The Shale Daily Update – 4.14.2020

Dominion and Duke Energy announced over the weekend that they have cancelled plans to complete the $8 billion Atlantic Coast Pipeline project.
Oil refinery industrial plant at night

Here are 10 Things You Need to Know About Oil and Gas Today:

The Big Story

In the wake of the OPEC+ nations agreement to cut global supplies of crude oil by roughly 10%, and with analysts predicting the U.S. will lose between 2 million to 4 million bopd over the next few months, the Texas Railroad Commission holds a hearing today to consider whether to mandate restrictions on oil production within the state’s borders through its power of prorationing. It is a power that the Commission has not exercised in 47 years, and a question on which the industry itself is split down the middle. Regardless of what the Commission ultimately decides, the moment itself is historic.

Railroad Commission debate creates strange bedfellows – Strong analysis from the Houston Chronicle’s Sergio Chapa.

History Tells Proration Would Cause Chaos In The Texas Oil Patch – Interesting op/ed piece from Anas Alhajji at Forbes.com.

Texas to consider mandatory oil cutsExcerpt:

The industry has already seen numerous company bankruptcies and layoffs of thousands of workers. Cusack said state-ordered production cuts could put his Houston-based company and its 70,000 acre oil production site, 30 miles southeast from San Antonio, out of business. “Smaller companies like us cannot afford to have any forced curtailment of current production,” said Cusack, president and CEO of Recoil Resources. “We need every dollar we can get right now to pay our (debt) obligations.”

Oil slips as producer cuts fail to banish demand fearsExcerpt:

Oil prices edged lower on Tuesday, with investors apparently unconvinced that record supply cuts could soon balance markets pummeled by the coronavirus pandemic, though a predicted plunge in U.S. shale output provided some support.

Brent futures fell 52 cents, or 1.6%, to $31.12 per barrel after settling up 0.8% on Monday. U.S. West Texas Intermediate crude was down $1.06, or 4.7%, to trade at $21.38 per barrel, having dropped 1.5% in the previous session.

India plans to fill strategic oil storage by the third week of May – Great idea – America needs to do the same thing.

Despite OPEC agreement, Canadian oilpatch cutbacks expected to continue – Times are bad in Canada, too.

Oil industry group leader says international oil deal not enough to help Louisiana producers – Excerpt:

“Our industry is on the verge of collapsing,” said Gifford Briggs, president of the Louisiana Oil & Gas Association. “With tens of thousands of jobs and millions of dollars in tax revenue at risk, it is essential for policymakers at all levels of government to implement aggressive and immediate solutions to offset the expectation of prolonged shut-in wells, a massively oversupplied world oil market and the global shutdown of our economy.”

Briggs urged Congress to temporarily eliminate federal offshore royalties in the Gulf of Mexico “to prevent thousands of leases from being shut in.” LOGA also is asking Louisiana lawmakers to “provide immediate severance tax relief,” ease regulations, and find a way to address local government lawsuits against the industry alleging environmental damage to the state’s coastal region.

Local producers agree OPEC+ pact is good first stepExcerpt:

Tommy Taylor, director of oil and gas development at Fasken Oil and Ranch, called the agreement a good first step to eventually improving oil prices.

“But it appears that the commodity traders are wanting to see how the inventory volumes change before the price of oil is going to change in a positive direction,” he told the Reporter-Telegram by email. “I’m sure they would like to see how demand responds once the coronavirus clears out and employees are allowed to go back to work. This is certainly an unprecedented time in our industry (and historically) where demand is off 10-20% worldwide and supplies are abundant. It will take some time for the impact of this pandemic event to work through the economies around the globe. The low oil prices will certainly provide a much-needed stimulus effect for the United States economy and hopefully we all will return to our more normal lives sooner than later.”

In an email to the Reporter-Telegram, Kirk Edwards, president and chief executive officer of Latigo Petroleum, credited the Trump administration with helping broker the agreement.

“It is great that the Trump administration was instrumental in getting the flood of oil stopped that was coming to our Texas Gulf Coast, the same oil that was already exasperating the takeaway problems the Permian producers were starting to see because of storage being full,” he wrote. “Now the hard part begins for Texas as our regulators get to decide the mechanism (to determine) whose oil is the most important to allow to be marketed or whose oil will be shut in for lack of pipeline and market access. This will be a completely unfair situation for the smaller independents, which number over 6,000 in Texas, as they do not have the size to command pipeline access nor the political clout to be heard. (That is) unless the Texas Railroad Commission can figure out a way to allow everyone to cut back and feel the same pain until our energy demand picks back up. Either way, the number of rigs running in West Texas and the frac crews working to complete them will continue to plummet until the oil oversupply problem gets resolved, which to me will be quite a few months down the road.”

North America’s Oil Industry Is Shutting Off the SpigotExcerpt:

President Trump promised the U.S. would curtail oil output in a pact with major producers over the weekend. There isn’t much for him to do: The dismal economics and strained physics of the oil market are causing U.S. producers to shut down themselves.

Canceled orders were mounting amid the sharp drop in fuel demand when Texland Petroleum LP decided to shut in each of its 1,211 oil wells and cease production by May.

“We’ve never done this before,” said Jim Wilkes, president of the 7,000-barrel-a-day Fort Worth, Texas, firm, which has weathered oil busts since 1973. “We’ve always been able to sell the oil, even at a crappy price.”

Eni: Pondering Options To Weather The Oil Price Collapse – Interesting analysis about how a major integrated oil company based in Italy is planning to adjust its business to the current volatile market situation.

That’s all for today.

 

 

 

 

 

 

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