The Shale Daily Update – 4.28.2020

Saudi Arabia is threatening to ignite another global oil price war if cheating participants in the OPEC+ deal continue to exceed their quotas.

10 Things You Should Know About Oil and Gas Today

The Big Story

Lots of media speculation today about the Trump Administration’s action – or rather, inaction – thus far in relation to the crashing oil and gas industry in the U.S. Treasury Secretary Steve Mnuchin keeps talking about providing liquidity to struggling companies through low-interest loans. But unless the Treasury Department is planning to make those loans forgivable, that approach makes little sense in that the government would be loaning money to many companies that are already effectively bankrupt.

Meanwhile, as the Administration struggles to decide on an approach, the flotilla of 20 or so oil tankers carrying upwards of 50 million barrels of Saudi-produced crude oil continue their own slow approach to the shores of the United States. Once there, this Saudi oil will further flood an already over-supplied domestic market for crude oil, thus achieving the House of Saud’s goal of damaging the U.S. shale business. Even the very much anti-oil and gas Washington Post is questioning the wisdom of the President’s allowing this to take place in a piece published today.

In Texas, where indepdents Pioneer Natural Resources and Parsley Energy recently urged the Railroad Commission to consider using their powers to intervene in oil markets, the Houston Chronicle editioral board quotes analyst Amy Myers Jaffe today as saying that, even should the commissioners decide to act, it would be “too little, too late.” She’s right.

Speaking of too little, too late, an op/ed in today’s Williston Herald makes the case that regulators in North Dakota have also reached that point with a similar proposal to limit production in that state.

Things are also too late for Diamond Offshore Drilling, which declared bankruptcy over the weekend. Seeking Alpha points out this morning that that bankruptcy filing is now having a negative impact on some of Diamond Offshores big customers, such as Hess Corp. and Oxy.

Also on the bankruptcy front, Fitch Ratings has identified two significant producers in Wyoming as being at high risk of declaring bankruptcy in the coming days.

The situation is also becoming dire in New Mexico, whose recently-vibrant oil and gas sector saw the loss of 30 drilling rigs in a single week last week. Yikes.

Of course, tough times in the oil and gas industry do nothing to stop the Texas news media from running hit pieces targeting the business. Austin’s NBC affiliate, KXAN, has a real gem out today targeting pipeline giant Kinder Morgan and its Permian Highway pipeline system. This hit piece naturally quotes the claims of anti-pipeline activists as if they are unchallenged fact, a favorite tactic of biased media outlets. Too tiresome for words.

Speaking of pipelines, a recent ruling by an Obama-appointed federal judge temporarily rescinding a permit for the Keystone XL pipeline is now being used by the U.S. Army Corps of Engineers as an excuse to shut down its entire nationwide permitting system. This despite the extreme likelihood that this decision will be overturned on appeal. Stunning.

Finally, Oklahoma Governor Kevin Stitt sent a letter to President Trump asking him to declare the outbreak of COVID-19 to be an “act of God” in order to help provide relief to the ailing industry. If this is an “act of God,” it’s one from the vengeful God described in the Old Testament.

That’s all for today.
















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