Record Production for Bakken

February 18, 2015 Elizabeth Alford

Despite declining rig counts across the country, oil production remains at record levels and is currently exceeding demand.

Related: Bakken-Three Forks rig count

According to the Energy Information Administration (EIA), US oil production hit a record 9,226,000 barrels per day last week, with production from the Bakken formation up to an average of 1.2 million barrels a day, a 28% year-over-year increase.

This record production is contributing to an international surplus and keeping crude prices low. It is estimated that oil supply is exceeding demand by over one million bbl/d in the global market.Inventories for U.S. commercial crude oil increased by 4.9 million barrels this week. At 417.9 million barrels, U.S. crude oil inventories are at the highest level for this time of year in at least the last 80 years. Consumption grew by 0.9 million bbl/d in 2014, averaging 92.1 million bbl/d for the year. EIA predicts global consumption to grow by 1.0 million bbl/d in both 2015 and 2016 and global oil inventories to continue to build in 2015.

“CNBC recently reported that, “The decline in the US rig count likely remains well short of the level required to slow US shale oil production to levels consistent with a balanced global market. Lower oil price will be required over the coming quarters to see the US production growth slowdown materializes.”

Kinder Morgan Acquires Hiland

February 17, 2015 Elizabeth Alford

Kinder Morgan announced last week that it finalized the acquisition of Hiland Partners, a midstream firm founded by Harold Hamm, CEO of Continental Resources. The deal, reported at $3 billion, includes assuming almost $1 billion in debt.

Hiland primarily serves production from the Bakken Formation in North Dakota and Montana and by operating crude oil gathering/transportation pipelines and gas gathering/processing systems including roughly 1,225 miles of pipeline. Company officials anticipate retaining nearly all of Hiland’s approximately 430 employees.

“We are delighted to establish a substantial midstream footprint in one of the most prolific oil producing basins in the United States,” said KMI Chairman and CEO Richard D. Kinder. “Hiland’s systems serve some of the Bakken’s largest and most successful producers, including Continental. We look forward to continuing to provide high quality midstream services to these producers and pursuing incremental growth opportunities in the basin.”

Harold Hamm began contemplating the sale due to financial worries stemming from plummeting oil prices and a very public, and expensive divorce. Hamm reportedly sold the interest in order to gain the necessary cash for a $1 billion divorce settlement, one of the largest divorce tabs ever recorded. This acquisition is on the heels of a personal loan in December at the same time the company slashed its 2015 capex for the second time.

John Hofmeister Challenges NAPE Attendees

February 16, 2015 Elizabeth Alford

In a short talk to the attendees of the NAPE business conference, the former president of Shell Oil Company, John Hofmeister, shared his perspective on the current regulatory and political environment and encouraged participants to take leadership.

Hofmeister gave a brief update on what he sees as a crisis in the energy sector, citing the massive shutdowns of coal plants and the U.S. neglect of nuclear power sources. He also highlighted our inability to keep up and believes we cannot meet global oil demand by 2020. He reminded participants that the world will use more, not less, energy and that the post industrial electronic age brings more demand than ever.

“Addressing the lunch crowd, John Hofmesiter said, “The devices that we love and that our children love even greater, are penetrating the population by the billions and they only work with electrons.”

Hofmeister laid much of the blame squarely at the feet of the legislature, claiming that the regulatory burden is too high and insisting that someone must provide leadership and look out for the public interest. During much of the speech, he took on the fervor of a political candidate as he called on the energy guardians to “lift the game” to renovate, expand, build and change the current political climate that is hampering growth.

“Hofmeister encouraged the crowd to take leadership, saying, “It (Energy) is our national security. It is our economic security. it is the wealth of the nation. It is the most highly value creating opportunity this nation has to achieve the kind of economic growth that pays down the deficit, that enables us to secure social security or medicare, that enables us to create jobs by the millions, that enables us to put savings in bank accounts, that enables us to provide education for our children, that enables us to build infrastructure for water and sewer and roads and highways and everything else we rely upon, that enables our basic freedoms to be recognized, to be honored and to be realized. This is our job.”

NAPE Business Conference 2015

February 12, 2015 Elizabeth Alford

Hundreds gathered in Houston today for the opening of the NAPE Summit Business Conference. This annual networking event is designed to bring prospects, producers and purchasers together to forge important business connections and mine opportunities.

In an industry riddled with recent uncertainty, the atmosphere at the conference was marked by optimism. Bob Fryklund, Chief Upstream Strategist for IHS, set the tone in his opening comments as he encouraged participants not to push the panic button too quickly. Though he acknowledged the conversation has changed in recent months, he reminded participants of the record production set by North American producers in the last five years.

“Fryklund commented, “OPEC and others discount the resilience of North America,” and added that, “we will not be a diminished producer because of what we are going through.”

Many of the speakers spent part of their time talking about record production set by North American producers over the years and cyclical nature of the industry. History showed we would weather this storm.

Jack Stark, President and COO of Continental Resources continued the theme by listing some of the industry wins including:

Unprecedented growth from 2005-2015
World changing upstream technologies
Discovering a whole new, vast class of reservoir (shale plays)
Reserves at all time highs
Created jobs and increased our energy independence
Improved efficiencies such as cutting drilling time from 45 days to 17
A midstream evolution: pipelines, rail, rail to barge and connections to all coasts

For more about NAPE, visit napexpo.com

North Dakota Tax Trigger Getting Closer

February 11, 2015 Elizabeth Alford

The countdown has begun on North Dakota's small oil tax trigger.

This measure, which kicked in at the beginning of the month, was introduced by lawmakers to provide tax incentives to strained producers in order to ease the sting of prolonged lower crude prices.

The formula for the tax trigger states that when West Texas Intermediate (WTI) stays below $52.58 (2015) for five consecutive months, then the state waives its 6.5% oil extraction tax. Since January crude prices averaged $47.98 per barrel, the trigger took affect February 1st. As long as the price stays below $52.59 for the next four months, the incentive will take effect. Once the prices inches up, the calculations start over.

North Dakota state legislators jumped this week to take measures to extend the trigger through June 30, 2019. House Bill 1437 extends a smaller trigger that would take place the month after an average price point of $57.50 is reached. Both triggers would not be able to occur at once and there is provision to allow time for the state to recover from the huge losses that are inevitable.

“The bill’s sponsor, Rep. Glen Froseth said that, “It’s probably the best time to be doing it. We want the industry to keep working.”

To read the full bill, visit nd.gov.

Image: CCo Public Domain