What You Should Know About Oil and Gas Today
The State of Play
As we start another week in what has become the most destructive year for the oil and gas business in modern times, here are the basics of where the domestic U.S. industry stands:
The Baker Hughes rig count hit another all-time record low, with just 247 active rigs operating nationally as last week came to a close.
The Enverus Daily Rig Count, which uses a slightly different metric, is not at its all-time low, but not really all that much higher: It currently sits at 284 active rigs, up from last month’s all-time bottom of 268.
The Primary Vision count of active frac spreads (hydraulic fracturing crews and equipment) nationally is just 70, up from its May all-time low of 47, but down from the 80 recorded two weeks ago.
The price for a barrel of West Texas Intermediate as of this writing was $41.76, slightly up from its weekend close.
The NYMEX price for natural gas was sitting at $2.21 per Mmbtu.
Not a pretty picture.
Let’s move onto other news…
The Texas Railroad Commission is seeking public comments on its new proposed rules on the flaring issue that continues to give a huge black eye to the Texas oil industry. The response will be very predictable: The industry and its trade associations will endorse the changes, and the environmental community will pan them. In other unsurprising news, water remains wet.
In an interesting move, S&P Global Platts has begun publishing a new benchmark, American GulfCoast (cq) Select to reflect the rising importance of exports of crude oil going out of Texas ports, especially those in Houston and Corpus Christi. “What is West Texas Intermediate?” said Richard Swann, editorial director, American oil markets, with S&P Global Platts. “It’s a name that’s almost a victim of its own success. For most of the world, it’s not WTI Midland but WTI Cushing and that’s part of the Midland price. The price for Midland crude is linked to the Cushing differentials.”
“What has changed is the importance of exports,” said Swann. “There’s still a surplus of WTI that comes out of Midland and that surplus is being exported. That’s where the price is being established; that’s where you have to find buyers – the global market.”
In a key development for pipeline Giant Kinder Morgan, the commissioners court in Hays County, Texas appears set to restore its rights to continue construction of its Permian Highway natural gas pipeline through its territory today. KMI’s permit had been suspended on April 28, April 28, one month after a contractor hit a karst feature while trying to bore under the Blanco River near Chimney Rock Road in Blanco County.
Ed Longanecker, President of the Texas Independent Producers and Royalty Owners Association has an interesting Op/Ed in today’s Midland Reporter Times. In that piece Longanecker notes that the oil and gas industry represented 321,455 direct jobs in the state of Texas during the first six months of 2020, a decrease of nearly 40,000 jobs compared to the previous year. That’s a lot of lost jobs, most of which are not coming back anytime soon.
Meanwhile, the Houston Chronicle’s Sergio Garcia has a report on a new study showing that U.S. jobs losses in the oil industry service sector this year are now approaching 100,000. The report, conducted by Petroleum Equipment & Services Association, or PESA, further finds that total service sector employment is down by 118,000 from a year ago.
Yikes. In this piece published in the Santa Fe New Mexican, former congressman and current New Mexico Republican Party Chairman Steve Pearce lambasts New Mexico Oil and Gas Association Executive Director Ryan Flynn for expressing praise of a Democratic candidate for one of the state’s congressional seats. You don’t see that very often.
That’s all for today.