deal to acquire Rosetta Resources in May. All-stock deals are popular now, Tom Petrie said at Hart Energy’s DUG Permian conference.
Knowledge: E&Ps can use data to their advantage for microseismic, geochemical, geomechanical and production issues and information, attendees at Hart Energy’s recent DUG Permian Conference were told.  Results: Laredo Petroleum is reaping the rewards of steady work after years in the Permian Basin, Randy Foutch, chairman and CEO, said at DUG Permian. Resolution: Mud King Products Inc. manufactured knockoff mud pumps in China that were designed from stolen National Oilwell Varco blueprints. NOV won almost $400,000 in a legal case.
The New Normal: The industry is adapting to the low oil prices—acquisitions and mergers will continue, non-acquisition spending will fall and capital spending for the largest plays has been reduced.  Ask Your Questions: MLPs are proving trickier to govern and define. Lawyers gave a webinar covering MLP classification and qualifications under guidance by the IRS. Old Is New: Older oil fields in North America could be infused with activity through new fracturing techniques.
Game On: Maersk Group created an online game, “Quest For Oil: A Subsurface Gaming Experience.” Lessons that online gaming can give the offshore oil and gas industry were discussed at the close of this year’s Offshore Technology Conference.  Finish Line: E&Ps pulled through first-quarter 2015. Pioneer Natural Resources plans to sell its Eagle Ford midstream business, Apache lost $4.7 billion and Rex increased its production guidance. World View: Lifting sanctions against Iran would bring 1 million more barrels per day of oil onto the market by year-end 2016, but geopolitics are unpredictable.
Debate: Opinions differ on whether refracturing is a cost-effective way to revive old or incomplete wells, or if it potentially weakens offset wells’ value. Economics: E&Ps recently closed a record number of debt and equity offerings, a show of confidence in the industry even as E&P values have eroded. Important: The state of Tamaulipas is Mexico’s most violent—with cartels, kidnappings and theft—but it will also play a pivotal role in development and transit of hydrocarbons.
Prudence: Guarding the balance sheet by cutting costs and shortening drilling times is one strategy some E&Ps are using to combat the downturn. Stable: The oil market remained steady after a brief price spike on news April 28 that Iranians boarded the MV Maersk Tigris cargo ship headed to the Marshall Islands. Discussion: Recapitalization as a strategy for companies was assessed at Hart Energy’s recent Energy Capital Conference.

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