After successful open seasons, Medallion Pipeline said it will build a crude oil pipeline, Wolfcamp Connector, and its southward extension, the Reagan Gathering Extension, in West Texas. Irving-based Medallion expects to place both pipelines in service by the end of 2014. The combined gathering system will extend about 112 miles through the Midland Basin at an initial capacity of 65,000 b/d. It will connect at the Colorado City hub to take-away pipelines accessing Cushing, Okla., and the Gulf Coast.
• • • • •
Denver-based wellhead company Canary said it acquired American Wellhead of Odessa to mark its entry into the Permian Basin. David Walden, American’s president and founder, will remain with the company as operations manager, according to the Odessa American. Canary operates throughout the United States, with a focus on equipment used in hydraulic fracturing of horizontal wells.
Dan Eberhart, Canary CEO, told the Odessa American, “The Permian Basin is 7.5-to-8 percent of our business, but approximately 25-to-30 percent of the U.S. oilfield, so it was important to get a presence here. Hopefully this is just the first chapter.”
• • • • •
Canyon Midstream Partners of Houston announced plans for the James Lake System, a natural gas gathering, processing, and treating system anchored by a 10-year agreement with a major oil and gas company. The Midland Reporter-Telegram said the system will include a cryogenic gas processing plant—one with an initial processing capacity of 70 million cubic feet per day and treating capabilities for natural gas containing hydrogen sulfide and carbon dioxide—in Ector County. Canyon is also developing 40 miles of high-pressure gathering trunklines and three compressor stations that will connect to low-pressure field gathering systems that Canyon is building for its anchor customer in Ector and Andrews counties.
Michael Walsh, Canyon president, said, “Production is growing at such a fast pace it’s inviting additional midstream construction and creating opportunities for new companies like ourselves.”
• • • • •
Irving-based Exxon Mobil Corporation will enhance its Permian Basin portfolio managed by its Fort Worth-based subsidiary XTO Energy. Through an agreement with Endeavor Energy Resources, XTO will fund development to gain substantial operating equity in about 34,000 gross acres in the prolific liquids-rich Wolfcamp formation in Midland and Upton counties. Endeavor Energy will continue to operate shallow production, and XTO Energy will drill and operate horizontal wells in deeper intervals. The agreement increases XTO’s holdings in the Permian Basin to more than 1.5 million net acres, enhancing the company’s significant presence in a major growth area for onshore oil production.
• • • • •
Breitling Energy drilled the first well in its Breitling-Leafwing prospect and on Feb. 10 announced a new field discovery in Taylor County 10 miles north of Abilene. The Teaff #1 well discovered oil in the Lower Hope Lime at 2,630 feet. Breitling said initial swabbing tests produced oil at a rate of about 210 barrels of oil per day; updated maps indicate the presence of at least four other locations. Breitling anticipates the Teaff #1 well will pump at a rate of about 110 barrels per day. Chris Faulkner, CEO and president of the Dallas-based company, said, “As we drill additional locations in the surrounding area in the upcoming months, we hope for similar findings. These results and this project are a nice addition to our overall operational growth plans.”
• • • • •
Crosstex Energy is building a 35-mile, high-pressure natural gas pipeline to provide Permian Basin gathering capacity for its previously announced 60-MMcfd Bearkat gas processing complex in Glasscock County. The 12-inch OD pipeline is supported by a long-term, fee-based agreement with a major oil and gas producer in the region. Dallas-based Crosstex said the $70 million pipeline in the eastern portion of the Wolfberry oil play will have a capacity of about 100 million cubic feet per day and will provide gas takeaway solutions for constrained producer customers in Howard, Martin, and Glasscock counties. It is expected to begin operating in 2014 second half.
• • • • •
Dallas-based Pioneer Natural Resources reported plans for a capital budget of $3.3 billion for 2014. Pioneer said it will use $2,165 million to target the northern Spraberry-Wolfcamp area in West Texas, including $1,225 million for horizontal drilling, $440 million for vertical drilling, $400 million for infrastructure additions, land, and science, and $100 million for gas processing facilities. Pioneer said it produced 161 million boe/d overall in 2013—an increase of 12 percent over 2012. It had year-to-year increases of 35 percent in the Eagle Ford and 19 percent in the Spraberry-Wolfcamp.
Pioneer forecast annual production growth of 14-to-19 percent from 2013 to 2014 and said it is “expecting to more than double production by 2018 compared to 2013.” Pioneer is the largest acreage holder in the Spraberry-Wolfcamp play (600,000 gross acres in the northern portion, 200,000 in the southern). Scott D. Sheffield, chairman and CEO, said, “We are in the process of reallocating capital to higher-return Spraberry-Wolfcamp horizontal drilling by reducing our vertical drilling activity and divesting our Alaska and Barnett Shale assets.”
• • • • •
Rigs designed for horizontal drilling made a big move into the Permian Basin last year—meaning more business for the $31 billion fracturing industry. Among the companies increasing activities in West Texas was FTS International, which improved revenue by moving some of its equipment and mobile fleet to Odessa from less active regions. Greg Lanham, FTS chief executive, told the Midland Reporter-Telegram that FTS hired an additional 50 employees and plans to hire more new crew members.
The Reporter-Telegram said that as of Jan. 17 there were 249 active horizontal rigs in the Permian Basin—up more than 100 from a year ago, according to Baker Hughes, and five times the number added in the second-most active region, the DJ Basin, centered in Colorado.
• • • • •
Oil and gas operators in the West Texas portion of the Permian Basin had production volumes in 2013 that were 13.1 percent higher than in 2012, according to Karr Ingham of Amarillo, the economist who prepares the Texas Permian Basin Petroleum Index. He said natural gas production volumes were 3 percent higher in 2013 than in 2012.
“The relative importance of the Permian Basin, not just to the Texas economy but to the national economy, is growing, not shrinking,” Ingham told the Midland Reporter-Telegram. People are “relating the Permian Basin to the largest oil fields in the world and [it] could overtake those fields as the biggest as the magnitude of the potential resources are expanded and new resources are tapped.”
He said employment was up 12.8 percent over 2012, and the value of 2013 production was $35.7 billion—money that Ingham said primarily remained in the region to fund drilling projects and other capital expenditures, paychecks for employees, royalty payments, taxes, construction projects, purchases of materials, and equipment—from pumping units to vehicles—and housing and restaurant meals.
• • • • •
FROM THE RAILROAD COMMISSION OF TEXAS
[issued 26 February 2014]
The Texas average rig count as of Feb. 21, 2014, was 843, representing about 50 percent of all active land rigs in the United States. In the last 12 months, total Texas reported production was 704 million barrels of oil and 7.7 trillion cubic feet of natural gas.
The commission’s estimated final production for December 2013 is 64,313,383 barrels of crude oil and 534,415,663 MCF (thousand cubic feet) of gas well gas.
The RRC derives final production numbers by multiplying the preliminary December 2013 production totals of 55,716,350 barrels of crude oil and 440,391,976 MCF of gas well gas by a production adjustment factor of 1.1543 for crude oil and 1.2135 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the commission for January 2014 was 265,468,592 MCF compared to 363,235,951 MCF in January 2013. The February 2014 gas storage estimate is 207,735,996 MCF.
The RRC Oil and Gas Division set initial March 2014 natural gas production allowables for prorated fields in the state to meet market demand of 8,225,162 MCF (thousand cubic feet). In setting the initial March 2014 allowables, the commission used historical production figures from previous months and producers’ demand forecasts for the coming month, then adjusted the figures based on well capability. These initial allowables will be adjusted after actual production for March 2014 is reported.
• • • • •
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 11 February 2014]
Temperatures east of the Rocky Mountains have been significantly colder this winter (October 2013 to January 2014) compared with the same period both last winter and the previous 10-year average—putting upward pressure on consumption and prices of fuels used for space heating. U.S. average heating degree days were 12 percent higher than last winter (indicating colder weather) and 8 percent above the previous 10-year average. The Northeast was 11 percent colder than last winter, the Midwest 17 percent colder, and the South 20 percent colder, while the West was 3 percent warmer.
The cold weather had the greatest effect on propane prices, particularly for consumers in the Midwest. Cold temperatures tightened supplies in the East and Midwest regions that were already low heading into the winter heating season. Residential propane prices in the Midwest rose from an average of $2.08 per gallon Dec. 2, 2013, to $4.20/gal Jan. 27, 2014. Prices fell back to $3.83/gal Feb. 3, 2014.
EIA now expects that propane prices in the Midwest will average $2.41/gal over the winter (39 percent higher than last winter) while those in the Northeast will average $3.43/gal (14 percent higher than last winter).
While the North Sea Brent crude oil monthly average spot price fell by almost $3 per barrel from December 2013 to January 2014, cold temperatures have tightened heating oil supplies and helped drive up retail prices. Weekly U.S. residential heating oil prices increased by $0.14/gal between the end of December and end of January. Despite the recent increases, EIA expects that U.S. heating oil prices will average $3.82/gal this winter—$0.05/gal (1 percent) lower than during last year’s winter heating season.
Cold weather also contributed to a new record-high withdrawal of natural gas from storage and a surge in natural gas spot prices. Natural gas working inventories Jan. 31, 2014, totaled 1.92 trillion cubic feet (Tcf), 0.78 Tcf below the level at the same time a year ago and 0.56 Tcf below the previous five-year average (2009-13).
Henry Hub natural gas spot prices increased from $4.32 per million British thermal units (MMBtu) Jan. 2 to $5.66/MMBtu Jan. 27 before falling back to $5.04/MMBtu Jan. 31. EIA expects that the Henry Hub natural gas spot price, which averaged $3.73/MMBtu in 2013, will average $4.17/MMBtu in 2014, an increase of $0.27/MMBtu from last month’s forecast. Residential natural gas prices are expected to average $10.16 per thousand cubic feet (Mcf) this winter, an increase of $0.41/Mcf (4 percent) from last winter.
—compiled by Garner Roberts