The Weekly USA Oil & Gas Update: 13th April 2015

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

Goldman Sachs: production growth too strong for meaningful price gains

The US oil industry has not yet re balanced, according to Goldman Sachs. "While the decline in the US rig count has been faster than we expected, it remains insufficient tn our view to balance the US market in 2016. Prices need to stay low for longer to achieve a sufficient and sustainable slowdown in US production growth," the company said in a note dated last Monday. Goldman thinks US production will continue to grow by 700,000 barrels per day in 2015, despite the current price environment, because of "high-grading" in remaining drilling activity areas. Goldman isn't alone; commodity analyst Matt Smith believes recent price gains are not a sign that the price slide is over. "It's a bit of a head fake," he told CNBC last week. Article here

As many as 3,500 wells drilled but uncompleted in US

Falling oil prices have had operators delaying the completion of wells already drilled. Completing a well means hydraulically fracturing the well, an expensive practice which utilizes large amounts of sand and water, along with costly pressure pumping, comprising up to two-thirds of total well costs in unconventional oil and gas development. Delaying completions represents a great way to cut capital budgets while honoring deals with drilling rig providers. This inventory of wells that are already drilled and just need completion represent a significant amount of available production which could be quickly added to inventory once prices recover. Article here

IHS releases rankings of largest privately-held producers

The rankings, based on production, place Samson, Chief Oil & Gas, and Hilcorp Energy as the top three in natural gas, and LLOG Exploration, Hilcorp and Citation as the top three in liquids production. Article here

Unconventional Oil & Gas News

ConocoPhillips plans to ramp up rigs in 2017

The largest independent operator cut its capex budget nearly 30% this year, but plans to ramp activity back up in 2017 when it expects prices to recover. The company will double its rig count in North Dakota to 10 and increase its Eagle Ford rig fleet from 7 to 12 in 2017. CEO Ryan Lance said at a recent press conference that "[w]hile we've ramped down to adjust to current market conditions and lower commodity prices, our intention is to ramp back up with rig count in both those two plays." Why focus on shale at this time? Lance said that shale projects have better returns and a shorter cash cycle compared to alternatives. Article here

Environment and Safety News

OSHA tags oil & gas field work as "high hazard", subject to special enforcement program

Due to its recent high rate of fatalities, 15.9 per 100,000 workers for oil & gas versus 3.4 per 100,000 overall, OSHA has designated oil and gas field work, including drilling and support activities, as "high hazard'. The designation means that if OSHA inspectors find multiple willful or repeat violations or issue failure-to-abate notices, or a combination of these, the employer can be placed into the Severe Violator Enforcement Program (SVEP). This program targets industries of concern for national emphasis, and can include additional scrutiny at all an employer's worksites. Article here

Mergers and Acquisitions News

Shell to buy BG Group for $70 billion

BG Group has extensive assets in natural gas with an eye to LNG exporting, an area in which Shell wants to expand. LNG "is a very, very important component of this," said Shell's CEO Ben van Beurden. "It is really the strength of both companies." Shell is also taking advantage of the timing for this deal; BG's shares have fallen by over 30% since last May. Article here