Obama Issues Keystone Pipeline Veto

February 25, 2015 Elizabeth Alford

The White House issued a press release this week to announce that President Obama has carried out his promise to veto the Keystone XL Pipeline Approval Act. This action allows a final decision to be put on hold until further environmental reviews are complete.

The Keystone pipeline veto is the latest round in a highly political debate that has been raging since 2008, when the TransCanada Corporation first applied for a permit to construct the pipeline. At issue is a proposed 1,179-mile section of the pipeline that would run through the heart of the Bakken Formation in order to deliver 800,000 barrels of petroleum to the refineries on the Gulf Coast.

Since the first of the year, President Obama has hinted at his intentions to veto anything the Republican majority might try to push through. Instead he has urged lawmakers to “pass a bipartisan infrastructure plan that could create more than 30 times as many jobs per year, and make this country stronger for decades to come.” Read more here.

“In the official news release, President Obama stated “The Presidential power to veto legislation is one I take seriously. But I also take seriously my responsibility to the American people. And because this act of Congress conflicts with established executive branch procedures and cuts short thorough consideration of issues that could bear on our national interest — including our security, safety, and environment — it has earned my veto.”

A backlash to the Keystone pipeline veto began almost immediately and accusations towards the President have accelerated, with some decrying his ties to environmental groups. The future of the legislation is unclear, but republican lawmakers are certain to try and override the veto very soon.

EOG Reduces 2015 Capex 40 Percent

February 23, 2015 Elizabeth Alford

EOG announced a strong fourth quarter for 2014 and revealed a disciplined 2015 spending plan that leverages their position to get them through the current difficult market. The company gives much of the credit for its success to the outstanding performance from its interests in the Bakken formation in North Dakota.

EOG reported its Q4 net income at $445 million, which stands in sharp contrast to many companies who saw losses as crude prices plummeted through the fall. Overall, 2014 brought a net income of $2,915 million for the company, compared to $2,197 million for 2013.

Related: Energy Giants Announce Layoffs

2015 Capital Plan

As EOG looks to the new year, they expect their capital expenditures to range from $4.9 to $5.1 billion. This number includes projects for production facilities and midstream expenditures and will primarily be directed to EOG's highest rate-of-return oil assets including the Bakken play. This is a 40 percent reduction compared to 2014 spending and Capital will be allocated

“Chairman and CEO, William R. “Bill” Thomas, commented that “EOG delivered both high returns and strong growth in 2014, a unique accomplishment in the energy sector. Our returns-focused capital discipline has been at the core of EOG’s culture since the very beginning. We are confident we will continue to earn healthy returns on our capital program during this commodity down cycle and, more importantly, emerge stronger and poised for significant long-term growth.”

The biggest news for 2015 is that additional development in the Bakken will be put on hold. The company's plans to utilize existing rigs and complete approximately 45 percent fewer wells in 2015 (25) versus 2014 (59). This tactic will prepares the company to resume strong growth when prices recover.

Marathon Oil Reduces 2015 Spending by Half

February 19, 2015 Elizabeth Alford

Marathon Oil announced further cuts to its 2015 capital spending plan, reducing numbers another 20 percent from their initial December forecast. This represents a total capex that is less than half of last year’s budget. The company will continue to focus spending on its shale resources and will reduce exploration spending by more than half.

Bakken Highlights

Marathon reports that its Bakken production increased 38% from 2013. This number includes 17 gross operated Bakken wells to sales, with 15 piloted enhanced completions. 18 pilot completion wells averaging greater than 30% uplift in cumulative production over the first 60 days. For 2015, Marathon’s operations in the Bakken will receive a $760 million piece of the pie, which represents 22% of the company’s total budget and includes approximately $550 million for drilling, completions and recompletions.

“President and CEO Lee Tillman noted that “Nearly 70 percent of our 2015 capital spending will be directed toward our three core U.S. resource plays, which continue to be among our highest-return investment opportunities. This budget reflects an emphasis on investment selectivity, balance sheet flexibility and positioning for price recovery.” He added, “Though our U.S. resource plays generate competitive returns at current pricing, we’re taking action to materially reduce our 2015 capital program relative to 2014 to protect our financial flexibility.”

Marathon in the Bakken Formation

The North Dakota Bakken Shale oil play is top investment priority for Marathon Oil, where they have approximately 370,000 acres across North Dakota and Montana.

Marathon News: Energy Giants Announce Layoffs

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.