Articles Posted in Oil and Gas News

Another recent study, this one by the American Petroleum Institute (API), a national association that represents the oil and gas industry, has shown how drilling and spending on shale oil and gas boomed in 2011. This report stated that 10,731 shale oil and natural gas wells were drilled and $65.5 billion was expended in that year alone. Just a few years ago, in 2009, there were only 5,531 such wells and 7,077 shale wells. Almost twice as many shale gas wells were drilled in 2011 as the year before, with 6,759 drilled in 2011 compared to 3,414 in 2010.

This is great news for the American oil and industry, especially for those states like Texas rich in shale oil and gas. The number of wells drilled was up 43.8 percent from 2010, and drilling expenditures were up 87.6 percent in the same time frame. Shale gas drilling expenditures accounted for more than half of all drilling expenses in 2011, up from only one-fourth in 2009. Shale wells now account for almost a quarter of all wells drilled in the US–API’s Statistics Director Hazem Arafa estimates it at 23%.

Meanwhile, offshore drilling declined in the past years, in large part due to the moratorium after the Deepwater Horizon incident, but picked up again in 2011, with expenditures rising to $8.1 billion. That is still very little compared to the 2009 expenditures of $24.9 billion, but is more than double the 2010 figure of only $4 billion. Overall, all types of wells drilled totaled 44,160 with an expenditure of $124,794,493,000 in 2011, showing the health of the entire industry which supports 9.2 million US jobs and produces $85 million a day in government revenue. This industry represents 7.7% of the US’s total economy and has invested over $2 trillion in the US since 2000, investing in all kinds of energy solutions.

Good news for Texas mineral owners and the Texas oil and gas industry in the form of more investment in our shale resources! An new oil and gas company out of Fort Worth, Texas, Titan River Energy, has announced they will use $100 million from a capital commitment to drill and develop in Texas’s oil shales. Titan River gets its name, according to Charles “Chip” Simmons Jr., Titan River chief executive officer, from the largest of Saturn’s moons, “the only place other than Earth where we’ve discovered [liquid] hydrocarbons.” Mr. Simmons said, “One of the things that differentiates Titan River is we’ve got all the capability to not only pursue land acquisitions but also geologic assessments, drilling, completion and operations.”

The $100 million for this new investment was provided by Ridgemont Equity Partners of North Carolina and Post Oak Energy Capital of Houston. Titan River will also invest an undisclosed amount in the project. Titan River has already leased 2,500 square feet of office space in downtown Fort Worth for a corporate headquarters and another office in The Woodlands.

Titan River has most recently focused on Eagle Ford Shale, but the company is interested in the Wolfcamp Shale as well. The company is looking statewide in Texas for possible production locations. Lee Matthews, the Chief Operating Officer and President of Titan River, hinted they may expand outside Texas. He has said that “We’re not totally limited to Texas, but our preference is to get started in our home state.” Mr. Simmons has been quoted as saying that the focus will be on converting acreage into reserves through drilling joint ventures, farm-ins and leasing opportunities. Mr. Matthews told reporters that starting an upstream operating oil and gas company was a lifelong goal. The management team includes Don Pearce, executive vice president of drilling operations; Kent Bowker, executive vice president of geology; and Brennan Potts, vice president of land and business development.

The reaction to the death of Venezuelan strongman Hugo Chavez has varied around the world. His antagonism towards the US was well known and vocal. But now that he is gone, the oil and gas industry is curious about what will happen to Petroleos de Venezuela SA (PDVSA), the Venezuelan national oil company, which controls most of the country’s substantial oil and gas resources.

Since Chavez was elected, only two multinational oil companies remained in Venezuela, Chevron and Repsol SA. So the future of PDVSA is crucial not only to Venezuela, but to the world oil market, since Venezuela is a leading oil producing nation.

Chavez based much of his popularity on handouts during his 14 years in power. A lot of the money he used for these handouts came from Venezuela’s oil wealth, to the detriment of proper management and maintenance at PDVSA. Since Chavez came to power in 1999, PDVSA’s output has declined by 600,000 barrels per day. The refineries are only working at 60% of capacity. The company employed 30,000 workers in 1999, but currently employees only 115,000. PDVSA has had to rely on Chinese financial support, especially since the company is $85 billion in debt, but even the Chinese show signs of weariness at the mismanagement at PDVSA.

Recently, DCP Midstream and DCP Midstream Partners confirmed plans to build a cryogenic plant in South Texas to service the Eagle Ford shale. The cryogenic plant will provide natural gas processing services. The construction will be by a joint venture owned two thirds by DCP Midstream and one third by DCP Midstream Partners.

The plant is planned for Goliad, Texas, is expected to be completed in early 2014, and would be the seventh DCP plant in Texas (and the third brought online by the company in the last 18 months). With this latest venture, the year’s total co-investments for DCP and Partners was over $1 billion. The Goliad plant is expected to have a capacity of 200 million cubic feet per day and would allow the DCP Eagle Ford properties to provide complete service for the Gulf Coast markets. These properties include 6,000 miles of gathering lines, three fractionators with a capacity of 36,000 barrels per day, access to the Sand Hills natural gas pipeline, and long-term commitments for 900,000 acres in the Eagle Ford. About the new plant project, DCP Midstream president and chief operating officer Wouter van Kempen said, “The DCP Midstream enterprise continues to execute on its impressive slate of growth projects underpinned by solid contracts in liquids rich areas.”

DCP and Partners are not the only ones, nor even the most recent, to jump on this bandwagon. In February 2013, Howard Energy Partners announced it will build a cryogenic plant to process natural gas in Webb County, Texas at a cost of about $100 million. This new plant will service Eagle Ford’s shale but also the shale plays at Olmos and Escondido. Howard Energy says they will start construction of the cryogenic plant in April and also expect it to be completed in early 2014. The company signed contracts with Escondido Resources II and Laredo Energy in relation to the new plant.

Pioneer Natural Resources Co. (PNR) has 155,000 gross acres in the Barnett Shale play- two thirds in the liquids-rich area and one third in the dry gas area. PNR has operated this area since 2007.

Pioneer, a company out of Dallas, started divesting procedures for these shale play properties in September 2012. The chairman and chief executive officer of Pioneer, Scott Sheffield, said when the divestment was announced last year, “The sale of our Barnett shale properties will allow us to strategically reallocate capital to our higher-return, core assets in the Spraberry vertical play, the horizontal Wolfcamp shale play, and the Eagle Ford shale.” In December last year, Pioneer received several bids but none were sufficient to cover the value of the assets according to the company. Due to this lack of acceptable bids, Pioneer will keep operating the Barnett assets.

The Barnett properties were reclassified to discontinued operations in the third quarter. Now that the divestment process has been halted, the properties will be again reclassified to continuing operations for the fourth quarter of 2012. In the fourth quarter of 2012 this area produced about nine thousand barrels of oil equivalent per day. Pioneer has one rig currently in the liquids-rich Combo area and plans to continue to focus on drilling in this area. In the fourth quarter, the company drilled eight new wells in this area and put eight wells on production.

The Texas Petro Index is put out by the Texas Alliance of Energy Producers, an organization that represents the interests of the oil and gas industry in Texas with the state and federal government. The TPI is a composite index of upstream economic indicators and was created by economist Karr Ingham. The index is updated by Mr. Ingham and released each month. Late this summer, in July and August 2013, the index hit record highs. The previous records occurred in September and October of 2008. The July 2013 index was up 4.4% from the same month in 2012, and in August 2013 the index increased 4.6% from August 2012.

Contributing to these record numbers were upward revisions in Texas oil production numbers. Crude oil production was up 16.7% from the previous year, and oil prices remained high and hit $100 per barrel on average in July 2013. In August 2013 the price per barrel was 13.7% higher than in August 2012. The increase in oil prices resulted in an increase of 32.8% in the value of oil produced in Texas compared with 2012. For natural gas, production decreased from 2012 by about 5.8% but higher wellhead prices, which were as much as 14.1% higher than in 2012, more than offset the lower production. The net value of gas produced in Texas increased by 7.5%.

Employment numbers in the oil and gas industry have also been positive. Earlier this year, the number of workers in the Texas oil and gas sector hit 282,700, which is also a record according to the Texas Workforce Commission.