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Oil and Gas Roundup — May 15

May 15, 2017
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

U.S. rig count up for 17th straight week as Oklahoma count falls

U.S. energy firms added oil and natural rigs for a 17th week in a row, extending a 12-month drilling recovery that is expected to help boost crude production in the United States to a record high next year.

The Oklahoma rig count fell by two to 118, the first time in a year the count has declined in back-to-back weeks.

Nationwide, drillers added eight rigs in the week to May 12, bringing the total count up to 885, Baker Hughes Inc. said on Friday.

Texas added eight rigs this week to 451. Colorado, North Dakota, Ohio and Wyoming each gained one rig this week, while Alaska and New Mexico both lost one rig.

The pace of rig count additions has declined with the total over the past four weeks falling to the lowest since March.
U.S. crude output was expected to rise to an average of 9.3 million barrels per day (bpd) in 2017 and a record high 10.0 million bpd in 2018 from 8.9 million bpd in 2016, according to federal energy data.

Higher output in non-OPEC countries, particularly the United States, Canada and Brazil, which has offset the Organization of the Petroleum Exporting Countries' (OPEC) deal reached last year to cut production, should limit any upside to global oil prices through the end of 2018, the U.S. government said.

U.S. crude futures, however, rebounded this week to trade around $48 on Friday, putting the front-month contract on track to increase for the first time in four weeks, on expectations that OPEC will extend production cuts beyond the end of June and on falling U.S. inventories.

OPEC and other producers meet on May 25 to decide whether to extend cuts. Saudi Arabia, OPEC's de-facto leader, has said it expects an extension to the end of 2017 or possibly beyond.

U.S. crude stockpiles, meanwhile, posted their biggest one-week drawdown since December last week as imports dropped sharply.

Forbes profiles Oklahoman and OIPA member Kate Richard

Kate Richard grew up in the ultimate company town, Oklahoma City, where virtually every adult seemed to labor for King Oil, and dinner-table talk revolved around the newest exploits of the industry’s flamboyant wildcatters-turned-tycoons. As a youngster, Richard thrilled to her grandfather’s stories of sinking the earliest wells in Angola for what’s now Conoco, and the accounts from her great uncle—a founder of Devon Energy—of planting platforms in the Caspian Sea off Azerbaijan following the fall of the Soviet Union.

The anchors of everyday life regularly made way for drilling: Richard heard tales of how a high school sports facility was moved to accommodate a rig and pumpjack, and that airport runways got rerouted to turn the tarmac into an oilfield.

Richard graduated from Harvard in 2004, practiced investment banking for Goldman Sachs, and then vetted energy investments for Michael Dell’s MSD Capital. But when Oklahoma City became the capital of the shale oil revolution, the 28-year-old returned home and launched an oil and gas private equity fund—Warwick Energy—in 2010. At the time, oil prices were hovering around $90 per barrel.

She was intrigued that even with crude at those historically lofty levels, the big drillers were somehow generating mediocre returns; nor was she confident prices would remotely remain so high. Richard recalled that crude was selling for $17 (the equivalent of $32 today) in the mid-1990s when she was a teenager, and although Oklahoma City was far from a boomtown, producers had made enough money to keep pumping plenty of the thick black stuff.

So in those heady times, Richard took an unusually cautious, analytical approach to investing. She used sophisticated analytics to target small patches of land where drillers could produce profitably in times of cheap oil. After prices collapsed in late 2014, her Warwick Energy Group profited in a period when most private equity shops showed poor results, and a number of independent producers either went bust or struggled through restructurings that pounded their share prices.

Read the Forbes story.

Signs of oil boomlet in North Dakota after pipeline finished

There are hundreds more jobs than takers in the heart of North Dakota's oil patch. Finding a hotel room, parking space or table at a restaurant is no longer easy.

More than two years after the state's unprecedented oil bonanza fizzled to a lull, North Dakota - the nation's No. 2 oil producer behind Texas - is experiencing a sort of boomlet that has pushed daily production back above 1 million barrels daily.

"There is a long-term optimism that was not here just a year ago," said Williston Republican Sen. Brad Bekkedahl, whose western North Dakota district is in the epicenter of the state's oil-producing region.

Industry officials and others say the uptick comes from a bump in crude prices, regulatory certainty with the more drill-friendly Trump administration, better technology, and the prospect of nearly half of the state's crude coursing through the disputed Dakota Access Pipeline, which could open markets abroad where top prices are typically fetched.

Though the pipeline still faces opposition from American Indian tribes and environmentalists who fear it threatens cultural sites and drinking water, Ron Ness, president of the North Dakota Petroleum Council, calls it a "game-changer that opens up everything."

The $3.8 billion pipeline - expected to be fully operating next month - opens up the possibility for North Dakota oil to be sold on the world market, where industry officials say it could earn several dollars more per barrel. Shippers also can save about $3 per barrel moving the oil by pipeline rather than using the mile-long trains that have carried North Dakota crude to the Gulf Coast since 2008, industry officials say.

Read more at the Associated Press.

Trump's China deal boosts U.S. LNG without rule change

America’s shale gas could soon head to China under long-term contracts for the first time, bolstered by a new trade deal that may not even change existing rules.

Cheniere Energy Inc., the first exporter of natural gas from the lower 48 states, sees the agreement as “amplifying and accelerating conversations about new long-term contracts” with China, said Eben Burnham-Snyder, a spokesman for the Houston-based company. While the deal announced Thursday by President Donald Trump’s administration doesn’t appear to alter access for Chinese companies to U.S. gas cargoes, it welcomes China to receive shipments and engage in long-term contracts with American suppliers.

Fifteen months after Cheniere shipped its first cargo of shale gas, putting the U.S. on course to become a net exporter of the fuel by next year, the agreement between the world’s two largest economies may unleash even more American supply on a glutted global market. The deal could pave the way for a second wave of investment in U.S. LNG terminals, connecting the fastest-growing supplier with the biggest growth market, according to Wood Mackenzie Ltd.

“In the last month, Cheniere has had extensive negotiations with several Chinese commercial entities and obviously with this agreement we expect this to continue and accelerate,” Burnham-Snyder said in phone Friday.

While Cheniere shipped nine cargoes from its Sabine Pass facility in Louisiana to five terminals in China over the last year, according to Burnham-Snyder, those cargoes were sold on the so-called spot market for immediate delivery, rather than under long-term contracts.

Read more at Bloomberg.
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