Shale Play Short Takes

US Map Blue
US Map Blue

Bakken Shale – North Dakota/Montana

Rising oil prices and rapidly advancing hydraulic fracturing and drilling technologies are leading to increased interest in the Bakken region once again. A good example of this growing trend came in late April when Hess Corp. announced it would be ramping up its drilling program in the play over the remainder of 2018. Hess was able to increase its production in the Bakken by 12% during the first quarter of the year. The company now plans to add one additional rig during the third quarter and another rig in the fourth quarter as a part of its Bakken development program. Also in late April, EOG Resources, Inc. announced its own plan to divest its interests in the North Sea and redirect some of that capital to expand its drilling and development program in the Bakken.

Denver/Julesberg (DJ) Basin – Colorado

The overall rig count remained fairly static in the DJ Basin despite the recent run-up in crude prices. Whiting Petroleum Corporation announced on April 25 that its 100,000 acres of leasehold in the Northeastern part of the play are up for sale as a part of the company’s overall plan to become a purely Bakken-focused producer. Bill Barrett Corp. completed its merger with Fifth Creek Energy Company, LLC in late March and emerged as a DJ Basin-focused producer with the new name of HighPoint Resources Corp. The combination of the two companies creates a new exploration and production firm with a 151,100-net-acre position in the DJ Basin that includes an inventory of 2,865 undeveloped drilling locations.

Permian Basin – Texas/New Mexico

The Permian Basin will overtake the nation of Iran in overall oil production by the end of 2018, according to the U.S. Energy Information Administration (EIA). The EIA also notes that, if the Permian were a part of OPEC, it would rank as the cartel’s fourth-largest producer. The Permian obviously remains the most active shale region in the world, home to 45% of all the active drilling rigs in the country as of the end of April. But some remain concerned that a looming shortage of pipeline takeaway capacity could serve as a limiter to the region’s growth in the coming months and years. With several new pipeline projects already underway, Phillips 66 Company announced on April 25 that it is joining the effort to alleviate that situation, saying it has received sufficient binding commitments on an initial open season to proceed with construction of the Gray Oak Pipeline system. When completed, Gray Oak will be able to carry as much as 700,000 barrels of Permian oil to market every day.

Eagle Ford Shale – Texas

With the price of crude oil rising into the high $60s per barrel during April, things are starting to heat up in the Eagle Ford region of South and Central Texas. The Eagle Ford remains the second-most active shale play area, with its rig count approaching 80 at the end of April. The higher crude price will make more Eagle Ford projects economic to drill, so we can expect the region’s rig count to continue its upward trajectory. Pioneer Natural Resources Company announced in February that it was planning to sell all of its non–Permian Basin assets, which included about 70,000 acres of Eagle Ford leasehold. As a part of that plan, Pioneer announced on April 25 the sale of 10,200 acres of Eagle Ford leasehold to Sundance Energy, Inc. for $102 million. The acreage is located in Atascosa, LaSalle, Live Oak and McMullen counties.

Marcellus Shale – Pennsylvania/West Virginia/Ohio

The downtrodden and harassed voters of Mahoning County, Pa. will be faced with a ballot initiative that would ban hydraulic fracturing this November. This sad news comes after the Pennsylvania Supreme Court ruled that the County’s Board of Elections had exceeded its authority in refusing to put the measure on the ballot yet again after the voters had rejected the proposal six times since 2013. The Court’s decision reverses its own decision issued just six months previously. It seems these radical anti-fracking activists — and now the state’s Supreme Court — just will not allow the voters of Mahoning County to give them “no” for an answer.

Haynesville Shale – Louisiana/East Texas

Proximity to Cheniere Energy’s, Inc. Sabine Pass LNG export terminal has helped to boost the recent uptick in activity in the Haynesville region over the past year. Now, a new player in the LNG export business promises to provide another boost. Tellurian, Inc. is seeking investors to help fund its planned $12 billion Louisiana-based export terminal, which, if funded fully, would begin development in 2019. The twist to the Tellurian plan is that it would be a fully integrated development that would include ownership of production assets and pipelines dedicated to supplying the terminal. Tellurian says that its plan would dictate that much of the production ownership would involve wells in the Haynesville region. Stay tuned for further updates on this key project.

SCOOP/STACK Play – Oklahoma

The Oklahoma legislature passed a bill raising the state’s oil and gas production tax rate on all wells, new and existing, to a uniform 5% of gross value. Oklahoma Governor Mary Fallin signed the bill into law at the end of March. This represents a very significant increase in the production tax in the Sooner State, one that will eat into producers’ profit margins and likely dampen interest in the SCOOP/STACK play area going forward. In the weeks following the tax increase, the rig count in the SCOOP/STACK declined slightly, while the overall national count rose significantly. Despite the recent loss of rigs, the region remains the third-most active shale play area in the U.S.


About the author: David Blackmon is the Editor of SHALE Oil & Gas Business Magazine. He previously spent 37 years in the oil and natural gas industry in a variety of roles — the last 22 years engaging in public policy issues at the state and national levels. Contact David Blackmon at [email protected].




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