The State of Oil and Gas: June 5, 2017

Whew!  Five days later than usual.  I’ll stick with the “business is booming” story for now.

Libya says it has exceeded 800,000 barrels of oil per day recently, with the possibility of hitting 1MM in the near future if they can get some contractual issues ironed out.

The EIA expects the U.S. to produce more gas this year than it previously thought.

A new study suggests that re-fracking can bring so much new production online from an old well that it’s just like drilling a new well.  It doesn’t mention whether re-fracking makes it possible to extract gas that otherwise would remain trapped in the formation, or just speeds up the extraction of gas that would come out anyways.

Sabine Pass continues to increase exports of LNGs.  The plant took in 2.3 Bcf per day in the second week of May, up from 2.1 Bcf per day in the first week.

A recent trade deal will make it possible for the U.S. to export LNGs to China.  Nice.

Some think that OPEC can’t just extend their production cuts, they need to double down on them.  There’s no other way to chew through the surplus.

Mexico has been increasing its reliance on natural gas.  Interestingly, it has a shockingly small number or drilling rigs running.  Good for the U.S., weirdly bad for Mexico.

This article discusses what OPEC is trying to accomplish by cutting production.  It’s pretty interesting, but even more interesting is the fact provided in the article that U.S. oil production is expected to hit 9.3 million barrels per day this year, and 10 million barrels per day next year.  That’s a lot of new production, and all thanks to OPEC and Russia cutting production.  They’re playing a dangerous game, and at some point they’ll probably have to start producing at full speed or they’ll just create a behemoth in the U.S.

This article goes into just how much money OPEC has “lost” since their announcement in November of 2014 that they would flood the market with cheap oil.  It also briefly mentions that Saudi Arabia has explored using fracking in its own oil fields, with little success.

There aren’t enough frack crews.  This was one of the factors that I thought might slow down the growth of the oil and gas industry when the price of oil and gas started to recover.

On top of that, somebody crunched the numbers and decided that the Marcellus/Utica region needs an additional 45 drilling rigs (and corresponding frack crews, of course) to fill the new pipelines that are going to be completed in this area.  There are only about 50 rigs running in this area right now.  There used to be a lot more than those two number combined, back in the boom before 2014, so if the crews could be found the rigs could be run and the gas produced.

Both oil and gas prices are down again.  Oil is down in spite of OPEC and Russia extending the production cuts for another nine months.  This article says the extension is going to have the desired effect and oil prices will go higher again.

Natural gas prices have gone down in part because some power producers are switching back to coal.  This leads me to think that we’ll probably be pushing the limits of natural gas storage at the end of injection season this year, just like last year, with the associated low price of natural gas.

Marcellus drillers aren’t drilling a lot of new wells compared to other oil or natural gas plays.  They’re completing DUCs.  There’s a lot of drilling that needs to be done in the near future, and they’ll have to bring on some new rigs soon.

2 thoughts on “The State of Oil and Gas: June 5, 2017

  1. Antero Resources contacted my family in January 2017, to inform us that we are heirs to 23 acres in Tyler County. Tyler county records indicate that I own an undivided.00059 net mineral acres. I signed a lease and received a $200 bonus check with 15% royalty. I realize this isn’t much, but I don’t have many relatives alive who signed their leases.
    I recently discovered that Antero applied for a permit to drill in the area where I own land.
    My question is: will Antero contact me if oil is discovered? And since there aren’t many heirs that signed the lease, will royalties be divided equally among those who signed the lease? I don’t know much about the oil business, but I’m curious what this is worth. Also, what should be doing to make sure I’m not being taken advantage of. Thanks!

    • Antero will contact you once they start producing. By the way, they’ll mostly be producing natural gas in Tyler County, WV. There’s very little oil that comes out of the wells in this part of the Marcellus Shale. Once they start producing, they’ll send you a Division Order. Make sure the D.O. doesn’t change the lease. If it does, cross out those things that are different from the lease, initial next to those changes, sign it and send it back. The royalties will not be split differently because some people didn’t sign. Those peoples’ royalties will be place in escrow or their interests will be sold by the court in a partition suit. You could show up and buy them, just let all the other buyers know that you’re family and they’ll (probably) let you buy them. As far as not being taken advantage of, that’s what you do when you negotiate the lease, for the most part. You can check your check stub to see how much they’re deducting in post-production costs and if it seems like a lot you can try to get them to change it. That’s about all you can do with the small interest that you have. Good luck!

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