Oil & Gas

Denbury Resources Declares Bankruptcy

31 August 2020
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Denbury Resources, Inc., a Texas-based oil company doing business in eastern Montana, has petitioned for Chapter 11 bankruptcy.

Denbury was noted for its focus on recovering stranded oil reserves from mature fields using enhanced oil recovery, including sequestering carbon dioxide, which was extracted from fields in Wyoming.

The company is hoping to shed about $2.1 billion of its bond debt. It has secured lenders for interim funding and anticipates continuing its operations and paying employees wages and benefits.

“We look forward to emerging a financially stronger company, and we are excited about building on the multiple advantages of our unique CO2 EOR (Enhanced Oil Recovery) focused strategy for many years to come,” said Denbury’s President and CEO, Chris Kendall 

Other Pipelines Expand in Face of Shutdown of Dakota Access Pipeline

27 August 2020
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As the Dakota Access pipeline deals with lawsuits aimed at closing it, other pipeline companies are anticipating an increase in demand for transportation and are expanding their pipelines. Also, the higher –risk and higher- cost alternative of transporting oil by tanker cars on railroads is seeing an increase, according the Oil Patch Hotline.
Kinder Morgan’s Highland crude oil pipeline, which carries 88,000 BOPD, which originates near Sidney, the pipeline e could be expanded with the addition of a new compressor to add another 35,000 BOPD in the next 12 to 18 months, according to CEO Steven Kean.
“So we have seen increased activity and interest in HH,” Kean told Wall Street analysts recently. “Our volumes were up this month versus last month. That is a function of, I think, really two things, concerns about takeaway, but also for reasons of priority of access to HH, people do want to maintain their history on the system. So we continue to see barrels that might have otherwise gone someplace else, and they’re continuing to come our way.”
If there was a shutdown of Dakota Access, it could expand the WTI differentials in the Bakken, he added.
Interstate Energy Partners, which is the parent company of Dakota Access, is appealing to the Federal District Court in Washington, DC, a recent decision by a judge to empty the pipeline while a 13-month environmental review takes place. The Dakota Access Pipeline moves 600 BOPD (Barrels of Oil per Day).
“It’s a bad broader message for pipeline infrastructure, but also for our business, particularly on the gathering side,” Kean said.
In the meantime, Crestwood Equity Partners said it is capable of moving 160,000 BOPD of crude oil by rail out of its Epping, ND terminal.
It is one of a dozen terminals capable of moving crude out of the state. About 300,000 BOPD—one third of North Dakota’s daily production, is shipped out daily on unit train tanker cars. Moving oil by rail has a greater environmental impact, poses greater environmental and safety risks, and costs more.
“In the event of a shut-down of the DAPL pipeline, Bakken basis differentials will be negatively affected in the short term until production volumes are reallocated to other pipelines and rail facilities,” said Crestwood President, Chairman and CEO Robert G. Phillips.

Higher Crude Oil Prices Projected

19 May 2020
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From Oil Patch Hotline

Two major Wall Street banks are projecting higher prices for crude oil later this year because of production cuts by OPEC and hundreds of wells shut down in leading oil producing states of Texas and North Dakota.

UBS sees Brent rising to $43 a barrel by the end of the years because of lower prices and rising to $55 a barrel by mid-2021.

Goldman Sachs upped its Brent forecast from $52.50 to $55.63 a barrel  and raised West Texas Intermediate crude from $48.50 to $51.38 a barrel for 2021.

“Oil production has started to decline quickly from a combination of scale back in activity, shut-ins and core-OPEC/Russia production cuts. Demand is also beginning to recover from a low base, led by a restarting Chinese economy and increasing transportation demand in developed market economies,” Goldman Sachs said.

“We still expect oil demand to contract strongly this quarter, though not as much as we did before; we now estimate minus 15 million barrels per day  year on year for the second quarter, versus minus 20 mbpd previously,” UBS said.

The bank expects global oil supply to contract by nearly 6 mbpd year on year in the second quarter, citing forced production shut-ins in North and South America as current low price environment fails to cover operating costs.

During early trading May 6 the New York Mercantile Exchange, WTI had risen to $23.62 a barrel and Brent was up to $29.81 a barrel.

Bakken Output Increases, Expected to Grow More

19 February 2020
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North Dakota’s Bakken Shale gas output increased by 20% in 2019, and the latest analysis shows it growing another 10% year over year in 2020. Due to limited downstream access, the additional production looks to take a greater share on Northern Border Pipeline.

Bakken gas production is expected to grow by 10% in 2020, before slowing down to about 4% annually from 2021 through 2025, according to a forecast by S&P Global Platts Analytics.

Last year, Bakken producers relied on well completions, or bringing drilled but uncompleted wells online, to keep production growing. However, one of the lingering constraints within the basin is insufficient processing capacity and natural gas takeaway, which has caused producers to consistently miss gas capture targets established by the North Dakota Industrial Commission.

To combat the issue there has been a push for additional infrastructure and as a result: four gas processing plants came online during the second half of 2019 and another five are in the planning stages with in-service dates spread out over the next two years.

With Bakken gas production growing faster than processing plants can come online, the region has come up short in meeting the state’s regulatory policy for gas flaring, which not only are set to tighten in 2020, but also are expected to be enforced more aggressively due to public pressure.

Recent enforcement of the regulations has not been strict, especially since the NDIC designated various extenuating circumstances and producer exemptions. The NDIC currently estimates more than 500 MMcf/d of gas is being flared at oil wells within the state with natural gas capture rates hovering around 83% in November 2019. This is a problem because the commission’s current gas capture target is 88% and increases to 91% in November 2020.

There is also a shortage of gas pipeline takeaway within the region. The main outlet for Bakken gas is Northern Border, where Western Canadian import volumes compete for space. Bakken gas has been increasing its market share of Northern Border’s capacity for the past several years. As of late, the percentage of Bakken gas on Northern Border’s roughly 2.5 Bcf/d capacity has approached 80%, according to Platts Analytics.

This means about.500 MMcf/d of Northern Border capacity currently being occupied by Canadian volumes that Bakken gas could potentially push out. In order to meet the current 12% flaring limit, operators in the Bakken need to capture an additional 200 MMcf/d, which is within the bounds of potentially available capacity on Northern Border.

However, about a quarter of the gas produced in the Bakken originates in the Fort Berthold Indian Reservation, where it is more difficult to obtain permits for building infrastructure such as gathering and takeaway pipelines. Per the latest state data, capture rates in the FBIR stand at 81%. While this marks a notable improvement since January 2019 when the FBIR capture rate registered at 73%, it remains unclear how much extra gas operators in FBIR can capture next year.

With no new announcements for imminent gas takeaway pipelines serving the Williston Basin, operators in the basin will need to maximize their footprint on Northern Border to meet the required capture rates.

Oil Video

25 January 2020
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A new video being promoted by the American Petroleum Institute (API), the nation’s largest oil and gas trade association, and a fact sheet put out by the Western Energy Alliance refute claims about natural gas production made by Democratic presidential candidates who vow to ban fracking.

API’s video points to how domestic natural gas production is essential for U.S. energy security.  https://youtu.be/ALEY2lqAOGU

Gas Prices Drop

15 October 2019
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Labor Day Weekend saw the lowest gas prices in at least three years, AAA reports.

Gas prices dropped in every state except for Hawaii. Idaho saw the largest decrease of 16.8 percent, followed by Utah, Wyoming, Alaska and Colorado.

The national average of $2.58 per gallon is about 25 cents less than last year’s prices, and 5 cents less than 2017’s, during the same time period.

Louisianans, Mississippians, and Texans pay the least for gas, at about $2.20 a gallon, compared to Hawaii’s $3.66 a gallon.

The highest gas prices still tend to be in the West, upper Midwest and Northeast, AAA reports, where gas costs anywhere between $2.78 and $3.70 per gallon, and up.

Continental CEO Predicts More Drilling Rig Cuts

15 October 2019
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From the Oil Patch Hotline

Harold Hamm, CEO of Continental Resources, the largest Williston Basin producer, said OPEC and U.S. shale producers should cut crude oil production and shipments into an oversupplied market.

U.S. shale producers “need to row our own boat… We need to make sure we don’t oversupply the market,” Hamm told a Denver conference recently. “Capital discipline is more important now than at any time I’ve seen.”

Producers need to cut back on the number of active drilling rigs, noting that reductions so far “haven’t bottomed yet,” Hamm said. He believes that the current rig count of 909 will drop to 800.

Oil Field Innovations Change The World & Oil Industry

13 October 2019
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“You did that.”

“We need to talk about it more,” said Blu Hulsey, Senior Vice President of Government Relations and Regulatory Affairs at Continental Resources. The accomplishments and technological development of the petroleum industry goes far too much unremarked upon, Hulsey told the audience at the Montana Petroleum Association’s Appreciation Luncheon at the DoubleTree in Billings, on August 28.

The technology that has been developed within the industry “is equal to the technology of putting people on the moon,” he said,

Continental Resources is one of the largest oil producers in the Bakken.

“We are the greatest oil country in the world,” Hulsey unequivocally stated at one point.

The accomplishments of the industry “has changed the world,” said Hulsey, pointing to the recent antics of Iran capturing oil tankers and threatening other countries militarily “…and the price of gas in Billings doesn’t go up a penny,” he exclaimed. In the past, with the US dependent upon the Middle East for oil, any kind of incident like those recently witnessed, would have caused oil prices to sky rocket, but not anymore.

“You did that,” he told the room packed with representatives of all aspects of the petroleum industry. The US petroleum industry is now the world’s largest producer of oil and an exporter of oil and gas to the rest of the world.

As the cost of production continues to decline because of the new technology, and the level of production continues to increase there will continue to be a lot of changes to the world and to the industry itself.

The industry is changing how it looks at itself. “Everyone is looking internally,” he said about petroleum businesses.

You don’t need 150 rigs in the Bakken, 60 will produce just as much, now.

Returns that were projected on $70 per barrel oil prices are now being experienced with $50 per barrel oil prices. 

“We have almost doubled production in four years because of technology,” said Hulsey.

At one point it was impressive that there were 12 wells in the Bakken that hit 100,000 barrels of production in the first 90 days. Now there are 157 wells that hit that level of production in 90 days, and more and more continue to hit that goal.

“You are going to see long-term growth in the Bakken,” predicted Hulsey, “and we are going to continue to get more recovery.”

Investors are not being apprised of this reality as much as they should be, Hulsey lamented.

Hulsey praised the people in the industry. When the industry encounters barriers, “our people get better – American ingenuity is making a difference.”

Hulsey talked about the Bakken as a world class resource, saying that 150 miles wide and 150 miles long, it is comparable to the Permian Basin, which while impressive and larger doesn’t have the same quality of oil. There is more water in the Permian oil. Having considerably less water reduces production costs in the Bakken. Efficiencies being achieved in the Bakken are not necessarily found in every oil field – many won’t be found in the Permian.

The Bakken will eventually produce 30 to 40 billion barrels of oil.

Hulsey lauded the Trump administration. “We have an administration that is not stopping us from doing long-term development…that means big improvements for the long term.”

MPA Applauds Court Decision

21 July 2019
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By Jenna McKinney, Montana Petroleum Association

 The Montana Petroleum Association (MPA) applauds the 9th U.S. Circuit Court of Appeals panel that recently ruled the injunction put in place last fall by U.S. District Court Judge Brian Morris is no longer in effect. This decision comes shortly after the Trump administration issued a new Presidential Permit on March 29, 2019. The new permit supersedes the previous permit and allows TransCanada to now continue construction of the Keystone XL pipeline project.

The continued delays of the Keystone XL pipeline project have gone on since the first Presidential Permit was issued in 2008. In Montana the four year permitting process resulted in a Major Facilities Siting Act permit in 2012, seven years ago. The initial hold ups were due to standard protocols for Environmental Impact Studies (EIS) and determining the most advantageous route for the pipeline to go from Canada to Houston, TX. The subsequent delays and court appeals have become a battle ground for political gamesmanship and conflicting ideologies. The Keystone XL pipeline project is one example of how political posturing has harmed our economy by stifling employment and slowing reasonable access to markets. With a projected $3.4 billion added to the U.S. GDP, and the creation of tens of thousands of jobs, isn’t it time for the Keystone XL to be built?

Montana Petroleum Association Executive Director, Alan Olson responded to the news with, “Oil and gas development and industry growth means significant job opportunities for Montanans, it means energy independence for America, and provides responsible, safe, and efficient transportation for the oil and gas industry.  We appreciate the Trump Administration’s support of Keystone XL pipeline and the Oil and Gas industry.”