What You Should Know About Oil and Gas Today
The Big Story
Today’s Big Story has to be the filing for Chapter 11 bankruptcy protection by fracking pioneer BJ Services Company. As Sergio Chapa reports in today’s Houston Chronicle, the filing came after a hoped-for $75 million financing deal with equity partner CSL Financial Management fell apart.
“The proposed transaction was nearly final, but fell apart on the one-yard line as the last remaining issues could not be resolved,” CEO Warren Zemlak wrote in the filing.
For those who are not aware, BJ Services is one of the industry’s most long-standing service providers, having been started in the 1870s by mining equipment manufacturer Byron Jackson. The company has been a big player in the hydraulic fracturing space, and this particular bust, with its dramatic reduction in drilling and fracking, has hit it and the service sector in general particularly hard.
BJ has already been forced to lay off 800 employees and furlough another 200 this year, and this bankruptcy filing could force even more workforce cuts. Sarah Foss, an energy industry bankruptcy expert with financial service Debtwire, is quoted by Chapa as saying “It would be tragic for a company that has been around since the 1870s and all those people,” should the company fail to reach a deal with lenders and investors and be forced to liquidate.
Indeed, it would, for the entire industry.
By the way, for those emailers who think I rely too much on the Houston Chronicle for information in these updates, I challenge you to find another media outlet that does a better job of covering the oil and gas industry than the Chronicle does these days. No other news outlet comes close, other than Shale Magazine, of course.
But I digress. On to other news…
Despite steady crude oil prices, gasoline prices actually fell by 2 cents last week according to the folks at GasBuddy. The average price for a gallon of regular in Texas was $1.80, a nickel higher than a month ago and 58 cents lower than a year ago.
Big news in the Dallas Morning News today: The oil bust has now turned a big State of Texas government budget surplus into a $5 billion shortfall. That’s the latest projection by Texas Comptroller Glenn Hegar, who will provide another update to his revenue estimate shortly before the next session of the legislature starts in January. You should expect to start seeing similar stories coming from other big oil-producing states in the months to come.
The state of New Mexico is responding to its own failing budget fortunes due to the oil bust by trying to make the situation for the industry in its state even more difficult and depressed. The state’s Environment Department rolled out new heavy-handed methane emissions rules yesterday. Yeah, that’s the ticket!
Another big hit to the pipeline industry: In a July 2 letter, the Department of Interior via the Bureau of Indian Affairs told Ohio-based Marathon Petroleum Corp. that it was guilty of operating part of the Tesoro High Plains pipeline system “without the consent of individual Indian landowners” and must cease operation of the pipeline. It also must pay affected parties $187 million — a portion of the debt that landowners say they are owed in right of way fees, Interior said. The pipeline has been in operation for almost 70 years.
Somehow amidst all of this negative news, Natural Gas Intelligence reports that applications for drilling permits actually rose in the month of June after absolutely collapsing during March through May. According to Evercore, a total of 1,238 permits were approved nationally during June, an increase of 166 from May. But don’t get too excited: That’s 77% below the number of permits approved during June, 2019.
That’s all for today.