Heitkamp Urges Repeal of Oil Export Ban

June 8, 2015 Elizabeth Alford

Heidi Heitkamp, U.S. Senator from North Dakota is urging lawmakers to repeal a 1970’s era ban on oil exports.

Taking the Senate floor last month, Heitkamp said that the existing restrictions on U.S. oil producers are harming America’s competitiveness. Heitkamp hopes to level the playing field by doing away with restrictions that hinder America’s economic growth and that threaten our long-term goal of becoming energy independent.

Not everyone is in favor of lifting the ban, however.

“Athan Manual, the director of the Lands Protection Program at the Sierra Club, said his biggest concern is how increased oil consumption around the world will impact climate change. “We don’t think we should be exporting global warming, basically, to other countries,” he said. “We think all the countries in the world should do what the U.S. is doing and dramatically reduce their use of fossil fuels, especially oil, to fight climate change.”

Floods Threaten Bakken Producers

June 4, 2015 Elizabeth Alford

North Dakota experienced its wettest May on record and all the rain is causing trouble for some oil and gas producers.

The region had almost 8 inches of rain last month and now flood waters threaten operators near the confluence of the Missouri and Yellowstone rivers. More rain is expected and could cause raise flood levels to 22 feet by this weekend. North Dakota regulators have stepped up inspections and are urging producers to take precautions. Inclement weather can easily wreak havoc on the energy infrastructure including well flooding, road closures and truck bans.

“Alison Ritter, a spokeswoman for the state Department of Mineral Resources, said 13 companies were notified to secure their equipment. “The well sites might not flood but the access roads might,” Ritter said. “So we want to make sure they have everything secure now in case they lose access.”

Last year, a well owned by Zavanna LLC was swamped with water causing 1,400 gallons of oil to leak and eventually coated brush, trees and grass in the area.$3 million in fines were levied last year against 19 companies that failed to protect against spring flooding.

Other affected producers include Statoil, Exxon Mobil's XTO Energy and Oasis Petroleum, who have been given the option of voluntarily shutting in wells.

Shale Oil: The Sky’s the Limit

June 3, 2015 Elizabeth Alford

As crude prices plunged throughout the fall of 2014, producers tightened their budgets and changed their strategies to wait out the crisis.

Not only are these tactics working for individual companies, but the efficiencies and innovations that are occurring may be setting the stage for another season of prosperity.

Cutting Costs Producers have slashed costs associated with drilling through greater efficiencies and supplier reductions, including these first quarter results:

Sanchez reported Q1 costs at 30 to 40% below fourth quarter 2014
Matador reduced operating costs 30% to 40% for Q1
Continental’s drilling and completion costs fell by 15%
EOG announced it has benefitted greatly from the pull-back in activity and progress is being made to lowering cost in each phase of their operations

Innovation Looking for greater efficiency also means innovation. Cutting edge producers are pushing the science and technology to new levels as they work to get the most out of their resources. These include advancements in 3-D seismic research, telemetry, remote guidance and innovations in CO2 or nitrogen-style completions. Chesapeake recently reported that their drilling team broke several records including drilling their deepest well with a total measured depth of just under 21,000 feet, fastest spud-to-rig-release time of 7.8 days, and lowest drilling cost well at $1.1 million.

“A Wall Street Journal article recently said that this increased efficiency has fundamentally changed the industry. “Oil production is becoming a modern manufacturing process. The frackers are engaged in ‘just-in-time’ production, analogous to the methods pioneered by Japanese manufacturers in the 1970s and 1980s, which led directly to hyper-efficient global supply-chain management perfected by Wal-Mart in the 1990s.”

All of these advances have come during lean times, so what will happen as crude prices continue to increase? Since some operators report that they are more profitable today at $65 a barrel than they were at $95 a barrel three years ago, we could find ourselves in another boom very soon.

Rising Crude Derails Bakken Tax Trigger

June 2, 2015 Kenny DuBose

The recent increase in crude prices is good news for North Dakota’s coffers, but bad news for Bakken oil and gas producers.

North Dakota's oil tax trigger was introduced by lawmakers to provide tax incentives to strained producers to ease the sting of prolonged lower crude prices. The trigger went into effect in February as WTI crude dipped below the $52.58 price point. The formula requires that crude stay below that price for five consecutive months, for the state to waive its 6.5% oil extraction tax.

The oil trigger was expected to take place June 1st, but rising crude prices mean it wont be implemented and producers will miss out on an estimated $480 million over the next six months. Since the nosedive last fall, crude prices inched up after the first of the year and make a sharp rebound in May, increasing almost 25% since April 1.

“State Tax Commissioner Ryan Rauschenberger confirmed this by saying “Given that oil has been trading mostly in the upper 50s, well above $55.09, we will not be triggering.”

To read more, visit nd.gov.

Energy Executives Forced to Adapt

June 1, 2015 Kenny DuBose

Budget Cuts Affect Man Camps — Energy Execs Change Strategy to Stay Competitive

In these uncertain times, energy companies are getting creative in order to stay profitable and competitive, according to a recent survey by KPMG Global Energy Institute.

The firm found that 56% of the 200 senior executives polled plan to change their business model over the next two years to deal with the fluctuations and uncertainty.

“KPMG’s Regina Mayor said “Companies are taking necessary actions to drive improved near- and long-term performance and identify areas of greater efficiency to adapt to market pressures and remain competitive in this environment.”

The executives indicated that they will focus on managing costs through by:

Better management of staffing or outsourcing
Improved planning and budgeting management tools
Changing service delivery models
Optimizing costs related to inventory and repairs

Tightening the belt doesn't necessarily mean more layoffs, however. Over the next two years, the majority of the oil and gas executives (76%) expect to see their organizations’ ranks to increase or stay the same over the next two years.

“This data shows that even in today’s challenging price environment, short-term staffing cuts are not as pervasive as headlines may indicate, and perhaps there is more job opportunity across the broader energy market,” said Mayor. “It’s not all doom and gloom in the oil sector; the companies that employ a variety of actions around supply chain, cost optimization and a well-designed core operating model that will come out of this downturn with a successful future.”