The Weekly USA Oil & Gas Update: 20 May 2014

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

Permian surpasses Bakken and Eagle Ford on number of rigs drilling horizontally

According to the US Energy Information Administration (EIA), "During the first quarter of 2014, the increase in oil-directed horizontal rigs in the Permian Basin was more than four times the combined increase in the Eagle Ford and Williston Basin," which puts the total count for rigs drilling horizontally in each at 215 in the Permian, 173 in the Eagle Ford, and 164 in the Bakken's Williston Basin. Including vertical drilling rigs, the Permian has 545 rigs in total, far more than any other basin, and up 16% from a year ago. Producers are going after stacked pay zones in the Spraberry, Wolfcamp, and Bone Spring formations in west Texas and eastern New Mexico. Article here

Unconventional Oil & Gas News

Ohio's Utica Shale will continue to be a focus for Chesapeake

Far and away the Utica's largest participant, Chesapeake has so far drilled 485 wells in the play, with 274 of these producing. Between the Utica and the Marcellus, these plays provide 39% of Chesapeake's total production for Q1 2014. The reason, "It's about value, " according to VP Chris Doyle in a recent teleconference. Chesapeake has reduced its costs for drilling and completing the typical Utica well from $7.7 million in 2012 down to $6.7 in 2013, and has a target for the end of 2014 for a total cost of $5.7 million per well. Combine this with an average first-month production of 1,360 barrels of oil equivalents per day, and you can see why Chesapeake is committed to continued development of the Utica. With its 1 million acres containing 5,500 prospective drilling sites, this can go on for decades. Article here

Whiting continues its Bakken focus

The company recently sold $917 of non-core assets to further focus on its prolific Bakken acreage, now standing at over 715,000 net acres. In 2014, Whiting plans to invest $2.4 billion, which will push production growth 17% to 19% over its current 100,000 bpd. This level of development could continue for quite a while; "at the current drilling pace, we estimate we have 22 years of drilling inventory in the Williston Basin," said CEO James Volker. They do this efficiently as well, drilling a well to a total depth of 10,000 feet, then horizontally another 10,000 feet in just 11 to 15 days. Article here

Environment and Safety News

Regulators considering stabilization step before Bakken crude shipped

After several fiery train crashes involving flammable Bakken crude oil, regulators are considering adding a processing step before the crude is shipped to strip out the most flammable elements. Running the crude through stabilizers would strip out the natural gas liquids (NGL's) and reduce the volatility of Bakken-produced crude. "I do think that is part of the equation that we ultimately need to address in terms of railcar safety," said Greg Garland, CEO of Phillips 66 when asked if he could see adding stabilizers to remove NGL's in the Bakken. A US Department of Transportation spokeswoman when questioned about the topic said "We are looking at all our options and everything is on the table." Producers have so far resisted the stabilization step; building the infrastructure to perform this operation could potentially cost billions, and there is no nearby market for the NGL's once removed. Article here

Mergers and Acquisitions News

Chesapeake still restructuring; plans to sell $4 billion more in assets this year

The company has already raised $925 from selling assets this year, but plans to continue slimming down its asset portfolio to pay down debt. Chesapeake will also spin off its oilfield services unit. So far, these moves have paid off, with its stock price rising 39% over the last twelve months. The company also continues to spend on developing the assets it owns, raising its annual capex from around $5 billion this year to between $5.5 billion and $6 billion in 2015. Article here