Halcón Resources Reduces 2015 Budget

January 12, 2015 Elizabeth Alford

In a press release on January 8th, Halcón Resources executives announced that they will slash their drilling and production budget almost in half for 2015. The Houston-based company affirmed it will reduce operations in the Bakken to two rigs in the Fort Berthold area of North Dakota.

This is the second round of cuts for the Bakken producer in less than two months due to the continued decline in oil prices. Projected spending for the company is set at between $375 - 425 million, which represent a steep decline from 2014 numbers of $950 million. Even with decreased spending for 2015, production is expected to increase to an average 40,000-45,000 barrels per day, compared to 43,554 b/d in the third quarter of 2014.

“Halcon CEO Floyd Wilson says that, “Our plan is to deploy capital to assets where results indicate EURs and initial production rates higher than our published type curves. We are comfortable with our current liquidity position and we expect our strong hedge portfolio to continue generating income well into 2016. Although we are significantly hedged, the continued weakness in crude oil prices, combined with elevated service costs, calls for conservative planning. We expect to see these costs come down dramatically during 2015.”

Read the full report at halconresources.com.

Obama Threatens Another Veto for Pipeline

January 8, 2015 Elizabeth Alford

On the very day that Congress reconvened, President Obama spoke out about his intentions to veto the latest version of the Keystone pipeline bill. This pronouncement escalates the standoff that has continued for over six years as lawmakers, divided along party line, have debated whether the benefits outweigh the potential risks of such a venture. The GOP has been very clear that this issue would be the first order of business for the 114th congress.

Until now, the president has been vague about his intentions and as late as Monday was not speaking publicly about this. But that all changed on Tuesday when White House Press Secretary, Josh Earnest, announced that a veto is likely.

“Earnest told USA Today that “I can confirm for you that if this bill passes this Congress, the president wouldn’t sign it either. And that’s because there is already a well established process in place to consider whether or not infrastructure projects like this are in the best interests of the country.”

Understandably, the President's decision has been difficult and disappointing news for Republicans who had hoped that their newly elected majority status would change the outcome.

“Sen. Mitch McConnell, R-Ky said that, “The president threatening to veto the first bipartisan infrastructure bill of the new Congress must come as a shock to the American people who spoke loudly in November in favor of bipartisan accomplishments. Once again the president is standing in the way of a shovel-ready jobs project that would help thousands of Americans find work.”

Read more in usatoday.com

photo credit: Barack Obama via photopin cc

Keystone Pipeline Set for Vote this Friday

January 6, 2015 Elizabeth Alford

As Congress heads back into session, GOP leaders wasted no time in submitting the latest version of the bill that would approve additional construction on the Keystone pipeline. The bill should come to a vote in the House as early as Friday before heading to the Senate early next week.

With all the controversy surrounding this construction, it has been quite a battle to get to this point. The application for this disputed section of the pipeline was submitted over six years ago and has been approved by the house many times. The difference now is that with a newly elected Republican majority, the bill is expected to easily pass both houses. The White House continues to remain silent about whether President Obama will veto the bill, though he recently shared his skepticism about its value to American consumers.

“The bill’s author, Rep. Kevin Cramer (R-N.D.), said in a statement that, “By passing this bill in the House and Senate with bipartisan votes, we can help provide the political muscle the president needs to finally approve this piece of critical transportation infrastructure, which will contribute thousands of jobs to the national economy and further our push toward national energy security.”

The construction of this pipeline is crucial to transport the record amounts of oil (830,000 b/d ) being produced in the Bakken region to the refineries on the Gulf Coast. Currently, just under 70% of all the oil produced in North Dakota is transported out of the state by rail. The Keystone XL Pipeline could alleviate some of the rail congestion being caused by the transport of oil, which would free up the rail service in North Dakota and across the midwest for the transport of other goods, primarily agricultural.

No Income Tax for North Dakota?

January 4, 2015 Elizabeth Alford

In a few short days, the North Dakota legislature heads back into session. Expected to take center stage are several key funding issues recently made more crucial by the continued decline in oil prices

First is an initiative by GOP members that would effectively wipe out the state income tax. A new bill that is expected to be introduced early in the session will reduce the income tax rate to zero. This is a counter to Gov Dalrymple’s proposal for a 10% decrease in personal and corporate income tax that was made in an effort to draw more people to the region. This issue is highly contested since there is great concern over the potential lost revenue due to plummeting oil prices.

North Dakota's state funding is tightly tied to taxes on oil and gas production and was responsible for more than half the state’s revenues for 2013. So as oil prices decline, legislators have reason to be nervous. In addition to expected lower production, there is a quirky law from 2001 that allows tax exemptions when oil hits a certain low price point. Though the formula is a bit complicated, basically if oil stays below $52.58 (2015) for five consecutive months, the percentage of tax decreases, potentially resulting in untold millions in lost revenue.

Reduced tax revenue brought on by low oil prices has already put many services at risk, so reducing state income tax is making many lawmakers nervous.

“Senate Majority Leader Mac Sneider told a teh Jamestown Sun that “I think at a time when we’re seeing warning signs of not wanting our budget to be dependent on the price of a commodity, I think eliminating the income tax is shortsighted. We’ll be focusing on tax relief, but it’ll be on the tax that people are most concerned about, and that’s property tax.”

Another funding issue that ND legislators will be deciding is the way the state divides tax revenues. When Gov. Dalrymple rolled out his proposed budget, it included a change in the state’s oil production tax distribution formula that would shift the way funds are split and allow more money to be funneled back to the county level. Currently local governments receive 25 percent of these funds but this would increase that 60 percent, which would be vitally important to improve local infrastructure (including roads, water plants and housing) that has not caught up with the demand.

Year in Review: Record Production

January 2, 2015 Elizabeth Alford

2014 was one for the record books as exploding production elevated the Bakken region to major-player status amongst the world's energy leaders.

January began as North Dakota set several all-time highs including having over 10,000 producing wells averaging 973,045 b/d and natural gas at 1,086,571 MCF/day.

By June, the NDIC announced it had hit the 1 million b/d in production. This long anticipated goal was slowed a bit by difficult weather in the winter but by the time it happened, the U/S. was positioned as the worlds largest oil producer. Even as oil prices began to decline throughout the fall, production continued to break records and by September, production averaged 1.2 million b/d.

The latest numbers from the NDIC show that at the end of the year, the Bakken and Three Forks regions alone averaged 1,118,010 barrels per day and boasted two more all time high records for producing wells (11,892) and gas (44,317,381 MCF = 1,429,593 MCF/day).

Whether this volume of prodcution can be maintained with current price declines is unclear, but the EIA predicts that drilling will slow for 2015 due the uncertainty.

Read more at dmr.nd.gov