SHALE Update: From the Bakken Shale to the Utica – What’s Happening?

Shale Play Short Takes

Bakken Shale – North Dakota/Montana Kinder Morgan and Tallgrass Energy announced that they will expand their jointly-operated Hiland Crude Pipeline system. The expanded system will be capable of moving Bakken crude to markets on the East Coast of the U.S., and to Cushing, Oklahoma. A new report by ESAI Energy projects that the Bakken will set another record for crude output during 2019 and 2020. The report estimates that Bakken production growth will add almost 250,000 barrels per day to total U.S. crude production by the end of next year.

Denver/Julesburg (DJ) Basin – Colorado Boulder County became the fifth community to announce a moratorium on new drilling permits in the wake of the passage by SB 19-181 by the Colorado state legislature earlier this year. The Boulder moratorium has an initial term of 9 months, but would be subject to extension at the whim of the county commissioners court thanks to new powers granted to local communities by the new law. But the news is not all bad: On June 4, the Aurora city council voted 6-4 to approve a plan for new drilling submitted by ConocoPhillips under the new law. Under the agreement, ConocoPhillips agreed to higher reporting standards than currently required by state rules and to respond to any odor complaints within 24 hours. The plan now goes to the Colorado Oil and Gas Conservation Commission for final approval.

Permian Basin – Texas/New Mexico The world’s most active oil play became the driving force behind this year’s oil and gas industry merger in May, when Occidental Petroleum stole Anadarko Petroleum away from Chevron. In fact, the $57 billion buyout represented the largest U.S. oil and gas-related merger of the 21st century, and was the fourth-largest upstream merger deal in history, according to DrillinInfo. Rystad Energy said in a report in early June that natural gas flaring had reached record levels in the Permian during 2019. Producers flared 661 million cubic feet per day (mcfd) in the Permian Basin of West Texas and eastern New Mexico during the year’s first quarter, according to Rystad.

Eagle Ford Shale – Texas As part of its drilling program for the second half of 2019, ConocoPhillips announced that it would drill 13 new wells on its acreage in Karnes and DeWitt counties. This brings the total number of Eagle Ford drilling permits filed by ConocoPhillips during 2019 to 80. Marathon Oil, one of the largest producers in the Eagle Ford, closed the divestiture of its remaining North Sea assets, completing its exit from the U.K. The divestiture is part of Marathon Oil’s global strategy of exiting its international operations in order to dedicate more capital to the development of its U.S. acreage in the Eagle Ford and other shale plays.

Marcellus/Utica Shale – Pennsylvania/West Virginia/Ohio Pennsylvania’s Public Utility Commission announced in June that the state’s Impact Fee on natural gas operations in the Marcellus and Utica Shale plays raised a record $243 million for 2018, plus $8.9 million in back fees. The 2018 total collections exceeded the previous record of $225 million set in 2013. Despite the collapse of the NYMEX natural gas price, which dropped below $2.30/mmbtu at the end of June, drilling activity in the Marcellus/Utica region remained remarkably stable. According to the DrillingInfo Daily Rig Count, the region had 64 active drilling rigs as of June 30, three more than were running at the end of June 2018.

Haynesville/Bossier Play – Louisiana/East Texas Comstock Resources announced on June 10 that it would acquire the assets of Haynesville producer Covey Park for $2.2 billion. This was the latest in a series of acquisitions in the are by Comstock since Dallas Cowboys owner Jerry Jones came in as a majority shareholder in mid-2018. The transaction now gives Comstock more than 1.1 billion cubic feet per day of natural gas production, and 293,000 net acres with more than 2,000 drilling locations.

SCOOP/STACK Play – Oklahoma The rig count in the SCOOP/STACK has dropped by more than 25% since the first of the year, as disappointing well recoveries, combined with increasing pressure from shareholders to increase investor returns, have led operators to scale back capital dedicated to their drilling programs. Although the play has largely been quiet on the mergers and acquisitions front, some operators still find its acreage attractive. In late May, Red Wolf Natural Resources announced it had acquired 56,000 acres and associated production in the region.

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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