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Oil and Gas Roundup — Feb. 3

February 03, 2017
TOPICS: In the news
Oklahoma rig count jumps 6; U.S. count up 17

The number of rigs exploring for oil and natural gas in Oklahoma climbed by six to 102 this week, up 22 from one year ago.

Nationwide, the rig count rose by 17 to 729. Oil-seeking rigs numbered 583; 145 rigs were searching for natural gas, and that number was flat week-over-week. A year ago, 571 rigs were in operation in the U.S.

Of the other major oil- and gas-producing states, Texas was up four to 355; Louisiana was down one to 52; New Mexico was up four to 46; North Dakota (36), Pennsylvania (33) and Ohio (21) were unchanged; Colorado climbed one to 26; Wyoming rose one to 20.

The bulk of the new activity was in the Cana Woodford, which saw its rig count climb to 56, tying the play with the Eagle Ford for the second-most active basin. The Permian gained four rigs to 295.

Oklahoma posts first GDP gain in four quarters

Improving agriculture and energy prices helped Oklahoma reverse three consecutive quarters of decline in another sign that the state economy may be crawling out of a two-year slowdown.

Oklahoma's gross domestic product in the third quarter of 2016 posted its first gain in four quarters, but still ranked No. 47 among U.S. states, according to a report released Thursday by the U.S. Bureau of Economic Analysis.

The state's GDP gained 0.7 percent from the previous quarter, following declines of 2.7 percent, 1.9 percent and 7.5 percent in the three previous quarters.

"Since a lot of what we produce is commodities, when commodity prices fall, Oklahoma's GDP has no choice but to fall. It's a matter of math," said Russell Evans, executive director of the Steven C. Agee Economic Research & Policy Institute at Oklahoma City University.

Overall GDP improved in 48 states and in Washington, D.C., in the third quarter. South Dakota had the largest gain at 7.1 percent. New Mexico and Alaska each declined by 0.1 percent.

Two consecutive quarters of GDP decline technically defines a recession, meaning the state emerged from a recession in the third quarter, following three quarters of declines.

Evans, however, said it's important to consider both GDP and employment together. Both have been down over the past two years, although not necessarily at the same time.

Read Adam Wilmoth’s story at NewsOK.

House votes to roll back Obama venting and flaring rules

The House voted Friday to repeal an Obama administration regulation aimed at reducing methane emissions from fracking.

Lawmakers voted 221-191 in favor of a resolution disapproving of the Obama-era rule from the Department of the Interior. Federal law allows Congress to override recently approved regulations under the Congressional Review Act.

The resolution rolls back an eleventh-hour regulation aimed at cutting methane, a powerful greenhouse gas, from oil and natural gas wells on federal lands as part of former President Obama's climate change agenda. The Senate is expected to vote soon on a companion resolution repealing the methane venting and flaring regulations.

Environmental groups condemned the repeal as a license to pollute for drillers, while wasting valuable methane gas that should be paid for by companies operating on public lands instead of burnt off and just released into the air.

Read more from the Washington Examiner.

Shale oil makes $70 the new $100

Wood Mackenzie's outlook of breakeven oil prices in North American shale basins puts the average shale breakeven price for new wells below $50 a barrel, meaning that most shale drillers could turn a profit even with oil prices at the current level of $54 per barrel.

Even the highest shale breakeven prices in Wood Mackenzie's projections are in the low $70s, down from $100 a few years ago, which threatens to hinder OPEC's ability to lift oil prices through production cuts.

Consider a driller in the Bakken with an average breakeven price of $52 a barrel. Add in, say, $4 for overhead and interest charges and assume the oil is being sent from North Dakota to refiners on the Gulf Coast by railroad at $12 a barrel. The all-in breakeven price for that barrel is $68. If there's space on a pipeline available, then that comes down to maybe $63 (which is why President Trump's push for new pipelines is welcomed particularly by inland drillers).

In contrast, drillers in the Wolfcamp basin -- part of the prolific Permian basin -- enjoy average breakeven prices of about $42 to $43 a barrel on Wood Mackenzie's projections. Add in $4 of overhead and interest but only $3 to ship the oil across Texas, and the all-in breakeven price is about $50. No wonder the Permian shale is the hottest area for E&P investment.

Read more at Bloomberg.

Review of pipeline could be beginning of end for opponents

The Army's review of a proposal to finish the Dakota Access pipeline could be the beginning of the end for opponents who have been fighting the project for nearly a year.

But the American Indian tribe at the center of the debate, the Standing Rock Sioux, vows to keep battling the pipeline in court out of fear that an oil leak could contaminate its drinking water.

Here's a look at the legal steps that remain before the last section of pipe can be laid and the final options to stop it.

On Tuesday, the acting secretary of the Army ordered a review of an earlier decision to block the last section of pipeline from being laid under a Missouri River reservoir. The move came just days after President Donald Trump issued a memo calling for reconsideration of the December decision by the Army Corps of Engineers.

Based on a discussion with the Army secretary, Robert Speer, Republican Sen. John Hoeven said Wednesday that there is no doubt in his mind that permission to finish the project will be granted.

Read more from the AP at ABC News.
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