Offshore operator reports show that personnel were evacuated from 21 production platforms (3.5 percent of the manned platforms in the Gulf) and 2 rigs (2.6 percent) during Hurricane Isaac in late August, according to the Oil and Gas Journal. About 1.3 million b/d of production was offline at the height of the storm. The Journal also said the U.S. Department of Energy loaned one million barrels of crude oil to Marathon Petroleum from the nation’s strategic petroleum reserves to help the refiner recover from disruptions caused by the hurricane at its 490,000 b/d refinery in Garyville, La. Marathon agreed to return the crude within three months.
Maria van der Hoeven, executive director of the International Energy Agency, visited Texas in August. She toured the Eagle Ford shale in south Texas and spoke at the Baker Institute at Rice University in Houston. The IEA chief said governments worldwide must work with industry to address legitimate public concerns about environmental issues if unconventional natural gas is to reach its global development potential.
Irving-based Pioneer Natural Resources plans to sell its Barnett shale holdings developed since it entered the natural gas field in 2007, according to the Fort Worth Star-Telegram. Pioneer said it will use the proceeds to trim debt, and it will redirect capital spending to what it called more profitable areas in west and south Texas. It hopes to have a sale completed in the first quarter of 2013.
Houston-based Noble Energy signed an agreement to sell certain oil and natural gas properties in the Permian Basin to Houston-based Sheridan Holding Company for $320 million. The Midland Reporter-Telegram reported that the properties include Noble Energy’s interest in about 250 producing wells on about 11,000 net acres.
Most of Chesapeake Energy’s assets in the Permian Basin are being bought by Royal Dutch Shell PLC and Chevron Corp., in deals that also involve all of its Chesapeake’s remaining infrastructure network in the region, according to a report on yahoo.com. The same report stated that the Oklahoma-based natural gas operator sold its pipeline network for more than analysts had expected, but got less for its Permian assets than expected—this per Argus Research analyst Phil Weiss.
Chesapeake held 1.5 million acres in the Permian Basin. Its sales in the region work out to about $3,200 per acre, less than half the $7,500-an-acre average that sellers in the Permian had reaped in 10 previous sales during 2011 and 2012, according to Morningstar analyst Mark Hanson. Chesapeake is reported to be selling about 618,000 acres in the southern Delaware Basin portion of the Permian Basin to Shell, which said it is paying $1.94 billion. Chevron, meanwhile, is purchasing another another 264,000 acres. Chesapeake is keeping 470,000 acres in the Permian.
The Texas Railroad Commission selected Milton Rister as Executive Director beginning October 1, 2012. Polly McDonald will continue to serve the Commission as Director of the Pipeline Safety Division. Rister served as Director of Administration for Governor Perry. He previously served as Executive Director of the Texas Legislative Council and as a Senior Advisor to Lt. Governor David Dewhurst. RRC Chairman Barry Smitherman said, “As the Railroad Commission undergoes a second round of Sunset Review, and as our agency enters a new Legislative session next year, Mr. Rister’s comprehensive experience and background in working with our state’s top elected officials and the Legislature will be invaluable.”
Commissioner David Porter said, “The Railroad Commission is a global leader in energy regulation and has almost 100 years of experience in protecting the environment and public safety. I look forward to working with Mr. Rister to help continue to enhance the Commission’s expertise in regulating our robust oil and gas industry.”
Commissioner Buddy Garcia said, “As someone who has also had the privilege to serve at several state agencies, I believe Mr. Rister’s experience and perspective will serve the Railroad Commission well. I am confident Milton will be an asset as this agency continues to demonstrate that regulation at the state level is the best model for balancing the development of domestic energy with protecting public safety and the environment.”
Snyder-based Globe Energy Services, LLC, announced the acquisition of Jet Well Service Company in Perryton, Texas. Founded in 1965, Jet is a Texas-based well servicing company with 11 workover rigs in its fleet. Following the acquisition, Jet will operate under the Globe name. “Jet is a family-owned company with a strong operating history in the Texas Panhandle,” said Troy Botts, Globe’s President and Chief Executive Officer. “We welcome the Jet team and are excited about the acquisition.”
Johnny Slaughter, Globe’s Vice President of the Well Servicing Division, stated, “We are excited about Globe’s entry into the Mid-Continent workover rig market and about building upon our base of operations in the region.” Botts added, “Globe is known in the Mid-Continent region for commitment to safety and service in the fluid services industry. Of course, we bring that same strong commitment to our involvement with well servicing rigs.”
Houston-based Eagle Rock Energy Partners will pay $227.5 million for two BP America processing plants and associated gathering in the Texas Panhandle, according to the Oil and Gas Journal. Eagle Rock will gather and process BP’s production from existing connected wells in the 20-year, fixed-fee gas gathering and processing agreement.
BP and its joint venture partners will commit to Eagle Rock all future gas production from new wells drilled within an initial two years and within a two-mile radius of the existing gathering system. The Journal said BP’s Panhandle system encompasses about 350,000 acres and more than 500 drilling locations – including Sunray and Hemphill plants and 2,500 miles of gathering pipelines in Lipscomb, Hemphill, Roberts, Ochiltree, Hansford, Hutchinson, Sherman, and Moore counties.
Increasing activity in the Permian Basin includes two new companies, according to the Midland Reporter-Telegram.
Chisos Services performed its first well plugging and abandonment services in west Texas in April under the direction of well-plugging veteran Howard Boatright after the state’s Railroad Commission issued stricter rules in 2010 for inactive oil and gas wells.
David Frederick, Chisos manager, told the newspaper, “All the operators could see problems getting ready to occur with the RRC getting a lot stricter.” He said Chisos plans to add additional units next year.
Another new company, EagleClaw Midstream Services, will address the challenge to get new production to market. “There’s so much new production in areas with no infrastructure,” Bob Milan, president, said. “That infrastructure has to be built.”
There will be many midstream opportunities in the Permian Basin in the next 24 months, Milan said. “Clearly, the Delaware Basin, the Cline shale, Bone Spring are all really exciting.” EagleClaw’s initial focus will be building new gathering, treating, and processing facilities after its September opening.
Also, Magellan Midstream Partners has two new projects. Coming online in 2013 will be the reversal of part of Magellan’s current Longhorn refined products pipeline system that begins in Houston and delivers gasoline and other refined liquids to distribution terminals in Odessa and El Paso.
A new 400-mile pipeline will originate near Colorado City and terminate near Magellan’s Houston gateway. It will be capable of transporting 278,000 barrels of oil per day upon completion in 2014, according to Magellan’s Bruce Heine.
In its seventh benchmarking study of operating costs in the Permian Basin, Ziff Energy Group said unit operating costs increased 46 percent since its last study in 2007. According to the Midland Reporter-Telegram, the company studied 100 Permian Basin fields and reported that average operating costs for oil fields rose 61 percent to $16.77 a barrel since 2007 “in line with the rise in oil prices during that same period.”
Ziff attributed the increases to higher taxes paid by producers and rising service costs. The data covered the 12 months from July 1, 2010, to June 30, 2011.
FROM THE RAILROAD COMMISSION OF TEXAS
The Texas average rig count as of Aug. 17, 2012, was 900, representing about 49 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 461 million barrels of oil and 7.3 trillion cubic feet of natural gas.
The commission’s estimated final production for June 2012 is 46,172,198 barrels of crude oil and 520,218,696 Mcf (thousand cubic feet) of gas well gas. The commission derives final production numbers by multiplying the preliminary June 2012 production totals of 38,566,821 barrels of crude oil and 438,300,359 Mcf of gas well gas by a production adjustment factor of 1.1972 for crude oil and 1.1869 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for July 2012 was 389,787,924 Mcf compared to 382,867,842 Mcf in July 2011. The August 2012 gas storage estimate is 385,510,467 Mcf.
The RRC Oil and Gas Division set initial September 2012 natural gas production allowables for prorated fields in the state to meet market demand of 9,784,268 Mcf (thousand cubic feet). In setting the initial September 2012 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 September 2012 is reported.
FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
Brent crude oil spot prices have increased at a relatively steady pace from their 2012 low of $89 per barrel June 25 to their recent high of $117 per barrel Aug. 23 because of the seasonal tightening of oil markets and continuing unexpected production outages. EIA expects Brent crude oil prices to fall from recent highs over the rest of 2012, averaging $111 per barrel over the last four months of 2012 and $103 per barrel in 2013.
West Texas Intermediate (WTI) crude oil spot prices rose by a more modest $17 per barrel between June 25 and Aug. 23 as the WTI discount to Brent crude oil widened from $10 per barrel to $22 per barrel. EIA expects WTI spot prices to average $93 per barrel in 2013 with the WTI discount to Brent narrowing to $9 per barrel by the end of the 2013.
Higher crude oil prices, refinery outages, a pipeline disruption, and concerns over Hurricane Isaac’s impact on the Gulf Coast contributed to higher gasoline prices during August. EIA has increased the average regular-gasoline retail price forecast for the third quarter of 2012 to $3.66 per gallon from $3.49 per gallon last month. EIA expects retail gasoline prices to begin declining in late September as the gasoline market recovers and transitions from summer-grade to winter-grade gasoline specifications. Forecast regular gasoline retail prices average $3.58 per gallon over the fourth quarter of 2012 and $3.43 per gallon in 2013.
EIA expects U.S. total crude oil production to average 6.3 million barrels per day (bbl/d) in 2012, an increase of 0.7 million bbl/d from last year. Projected U.S. domestic crude oil production increases to 6.8 million bbl/d in 2013, the highest level of production since 1993.
Because of the projected increase in natural gas prices relative to coal, EIA expects the recent trend of substituting coal-fired electricity generation with natural gas generation to slow and likely reverse over the next year. From April through August 2012, average monthly natural gas prices to electric generators increased by 34 percent while coal prices fell slightly. EIA expects coal-fired electricity generation to increase by 9 percent in 2013 while natural gas generation will fall by about 10 percent.
EIA expects carbon dioxide emissions from fossil fuels, which fell by 2.3 percent in 2011, to further decline by 2.4 percent in 2012. However, projected emissions increase by 2.8 percent in 2013 as coal regains some of its electric-power-generation market share.
Natural gas working inventories ended August 2012 at an estimated 3.4 trillion cubic feet (Tcf), about 13 percent above the same time last year. EIA expects the Henry Hub natural gas spot price, which averaged $4.00 per million British thermal units (MMBtu) in 2011, to average $2.65 per MMBtu in 2012 and $3.34 per MMBtu in 2013.
—compiled by Garner Roberts