The Shale Daily Roundup – 7.13.2020

Energy Dominance Dumbinance
Ukraine, Carpathians night photo of the European oil rig rocking the pump on the background of the Milky Way Galaxy in the universe. Symbol of energy and ecology of planet Earth

What You Should Know About Oil and Gas Today

The State of Play

Rig Count Conflict: While the Baker Hughes weekly rig count showed a drop for the 20th consecutive week last week, the Enverus Daily Rig Count showed a significant rise. The Enverus count bottomed out at 267 on July 5, and had risen back to 280 as of Friday, when the Baker Hughes count came in at 258. That upward trend at Enverus continued through the weekend, rising to 291 as of Sunday. That’s a 9% increase in 7 days, which in normal times would be considered somewhat significant. But these are far from normal times for the oil and gas business, so let’s wait to see where things stand a week from now before we decide it’s truly a trend.

Oil Price: The price for WTI continues to hover right around $40 per barrel this morning. That key U.S. index has remained within $1 of that mark for two solid weeks now, an indication that global supply and demand for crude are essentially in balance right now. With economies continuing to reopen from their COVID-19 restrictions and global demand rising as a result, that would be a bullish signal, but…

Here comes OPEC+ again. – Saudi Arabia and Russia are now leading a charge among the OPEC+ countries to raise production quotas beginning August 1, as reported by the New York Times, and that is putting a damper on any upwards price momentum. Ministers from the OPEC+ nations will meet via teleconference on Wednesday to decide whether it would be prudent to allow its participants to add roughly 2.5 million bopd in additional supply to the market at the start of August.

On to Other News…

With his repeated promises to decimate the nation’s oil and gas industry during this campaign, Joe Biden has created a fracking mess for himself in key swing states where fracking provides hundreds of thousands of jobs and billions in economic impact. My new piece at Forbes analyzes how difficult it is going to be for the candidate to clean that mess up.

The Houston Chronicle’s Sergio Chapa has an excellent piece this morning detailing the rising challenges faced by producers who still want to drill their wells in populated areas. It’s long, but well worth your time to read.

Chapa also reports about the efforts by Midland-based Summit Petroleum to obtain a raft of new drilling permits so it can ramp up its drilling program in the midst of this current bust. Summit filed for nine new drilling permits last week for horizontal wells targeting the Spraberry Formation in Upton County.

Marathon Petroleum re-started its refining complex along Galveston Bay over the weekend. The refinery operation had been shut down since May 23 as a part of a massive overhaul and maintenance project.

During a trip to San Antonio over the weekend, Energy Secretary Dan Brouillette predicted that the U.S. oil and gas industry would “come back very, very strong.”

“Energy underpins everything we do in the U.S. economy,” Brouillette said. “It’s one of the backbones of the strength of the economy and the nation itself, so it’s very important that we see this industry survive this pandemic and hopefully come out the other side even stronger.”

Let’s hope the Secretary is right.

At last, a “Peak Oil” prediction that will probably turn out to be right. – After a century-plus of always, without exception, being 100% wrong, the “Peak Oil” mantra could turn out to be correct in at least one isolated instance. Matt Gallagher, CEO of Parsley Energy, is quoted by The Financial Times this morning has predicting that the record 13 million bopd production level achieved by the U.S. industry before all the COVID-19 panic set in will probably never be equaled again. Given the severe challenges the upstream part of the business now faces in raising capital, it seems likely that Gallagher’s prediction might stand the test of time, unlike every “Peak Oil” prediction that came before it. I’ll get back to you in 100 years to provide an update on how it all turned out.

That’s all for today.












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