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Shale Play Short Takes – March 2019

Bakken Shale – North Dakota/Montana Due to ongoing booming production from the nation’s second-largest oil producing basin, Energy Transfer announced it was expanding the capacity in its Dakota Access Pipeline system to 570,000 bpd. The company said it had moved more than 500,000 bpd during the fourth quarter of 2018 and would be able to meet rising demand by boosting horsepower in its compressor systems. Energy Transfer also said it was considering new pipeline capacity to the system in the coming months due to the region’s surging production, which the EIA projected would reach a record 1.45 million bpd in March. Targa Resources reached a deal to sell a 45 percent interest in a portion of its Bakken assets to funds managed by GSO Capital Partners and Blackstone (NYSE:BX) for $1.6 billion. Per the company’s press release, the assets “include 480 miles of crude oil gathering pipelines, 12K barrels of operational crude oil storage, 260 miles of natural gas gathering pipelines, the Little Missouri natural gas processing plant with a current gross processing capacity of 90 mcf/d and a 50 percent interest in the 200 mcf/d Little Missouri 4 Plant that is expected to be completed in Q2 2019.”

Denver/Julesberg (DJ) Basin – Colorado The oil boom is also ongoing in Colorado, as Noble Energy reported record oil production from its DJ Basin operations in its fourth quarter 2018 earnings release. The company’s production in the region rose to 138,000 bpd, up 9 percent from the previous quarter. Noble reported that it drilled 50 onshore wells in the U.S. during Q4 2018, and expects to drill 165 to 175 new wells during 2019. Anadarko Petroleum also reported new highs from its own DJ Basin operations during its earnings call on Feb. 6. Anadarko CEO said that the company enjoys “substantial scalability due to our premium acreage positions in the Delaware and DJ basins today, and in the Powder [River Basin] in the future. These basins contain decades of cash flow enhancing inventory, supported by our midstream MLP that ensures APC’s access to extensive infrastructure that provides flow assurance.”

Permian Basin – Texas/New Mexico Longtime Pioneer Resources CEO and Chairman of the Board Scott Sheffield re-assumed the CEO positionin late February when it is was announced that the man who replaced him as CEO, Tim Dove, would be retiring. During Dove’s time in the CEO post, Pioneer transitioned from a company with a diverse set of assets around the U.S. to being purely Permian Basin-focused, and ranks as one of the Basin’s largest producers. Dove’s retirement, announced on Feb. 21, was effective immediately. By far the nation’s largest oil-producing region, the Permian continues to set new production records. In late February, the EIA projected that the U.S. would set another all-time oil production record in March, exceeding 12 million bpd for the first time. EIA said that 4 million bpd — fully a third of total U.S. production — would come from the Permian. According to data compiled by the EIA, if it were an independent nation, Texas would currently rank as the fourth largest oil-producing country on Earth, trailing only the rest of the U.S., Russia, and Saudi Arabia. The Permian Basin alone would rank fifth on that list, also trailing Iraq by a small margin.

Eagle Ford Shale – Texas In late February, Howard Energy Partners and NextEra Energy Partners announced the formation of a new joint venture designed to develop new opportunities to export Eagle Ford Shale natural gas into Northern Mexico. Both companies own and operate midstream infrastructure in the Eagle Ford, and the plan will be to develop new markets to which to move their system gas. Rocky Creek Resources announced the completion of a record producer in the lower Eagle Ford formation in Lavaca County. Per the company’s press release of Feb. 5, the Shiner 1H well came on-line last fall at an initial production rate of 2,070 bpd, and even after 120 days on-line was still producing more than 900 bpd. The well was drilled to a depth of 12,320 feet, with an 8,550 foot lateral. Despite a slight fall-off in the regional rig count through the first two months of the year, the Eagle Ford remains the nation’s third-largest oil producing basin, and fourth-largest natural gas basin, according to the EIA.

Marcellus Shale – Pennsylvania/West Virginia/Ohio Pennsylvania Gov. Tom Wolf continues to push legislators to enact a severance tax on natural gas produced from the Marcellus Shale. Wolf’s latest tactic is to tie a proposed volume-based tax with a $4.5 billion spending plan that would address a variety of projects he would like to fund. His proposed rate of tax would start at 9.1 cents per mcf of production when the price is at or below $3.00, and rise to a top rate of 15.7 cents per mcf when the price is at $6.00 or above. The Democratic governor would assess the severance tax on top of the state’s “impact fee” that was enacted in 2012. Despite the efforts of Pennsylvania politicians to implement new taxes on the industry, Marcellus producer Cabot Oil & Gas announced record-setting profits and production levels in late February, a report that CEO Dan Dinges described as the best year in the company’s history. Included in the results were net profits of $557 million, $297 million of free cash flow, and overall natural gas production of 735 bcf equivalent, a 7 percent increase year-over-year.

Haynesville/Bossier Play – Louisiana/East Texas A new report from Rystad Energy issued in January projects that the Haynesville Shale region is on a path to reach new all-time high production levels later this year. In an article published by the Oil & Gas Journal, Artem Abramov, Rystad Energy partner, was quoted as saying, “We conclude that Haynesville shale’s revival, for the second year in a row, looks sustainable. Supported by its proximity to a new LNG export terminal, gas production will continue to grow, and achieving new all-time high gas production levels should happen within a matter of months.” The ongoing growth in the Haynesville despite the chronic low price environment for natural gas is driven by the growing U.S. LNG exports business, and the play’s close proximity to Cheniere Energy’s Sabine Pass LNG exports facility in southern Louisiana. As LNG export facilities expand, Rystad is projecting that the country’s total exports for 2019 will surpass 40 million tons in 2019, 65 million by 2022, and 150 tons by 2030.

SCOOP/STACK Play – Oklahoma Natural gas production in the SCOOP/STACK in central Oklahoma set new record highs in early February, coming in at 3.53 bcf/d on Feb. 4, according to S&P Global Platts Analytics. Platts Analytics determined that the SCOOP, located mainly in Grady County, was the main driver of the recent surge in gas production for the region, and forecasts that overall SCOOP/STACK gas production would grow by more than 300 mmcfd by the same time in 2020. One of the region’s most active drillers and producers, Continental Resources, reported that its fourth quarter 2018 production had grown by more than 13 percent when compared to its fourth quarter in 2017, while its full-year production for 2018 rose by 23 percent from 2017.

 

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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