Friday, November 17, 2017

US Oil Drilling Rig Count Holds Steady This Week

U.S. energy companies kept the oil rig count unchanged this week, Baker Hughes, a GE company (NYSE: BHGE), said Nov. 17 as some analysts expect a gradual decline in overall rigs in the fourth quarter and in 2018. The rig count, an early indicator of future output, held at 738 in the week to Nov. 17, still much higher than 471 rigs a year ago as energy companies boosted spending plans for 2017 as crude started recovering from a two-year price crash. The increase in drilling lasted 14 months before stalling in August, September and October after some producers started trimming their 2017 spending plans when prices turned softer over the summer.
Source: Daily Dose of News

Wednesday, November 15, 2017

House Tax Reform Vote Set, But Do Oil, Gas Companies Benefit?

The U.S. oil and gas industry would emerge from the first tax reform since 1986 relatively unaffected, though time will change some dynamics—for good and ill—and a few prized deductions are going away. Oil and gas companies stand to lose some tax provisions, including $1.3 billion in annual domestic production deductions. The highly leveraged E&P sector may also eventually see new caps on interest expenses as financially stifling—especially as commodity prices rise.  The industry is also losing some tax credits, mostly those that kick in at low commodity prices such as EOR credits that will have little impact. And the big headline, reduction in corporate rates to 20% from 35%, is more likely to benefit refiners since few E&Ps generate positive net income. “Corporate income tax matters less for energy than just about any other sector of the U.S. economy,” Pavel Molchanov, an analyst at Raymond James, said in a Nov. 6 report.
Source: Daily Dose of News

Monday, November 13, 2017

Greens Struggle to Counter Evidence that New Mexico is Reducing Methane Emissions

The Environmental Defense Fund (EDF) last Thursday released a report that claims methane emissions from New Mexico oil and natural gas development “are drastically higher than official state reports.”

The timing of the report is a bit suspect, considering two recent reports have actually found that New Mexico methane emissions are rapidly declining, based on newer data.

The Associated Press reported last week that:

“Methane emissions from oil and natural gas production in New Mexico have dropped by more than 50 percent over the past year thanks to advances in technology and changes in the way wells are drilled, state regulators said Friday.”

Recent data from the U.S. Environmental Protection Agency also show that methane emissions from oil and natural gas production in the San Juan Basin have declined by 47 percent from 2011 to 2016. The San Juan Basin is home of the infamous methane “hot spot” that environmentalists have long blamed on oil and natural gas, despite conflicting analyses from scientists and federal agencies.

Considering these trends run counter to EDF’s call for duplicative and unnecessary federal methane regulations, EDF’s latest report appears designed to create a counter narrative to the recent double shot of good methane news from EPA and state regulators.

Furthermore, EDF is using its new report to lobby policymakers and convince them to impose additional state regulations on the oil and natural gas industry. EDF even held a joint press call with U.S. Senator Tom Udall (D-N.M.) and several environmental activist groups last week, proving that elected officials like Sen. Udall are being swayed by misleading reports produced by environmentalists.

Let’s take a look at the EDF report’s claims versus the facts.

CLAIM: “The EDF-compiled inventory is based upon a custom analysis combining several data sources including recent studies, the EPA GHG Reporting Program (GHGRP), and EPA’s GHG Inventory (GHGI) national estimates of Petroleum and Natural Gas Systems methane emissions.”

FACT: To be clear, EDF’s analysis is based on computer simulations — and the input data for the computer simulations was outdated, to boot. EDF admits its data is based on “estimated emissions for 2015 in New Mexico.” This is an important factor to consider when evaluating the validity of the EDF report, especially since just one week ago multiple news sources reported on the most recent EPA data showing significant emission reduction over the past year, even as production is on the rise in New Mexico.


That EPA GHGRP is based on actual reported field samples from 2016, as is the New Mexico Energy, Minerals, and Natural Resources Department data that recently reported 52 percent declines over the past year.

Clearly, the more recent data based on actual field samples should be considered more credible.

CLAIM: “A new report based on recent scientific breakthroughs in methane quantification finds that emissions of methane – both a potent greenhouse gas and valuable fuel source – are drastically higher than official state reports.”

FACT: As we’ve mentioned, EDF’s report only runs numbers through 2015. The new state data released last week was based on emissions data through 2016. Notably, that data reported 50 percent reductions since 2015. This pretty much explains why the EDF’s estimates were significantly higher — because EDF didn’t include the latest data that showed emissions have been cut in half since 2015!


Source: EDF Report

CLAIM: “The report offers insights about the largest sources of methane waste in order to help policy makers and operators identify the greatest opportunities to reduce pollution, increase efficiency, and return a valuable commodity to the local economy and state taxpayers.”

FACT: EDF and other environmental groups have long alleged that a vast majority of oil and gas methane emissions can be attributed to so-called “super emitters” present at a very small percentage of oil and gas sites. These so-called “super-emitter” sites are what EDF is referring to in the above claim, and EDF has used the notion of “super emitters” as justification for costly new methane regulations from the EPA and other federal agencies for years.

But importantly, a recent National Oceanic & Atmospheric Administration (NOAA) study has revealed that many of the studies used to support the “super emitter” theory were conducted during episodic events, which skewed emissions higher than they typically would be, casting doubt on their conclusions. As a result, these “peak” emission data were inappropriately used to calculate a normal emissions profile by the EPA in its most recent Greenhouse Gas Inventory.

In other words, official regulatory inventories are likely overestimated rather than underestimated, as EDF has repeatedly claimed.

In addition, EDF’s report claims taxpayers are losing royalty revenues due to methane not being captured. Aside from the fact that methane emissions are low and continuing to plummet, EDF does not consider the fact that the type of policy influence they are pushing for with this report will actually have a negative effect and will further reduce production on federal lands, and there’s already a hold up of production on federals due to out of control federal permitting backlog as well as the right of way application backlog holding up quick and efficient transport of oil and natural gas products to market. Last but not least, let’s not forget that uncaptured methane equals revenue losses for oil and gas producers, so there’s motivation for industry to capture all methane.

CLAIM: “New Mexico’s methane waste problem first made international headlines when a 2014 NASA study revealed a 2,500-square-mile methane ‘hot spot’ over the Four Corners region—the highest concentration of this pollution found anywhere in the U.S. Researchers later learned that pollution from New Mexico’s oil and gas facilities were largely the cause of this massive methane cloud.” Furthermore, the EDF report also claims, “Subsequent studies indicated that although the San Juan Basin includes other methane sources such as coal mines and geologic seepage, these sources are not large enough to explain the bulk of emissions, and that oil and gas development is the largest source of emissions contributing to this massive methane ‘hot spot’.”

FACT: Energy in Depth has noted before that the San Juan Basin is well-known as a large area of natural seepage – when methane emissions are naturally occurring and not the result of energy development. According to a 1999 report from the U.S. Bureau of Land Management (BLM), “Historically documented naturally occurring gas seeps throughout the San Juan Basin existed prior to oil and gas drilling operations.” Most recently in March 2017, the Associated Press reported that New Mexico state regulators concluded that the four corners methane hot spot predates oil and gas production by “millions of years”:

“New Mexico’s top oil and natural gas regulator said a giant cloud of the greenhouse gas methane hanging over the Southwestern United States comes in large part from natural seeps from underground formations and coal mining operations, disputing recent scientific findings. At a confirmation hearing Wednesday, acting New Mexico Energy, Minerals and Natural Resources Secretary Kenley McQueen said the methane hot spot over the Four Corners region of Arizona, Colorado, New Mexico and Utah dates back millions of years.”

The most recent GHGRP data showing a 47 percent drop in oil and gas methane emission since 2011 is just the latest evidence casting doubt on the oft-repeated claim that oil and gas development are to blame for the Four Corners “hot spot” in the San Juan Basin.


On last Thursday’s EDF press call, a reporter with the Carlsbad Current-Argus asked the call organizers if oil and gas operators were already implementing technology to reduce emissions without the need for additional regulations. The response by EDF’s Director of Regulatory & Legislative Affairs is surprisingly complimentary to industry:

“I think it’s right to recognize some oil and gas producers are stepping up on this issue. For instance, XTO, which is the domestic drilling arm of Exxon-Mobil, has made big, big investments in southeastern New Mexico this year,” said Jon Goldstein, Director of Regulatory & Legislative Affairs for EDF. “Six billion dollars poured into the Permian Basin in New Mexico to buy up new acreage. And they have also announced a number of efforts to reduce methane emissions, that really show their commitment to doing this development right and doing right by New Mexico.”

On the call, Goldstein also pointed out the accomplishments by Conoco-Philips in northwestern New Mexico to reduce emissions. Despite Goldstein’s acknowledgment of industry’s efforts and strides in emission reductions, both Senator Udall and EDF will continue a regulatory crusade on the oil and gas industry at any cost. In an EDF press release, Senator Udall said:

“This report gives us an important picture of how much we could gain by taking simple steps to become more efficient. Proven, low-cost fixes could eliminate up to half of the pollution by simply plugging leaks. By capturing that taxpayer-owned resource we can make a big difference for our state’s kids,” said U.S. Senator Tom Udall.

Senator Udall said on the call that he plans to use EDF’s report as “important ammunition” in Washington, D.C., to push for implementation of the Bureau of Land Management’s much maligned venting and flaring rule. Experts agree this rule would potentially put thousands of small operators out of business, and ultimately hurt the state of New Mexico by jeopardizing the $1.6 billion in tax revenue the oil and gas industry contributed to the New Mexico General Fund in 2016.



According to the New Mexico Oil and Gas Association:

“The rules are estimated to cut oil and gas production, resulting in more than $750 million in lost general fund revenue for New Mexico schools, health care, and public safety. The loss in production could also eliminate 2,200 oil and gas jobs and as many as 5,390 direct and indirect full-time jobs.”

Reports coming out of New Mexico put into context what’s at stake for the state of New Mexico should Senator Udall take marching orders from environmental groups like EDF:

“Overall, the oil and gas industry contributes about one-third of New Mexico’s budget each year and employs more than 100,000 workers.”

Source: Daily Dose of News

Saturday, November 11, 2017

Rainmaker: WPX Sells San Juan Gas Assets, Closes JV

Proceeds from WPX Energy Inc.’s (NYSE: WPX) agreement to sell its gas-producing properties in the San Juan Basin and its Permian Basin midstream joint venture (JV) will add more than $500 million to the company’s coffers, the company said in November. WPX agreed to sell about 130,000 net acres in the San Juan in northern New Mexico and southern Colorado to an undisclosed buyer for $169 million, the company said Nov. 2. WPX’s oil operations in the San Juan Basin’s Gallup oil play are not included in the sale. The company’s board of directors previously determined it only would sell the assets at a minimum price, which was not disclosed. Revenues in the San Juan Basin assets, which have been held for sale, were about $58 million for the nine months ending Sept. 30. “We’ve been checking a lot of boxes on our to-do list,” Rick Muncrief, WPX chairman, president and CEO said during Nov. 2 earnings call.
Source: Daily Dose of News

Friday, November 10, 2017

The National Association of Royalty Owners (NARO) Appalachia Chapter Annual Conference

The National Association of Royalty Owners (NARO) Appalachia Chapter recently held its annual conference at the Greenbrier Resort in White Sulfur Springs, WV.  Mineral owners from all around the Appalachian Basin and as far away as Texas came to learn about managing their mineral assets and to become more knowledgeable about all of the exciting activity happening in the Marcellus and Utica Shale areas. The Department of Energy (DOE), National Energy Technology Lab’s (NETL) Dr. Randall Gentry provided a snapshot of how the Utica and Marcellus Shale are playing a significant role in meeting energy needs nationally.  He described the ethane volumes coming out of the area are enough to support up to nine (9) cracker plants depending on size, and that the incoming storage fields would be a game changer for the area economically. Bob Orndorff, Dominion Energy; Jim Crews, Marathon/MPLX; and Brent Breon of Blue Racer Midstream echoed the same sentiments and expressed the need for midstream buildout, separation facilities, natural gas fired power plants, storage, and for pipeline transport to other states to meet their energy needs.  Exports through Cove Point were also discussed. Jackie Stewart from Energy in Depth Ohio spoke to the number of jobs that are being created region-wide.  She also spoke of ways that mineral owners can educate the public factually on construction and drilling projects. Eclipse Resources’ Oleg Tolmachev provided an operational update on their record setting lateral lengths and the benefit of this not only in terms of economic benefit, but also as it relates to decreasing the environmental footprint especially in areas involving state and federally owned lands. Brian Ward from Apateq Corporation discussed their portable clean water solutions technology to clean frac water onsite, reducing the need for transportation and injection. DOE/NETL, WVU, OVU and Terra Nova Exploration provided information on an array of topics from Rare Earth Elements, Alternative Clean Energy Programs, and the geology of the basin including the Rodgersville Shale in eastern Kentucky. HartPetro Global, Bounty Minerals, Ohio Farm Bureau, Jackson Kelley Law Firm, Hicks Partners, and Arnet, Cornish, Toothman provided mineral owner specific education on pipelines, commodities, storage, managing mineral assets as a business, discussing division orders and calculating decimal interest, grassroots to government relations and why auditing is important.  NARO Appalachia President, Robert Mead, expressed that, “Of particular interest were the presentations regarding on-going litigation in both Ohio and West Virginia pertaining to post production costs.  NARO is dedicated to the proposition that royalty owners should be fairly compensated for the minerals withdrawn from their property. Legislative updates from WV and OH were provided by WV Senator Charles Trump and OH Representative Andrew Thompson. Andrew Thompson Ohio Representative stated, “It was my honor to address the NARO conference; They represent many of my constituents, and they share my interest in ensuring we are formulating good policy in the oil and gas realm.” A special welcome was given by WV Senator Joe Machin’s office and in attendance was a representative from Senator Mitch McConnell’s office.  Chuck Cunningham from Securing America’s Future Energy (SAFE) gave an update on Senator Cramer’s House resolution encouraging an investigation into OPEC’s market manipulations and coming up with solutions to combat this. The Ohio Oil and Gas Association (OOGA) provided a glimpse of where the Appalachian Basin is headed and the economic benefits associated with that growth. Panel discussions on how various organizations have worked well partnering with NARO Appalachia to build relationships, accomplish common goals, and network more effectively.  Another panel discussion on Post Production Deductions led to an effort to draft possible legislation related to transparency and standardized minimum reporting requirement on royalty check stubs so that mineral owners can know if they are being paid according to the terms of their lease agreements. Joel Potts, WV NARO Appalachia Board member was quoted saying, “In seven years, this was the best conference yet!” Rebecca Clutter, NARO Appalachia Board member from OH stated, “Our Board worked very hard to bring the most current information on an array of topics to our members, while providing excellent networking opportunities to our sponsors and presenters.  Everyone that I spoke with expressed value in attending which is very exciting to us as a member based organization.”  The mission of NARO, a national organization, is to represent solely and without compromise, oil and gas royalty owners’ interests. Gregory McCoy of North Carolina was recognized for recently completing and passing the Certified Mineral Management Course, a program offered by NARO.  Valerie Antoinette from Pennsylvania was recognized for her work on the annual conference, and Janet Conn of Ohio was recognized for her work on the NARO Appalachia Facebook page as well as other communication efforts. Joseph Barone President Shale Directories, LLC

Wednesday, November 8, 2017

Noble Energy Sells Sliver Of D-J Basin For $600 Million

Noble Energy Inc. (NYSE: NBL) signed a definitive agreement with SRC Energy Inc. (AMEX: SRCI) to divest about 30,200 net acres from the company’s non-core Denver-Julesburg (D-J) Basin position in Weld County, Colo., the companies said Nov. 8. SRC agreed to pay $608 million to expand its core Greeley Crescent development area. The deal includes average production of 4,100 barrels of oil equivalent per day (boe/d) and 600 drilling locations. Multiple development pads are already under permit and much of the acreage is HBP, SRC said.
Source: Daily Dose of News

Tuesday, November 7, 2017

Diamondback Buys $100 Million Permian Acreage, But Bigger Deals Elusive

Diamondback Energy Inc. (NASDAQ: FANG) cobbled together more than 1,000 net acres and more than 950 net acres at an attractive price but CEO Travis Stice said Nov. 7 that larger tier-one Permian Basin assets remain out of stock.  Diamondback said it acquired the leasehold and mineral acreage for $102 million during third-quarter 2017. The royalty acres will likely be dropped down to Viper after commencing active development in 2018, the company said. David Kistler, an analyst with Piper Jaffray & Co., said the bolt-on deals were “the biggest news” of an otherwise solid operating quarter for which the company had pre-announced production results above expectations.
Source: Daily Dose of News