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Ely family

For many residents of Carter Road in Dimock, Pennsylvania, it’s been nearly a decade since their lives were turned upside down by the arrival of Cabot Oil and Gas, a company whose Marcellus Shale hydraulic fracturing (“fracking”) wells were plagued by a series of spills and other problems linked to the area’s contamination of drinking water supplies.

With a new federal court ruling handed down late last Friday, a judge unwound a unanimous eight-person jury which had ordered Cabot to pay a total of $4.24 millionover the contamination of two of those families’ drinking water wells. In a 58 page ruling, Magistrate Judge Martin C. Carlson discarded the jury’s verdict in Ely v. Cabot and ordered a new trial, extending the legal battle over one of the highest-profile and longest-running fracking-related water contamination cases in the country.

In his order, Judge Carlson chastised the plaintiff’s lawyers for “repeatedly inviting the jury to engage in unwarranted speculation” and wrote that, in his personal estimation, the plaintiffs had not presented enough evidence to warrant the jury’s $4.24 million in damages. The original complaint for the case was filed in November 2009.

Nonetheless, Judge Carlson declined to throw out the lawsuit entirely, ordering Cabot to re-start settlement talks with the Ely and Hubert families. If those talks fail, the trial process will begin anew, extending the already years-long legal battle into months or even years to come.

“The judge heard the same case that the jury heard and the jury was unanimous,” Nolan Scott Ely, the lead plaintiff in the case, said in a statement. “How can he take it upon himself to set aside their verdict? It’s outrageous.”

…click on the above link to read the rest of the article…

Shale Hotspot Draws In Another Big Oil Player

April 10, 2017

Shale Hotspot Draws In Another Big Oil Player

The oil price crash that destroyed a lot of smaller oil producers has not spared the finances of even the oldest and largest oil companies. Trying to keep the precious dividends intact and growing, Big Oil is focusing on cost control and cash preservation, and has effectively deferred investments in new ultra-expensive drilling ventures.

One of the biggest companies, U.S. Chevron, is now planning to capitalize on its vast acreage holdings in the Permian. Investments in new mega projects, at least over the next few years, are not currently on the table, chief executive John Watson told Reutersin an interview published this week.

Chevron is now betting big on the Permian; the star shale play straddling West Texas and New Mexico that has seen most of the resurgence since oil prices started steadily recovering in the fourth quarter last year.

Unlike some other (and smaller) producers who have just recently rushed to secure holdings in the shale play, Chevron is not a newcomer to the Permian – the group and its legacy companies have held acreage in the area since the early 1920s.

Now the new oil order is causing the company to shift strategies away from mega drilling projects to secure steady returns in more conservative projects in order to protect dividends and keep them growing.

Chevron reported earnings of $0.22 per share for the fourth quarter of 2016, compared with a loss of $0.31 per share for the fourth quarter of 2015, in line with analyst expectations that it would return to profit, but still missing the EPS estimates by a wide margin. Full-year 2016 results showed a loss of $497 million compared with earnings of $4.6 billion in 2015, which was the first annual loss Chevron has booked since 1980.

…click on the above link to read the rest of the article…

How OPEC Lost The War Against Shale, In One Chart

March 21, 2017

How OPEC Lost The War Against Shale, In One Chart

At the start of March we showed a fascinating chart from Rystad Energy, demonstrating how dramatic the impact of technological efficiency on collapsing US shale production costs has been: in just the past 3 years, the wellhead breakeven price for key shale plays has collapsed from an average of $80 to the mid-$30s…

… resulting in drastically lower all-in breakevens for most US shale regions.

Today, in a note released by Goldman titled “OPEC: To cut or not to cut, that is the question”, the firm presents a chart which shows just as graphically how exactly OPEC lost the war against US shale: in one word: the cost curve has massively flattened and extended as a result of “shale productivity” driving oil breakeven in the US from $80 to $50-$55, in the process sweeping Saudi Arabia away from the post of global oil price setter to merely inventory manager.

This is how Goldman explains it:

Shale’s short time to market and ongoing productivity improvements have provided an efficient answer to the industry’s decade-long search for incremental hydrocarbon resources in technically challenging, high cost areas and has kicked off a competition amongst oil producing countries to offer attractive enough contracts and tax terms to attract incremental capital. This is instigating a structural deflationary change in the oil cost curve, as shown in Exhibit 2. This shift has driven low cost OPEC producers to respond by focusing on market share, ramping up production where possible, using their own domestic resources or incentivizing higher activity from the international oil companies through more attractive contract structures and tax regimes. In the rest of the world, projects and countries have to compete for capital, trying to drive costs down to become competitive through deflation, FX and potentially lower tax rates.

…click on the above link to read the rest of the article…

US Shale Production To Soar By 3.5 Million Barrels/Day Over Next Five Years: BofA Explains Why

February 20, 2017

US Shale Production To Soar By 3.5 Million Barrels/Day Over Next Five Years: BofA Explains Why

Two years ago, when Saudi Arabia launched on an unprecedented campaign to crush high-cost oil producers, in the process effectively putting an end to the OPEC cartel (at least until last year’s attempt to cut production), it made a bold bet that US shale producers would be swept under when the price of oil tumbled, leading to a tsunami of bankruptcies, as well as investment and production halts. To an extent it succeeded, but where it may have made a glaring error is the core assumption about shale breakeven costs, which as we reported throughout 2016, were substantially lower than consensus estimated.

In his latest note, BofA’s Francisco Blanch explains not only why a drop in shale breakevens costs is what is currently the biggest wildcard in the global race to reach production “equilibrium”, but also why US shale oil production could surge in the coming years, prompting OPEC to boost production in hopes of recapturing market share. Specifically, Blanch predicts that US shale oil production could grow by a whopping 3.5 million barrels per day over the next five years.

Here’s why: as he explains “many oil companies around the world have survived the price meltdown by bringing down breakeven costs in the last two years.

But what parts of the world can grow output in the years ahead? In BofA’s view, US shale oil producers will come out ahead and deliver outsized market share gains by 2022. Shale oil output in the US may grow sequentially by 600 thousand b/d from 4Q16 to 4Q17 on increased activity in oil rigs and fast productivity gains. Importantly, breakeven costs for key major US plays now stand around the $55/bbl mark.

…click on the above link to read the rest of the article…

Can U.S. Shale Add 1 Million Bpd In 2017?

December 27, 2016

Can U.S. Shale Add 1 Million Bpd In 2017?

Oil prices are up on expectations that OPEC will contribute to a faster balancing in 2017, with up to 1.8 million barrels per day in cuts along with some non-OPEC countries. That has put a floor beneath prices, with fears of another downturn largely dissolved after OPEC’s announcement.

But what if U.S. shale comes roaring back and ruins the price rally? Estimates run the gamut on how quickly U.S. shale production can rebound and by what magnitude. Citigroup sees output rebounding by 500,000 barrels per day if oil prices average $60 per barrel. A December 12 report from Macquarie said that oil prices above $60 could spark a 1 million barrel-per-day revival.

U.S. shale is already up about 300,000 barrels per day from a low point in the summer of 2016, at least according to preliminary data. The gains are expected to continue. The industry is producing about as much oil as it was two years ago, with only one-third of the more than 1,700 rigs in 2014. Drillers are producing just as much oil with a lot less effort.

If U.S. shale surges back by 1 mb/d as Macquarie suggests, it would offset most of the cuts from OPEC and non-OPEC countries. Additionally, one would have to assume some degree of non-compliance and/or “cheating” on the cuts from participating countries, plus an expected increase in supply from Libya and Nigeria. Altogether, a rise in oil prices could be self-defeating, leading to prices falling once again later in the year. Related: Oil Price Roulette: Investors Bet On $100 Oil

Then there are also the implications on oil demand to consider. Higher prices might cut into demand growth, leading to an expansion in consumption at a much slower rate. The IEA already thinks oil demand will grow by 1.3 million barrels per day in 2017, one of the weakest in years.

…click on the above link to read the rest of the article…

Shale Euphoria: The Boom and Bust of Sub Prime Oil and Natural Gas

March 24, 2016

Shale Euphoria: The Boom and Bust of Sub Prime Oil and Natural Gas

Those whom the gods wish to destroy they first send mad

Introduction

The aim of this article is to show that the shale industry, whether extracting oil or gas, has never been financially sustainable. All around the world it has consistently disappointed profit expectations. Even though it has produced considerable quantities of oil and gas, and enough to influence oil and gas prices, the industry has mostly been unprofitable and has only been able to continue by running up more and more debt. How could this be? It seems paradoxical and defies ordinary economic logic. The answer is to be found in the way that the shale gas sector has been funded. It is part of a bubble economy inflated by monetary policy that has kept down interest rates. This has made investors “hunt for yield”. These investors believed that they had found a paying investment in shale companies – but they were really proving that they were susceptible to wishful thinking, vulnerable to hype and highly unethical practices that enabled Wall Street and other bankers to do very nicely. Those who invested in fracking are going to lose a lot of money.

A Global Picture of disappointed expectations

Around the world big expectations for fracking have not been realised. One example is Argentina where shale oil reserves were thought to rival those in the USA. It is a country where there has been local opposition while central government pushed the industry in alliance with multinational companies and its own company YPC. However profitability has been elusive. To have any hope of profitability shale development has to be done at scale to rapidly bring down costs enough to make a profit.

…click on the above link to read the rest of the article…

Jeff Rubin: Oil Sands Are ‘Hemorrhaging Red Ink,’ Doomed to Shutter

March 18, 2016

Jeff Rubin: Oil Sands Are ‘Hemorrhaging Red Ink,’ Doomed to Shutter

Former CIBC chief economist outlines latest predictions at ‘Carbon Talks.’

Former CIBC world markets economist Jeff Rubin at SFU’s ‘Carbon Talks’ panel. On the right is Vancity’s mutual fund manager Dermot Foley. Photo by Mychaylo Prystupa.

The oil sands are downsizing. Alberta’s Big Oil CEOs are talking to environmentalists. And proposed oil pipelines are in serious trouble.

Those were the takeaways from a trio of experts who spoke in Vancouver Wednesday at a “Carbon Talks” event hosted by Simon Fraser University with the David Suzuki Foundation and the Centre for International Governance.

And the reasons for them have a lot less to do with vocal activist opposition or the Trudeau government’s climate commitments than they do with the brute forces of the global marketplace for oil.

It was Jeff Rubin — former CIBC World Markets chief economist and now energy futurist — who declared some of Canada’s largest oil sands operations doomed to be shuttered.

“Hanging over the oil sands industry like the Sword of Damocles,” Rubin said, “is the fact that they are hemorrhaging red ink. At today’s prices, the oil sands are not commercially viable.”

The problem, he said, isn’t that the industry “has been targeted by sanctions or by environmental groups. The problem has been that oil imports in the United States have been halved over the last five years.”

The world is awash in oil. The so-called “shale gas revolution,” using fracking technology in the U.S., has brought cheap shale oil to the surface in abundance in North Dakota and Texas. That, plus the actions of Saudi Arabia and its OPEC partners to flood the market with low-cost oil, has crashed benchmark global oil prices from highs above $100 a barrel two years ago, to prices today in the high $30 range.

…click on the above link to read the rest of the article…

Energy Wars of Attrition: The Irony of Oil Abundance

March 9, 2016

Energy Wars of Attrition: The Irony of Oil Abundance

Three and a half years ago, the International Energy Agency (IEA) triggered headlines around the world by predicting that the United States would overtake Saudi Arabia to become the world’s leading oil producer by 2020 and, together with Canada, would become a net exporter of oil around 2030. Overnight, a new strain of American energy triumphalism appeared and experts began speaking of “Saudi America,” a reinvigorated U.S.A. animated by copious streams of oil and natural gas, much of it obtained through the then-pioneering technique of hydro-fracking. “This is a real energy revolution,” the Wall Street Journal crowed in an editorial heralding the IEA pronouncement.

The most immediate effect of this “revolution,” its boosters proclaimed, would be to banish any likelihood of a “peak” in world oil production and subsequent petroleum scarcity. The peak oil theorists, who flourished in the early years of the twenty-first century, warned that global output was likely to reach its maximum attainable level in the near future, possibly as early as 2012, and then commence an irreversible decline as the major reserves of energy were tapped dry. The proponents of this outlook did not, however, foresee the coming of hydro-fracking and the exploitation of previously inaccessible reserves of oil and natural gas in underground shale formations.

Understandably enough, the stunning increase in North American oil production in the past few years simply wasn’t on their radar. According to the Energy Information Administration (EIA) of the Department of Energy, U.S. crude output rose from 5.5 million barrels per day in 2010 to 9.2 million barrels as 2016 began, an increase of 3.7 million barrels per day in what can only be considered the relative blink of an eye. Similarly unexpected was the success of Canadian producers in extracting oil (in the form of bitumen, a semi-solid petroleum substance) from the tar sands of Alberta.

…click on the above link to read the rest of the article…

Fracking Supply Chain a Climate Disaster, Doing Little to Uplift Poor Communities: Studies

March 8, 2016

Fracking Supply Chain a Climate Disaster, Doing Little to Uplift Poor Communities: Studies

One of those studies, published in Environmental Research Letters and titled, “Just fracking: a distributive environmental justice analysis of unconventional gas development in Pennsylvania, USA,” concludes that “the income distribution of the population nearer to shale gas wells has not been transformed since shale gas development.”

The other, a report released by Environmental Integrity Project titled, “Greenhouse Gases from a Growing Petrochemical Industry,” examines the post-fracking supply chain and concludes that the petrochemical industry’s planned construction and expansion projects announced in 2015 alone are the “pollution equivalent to the emissions from 19 coal-fired power plants.”

Not Quite “Shaleionaires”

Two academics from outside of the U.S. and employed by the United Kingdom’s Newcastle University published the fracking environmental justice report. Lead author Emily Clough serves as a political science lecturer at Newcastle, while co-author Derek Bell serves as a professor of environmental political theory.

Both of them undertook an effort, as they write in the study’s introduction, to examine “income distribution and level of education in addition to race and poverty” and how these juxtaposed communities fared both “before and after shale gas development.” As it turns out, if you are poor and live in close proximity to a Marcellus Shale basin oil or gas well, you will receive some economic benefit — but not a very big one.

“In the 2009–2013 data, we found that the percentage of those living below the poverty threshold was slightly lower in areas close to unconventional wells than in areas further away,” they wrote. “This difference is small but statistically significant.”

…click on the above link to read the rest of the article…

“They Spent It All On Hookers, Blow And Fancy Toys” – Hedge Fund Manager Predicts Lower Oil For Longer, Quantitative Easing For The People, And A Gold Bull Market

March 7, 2016

“They Spent It All On Hookers, Blow And Fancy Toys” – Hedge Fund Manager Predicts Lower Oil For Longer, Quantitative Easing For The People, And A Gold Bull Market

In 2011, as gold prices rocketed to $1900 and oil was trading above $120 a barrel, there were few analysts who saw anything but further gains. But Marin Katusa of Katusa Research had a different opinion. At a major commodity conference Katusa, to boos and jeers from the audience, held strong to his analysis that an imminent deflationary collapse in commodity prices was on the horizon. And collapse they did.

According to Katusa, who is closely involved in the Canadian resource sector, most people simply assumed the good times would go on forever… because it was different this time. But like any uninhibited party fueled by unlimited cash, the hangover was sure to follow.

There’s no doubt you had massive high paying jobs. In Canada, the province that benefited the most is Alberta… In the last twelve months they’ve had 70,000 layoffs of jobs paying over a hundred grand a year.

…when I’d go to these oil towns you’d sit down at the casinos with them and these guys were all about the hookers and blow… they were all about their toys… big fancy trucks… snow mobiles… and they’re in the field for two weeks and they make $20,000 and blow it all at the casinos.

You knew it couldn’t last.

As Katusa notes in his latest interview with Future Money Trends, though the crash has been brutal for the sector, it’s not over yet and it’s going lower for longer.

They [OPEC] can survive at $20 oil…

For two years everyone’s been saying, “OPEC’s going to cut back.”

They reality here is, why would OPEC cut production? That would only prop up the Russians and the shale sector.

…click on the above link to read the rest of the article…

Top Drillers Shut Down U.S. Fracking Operations as Oil Prices Continue to Tank

March 2, 2016

Top Drillers Shut Down U.S. Fracking Operations as Oil Prices Continue to Tank

Among them: Chesapeake Energy, Continental Resources and Whiting Petroleum. Chesapeake formerly sat as the second most prolific fracker in the U.S. behind ExxonMobil, while Continental has been hailed by many as the “King of the Bakken” shale basin located primarily in North Dakota.

Halliburton too, the drilling services goliath and namesake of the “Halliburton Loophole” exempting the industry from U.S. Environmental Protection Agency (EPA) enforcement of the Safe Drinking Water Act as it applies to fracking operations, has recently announced it will cut 5,000 drilling jobs globally (8 percent of its workforce).

“Continental Resources Inc., the shale oil pioneer controlled by billionaire wildcatter Harold Hamm, halted all fracking in the Bakken shale formation in the U.S. Williston Basin after posting its first annual loss since the company’s public debut in 2007,” wrote Bloomberg. “Continental said it has no fracking crews currently working in the Bakken. The company continues to drill there, focusing on areas with the highest returns, but will leave most wells unfinished this year.”

Chesapeake’s immediate future is just as bleak, if not more so, and it will halt drilling in the Marcellus Shale, Utica Shale, Eagle Ford Shale and elsewhere. The company sits as the top-producing driller in both the Utica and the Marcellus.

Whiting, the most prolific shale oil producer in the Bakken, will halt all of its fracking in the near-future. The company, 83 percent of whose produced oil comes from fracking the Bakken, will simultaneously slash its spending budget by 80 percent.

…click on the above link to read the rest of the article…

Shale Set To Decline Substantially This Year

February 23, 2016

Shale Set To Decline Substantially This Year

The International Energy Agency released its Medium Term Oil Market Report on February 22 at the IHS CERA Week conference in Houston, an annual confab for the elite of the oil industry. In its report, the IEA sees U.S. shale finally capitulating this year, falling by 600,000 barrels per day, plus another contraction of 200,000 barrels per day in 2017. By then, oil prices should rebound as supply and demand converge.

But, it won’t be the end of U.S. shale, the IEA says. “Anybody who believes that we have seen the last of rising LTO production in the United States should think again; by the end of our forecast in 2021,
total U.S. liquids production will have increased by a net 1.3 mb/d compared to 2015,” the IEA wrote decisively. LTO refers to “light, tight, oil,” or light oil from shale.

The near-term prospects don’t look so good, however. The Paris-based energy agency believes that crude oil markets will remain oversupplied throughout 2016, with the glut expected to be around 1.1 million barrels per day (mb/d). The supply overhang will disappear in 2017, but the extraordinary levels of oil currently siting in storage will delay a rise in oil prices.

The pain will be felt far and wide. Shale companies are slashing spending, laying off workers, and forgoing drilling plans in an effort to avoid bankruptcy. Collectively, OPEC has seen oil export revenues fall from a peak of USD$1.2 trillion in 2012 down to USD$500 billion in 2015. Revenues will further decline to just USD$320 billion this year.

…click on the above link to read the rest of the article…

Bakken December Data, Big Decline

February 18, 2016

Bakken December Data, Big Decline

The Bakken and North Dakota tight oil production data is out.

Bakken & North Dakota

Bakken production was down 28,604 barrels per day to 1,096,044 bpd. All North Dakota was down 29,506 bpd to 1,152,280 bpd.

Bakken & ND Amplified

This is just the last two years of the chart above. It gives a slightly better look at what is happening.

Bakken BPD per Well

Barrels per day per well fell to 106 in the Bakken and to 90 in all North Dakota.

North Dakota Wells Producing

From the Director’s Cut

Producing Wells

November 13,100

December 13,119 (preliminary)(all time high was Oct 2015 13,190)

10,756 wells or 82% are now unconventional Bakken–Three forks wells

2,363 wells or 18% produce from legacy conventional pools.

–

Permitting

November 125 drilling and 0 seismic

December 95 drilling and 0 seismic

January 78 drilling and 0 seismic (all time high was 370 in 10/2012)

–

ND Sweet Crude Price

November $32.16/barrel

December $27.57/barrel

January $21.13/barrel

Today’s $16.50/barrel

(lowest since February 2002)(all-time high was $136.29 7/3/2008)

–

…click on the above link to read the rest of the article…

ANOTHER NAIL IN THE U.S. EMPIRE COFFIN: Collapse Of Shale Gas Production Has Begun

January 30, 2016

ANOTHER NAIL IN THE U.S. EMPIRE COFFIN: Collapse Of Shale Gas Production Has Begun

The U.S. Empire is in serious trouble as the collapse of its domestic shale gas production has begun. This is just another nail in a series of nails that have been driven into the U.S. Empire coffin.

Unfortunately, most investors don’t pay attention to what is taking place in the U.S. Energy Industry. Without energy, the U.S. economy would grind to a halt. All the trillions of Dollars in financial assets mean nothing without oil, natural gas or coal. Energy drives the economy and finance steers it. As I stated several times before, the financial industry is driving us over the cliff.

The Great U.S. Shale Gas Boom Is Likely Over For Good

Very few Americans noticed that the top four shale gas fields combined production peaked back in July 2015. Total shale gas production from the Barnett, Eagle Ford, Haynesville and Marcellus peaked at 27.9 billion cubic feet per day (Bcf/d) in July and fell to 26.7 Bcf/d by December 2015:

Top-U.S.-Shale-Gas-Fields-Production

As we can see from the chart, the Barnett and Haynesville peaked four years ago at the end of 2011. Here are the production profiles for each shale gas field:

Barnett-Shale-Gas-Field

According to the U.S. Energy Information Agency (EIA), the Barnett shale gas production peaked on November 2011 and is down 32% from its high. The Barnett produced a record 5 Bcf/d of shale gas in 2011 and is currently producing only 3.4 Bcf/d. Furthermore, the drilling rig count in the Barnett is down a stunning 84% in over the past year.

Haynesville-Shale-Gas-Field

The Haynesville was the second to peak on Jan 2012 at 7.2 Bcf/d per day and is currently producing 3.6 Bcf/d. This was a huge 50% decline from its peak. Not only is the drilling rig count in the Haynesville down 57% in a year, it fell another five rigs this past week. There are only 18 drilling rigs currently working in the Haynesville.

…click on the above link to read the rest of the article…

Rig Count: Capitulation?

January 10, 2016

Rig Count: Capitulation?

After last week’s moderate drop in rig count, the amount of horizontal oil rigs seems to implode this week.

The U.S. land rig count was down 37 this week and the land horizontal rig count was down 30.

Is this capitulation? Hard to say but it’s the biggest drop since March 2015. And, the Fayetteville Shale play officially bit the dust this week with zero rigs for the first time since the play began in 2005.

The tight oil horizontal rig count was down by 20 and the key Bakken-Eagle Ford-Permian HRZ rig count was down by 14. The Bakken lost 3 rigs, the Eagle Ford, 4, and the Permian, 7.

Shale gas lost 8 HRZ rigs. The Haynesville lost 2, the Marcellus, 6, the Utica 1, the Fayetteville, 1. The Woodford and Barnett each gained 1 rig.

(Click to enlarge)

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