Bakken Shale – North Dakota/Montana

The Bakken is another shale play that is currently experiencing a boost in capital being reallocated out of the Permian Basin. A new report from Bank of America Merrill Lynch finds that year-to-date drilling activity for the Bakken is 20 percent higher than in the same period for 2017. However, Bank of America sees a similar issue with pipeline constraints looming for the Bakken in 2019: “During 2019, we expect Bakken production to exceed takeaway capacity again, which should cause oil there to trade at a more persistent discount to WTI until new pipeline capacity arrives,” Bank of America Merrill Lynch wrote. “Oil pipelines aren’t the only limitation for Bakken growth, gas processing, and gas and NGL pipeline expansions will likely be needed to accommodate growth.” It’s a good problem to have, but it is a problem that will need to be resolved by the midstream industry in order for production growth to continue.

Denver/Julesberg (DJ) Basin – Colorado

The big issue facing the DJ Basin as this issue of Shale Magazine went to publication was the outcome of Proposition 112, which was successfully placed on the November ballot by anti-oil and gas activist groups. Though Prop 112 was expected to be rejected by Colorado voters, if successful it would enact a statewide setback rule of 2,500 feet any occupied structure, water source or “vulnerable area.” The Denver Post published an editorial opposing Prop 112 when an independent study determined that, if enacted, it would represent a de facto ban on further drilling in the state of Colorado. Anadarko Petroleum obviously felt comfortable that Prop 112 would fail, announcing in its third quarter results that its overall production for 2018 would increase by 12-14 percent by focusing on what it calls the “3 Ds” — the DJ Basin, the Delaware Basin and its Deepwater assets in the Gulf of Mexico.

Permian Basin – Texas/New Mexico

In mid-October, Earthstone Energy, Inc. announced the purchase of 20,800 net acres from Corpus Christi-based Sabalo Holdings and its subsidiaries. The new acreage will grow Earthstone’s Midland Basin acreage by 69 percent and double the company’s production. Earthstone said it will have 50,800 net acres in the Midland Basin after the deal closes, which is expected by the first quarter of 2019. DrillingInfo issued a report in late September detailing more than $32 billion in oil and gas merger-and-acquisition activity that took place during the 3rd quarter of 2018. More than half of that activity — almost $18 billion — centered on properties in the greater Permian Basin, which, despite the current temporary issue with pipeline takeaway capacity, remains the hottest oil and gas play area on the face of the earth.

Eagle Ford Shale – Texas

Energy Secretary and former Texas Governor Rick Perry was on-hand in San Antonio on Oct. 19 to help celebrate the 10th anniversary of the first successful horizontal well completed in the Eagle Ford Shale. The event, called the Shale-a-Bration, featured more than 350 attendees, and was held in Hangar 9 at Brooks Air Force Base. The EIA expects November crude production in the Eagle Ford to climb to a robust 1.438 million bopd, up 30 percent from the low of 1.1 million bpd reached in Aug. 2017. The Eagle Ford is one of several basins currently experiencing an influx of drilling capital originally targeted for the Permian Basin, as pipeline takeaway constraints force producers there to reallocate.

Marcellus Shale – Pennsylvania/West Virginia/Ohio

The Pennsylvania Department of Environmental Protection (DEP) is proposing to raise well permit fees on Marcellus wells by 150 percent, from the current level of $5,000 to $12,500, effective in 2019. The $5,000 per well fee was implemented in agreement with the oil and gas industry and initially generated enough funds to foot the bill for the entire DEP budget, even though only about 60 percent of the agency’s work is related to the Marcellus. But DEP officials now say that the fee is no longer sufficient, and wants this massive increase. The industry is opposed to the new fee level, and suggests the agency should be partially funded from the state’s general fund in order to cover its work that is unrelated to the oil and gas industry. Kinder Morgan announced in mid-October that it was shelving its proposed Utica Marcellus Texas Pipeline project, which was to be designed to transport natural gas liquids from the Utica/Marcellus region to the Texas Gulf Coast. The company said it will instead focus on reversing the flow of its existing Tennessee Gas Pipeline and retooling it to carry NGLs.

Haynesville Shale – Louisiana/East Texas

According to the DrillingInfo Daily Rig Count, the number of drilling rigs active in the Haynesville region has remained essentially unchanged over the past year. Yet, the EIA data show Haynesville gas production ramping up from 4.2 bcf per day to about 6.5 bcf per day, an amazing 50 percent increase in just a year. That is truly stunning for a play area that was almost dormant for three years beginning in mid-2013. This has been made possible by the combination of two key factors: 1) Impressive gains in efficiency have significantly reduced the time it takes to drill, frac and complete each well. Some producers report that wells that used to take 25-30 days to drill and complete now take only 10-12 days to get done. Thus, each active rig is able to drill more wells than was formerly possible; and 2) Rapid advancements in drilling, fracking and completion technologies are resulting in impressive per-well productivity gains.

SCOOP/STACK Play – Oklahoma

Production continues to ramp up in Oklahoma’s most prolific play area. The U.S. Energy Information Agency (EIA) expects overall production in the SCOOP/STACK to average 550,000 barrels of oil per day in 2019, a 9 percent increase over 2018 levels. LINN Energy Inc. and Roan Holdings, LLC reached an agreement in September to combine their holdings to form a pure SCOOP/STACK play company named Roan Resources Inc. The new company owns 150,000 net acres in the play and was producing about 40,000 bopd at the end of the first quarter of 2018.

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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