Tag Archives: Shale oil

BHP set to slash capex on shale | BDlive

BHP Billiton may be forced to slash its planned $4bn spending this year on US shale wells and book writedowns on its shale assets as it battles plunging prices for its biggest earners iron ore, oil and copper.

The mining giant, which has cut capital spending for the past two years, needed further savings to have enough cash to meet a promise not to reduce its dividend, analysts and investors said, with some tipping it could slice its US onshore drilling budget in half.

The spending cuts could come as soon as tomorrow, when BHP will release its December quarter operational review.

US onshore drilling, the biggest single item in BHP’s capital budget, is seen as the easiest target after a 41% plunge in oil prices, 16% drop in iron ore prices and 12% drop in copper prices over the past three months.

Other candidates for cuts in its $14.2bn capital and exploration spending plan could be its longer-dated projects such as the Canadian Jansen potash project and Australian Olympic Dam copper expansion study.

“When you are pushed up against the wall you have to make some difficult decisions, so all those things are possibilities,” said Richard Knights, an analyst at London-based investment bank Liberum.

“Commodity prices are falling very quickly, very sharply.

Shale drilling is much easier to shut than conventional oil and gas wells as individual wells are smaller, making it a logical target for cuts. It is not expected to cut spending on its conventional wells in the Gulf of Mexico.

Writedowns on the shale assets, which BHP acquired in 2011 for $17bn when gas prices were much higher, were also inevitable, analysts and investors said, based on a much weaker outlook for forward prices.

via BHP set to slash capex on shale | Mining | BDlive.

Oil Below $60 Tests Economics of U.S. Shale Boom – Bloomberg

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.

Sanchez Energy cuts capital spending by nearly 50 percent – HBJ

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.

American Eagle Energy Halts Drilling Plans – WSJ

American Eagle Energy Corp. said Wednesday that it has suspended its drilling operations and likely won’t resume until oil prices improve, the latest sign that a glut in crude oil is stifling exploration and production across the industry.Shares dropped 9.1% to 60 cents in light premarket trading. The stock is one of the hardest hit in the energy sector this year and approached $12 a share in November 2013.Oil prices have plummeted in the second half of 2014 as a flood of crude from U.S. shale disrupted the global oil market, leading a host of energy companies to cut drilling, lay off workers and slash spending.Earlier this month, Chevron Corp. told Canadian regulators that it had “indefinitely” suspended plans to drill for oil in Arctic waters. Energy giants ConocoPhillips and BP PLC, along with a number of smaller companies like Husky Energy Inc. and Penn West Petroleum Ltd. , have also said they would pare capital spending plans, while EOG Resources Inc. has said it would shed many of its Canadian oil and gas fields to refocus on the U.S.

via American Eagle Energy Halts Drilling Plans – WSJ.

Russian oil output hits post-Soviet high – IBT

Russia’s oil output has reached a post-Soviet high after it averaged 10.58 million barrels of oil per day in 2014.Oil output rose by 0.7% in the year, according to data from the Energy Ministry. The increase in production was bolstered for the most part by small producers, many of which are private companies, and which collectively increased output by 11% to just over one million barrels of oil per day.Oil and gas production account for about half of Russian’s budget, and  make up around two thirds of the country’s overall exports. Russia’s state-run oil giant Rosneft produces more oil than Opec members Iraq or Iran. However Rosneft saw its output fall 0.7%, amid problems at its West Siberian oilfields.The price of crude oil has slid dramatically in latter half of 2014 – a corollary of increased shale exploration in the US, which became an exporter again for the first time in decades.Crude oil reached a daily closing price of $110.53 on September 6, 2013, and fell to a current level of $53.64 as of December 30, 2014.

via Russian oil output hits post-Soviet high.

Oil-field lodging company slashes jobs, curbs spending – FuelFix

Oil-field lodgings company Civeo Corp. said it has slashed its workforce in the United States by 45 percent and in Canada by 30 percent as it prepares for weaker occupancy rates at its oil-field camps next year.The Houston-based company had more than 4,000 employees when it spun off from oil field services firm Oil States International in June.The announcement is the latest oil-field services layoffs in reaction to falling oil prices and anticipated oil-company budget cuts. Houston-based Hercules Offshore said it would reduce its headcount by 324 and oil field giant Halliburton said it would cut 1,000 jobs across multiple regions in the Eastern Hemisphere.Civeo also is cutting its spending plans for 2015 to $75 million to $85 million, down from its budget this year of $260 million to $280 million, as it anticipates lower demand for lodging services. It said it may be required to record impairment charges on its assets.

via Fuel Fix » Oil-field lodging company slashes jobs, curbs spending.

Billionaire Shale Pioneer Cuts Spending 41% on Oil Crash – Bloomberg

Billionaire Harold Hamm, whose early adoption of shale drilling in North Dakota helped usher in a U.S. energy renaissance, plans to cut spending by 41 percent at his company after the plunge in oil prices.Continental Resources Inc. and other U.S. producers can adjust quickly to the crude collapse and will be able to withstand the downturn better than many producing countries, which face economic “ruin,” Hamm said in an interview.“The oil and gas industry has lowered the cost of gasoline to consumers in this country,” Hamm, chairman and chief executive officer of Continental, said yesterday. “It’s been good for America, this increase in supplies that we have here. We don’t want to see it all go for naught.”Continental (CLR) and rivals including ConocoPhillips and Apache Corp. plan to trim spending and move rigs to more profitable areas while prices remain under pressure. Crude has fallen by almost 50 percent since June to a five-year low as demand forecasts fell amid a glut in supply fed in part by the shale revolution.Saudi Arabia and OPEC allies have declined to cut output to stave off price declines. U.S. prices are expected to average $63 a barrel in 2015, according to the U.S. Energy Information Administration. Photographer: Andrew Harrer/BloombergHarold Hamm, Chairman and Chief Executive Officer of Continental Resources Inc.U.S. producers have trimmed billions from 2015 spending plans as the price decline eroded potential profits from drilling in shale rock, a technological breakthrough that helped boost production to the highest level in almost 30 years.

via Billionaire Shale Pioneer Cuts Spending 41% on Oil Crash – Bloomberg.

Shale Output May Drop As Oil Prices Plunge – The Intelligencer

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.

The Fed Helped Cause $550 Billion Energy Debt Boom, And Now It Could End In Tears – Yahoo Finance

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.

ConocoPhillips cuts capital budget amid lower oil prices – Houston Business Journal

Amid falling oil prices, ConocoPhillips (NYSE: COP) said Dec. 8 its capital budget for 2015 is $13.5 billion, down about 20 percent from its 2014 budget of $16.7 billion.The Houston-based company said the decrease reflects reduced spending on major projects, several of which are nearing completion, and deferred spending on North American unconventional plays. However, it expects production to grow 3 percent next year from continuing operations, excluding Libya.

via ConocoPhillips cuts capital budget amid lower oil prices – Houston Business Journal.