The year 2014 has begun with a bang in the Permian Basin.
San Antonio-based Lake Truck Lines opened an oilfield services facility in Odessa with another planned in Snyder as it expands into the Permian Basin. Doug Cain, president and CEO, told the Midland Reporter Telegram, “We will probably be going after the Cline Shale and adding a facility on the eastern side of the Midland Basin. I believe in the Cline Shale, our clients believe in it, and I want us available. The opportunities for everyone are going to be substantial.”
Cain said expansion by operators such as Occidental, Apache, Concho, and Halliburton gave Lake Truck Lines the confidence to expand. “We’ll drill more wells in the next three years than have been drilled in the last 60 years,” he said. “Operators have a deliberate way of pinpointing areas to go after to maximize potential.”
Lake, which started in Houston in 1949, expanded from hauling cement and barite with its opening of another company, Lake Oilfield Services, to sell and lease equipment. Lake Manufacturing builds equipment at a factory in Torreon, Mexico. Lake was named Heavy Haul Trucking Company of the Year at the 2013 Oil and Gas Awards / Southwest.
Multiple shales in the Permian Basin along with the state’s Barnett Shale and Eagle Ford Shale, coupled with new technologies to extract oil and natural gas, have made Texas the leading energy-producing state in the nation and replenished the Texas Economic Stabilization Fund. Susan Combs, state comptroller, said in December that the fund, also known as the “rainy day fund,” could be at least $8 billion at the start of the 2015 legislative session. It is funded almost entirely by Texas’ oil and natural gas severance tax.
The comptroller’s report, according to the Fort Worth Star-Telegram, said Texas is projected to end the 2014-15 biennium with a surplus of $2.6 billion because payments from the Texas oil and natural gas industry will be $2 billion more than expected. The “rainy day fund” is being replenished after Texans voted in 2013 to use $2 billion for the state’s water plan.
Winter storms in November, December, and January caused power outages across West Texas, a setback that affected pump jacks that operate on electricity. According to the Dallas Business Journal, Irving-based Pioneer Natural Resources reported outages for pump jacks in the Spraberry and Wolfcamp. David Leaverton of Pioneer said the storm slowed production and drilling as utility crews focused first on returning power in residential areas. The storm caused some equipment to freeze, and service trucks were limited by icy roads. He told the Dallas Morning News that some wells were without power for “a few weeks.” Pioneer reported to the U.S. Securities and Exchange Commission that 4Q production averaged about 173,000 b/d—below the estimates of 179,000 to 184,000 b/d.
Apache Corp. said its Permian Basin production also was affected by the storms. The Houston independent said resuming operations after widespread power outages was delayed by icy roads. Apache said, however, that production in the fourth quarter increased by about 1,000 boe/d from the third quarter, when it was 131,700 (117,900 in 2012 fourth quarter). Weather problems offset new production added through Apache’s drilling program.
Construction of Pioneer Natural Resources’ new $50 million office building at ClayDesta Plaza in Midland remains on schedule, according to Danny Barker, director of facilities. He told the Midland Reporter-Telegram that Pioneer’s Midland employees will begin moving into the new six-story building in 2014 third quarter; all employees are expected to be settled into the new building by early fourth quarter.
The latest reports show that a boom continues in Lea County in southeastern New Mexico thanks to oil and gas. The Hobbs News-Sun said that the latest EnergyPlex economic index released by the Economic Development Corporation of Lea County showed a 13th straight quarter of improvement. During the second quarter of 2013, Lea County’s economy grew by 7.9 percent over the same quarter in 2012. The index is a reflection of the general economy and indicates that spending, taxable business receipts, construction, and employment continue to grow. Karr Ingham, an economist from Amarillo who prepares the EnergyPlex index, said employment in Lea County continues to register solid improvement, and the county’s growth should continue in 2014. The New Mexico Department of Taxation and Revenue also reported a jump in gross receipts taxes for Hobbs.
New Mexico’s petroleum and natural gas production make the state the third largest net energy supplier to the nation, and there’s substantial potential also for solar, wind, and geothermal energy, according to federal energy experts. The U.S. Energy Information Administration updated the state’s energy profile recently. New Mexico is second only to Wyoming in the number of producing mineral leases on federal lands, according to the EIA.
The state’s Oil Conservation Division said oil production jumped by another 15 percent in the first six months of 2013, putting New Mexico on track for its sixth consecutive year of growth. It has been the longest period of expansion in at least four decades. Oil production in the Southeast increased by a record 19 percent, from 71.3 million barrels in 2011 to 85.1 million in 2012. That’s New Mexico’s highest output since 1978. And from January through June of 2013, production climbed to 46.4 million barrels, up from 40.2 million in the same period in 2012. That puts the state on track to surpass 90 million barrels in 2013 for the first time since 1976.
An oil and gas boom in New Mexico and more than a dozen new renewable energy projects have resulted in record earnings of more than $670 million for the state’s Land Office—boosting funding available for public schools, universities, and other trust beneficiaries. Land Commissioner Ray Powell said 2013 marked the biggest year in the agency’s history. In the last three years, Powell told the Associated Press, the Land Office has generated about $1.7 billion through oil and gas royalties and revenues from grazing, rights of way, and other leases with developers and renewable energy companies. He said the developments on state trust lands also have translated into about 5,500 new jobs.
The driving forces behind the record earnings have been high oil and gas prices and an increase in the volume being produced, particularly in southeastern New Mexico. In 2013 from the state’s Land Grant Permanent Fund more than $597 million went to public schools in New Mexico and another $21.7 million went to state colleges and universities.
Texas Governor Rick Perry is one of 12 U.S. governors who announced support for the States First Initiative, an effort to support and enhance the states’ role as the primary and appropriate regulators of oil and gas development. In a letter Dec. 13 to U.S. energy policy leaders, they said, “The states’ ability to design effective regulations that reflect state-specific needs is a vital element in the resurgence of our nation’s oil and natural gas industry.” The Oil and Gas Journal said the Interstate Oil and Gas Compact Commission and the Groundwater Protection Council formed the initiative, which will focus on field operations. The letter added, “This critical area is where the states know best how to conduct oversight of exploration and production activities.”
Oil production in Lynn County continues to increase, according to the Tahoka—Lynn County News, from 366,381 barrels in 2011 to 600,078 in 2012 to 562,487 during the first 10 months of 2013. The newspaper projected total production for 2013 at about 662,000 barrels. The Cartwright lease—two miles northwest of O’Donnell—led production with 125,780 barrels of oil during the first 10 months of 2013. Eight different oil companies were issued a total of 13 drilling permits in Lynn County by the Texas Railroad Commission this year.
TransCanada Corp. began crude oil shipments Jan. 22 between Cushing, Okla., and Nederland on the Texas coast in the Keystone XL, a 36-inch OD pipeline of 487 miles with an initial design capacity of 700,000 b/d. It is expandable to 830,000. Deliveries will be used in the Beaumont-Port Arthur refining center. The Oil and Gas Journal said the company’s $2.3 billion Gulf Coast Project, the southern leg of Keystone XL, included the addition of 2.25 million barrels of storage in Cushing.
“This is a very important milestone for TransCanada, our shippers, and Gulf Coast refiners who have been waiting for a pipeline to supply oil directly from Cushing,” Russ Girling, TransCanada chief executive, told reporters. “This is the safest oil pipeline that has been built in America.”
The $7 billion northern segment of 1,179 miles, intended to bring Canadian crude to the Gulf Coast through Cushing, is under review by President Barack Obama and the U.S. Department of State because it crosses an international border.
Artesia, N.M.-based Wilbanks Energy Logistics (Wilbanks), an energy logistics and rig mobilization company, has acquired Permian Trucking and Hot Shot, LLC, a Gardendale, Texas-based rig mobilization and heavy haul trucking company. Wilbanks Chairman of the Board George Mattson made the announcement. “Permian Trucking’s experienced team, safety processes, efficient rig mobilization services and proximity to Midland/Odessa made it a great investment as we continue to expand the Wilbanks footprint in the Permian Basin,” said Wilbanks CEO Michael Wysocki. “The addition of this Midland/Odessa location puts us within a short distance of all of the key production areas in the Permian Basin.”
Mexican congressman Javier Trevino Cantu, a close ally of President Enrique Pena Nieto and a leading force in the Institutional Revolutionary Party, traveled to Texas recently to tout his country’s decision to open its oil sector to foreign investment, but he admitted to the Dallas Morning News that “Mexico has a long ways to go yet.” He added, “There are many opportunities in the world between South America and Africa and the Arctic. So how are we able to attract the oil companies? That’s going to be the key challenge.”
In private meetings with industry leaders and public events such as a speech in Dallas Jan. 24, he said that Mexico is open for business and committed to creating a legal structure that will be attractive to foreign oil companies. Also, according to the Morning News, Gustavo Madero, president of the National Action Party, and Jesus Reyes Heroles, former CEO of national oil company Pemex, met with oil executives and attorneys in Houston to explain expected upcoming developments.
The reforms’ main provisions, which became law Dec. 21, 2013, will allow the country’s oil and gas and electric companies to work with the private sector for the first time since they were nationalized in 1938. The Oil and Gas Journal reported, “International oil and gas companies keenly await more details as Mexico’s Congress drafts and debates secondary laws to implement its recently passed energy reforms.”
FROM THE RAILROAD COMMISSION OF TEXAS
[issued 29 January 2014]
The Texas average rig count Jan. 24, 2014, was 837, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 693 million barrels of oil and 7.7 trillion cubic feet of natural gas.
The commission’s estimated final production for November 2013 is 62,658,591 barrels of crude oil and 549,783,631 MCF (thousand cubic feet) of gas well gas.
The RRC derives final production numbers by multiplying the preliminary November 2013 production totals of 54,457,319 barrels of crude oil and 449,536,902 MCF of gas well gas by a production adjustment factor of 1.1506 for crude oil and 1.2230 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the commission for December 2013 was 369,184,325 MCF, compared to 430,119,811 MCF in December 2012. The January 2014 gas storage estimate is 328,745,511 MCF.
The RRC Oil and Gas Division set initial February 2014 natural gas production allowables for prorated fields in the state to meet market demand of 7,572,162 MCF (thousand cubic feet). In setting the initial February 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 February 2014 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 07 January 2014]
(This edition of the EIA Short-Term Energy Outlook is the first to include forecasts for 2015.)
After falling to the lowest monthly average of 2013 in November, U.S. regular gasoline retail prices increased slightly to reach an average of $3.28 per gallon during December. The annual average regular gasoline retail price, which was $3.51/gal in 2013, is expected to fall to $3.46/gal in 2014 and $3.39/gal in 2015.
The North Sea Brent crude oil spot price in December averaged near $110 per barrel for the sixth consecutive month. EIA expects the Brent crude oil price to decline gradually to average $105/bbl in 2014 and $102/bbl in 2015. Projected West Texas Intermediate (WTI) crude oil prices average $93/bbl during 2014 and $90/bbl during 2015.
EIA expects liquid fuels production from countries outside of the Organization of the Petroleum Exporting Countries (OPEC) to grow year-over-year by a record high of 1.9 million barrels per day in 2014. The U.S. and Canada together are projected to account for almost 70 percent of total non-OPEC supply growth this year.
EIA estimates U.S. total crude oil production averaged 7.5 million bbl/d in 2013, an increase of 1.0 million bbl/d from the previous year. Projected domestic crude oil production continues to increase to 8.5 million bbl/d in 2014 and 9.3 million bbl/d in 2015. The 2015 forecast would mark the highest annual average level of production since 1972.
Natural gas working inventories Dec. 27 totaled 2.97 trillion cubic feet, 0.56 Tcf below the level at the same time a year ago and 0.29 Tcf below the previous five-year average (2008-12). EIA expects that the Henry Hub natural gas spot price, which averaged $3.73 per million British thermal units (MMBtu) in 2013, will average $3.89/MMBtu in 2014 and $4.11/MMBtu in 2015.
Coal production, which fell by almost 9 percent between 2011 and 2013, is expected to increase by 36 million short tons (3.6 percent) in 2014 as higher natural gas prices favor the dispatch of coal-fired power plants and the drawdown of coal inventory ends. In 2015, however, forecast coal-fired production falls by 2.5 percent with declining coal use in the electric power sector as retirements of coal-fired power plants rise due to the implementation of the U.S. Environmental Protection Agency’s mercury and air toxics standards.
—compiled by Garner Roberts