The Weekly US Oil & Gas Update: 23 September 2013

Rig Counts - select states with key plays

General News

Colorado floods cause condensate spills in Weld County

Floodwaters in Colorado's Weld County, its most densely developed oil & gas region, have resulted in several spills of condensate totaling approximately 25,000 gallons. Although tanks were anchored for just such an event, flowlines were cracked from some of the flood's floating debris causing the releases. Colorado's Governor, John Hickenlooper was not overly concerned about the spills, given the amount of dispersion that would occur from flood waters. According to Hickenlooper, "The several small spills we've had have been very small relative to the huge flow of water coming through . . . in the universe, that's something the floodwaters probably churned up and spread out enough. But, the ultimate goal is zero and we're going to go back and see how we can do better." Of larger concern to health officials is the millions of gallons of raw sewage that were swept into the flood waters. Article here

California enacts law to regulate hydraulic fracturing

Governor Jerry Brown signed the law that will go into effect next year, the contents of which make neither environmental activists or the oil & gas industry happy. Activists were holding out for an outright moratorium on hydraulic fracturing (fracking) activities, which would have essentially ended new exploration in the state. The end result imposes on the industry an additional permit for fracking, which will require chemical disclosures, groundwater and air quality monitoring, and notification of nearby residents. This will lead to, increased costs to do business in a state with already robust taxes and and regulatory burdens, which may reduce exploration activity, according to industry. Article here

Unconventional Oil & Gas News

Shell gives up on Mississipian formation; selling all its Kansas assets

According to Shell spokesman Scott Scheffler, "Shell has completed its appraisal of its exploration holdings in the Mississippi Lime play and has elected to market these assets for sale and redeploy resources elsewhere in our global portfolio." Chesapeake, EnCana and Apache left the play over a year ago, while the play's largest promoter, Sandridge Energy, is focusing its efforts on its core acreage. With lots of acreage for sale, prices are falling from a high of $500 an acre down to $50 to $150 an acre. Not everyone is dissatisfied with the Kansas portion of the play. Tulsa's Unit Corp. is adding a second rig on the success of its initial exploratory wells, which averaged 240 bpdoe. Article here

Read more here: http://www.kansas.com/2013/09/19/3008861/shell-oil-pulling-out-of-kansas.html#storylink=cpy

Eagle Ford and Permian on pace to exceed combined 2 million bpd sometime in 2013

We have all been watching the Eagle Ford's incredible growth trajectory; the Wall Street Journal expects it to reach daily production of 930,000 bpd by the year end, close to Bakken volumes. What often gets overlooked is the rise in production from the nearby Permian, which is expected to exceed 1.4 million bopd by the end of the year, up from 890,000 pbd just earlier this year. Combined, the two plays should exceed 2.5 million bpd some time in 2014. Article here

Environment and Safety News

University of Texas study shows methane emissions from gas production lower than previously thought

A lot of controversy has been churning as environmentalists claim that natural gas's green house gas advantages are negated by methane emissions during production. The argument goes like this: generating electricity from natural gas results in about half the carbon emissions than when the same amount of electricity is generated from coal. These results have been confirmed to have large scale beneficial impacts--the US's carbon emissions have dropped dramatically since the large scale switch from coal to natural gas to generate electricity over the last 5 to 7 years. In fact, the US is the only industrial country to meet or exceed the Kyoto Treaty's goals for carbon emission, mostly due to this switching of fuel sources. Some environmentalists claim that this benefit is offset by the release of methane gas into the atmosphere during the production and transportation of natural gas, and methane is a much more potent greenhouse gas than carbon. Also consider that the effects of methane have a life of about 20 years, while carbon's last centuries. The net benefit or loss then depends on just how much methane gets released. The new Univ. of Texas study, published in the Proceedings of the National Academy of Sciences, is the first of 16 studies that will measure this, and so far the results are in natural gas's favor, as the study shows smaller releases than the EPA estimated--just 0.42% of total volume. Expect to read a lot about this issue in the coming months; activists have been performing their own non-peer reviewed studies showing much higher release rates, but with questionable methods for obtaining data, so look hard at the source of data for the conclusions. Article here

Safety seminar in Denver Tuesday, 9/24 to cover applying Process Safety Management concepts to upstream operations

The complementary 2-hour seminar for E&P companies and upstream service providers is presented by environmental and safety consulting firm ERM along with law firm of Jackson Kelly. ERM speaker Steve Hawkins will present PSM Light: Implementing Key Elements of Process Safety Management in Your Upstream Operations, and Jackson Kelly's Kristin White will present The Anatomy of a Workplace Accident - How you respond in the event of a fatality or catastrophe can largely determine your organizations' liability. The event runs from noon to PM and includes lunch. If you would like to attend, email me at todd.erickson@erm.com or call me at (307) 690-9195.

Mergers and Acquisitions News

Fieldwood Energy acquires Apache's GoM shelf portfolio for $3.75 billion

Backed by private equity giant Riverstone, Fieldwood will now be operating the largest shelf asset base in the Gulf of Mexico, with 95,000 boepd of net production and proved reserves of 239 MMboe. Apache retains 50% rights to deep exploration in the producing blocks as well as 50% of all rights in the exploration blocks. Article here