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Oil and Gas Roundup — May 23

May 23, 2017
TOPICS: In the news
A roundup of oil and natural gas industry news from around the state, nation and world:

U.S. oil and gas rig count tops 900

The number of rigs drilling of oil and natural gas throughout the country topped 900 this week for the first time in more than two years.

The oil and natural gas industry this week restarted 16 rigs, bumping the country's total to 901, up 123 percent from 404 one year ago. The number of rigs drilling for oil increased by eight to 720 while the natural gas count also gained eight, climbing to to 180. One rig was listed as "miscellaneous."

In Oklahoma, four new rigs were added, ending two weeks of declines and boosting the state count to 122, up 114 percent from one year ago.

Central Oklahoma's STACK and SCOOP fields are among the areas in the country where drilling activity has picked up fastest. The plays are part of the Cana Woodford basin, which was unchanged this week at 53. The basin had 29 active rigs one year ago.

The Cana Woodford is the third most-active field in the country, behind the south Texas Eagle Ford, which added two rigs this week to 85, and the Permian Basin in west Texas and southeast New Mexico, which gained four rigs this week to 361.

Read Adam Wilmoth’s story at NewsOK.

Midland Basin has lowest shale breakeven costs

Texas is the heart of oil and gas activity, with both the Permian and Eagle Ford driving tremendous amounts of production and activity.

In total, the oil and gas industry employed about 211,700 people in Texas in March, up 3,500 from February. “Oil and gas extraction” jobs increased slightly to 92,500, while “support activities” rose to 119,200. Historically, employment in “oil and gas extraction” is much steadier than employment in “support activities,” as support activities saw employment drop by about half during the downturn.

Texas accounts for about 54 percent of all oil and gas employment in the U.S. Nationwide, there are 181,200 people working in “oil and gas extraction” jobs and 208,200 people in “support activities.”

The current oil price is approximately at breakeven for new wells in the most prominent shale plays, according to the Dallas Fed Energy Survey. The fed asked 62 E&P companies “What WTI oil price does your firm need to profitably drill a new well?” in mid-March this year.

While results varied widely, here is a breakdown:

- The Midland area of the Permian emerged as the best play, with an average reported breakeven from $46/bbl in Midland to $50/bbl in the central platform.

- Oklahoma is still a factor, as the SCOOP/STACK was close behind with $47/bbl.

- The Eagle Ford showed the most consensus, with all results near the average of $48/bbl.

- Non-shale plays in the U.S. varied widely, with responses ranging from $25/bbl to $100/bbl, but averaged $53/bbl, slightly above current prices.

Read more at OilPrice.

How McMullen County, Texas, became the richest in America

When the residents of sleepy, rural McMullen County, Texas, found out that they officially lived in the richest county in America, "we were shocked," recalls Kimberly Kay Kreider-Dusek, the only lawyer in the area. She serves as the county attorney, prosecuting misdemeanors and advising county commissioners on legal matters.

McMullen County, population: 804, one of the least populous counties in the state, lies southeast of San Antonio. According to Internal Revenue Service numbers crunched by Syracuse University researchers, its population's average adjusted gross income — at $303,717 — now ranks as the highest in the nation.

It's not as if the cattle ranchers and others in McMullen didn't already recognize that landowners "were making nice amounts of money" from oil and gas royalties, and that welders at drilling sites were pulling in six-figure salaries, says Kreider-Dusek. Still, they hadn't realized that they had officially surpassed more famously affluent areas like Teton, Wyo., and Fairfield, Conn.

And, for the most part, what residents have chosen to spend their newfound riches on isn't just surprising, it's exemplary.

Read more at CNBC.

U.S. shale roars back at OPEC

OPEC may get its members to agree to continue to tamp down oil production, but it will be a Pyrrhic victory.

The biggest threat to the 13-member group’s dominance has been U.S. shale.

In November 2014, the Organization of Petroleum Exporting Countries decided to keep production levels high in the hope it could maintain market share.

But that was a difficult task to begin with, and since then, U.S. shale producers have become even more efficient.

By the time OPEC reversed course in November 2016, sending oil prices up as much as 10 percent, shale had already gained ground.
There are areas in the enormous Permian and Eagle Ford shale fields in Texas where producers can break even at prices as low as $34 a barrel, according to Bloomberg Intelligence.

And analysts now say U.S. shale production will grow even faster than expected. Macquarie Group now thinks production will increase 1.4 million barrels a day through December, up from a previous growth estimate of 0.9 million barrels a day. JPMorgan Chase & Co. doubled its forecast to an increase of 800,000 barrels a day for the same period.

As OPEC and non-OPEC producers (namely Russia) cut back on production, U.S. shale producers are moving to quickly fill the gap. Their output increase is equal to about half of the OPEC cuts and twice that of Russia’s cuts, according to a report out this week by Eugen Weinberg, head of commodity research at Commerzbank.

Read more at Bloomberg.
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