EIA Drilling Productivity Report Released



Former $2 billion private equity fund now nearly worthless: WSJ

Wells Fargo (WFC.N) and a number of other lenders are negotiating to take control of a hedge fund previously valued at more than $2 billion that is now worth close to nothing, according to a report from the Wall Street Journal.EnerVest Ltd., a Houston private equity firm that focuses on energy investments, manages the private equity fund that focused on oil investments. The fund will leave clients, including major pensions, endowments and charitable foundations, with at most pennies on the dollar, WSJ reported.The firm raised and started investing money beginning in 2013 when oil was trading at around $90 a barrel and added $1.3 billion of borrowed money to boost its buying power. West Texas Intermediate crude prices closed at $46.54 a barrel on Friday.

Source: Former $2 billion private equity fund now nearly worthless: WSJ

OPEC Quietly Opened the Taps in June

OPEC’s resolve to stick to promised supply cuts stumbled in June, the sixth month in its long-haul gambit to erode a world oil glut and boost prices. Total compliance within OPEC slipped below 100 percent, back to levels seen in February, dragged down by rising production in Angola, Iraq and Saudi Arabia. Meanwhile, a parallel effort by non-OPEC nations including Russia improved.

Source: OPEC Quietly Opened the Taps in June

Mexico Oil Privatization Pays Off With Billion+ – Barrel Find – Bloomberg

A consortium of Premier Oil Plc, Sierra Oil & Gas S de RL de CV and Talos Energy LLC made the discovery in the shallow waters of the southern Gulf of Mexico just two years after winning the exploration license. It’s the first new find by a private company in the country in almost 80 years, according to consultant Wood Mackenzie Ltd., possible only after the government ended the monopoly of state-run Petroleos Mexicanos.The Zama discovery “is the most important achievement so far of Mexico’s energy reform,” Pablo Medina, the senior upstream analyst for Latin America at Wood Mackenzie, said by email. “It is one of the 15 largest shallow-water fields discovered globally in the past 20 years.”

Source: Mexico Oil Privatization Pays Off With Billion-Barrel Find – Bloomberg

Talos reports large Gulf of Mexico discovery | The Oil & Gas Year

Talos Energy announced on Wednesday that it, along with partners Sierra Oil & Gas and Premier Oil, had made a significant discovery offshore Mexico through the Zama-1 wildcat well.Initial tests have indicated that Zama could hold up to 1.4 billion-2 billion barrels of original oil in place. The reservoir is thought to contain mainly light oil, with gravities of 28-30 degrees API, in addition to associated gas.“This is both a historic and significant discovery,” CEO Tim Duncan said in a statement.

Source: Talos reports large Gulf of Mexico discovery | The Oil & Gas Year

Premier Oil’s major Mexican oil discovery boosts shares

Premier Oil’s shares rocketed as much as 38 percent on Wednesday on news it discovered potentially more than 1 billion barrels of oil off the coast of Mexico, a major victory for Latin America’s No. 2 economy since the historic opening of its energy sector.Premier, which holds a 25 percent interest in the block alongside Talos Energy and Sierra Oil and Gas, said estimates for the Zama-1 well were in excess of 1 billion barrels, which could extend into a neighboring block.The news of the discovery, in the first shallow-water offshore exploration well drilled by the private sector in Mexico since the country’s 2014 energy sector opening, sent Premier’s shares rocketing as much as 38 percent on the London Stock Exchange and helped the peso strengthen 0.70 percent to 17.785 per dollar.In afternoon trading in London, Premier Oil shares were up 34 percent at 61.83 pounds.The find also hands the government of President Enrique Pena Nieto, which ended state-oil firm Pemex’s decades-long monopoly, a key victory as Mexico prepares to embark on fraught trade, security and immigration talks with U.S. President Donald Trump’s administration.Premier Oil’s Chief Executive Tony Durrant said the discovery “adds materially” to Premier’s portfolio of assets.”(The) Zama-1 discovery announcement appears about as material as we could possibly imagine at this early stage,” Jefferies analysts wrote in a note.The project is jointly owned with Talos Energy, which acts as operator and has a 35 percent stake, and Sierra Oil and Gas which holds the remaining 40 percent.

Source: Premier Oil’s major Mexican oil discovery boosts shares

Mexico Races for Pipes to Reach More U.S. Gas Before Summer – Bloomberg

Mexico is racing against the clock to get natural gas pipelines online this summer.The nation has found itself “in a tight situation,” David Madero, who oversees the government’s Natural Gas Control Center, said in an interview in Mexico City. The season when gas demand typically peaks is fast approaching, and Mexico is still dealing with setbacks in getting long-anticipated pipelines into service.The delays are causing a glut of natural gas to swell up north of the border as U.S. shale drillers wait for the lines to carry their fuel to market. Citigroup Inc. warned in a research note two months ago that the holdups in Mexico would probably force gas in the Gulf Coast to trade at heavy discounts.

Source: Mexico Races for Pipes to Reach More U.S. Gas Before Summer – Bloomberg

Dallas Fed Energy Survey – Dallasfed.org

Business activity increased in the second quarter, albeit at a slightly slower pace, according to oil and gas executives responding to the Dallas Fed Energy Survey. The business activity index—the survey’s broadest measure of conditions facing Eleventh District energy firms—remained robust at 37.3, slightly below the 41.8 reading last quarter. Despite some deceleration, most other indexes also reflected expansion on a quarterly basis. Responses among oilfield services firms were particularly strong.

Oil and gas production increased for the third quarter in a row, according to executives at exploration and production (E&P) firms. The oil production index was 10.2, down from 13.1 last quarter, and the natural gas production index declined seven points to 10.6. This suggests oil and gas production is rising at a slower pace than last quarter.

The business activity index for oilfield services firms edged up to 49.3—its highest reading since the survey began in first quarter 2016. Utilization of oilfield services firms’ equipment increased, with the corresponding index at 45.4, up from 26.0 last quarter.

Measures of selling prices and input costs suggested some pressure on margins for oilfield services firms. The index of prices received for oilfield services fell to 9.1 from 18.3, while the index of input costs surged to 37.0 from 23.6.

Labor market indexes point to rising employment, employee hours, and wages and benefits. Growth in employment was driven primarily by oilfield services firms. The employment index was 40.3 for services firms versus 5.7 for E&P firms. The employee hours indexes showed a similar gap: 43.3 for services firms versus 8.7 for E&P firms. The aggregate wages and benefits index moved up again, to 22.8 from 17.1.

The company outlook index posted a fifth consecutive positive reading but fell 25 points to 20.3. Uncertainty regarding the outlook rose again. Over 46 percent of firms reported increased uncertainty about the future, up from 33.8 percent last quarter.

On average, respondents expect West Texas Intermediate (WTI) oil prices to climb to $48.79 per barrel by year-end, with responses ranging from $30 to $65 per barrel. Respondents expect Henry Hub natural gas prices will end the year at $3.01 per million British thermal units (MMBtu). For reference, WTI spot prices averaged $43.80 per barrel and Henry Hub spot prices averaged $2.89 per MMBtu during the survey collection period.

Source: Dallas Fed Energy Survey – Dallasfed.org

Mexico’s First-Quarter Growth Revised Higher – Dallasfed.org

Mexico’s economy grew faster in first quarter 2017 than previously estimated. Gross domestic product (GDP) increased 2.7 percent, according to the government’s second estimate. Consequently, the consensus 2017 GDP growth forecast was revised to 2 percent from 1.7 percent in April.Other, more recent data were mixed; employment growth improved, but exports, industrial production and retail sales fell. Inflation rose further while the peso held steady against the dollar.

Source: Mexico’s First-Quarter Growth Revised Higher – Dallasfed.org

Behavioral finance in oil and gas – Oil & Gas Financial Journal

WHY DO EXPLORATION and production companies make more acquisitions, buy back more stock, and invest more in growing and developing their reserves when the commodity price is high and these uses of capital are at their most expensive levels? Why do they lever up at the top of the cycle when there seems to be more downside than upside? These actions seem at odds with the rational concept of “buy low and sell high.” Can behavioral finance explain these seemingly irrational behaviors?For over half a century, business school students have been trained in the efficient market hypothesis which asserts that investors cannot “beat the market” because the stock market is so efficient that share prices reflect essentially all available information at all times. In their economics classes, these students have been taught how investors always make rational decisions that are in their best self-interest. Given the volatility in the oil and gas industry, many undoubtedly wonder how efficient the market is and how rational investors are. How do we explain the apparent market inefficiency and irrational behaviors?

Source: Behavioral finance in oil and gas – Oil & Gas Financial Journal