The Shale Daily Update – 6.15.2020

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

What You Should Know About Oil and Gas Today

The State of Play

Crude prices are falling again this morning thanks to the latest round of panic stories related to COVID-19 being pushed out by the news media. West Texas Intermediate was off by about $1 per barrel as of this writing early Monday morning, trading at just over $35 per barrel.

The Enverus Daily Rig Count is for once not sitting at an absolute all-time low, although it’s very close. The 302 active U.S. rigs tabulated today is 1 rig above the all-time low of 301. So we got that going for us.

Meanwhile, the Primary Vision count of active frac spreads in the country right now comes in today at 69, up significantly from its low of 45 surveyed on May 20. Given the static rig count, that is most likely due to efforts by drillers to complete some of their inventory of “drilled but uncompleted” (DUC) wells in response to improved prices over the past few weeks.

Of course, the ongoing fallout in the oil and gas industry has been caused mainly by the demand-destroying impacts of the COVID-19 pandemic. My story at Forbes.com today reminds us that U.S. companies operating overseas have to deal with the same kinds of restrictions in other countries that they are dealing with at home.

My friend Allen Gilmer, founder and Chairman at Enverus, is also now a contributor at Forbes on energy matters. His first piece focuses on the unintended consequences coming out of all the various COVID-19 mitigation efforts. It’s a great read.

U.S. oil exports continue to drop as a result of the demand crunch, but Buckeye Partners, LP is betting on it being a temporary phenomenon. The company received first shipments at its new South Texas Gateway terminal last week, a month ahead of schedule.

Range Resources, a big Marcellus Shale producer, took a major blackeye late last week when it pled guilty to misdemeanor charges of attempting to cover up pollution issues at two Pennsylvania well locations. In response to a two-year grand jury investigation, the company pleaded no contest to a charge of “negligent oversight” and was hit with $150,000 in fines. Ugh.

Sergio Chapa reports in the Houston Chronicle on a new study released by the Institute for Energy Economics and Financial Analysis that finds that flaring in the Permian Basin wasted about $750 million worth of natural gas resources during 2018 alone. A little research into IEEFA reveals it to be a leftist organization that gets its funding from the typical anti-oil and gas foundations we find funding hundreds of such outfits, but there is no question that an awful lot of natural gas has gone to waste via flaring in the Permian Basin, and continues to do so today.

Also in today’s Houston Chronicle, Paul Takahashi reports on a new study by Rystad Energy that finds that the U.S. industry has lost more than 100,000 jobs in the current bust. Sadly, that’s probably a pretty conservative estimate.

Anyone who thinks the bust in the Permian Basin is somehow permanent is not dealing with reality, and the leaders in the region know it. Anticipating the recovery and regional growth to come, those leaders are lobbying hard to ensure that the looming extension of Interstate 27, which today runs the 121 miles between Amarillo and Lubbock, traverses through the Permian Basin on its way into Mexico.

From the story in the Houston Chronicle:

Republican congressional nominee August Pfluger of San Angelo, Odessa State Rep. Brooks Landgraf and Midland-Odessa Transportation Alliance President James Beauchamp say it won’t be easy to swing the road west away from the old Ports-to-Plains route down U.S. 87 through Big Spring; but they promise an all-out scrap to tug the Texas Department of Transportation and Federal Highway Administration around to their view.

“I absolutely feel there is sufficient reason for I-27 to go through Midland-Odessa,” Pfluger said. “When you consider that over a third of the oil and gas produced in the United States comes out of the Permian Basin, it’s absolutely critical to bring this north-south connector through the Basin.

The alternative would be take the route on a more eastward trajectory through the Texas Hill Country. The Texas Department of Transportation is currently conducting a traffic study that will ultimately determine the final route.

That’s all for today.