Updated 7/24/2015
News from the Permian Basin and West Texas:
Rig count in Permian Basin increases for fourth straight week
The oil and gas drilling rig count for the Permian Basin increased for the fourth consecutive week as of July 24, according to Houston-based oilfield services firm Baker Hughes, Inc. And the Texas count increased for the third time in the last four weeks. In the Permian Basin, BHI reported 245 working rigs – up three from 242 the previous week, but down 310 from 555 of the previous year. In Texas, BHI reported 374 working rigs – up eight from 366 the previous week, but down 512 from 886 the previous year. In the U.S., there were 876 working rigs – up 19 from 857 the previous week, but down 1,007 from 1,883 the previous year. According to the BHI report, 42.7 percent of rigs in the U.S. are in Texas (47.1 percent at this time last year), and 65.5 percent of the rigs in Texas are in the Permian Basin (62.6 percent last year).
The other top states are Oklahoma at 107 (up from 105 last week, down from 204 last year), Louisiana at 76 (up from 69 last week, down from 119 last year), North Dakota at 69 (up from 68 last week, down from 178 last year) and New Mexico at 51 (up from 50 last week, down from 94 last year).
The other top basins are Eagle Ford at 100 (up from 98 last week, down from 211 last year), Williston at 70 (up from 69 last week, down from 184 last year) and Marcellus at 59 (unchanged from last week, down from 78 last year).
Permian Basin Index down 9.2 percent in May 2015 from May 2014
The Texas Permian Basin Petroleum Index dropped nearly 10 points in May from April and is down 9.2 percent from May 2014, according to economist Karr Ingham. “The index is losing ground in huge chunks,” Ingham told the Midland Reporter Telegram. From May 2014 to May 2015, Ingham said the price of a barrel of crude oil fell 43.1 percent, the number of drilling permits issued by the Railroad Commission of Texas declined 59.6 percent, and operators reported completing 41.9 percent fewer wells. Production volumes continue to climb, however, in 2015 (up 11 percent from May 2014 to May 2015). “I just don’t see a set of market circumstances favorable to higher oil prices,” Ingham added. “Nobody knows what will happen overseas with the addition of Iranian oil to the marketplace (after the recent Iranian nuclear agreement), and we don’t know how ready they are. We’re already producing more oil than last year, and now even more oil from Iran.”
National Oilwell Varco spinoff acquires Odessa Pumps
The Midland Reporter Telegram reported that Houston-based NOW, Inc., which was spun off last year from National Oilwell Varco, is acquiring Odessa Pumps and Equipment. Pending final approval, it is the eighth announced acquisition by NOW since the spinoff. “NOW is a very aggressive company,” Odessa Pumps president Toby Eoff told the Reporter Telegram. “It speaks very well of us that they had a definitive strategy of entering the pump business and chose us.” The newspaper said Odessa Pumps has about 300 employees in its corporate office and 13 other locations in Texas, New Mexico and Oklahoma.
WPX Energy of Tulsa acquires assets in Delaware Basin
Tulsa-based WPX Energy said July 14 it will acquire RKI Exploration & Production for $2.35 billion plus the assumption of $400 million of debt. The majority of RKI’s leasehold is located in Loving County, Texas, and Eddy County, New Mexico. RKI’s liquids-rich assets in the Permian Basin include 22,000 boed of existing production (more than half oil), 92,000 net acres in the core of the Delaware Basin (98 percent held by production), 3,600 gross drilling locations across stacked pay intervals, and 375 miles of scalable gas gathering and water infrastructure. “This is a transformative opportunity that fits perfectly with our strategy to increase our oil production and high-quality oil inventory,” WPX president and CEO Rick Muncrief said in the company’s announcement. WPX said it plans to increase the rig count on the Permian assets to six from four by the end of 2015. The acquisition is expected to close by the end of the third quarter.
LINN Energy to sell remaining assets in Howard County
Houston-based LINN Energy said July 6 it has an agreement to sell its remaining position in Howard County for $281 million. The transaction is expected to close in the third quarter with an effective date of May 1. The company said the properties that were sold include about 6,400 net acres prospective for Wolfcamp drilling and about 2.0 Mboed of current production from 133 gross wells.
Midland-Odessa regional economic index declines in May from April
The Midland-Odessa regional economic index fell a point in May from April, but it remains 6.7 percent higher than May 2014, according to economist Karr Ingham. “It looks and feels like the downturn is gaining a little steam at this point,” he told the Midland Reporter Telegram. Ingham prepares the index for Security Bank and Midland Development Corp. He added, “The general spending picture is very likely to worsen in the coming months, and the rate of year-over-year decline will widen as the effects of the oil and gas slowdown gain a bigger foothold over the overall economy.” He said spending on automobiles is declining, construction is down compared to last year, and airline boardings are down.
Pace of oil production up in Scurry County compared to 2014
Oil production in Scurry County continues on a pace ahead of last year, according to the Snyder Daily News. In April the county reported that 1.4 million barrels of oil were produced for a year-to-date total of 5.8 million barrels. That compares to 5.4 million barrels in the first four months of 2014. Completions rose to 38 in April compared to 20 last May. The Daily News said, however, that permits are down to 13 issued in May 2015 compared to 21 the same month last year.
Production in Gaines County declines in April from March report
Gaines County produced 1.82 million barrels of oil in April, according to the Seminole Sentinel – down from the previous month and the same month last year. The Sentinel said the county produced 2.098 million barrels of oil in March 2015 and 2.017 million barrels in April 2014. According to statistics in the Sentinel from the Railroad Commission of Texas, five of the top 10 oil producing counties in the state are in west Texas – Andrews, Upton, Martin, Midland and Reeves. Karnes County in the Eagle Ford Shale in south Texas remains the leader.
News from Texas and the Southwest:
Abbott says Texas cuts taxes, relies on diversified economy
Gov. Greg Abbott told CNBC that Texas has been able to mitigate the economic damage caused by the decline in crude oil prices by cutting taxes and relying on a diversified economy. “While other states have been raising taxes, we cut taxes by $4 billion,” he said in an interview broadcast July 14, “and it is attracting businesses from New York, New Jersey and across the entire country.” Despite the diversified economy, according to the Federal Reserve Bank in Dallas, the state’s revenue could “take a hit” from lower oil prices. The bank said tax revenue from oil and gas for the state was $4.5 billion in 2013, but it is likely to decline in 2015. Texas gets nine percent of its tax revenue from oil and gas, but its exposure to the current oil surplus is much smaller than other states – such as Alaska (80 percent of tax revenue) and North Dakota (50 percent of tax revenue).
RRC adds toll-free telephone number to report emergencies
The Railroad Commission of Texas has added a new toll-free telephone number for reporting emergencies to the agency. Commission staff is on call 24 hours a day, seven days a week, to respond to emergencies in oil and gas exploration and production, intrastate pipelines and alternative fuels. The RRC announcement added, “Commission employees are not emergency responders or law enforcement officers. However, commission staff work closely with emergency responders to provide support.” The new toll-free number is 844-773-0305. The existing emergency number is 512-463-6788.
Kinder Morgan starts second splitter at condensate facility
Houston-based Kinder Morgan this month commissioned the second of two 50,000 bpd splitters at its new petroleum condensate processing facility near its terminal in Galena Park on the Houston Ship Channel. The first unit reported startup earlier this year at the $436 million facility. The company’s announcement added, “The processing facility is supported by a long-term, fee-based agreement with BP North America.”
Texas adds 2,700 new jobs in oil and gas industry in June
Texas added 16,700 jobs in June, including 2,700 jobs in the oil and gas industry, according to the Texas Workforce Commission. The state’s gain is smaller than the adjusted figure of 30,900 new jobs in May, but the seasonally adjusted unemployment rate dipped to 4.2 percent from 4.3 percent in May. The Dallas Morning News said the gain by the oil industry was its first since December 2014. Michael Wolf of Wells Fargo told the Morning News, “Despite these formidable headwinds, the Lone Star State has once again proved its resiliency. Although oil and gas payrolls are still 14,200 workers smaller than they were at the end of 2014, this month’s rise may be the first sign that the cuts in the oil and gas industry are finally bottoming out.”
Shell E&P manager: ‘Innovation needed now more than ever’
Claudia Hackbarth of Shell International E&P said in San Antonio that operators should resist the impulse to pull back on investments in technology despite the down market. Hackbarth, manager of unconventional gas and tight oil research and development, spoke July 20 at the Unconventional Resources Technology Conference. “Innovation is needed now more than ever,” she added. Energy demand is on pace to double by 2050, she said, and even with increases in traditional and new forms of energy, it will be difficult to meet that demand. To realize that potential, she added, industry will have to operate smarter and better. Other speakers included Adam Sieminski, administrator of the U.S. Energy Information Administration, and Tony Vaughn, executive vice president, E&P, Devon Energy, who told the Oil & Gas Journal that the unconventional sector is unique in its flexibility. “The pace of activity can be ramped up or down where and when necessary much more easily than large, expensive offshore projects,” Vaughn said.