The Permian Basin has been producing for decades, Matthew DiLallo reported in The Motley Fool, but “it is really just getting started on the next phase of its booming growth.” He added, “While it [Permian Basin] has already produced more than 30 billion barrels of oil in its history, there is still a lot of oil left in its tank. Producers are using new technology to target the play, and the results are truly stunning.”
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In his report, DiLallo cited the recent successes of Pioneer Natural Resources, Concho Resources, and Devon Energy. “The Permian Basin really is a world class oil play,” he said. “Over time it could turn out to hold the best shale oil resources in the country and really become the next great oil field. That’s actually pretty remarkable because it already has been one of America’s greatest oil fields. However, it’s the future potential growth that puts companies like Pioneer, Concho, and Devon in a position to deliver solid, long-term oil production growth.”
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David White, writing in Seeking Alpha, stock market news and financial analysis, says the phrase “the early bird catches the worm” also is true in the oil business. Talking about the Cline shale, he said, “The early exploration and production companies will probably be the biggest beneficiaries of what may turn out to be the most prolific shale field in the United States.”
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They include Apache Corp. (520,000 net acres), Range Resources (100,000 net acres), Clayton Williams Energy (40,000 net acres), Devon Energy Corp. (650,000 net acres in a joint venture), Laredo Petroleum Holdings (142,000 net acres) and Gulfport Energy (with a 12.1 percent interest in Diamondback Energy). White said positions in the Cline shale could have the biggest beneficial effect on the smaller E&P companies.
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Early information from the Cline shale indicated it may contain up to 30 billion barrels of recoverable oil. Another study by Devon Energy and Chesapeake Energy stated there could be 3.6 million barrels of recoverable oil per square mile. “At 140 miles long and 70 miles wide,” White said, “its 9,800 square miles could contain roughly 35 billion barrels of recoverable oil by this study.”
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Legislative auditors estimate New Mexico fails to collect as much as $56 million in yearly tax revenue from the trucking industry because of inadequate enforcement. Finance committee auditors said the state should enhance the Motor Transportation Division’s staff, hire more tax agency auditors, and ensure truckers pay a weight-distance tax that helps finance highway construction and maintenance.
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The state received nearly $73 million in revenue in 2012 from the tax based on a truck’s weight and how far it travels in the state. The division enforces tax collection by issuing citations to truckers who aren’t in compliance. Its staff also inspects trucks for safety violations and contraband—including illegal drugs—and collects fees at ports of entry across the state.
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Houston-based Linn Energy is buying assets in the Permian Basin for $525 million to expand the proportion of oil production in the company’s portfolio. The West Texas properties cover 6,250 net acres—containing 124 online oil and natural gas wells that are expected to pump about 4,800 barrels of oil equivalent per day primarily from the Clearfork over the next 12 months. Oil makes up 63 percent of the land’s daily production. Linn said the deal includes about 300 identified future low-risk, infill drilling locations. The deal is slated to close in the fourth quarter. The company did not disclose the seller.
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Denver-based Forest Oil Corp. has entered into a definitive agreement with an undisclosed buyer to sell a portion of its largely undeveloped acreage in the Permian Basin for approximately $35 million. The transaction includes approximately 58,200 gross acres (52,350 net) in Crockett County. The company intends to use proceeds to reduce outstanding borrowings under its bank credit facility. Following closing of this transaction, Forest will retain its Permian Basin acreage position of approximately 68,250 gross acres (63,500 net) in Pecos and Reeves counties.
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The Texas Petro Index, a composite index based on a comprehensive set of upstream economic indicators that was developed by Amarillo economist Karl Ingham, increased to a record 287.7 in July 2013. That’s up 4.4 percent from July 2012 and tops the previous all-time high of 287.6 from 2008.
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Ingham said the index, released by the Texas Alliance of Energy Producers, surged amid increases in crude oil prices, drilling permits, and industry employment. “The monthly crude oil price rose by more than $9 a barrel in July to average more than $100 a barrel for the first time since March 2012,” Ingham said. “The number of original drilling permits issued was up by more than 18 percent in July compared to July 2012, and oil and gas industry employment was up by more than six percent.” The index was 284.2 in June 2013.
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Texas crude oil production in July totaled an estimated 67.7 million barrels—up 14.1 percent from July 2012.
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FTS International sold all assets of its proppant business and related logistics assets to Fairmount Minerals of Chesterland, Ohio. FTSI also said it has a long-term agreement with Fairmount to provide proppant for FTSI’s well completion customers.
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Greg Lanham, CEO, said the sale enables FTSI to focus on the company’s core business of well completion. FTSI will use the proceeds from the sale for debt, which stood at nearly $400 million as of March 31, according to a recent filing with the Securities and Exchange Commission. FTSI has corporate offices in Cisco and Fort Worth. Fairmount is one of North America’s largest producers of industrial sand and resin-coated products.
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Lynden Energy Corp. of Vancouver has built its Wolfberry production in West Texas to an average of 1,244 boe/d (70 percent oil) in the last month, according to a Sept. 5 report in Oil and Gas Journal, and is monitoring the results of other operators’ horizontal wells being drilled into several benches of the Wolfcamp formation near Lynden’s acreage.
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The leases are located in Martin, Midland, Glasscock, and Howard counties. The Journal said nearby horizontal wells are operated by Pioneer Natural Resources, Diamondback Energy, Laredo Petroleum Holdings, and others.
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FROM THE RAILROAD COMMISSION OF TEXAS
[issued 27 September 2013]
The Texas average rig count as of Sept. 20, 2013, was 927, representing about 55 percent of all active land rigs in the U.S. In the last 12 months, total Texas reported production was 583 million barrels of oil and 7.4 trillion cubic feet of natural gas.
The commission’s estimated final production for July 2013 is 64,127,455 barrels of crude oil and 571,733,437 Mcf (thousand cubic feet) of gas well gas.
The commission derives final production numbers by multiplying the preliminary July 2013 production totals of 52,259,355 barrels of crude oil and 458,965,591 Mcf of gas well gas by a production adjustment factor of 1.2271 for crude oil and 1.2457 for gas well gas. (These production totals do not include casinghead gas or condensate.)
Texas natural gas storage reported to the RRC for August was 389,415,570 Mcf compared to 389,812,446 Mcf in August 2012. The September 2013 gas storage estimate is 398,340,111 Mcf.
The RRC Oil and Gas Division set initial October 2013 natural gas production allowables for prorated fields in the state to meet market demand of 8,190,427 MCF (thousand cubic feet). In setting the initial October 2013 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 October 2013 is reported.
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FROM THE U.S. ENERGY INFORMATION ADMINISTRATION
[issued 10 September 2013]
Monthly average crude oil prices increased for the fourth consecutive month in August 2013 as supply disruptions in Libya increased and concerns over the conflict in Syria intensified. The U.S. Energy Information Administration’s forecast for Brent crude oil spot price, which averaged $108 per barrel during the first half of 2013, averages $109 per barrel over the second half of 2013 and $102 per barrel in 2014—$5 per barrel (for 2013) and $2 per barrel (for 2014) higher than forecast last month.
Projected West Texas Intermediate (WTI) crude oil prices average $101 per barrel during the fourth quarter of 2013 and $96 per barrel during 2014. Energy price forecasts are highly uncertain and could differ significantly from the projected levels. The current values of futures and options contracts suggest the lower and upper limits of the 95 percent confidence interval for the market’s expectations of monthly average WTI prices in December 2013 at $86 per barrel (futures) and $131 per barrel (options).
In August unplanned disruptions among the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC producers reached an estimated 2.7 million barrels per day (bbl/d), the highest level since at least January 2011. Of this volume, 0.6 million bbl/d was attributable to non-OPEC producers, while OPEC producers accounted for the remaining 2.1 million bbl/d of outages. OPEC disruptions reached the highest level since at least January 2009 when EIA began tracking this information.
The EIA’s forecast for the regular gasoline retail price averages $3.44 per gallon in the fourth quarter of 2013—11 cents per gallon higher than last month. The annual average regular gasoline retail, which was $3.63 per gallon in 2012, is expected to be $3.55 per gallon in 2013 and $3.43 per gallon in 2014. As in the case of crude oil, the current value of futures and options contracts suggests a wide uncertainty in market expectations.
U.S. crude oil production increased to an average of 7.6 million bbl/d in August—the highest monthly level of production since 1989. EIA forecasts U.S. total crude oil production will average 7.5 million bbl/d in 2013 and 8.4 million bbl/d in 2014—about 0.1 million bbl/d (for 2013) and 0.2 million bbl/d (for 2014) higher than forecast last month.
Natural gas working inventories ended August 2013 at an estimated 3.2 trillion cubic feet (Tcf), 0.21 Tcf below the level at the same time a year ago and 0.04 Tcf above the five-year average (2008-12). EIA expects the Henry Hub natural gas spot price, which averaged $2.75 per million British thermal units (MMBtu) in 2012, will average $3.68 per MMBtu in 2013 and $3.91 per MMBtu in 2014.
—compiled by Garner Roberts