Add one more company to the rolls of natural gas firms that are cutting back in the wake of lower energy prices.
PennEnergy Resources LLC stopped drilling new wells in October, according to a report over the weekend in the Beaver County Times. Penn Energy has leases in Beaver, Butler and Armstrong counties.
via Driller cuts back on new wells in Marcellus Shale – Pittsburgh Business Times.
Independent oil and gas company, Magnum Hunter Resources, which is active in the Utica, Marcellus and Bakken shale gas plays, has said it is to cut capital spending on its projects, citing low commodity prices.
In a conference call last week, chief executive Gary Evans said the expectation was that natural gas prices were expected to remain low until at least the end of the year.
Evans said that the board will meet this week to discuss the fiscal plans for the year, but expects expenditure not to exceed $100 million.
He explained that “when you’re in a death spiral of prices in this business, you’re crazy to be spending money… we’re not spending any money right now.”
The company is set to produce the equivalent of between 30,000 and 35,000 barrels of oil per day in 2015.
via Magnum Hunter to significantly reduce capital expenditure | Shale Energy Insider.
Saudi Arabia wants its own gas-fracking revolution.
The country’s colossal state-run oil firm, Saudi Aramco, is investing another $7 billion (£4.64 billion) in unconventional gas (shale) drilling in the country. That’s more than double what the company had previously planned, according to the Financial Times.
That’s at the same time that the plunging price of oil, widely accredited to Saudi Arabia’s policies, is helping to stymie growth in US shale.
While Saudi Arabia apparently has the shale reserves it needs, what it doesn’t have is the water that is blasted into the earth to free up oil and gas in the process known as hydraulic fracturing, or fracking. According to Bloomberg and Baker Hughes, Saudi Arabia may have the world’s fifth-largest shale reserves, adding to its already tremendous mineral wealth.
via Saudi Arabia Wants Its Own Shale Gas – Business Insider.
Oil’s biggest bust since the global recession was good for a few cases of whiplash.Just two months ago, Continental Resources Inc. (CLR), the shale driller founded by billionaire Harold Hamm, budgeted for $80-a-barrel oil and planned to spend $4.6 billion in 2015. Six weeks later, with crude down 29 percent in the interim, Continental cut its 2015 budget to $2.7 billion.Halliburton Co. (HAL), the world’s biggest provider of fracking services to oil companies, announced Dec. 11 that it would dismiss 1,000 workers. Two months earlier, Chairman and Chief Executive Officer Dave Lesar said “our sector will be fine” if oil prices range between $80 and $100 a barrel.Oil PricesThe U.S. shale boom that’s brought the country closer to energy self-sufficiency than at any time since the 1980s will be challenged in 2015 as never before. The benchmark U.S. crude price fell below $50 today for the first time since April 2009. Demand growth is weakening and OPEC, which controls 40 percent of supply, is unwilling to cut output.“The extent and rapidity of the price decline has been a surprise,” said Andy Lipow, president of Lipow Oil Associates LLC, an energy consultant in Houston. “They’re facing a new reality.” Photographer: Daniel Acker/BloombergPioneer Drilling Co. operations near Montrose, Pennsylvania, U.S.West Texas Intermediate reached a 2014 peak of $107.73 in June before dropping as low as $49.77 today on the New York Mercantile Exchange. The grade settled at $50.04 a barrel. That’s below the break-even price for 37 of 38 U.S. shale oilfields, according to Bloomberg New Energy Finance.RBC Capital Markets and CIBC World Markets predict prices will remain below $60 for the first three months of 2015. Societe Generale SA’s Michael Wittner forecasts an average of $64.50 in the first quarter and $61.50 in the second.
via Oil Below $60 Tests Economics of U.S. Shale Boom – Bloomberg.
Posted in Bakken, Eagle Ford, shale breakeven
Tagged Bakken, Eagle Ford, energy capex, energy capital spending, Shale breakeven, shale jobs, Shale Natural Gas, Shale oil, Shale oil breakeven
On December 2, 2014, President Enrique Peña Nieto inaugurated Phase I of the new Los Ramones Gas Pipeline, which could by year end 2016 double the volume of gas the U.S. exports by pipeline to Mexico. Pipelines to Mexico already move a volume of gas equivalent to more than 16 million tonnes per year of LNG. Once Los Ramones reaches full capacity, U.S. gas producers will be able to export to Mexico more than seven times the annual gas volume that Osaka Gas and Chubu Electric—two of Freeport LNG’s largest LNG export customers—have signed up to purchase.The first 116 km stage of the pipeline project links Agua Dulce, Texas, to Los Ramones, Nuevo Leon. Phase II of the project is a 738 km line from Los Ramones into Mexico’s industrial heartland, including San Luis Potosí, Guanajuato, and Querétaro. Phase II began construction in August 2014 and will likely enter commercial service by early 2016.Ultimately, the Los Ramones pipeline system will provide a high-capacity conduit that can move 2 billion cubic feet per day (BCF/d) of Texas shale gas—primarily from the Eagle Ford play—into Mexico’s industrial northeast, including the economic powerhouse of Monterrey, as well as the expanding manufacturing hubs in the Central Mexican states listed above. For comparison, the Eagle Ford Shale presently produces approximately 6 BCF/d of natural gas, according to the EIA.
via Mexico Is Becoming the Single-Largest U.S. Shale Gas Export Customer | BakerHostetler – JDSupra.
Houston-based Sanchez Energy Corp. (NYSE: SN) is slashing its 2015 capital spending by nearly 50 percent from its original plan because of falling oil and gas prices.Although Sanchez has been one of the fastest-growing energy companies in Houston, the upstream energy company is following the thinking of other companies that have eased up on their new exploration and production projects with oil prices currently below $50 a barrel.
via Sanchez Energy cuts capital spending by nearly 50 percent – Houston Business Journal.
New planned pipelines to carry natural gas from the Marcellus and Utica shales to the Chicago, Illinois, area could spur fierce price competition and displace Canadian and Rockies supply.The projects, which include making part of the Rockies Express (Rex) pipeline bi-directional, could also lead to lower basis prices in Chicago, despite an expected increase in demand.The proposals include the Prairie State pipeline, which could move as much as 1.5 Bcf/d (42mn m³/d) from Douglas County, Illinois, to Chicago. The pipeline system, a joint effort between Tallgrass Development and AGL Resources, would span 140 miles (225km) and include connections to gas distribution systems, storage fields and interstate pipeline companies in the Chicago area.Another plan by Natural Gas pipeline (NGPL) is a potential expansion to its Gulf coast mainline from the Rex connection in Moultrie County, Illinois, to locations north on the pipeline system.That project could increase NGPL’s capacity by up to 435mn cf/d for delivery to markets in and near Chicago, said Kinder Morgan, the midstream group that owns and operates NGPL.The expansion could provide access to more than 100 of NGPL’s interconnects with Chicago-area local distribution companies, power plants, industrial end users, interstate pipelines, and NGPL’s storage and pooling locations.TransCanada is considering an expansion of the ANR pipeline system that could add about 2 Bcf/d of natural gas transportation into the Chicago area.And the potential reversal of Rex could bring 1.2 Bcf/d of gas from the Appalachian basin to Great Lakes demand centers. This is in addition to Rex’s Seneca lateral, which went into service in June, and is moving up to 362mn cf/d of production from the MarkWest Seneca gas processing plant in southeast Ohio into the Rex mainline, providing an outlet for Marcellus and Utica production. The pipeline is planning to increase capacity on the Seneca lateral to 580mn cf/d.The varied projects could lead to an oversupply of gas into Chicago, leading to fierce competition between competing basins, said Ed Kallio, director for gas consulting at Ziff Energy.”Chicago is going to be a blood bath,” Kallio said.
via News – Argus Media.
Despite the fact that natural gas prices last week hit their lowest level in two years – and that many exploration and production companies have largely abandoned natural gas in the age of America’s oil boom – Houston’s Southwestern Energy is doubling down on its investment in gas.”We’re really a gas-driven company,” chief executive Steven Mueller told the Chronicle on Tuesday, a day after the company announced it would increase capital spending next year by $200 million, to $2.6 billion, at a time when other Houston-based exploration and production companies are cutting back.”Today’s gas prices are low,” Mueller said. “We’re a little bit contrarian. We don’t think it will stay in that low $3 range.”The price closed Tuesday at $3.094 per million British thermal units, but Mueller said he expects that to rise in the coming year as utilities continue to shift from coal to natural gas-fired power plants. Inexpensive natural gas in the U.S. maintains a distinct price advantage compared to natural gas sourced abroad, he said.The CEO said Europeans, whether they use liquefied natural gas or imports from Russia, are hard-pressed to find natural gas for less than $9 per million BTU. At that point, manufacturers and other heavy users of natural gas will likely shift more operations to the U.S. to take advantage of its comparatively cheap natural gas – providing a boon for Southwestern. “We’ve got gas, we’ve got the infrastructure, and we’ve got the stable government,” Mueller said.
via 'Contrarian' CEO doubles down even as natural gas prices fall – Houston Chronicle.
Even as Utica and Marcellus shale companies set records for oil and natural gas production, plummeting oil prices likely will lead some to ditch their short-term drilling plans, industry officials said Friday.”Even just a few weeks ago, it was about $80. Now, it’s under $60,” said Shawn Bennett, senior vice president of the Ohio Oil and Gas Association. “Low commodity prices are causing some companies developing in shale areas to re-evaluate their drilling plans. Some, unfortunately, are going to start laying down rigs.””I would suspect that things will slow a little in the short-term,” added Tim Carr, a geology professor at West Virginia University. “In the long-term, if it stays low, then it will hurt.”According to the Ohio Department of Natural Resources, drillers produced more than 132 billion cubic feet of natural gas from July 1 through Sept. 30, up from 88 billion during the previous three-month period – and more than the 100 billion drawn from the entire state in all of 2013. In terms of Utica oil, the numbers show Buckeye State drillers increased production by 546,000 barrels during the period from July 1-Sept. 30, compared to the April 1-June 30 time frame.
via Shale Output May Drop As Oil Prices Plunge – News, Sports, Jobs – The Intelligencer / Wheeling News-Register.
Posted in Marcellus, Shale, Shale Natural Gas, Shale oil, shale production, Utica
Tagged Marcellus, shale, Shale Natural Gas, Shale oil, shale production, Utica
The danger of stimulus-induced bubbles is starting to play out in the market for energy-company debt.Since early 2010, energy producers have raised $550 billion of new bonds and loans as the Federal Reserve held borrowing costs near zero, according to Deutsche Bank AG. With oil prices plunging, investors are questioning the ability of some issuers to meet their debt obligations. Research firm CreditSights Inc. predicts the default rate for energy junk bonds will double to eight percent next year. Anything that becomes a mania — it ends badly,” said Tim Gramatovich, who helps manage more than $800 million as chief investment officer of Santa Barbara, California-based Peritus Asset Management. “And this is a mania.”The Fed’s decision to keep benchmark interest rates at record lows for six years has encouraged investors to funnel cash into speculative-grade securities to generate returns, raising concern that risks were being overlooked. A report from Moody’s Investors Service this week found that investor protections in corporate debt are at an all-time low, while average yields on junk bonds were recently lower than what investment-grade companies were paying before the credit crisis.
via The Fed Helped Cause $550 Billion Energy Debt Boom, And Now It Could End In Tears – Yahoo Finance.
Posted in Bakken, Eagle Ford, energy debt, Shale, shale breakeven, Shale Natural Gas, Shale oil, shale oil breakeven
Tagged Bakken, Eagle Ford, energy breakeven, Shale breakeven, Shale Natural Gas, Shale oil, Shale oil breakeven