permian gains give oomph to u.s. drilling permits in june
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BAKKEN SHALENorth Dakota Reports ‘Five-Alarm Fire’ as Production Tumbles
Calling it a “five-alarm fire,” North Dakota’s chief oil and gas regulator on Friday reported record oil and gas production declines during May among a sea of inactive or under-active Bakken Shale wells.
May oil production fell 30% to 26.6 million bbl (858,000 b/d), compared to 36.6 million bbls (1.2 million
b/d) in April. Natural gas production dropped 29% to 59.7 Bcf (1.9 Bcf/d) from 81.3 Bcf (2.7 Bcf/d) in April. It was the largest decline in monthly gas production ever.
During a webinar to discuss the results, Lynn Helms, who heads the state Department of Mineral Resources and its oil and gas division, attributed the historic
ANALYSISPermian Gains Give Oomph to U.S. Drilling Permits in June, but Recovery to 2019 Levels Not in Sight
Requests for U.S. drilling permits improved in June following a brutal April and May, with the Permian Basin still the top region for operators, according to Evercore ISI.
The analyst firm each month compiles permitting statistics for the Lower 48 and offshore using federal and state data. Covid-19 and low commodity prices had crushed permit requests in April, with May possibly the bottom, analyst James West said.
According to Evercore, 1,238 permits were approved in June, up by 166 month/month (m/m). However, per-mitting was off by 66% year-to-date and 77%
NEWSLouisiana Property Owners Awarded Larger Payout in Court Fight Against Bayou Bridge
Louisiana landowners involved in a lawsuit over the Bayou Bridge Pipeline (BBP), the last segment of the controversial Dakota Access pipeline system (DAPL), were awarded a larger payout after an appeals court re-versed a ruling.
In his decision on Thursday, Judge Jonathan Perry of the U.S. Court of Appeals for the Third in Louisiana said plaintiffs each would receive $10,000, rather than $150, plus legal fees for violation of the landowners’ due process rights. Perry said that “BBP’s conduct clearly shows no fear of the consequences of trampling on property owner’s constitutionally protected due process rights.”
The monetary award indicates that BBP
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Tuesday, July 21, 2020 - Vol. 10, No. 199
Trading Behemoth Vitol Launching U.S. Upstream Company . . . . . . . . 2
Trade Date: Jul 20; Flow Date(s): Jul 21Basin/Region Range Avg Chg Vol Deals
Gulf CoastBarnett 1.500-1.590 1.560 -0.085 84 16Eagle Ford 1.550-1.615 1.580 -0.080 184 36Haynesville - E. TX 1.530-1.630 1.555 -0.090 606 104Haynesville - N. LA 1.530-1.560 1.550 -0.105 10 6Permian1 1.300-1.500 1.425 -0.035 985 192Tuscaloosa Marine Shale 1.550-1.630 1.615 -0.095 850 126
MidcontinentArkoma - Woodford 1.590-1.650 1.610 -0.015 81 24Cana - Woodford 1.510-1.570 1.540 -0.055 89 15Fayetteville 1.550-1.600 1.565 -0.130 65 14Granite Wash* 1.475-1.535 1.500 -0.045 382 76
NortheastMarcellus - NE PA2 1.250-1.350 1.305 -0.025 366 89Marcellus - NE PA: Other3 1.300-1.350 1.330 -0.030 241 63Marcellus - NE PA: Tenn4 1.250-1.275 1.265 -0.035 126 26Marcellus - SW PA/WV 1.200-1.510 1.360 -0.035 1,477 228Utica5 1.290-1.525 1.440 -0.085 508 104
Rocky Mountains / WestBakken -- -- -- -- --Green River Basin* 1.500-1.590 1.520 -0.040 677 128Niobrara-DJ6 1.480-1.520 1.495 -0.050 553 75Piceance Basin* 1.490-1.510 1.495 -0.030 105 20Uinta Basin* 1.500-1.510 1.505 -0.030 53 5San Juan Basin* 1.470-1.620 1.565 0.035 592 91
Notes: Table represents fixed-price delivered-to pipeline transactions in USD/MMBtu. These data are comprised of deals that NGI believe represent trading activity in the respective resource plays and may contain gas that was produced from conventional formations. * Denotes a tight sands for-mation. Details on additional footnotes are available here. Volumes may not total due to rounding. For more information, please see NGI's Shale Price Methodology.
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from June 2019. Most of the new permitting activity in June was
focused on the Permian, with 109 more m/m, and in the Bakken Shale, which had 11 more requests than in May.
“Permian operators received approval for 381 wells with 70% generated by public companies, 2% by equity sponsored operators, and the remainder originated from private ones,” West noted.
“Improving activity was mainly related to the ma-jors,” which requested 30 more permits than in May, and from large-cap exploration and production (E&P) companies, which requested 31 more m/m.
The Bakken permit count improved in June to 67, 11 higher m/m. Public E&Ps requested 94% of all the permits, Evercore noted. Operators also increased their permit requests in the Mississippian Lime, up by 11 from May, and in Oklahoma’s Woodford formation, with nine more permits requested.
The year-to-date oil permit count at mid-year stood at slightly under 10,000, with more than one-third (36%) for the Permian, Evercore noted. However, Permian per-mitting remained sharply lower, off by around 32% year/year at 3,618 to date.
While the permit count is down from 2019, there has been a “steep fall” in the Powder River Basin, off by 97% year/year, and in the Denver-Julesburg (DJ)/Niobrara formation, which has seen permitting decline by 80%, Evercore analysts noted.
Natural gas permitting also has slumped sharply, with the mid-year total at 1,128 in June, down by 48% year/
year. The decline was blamed primarily on a deceleration in the Marcellus Shale, which had seen permits decrease by 54%.
Meanwhile, in the other big dry gas …cont' pg. 3
NEWSTrading Behemoth Vitol Launching U.S. Upstream Company
Swiss commodities giant Vitol Inc. is seeking to expand its upstream business in the United States with a venture to be headquartered in Houston and led by industry veteran Don Dotson.
Vencer Energy LLC is focused on acquiring mature producing oil and gas assets, with a specific focus on key basins in the Lower 48.
Vitol has more than 20 years of experience developing and operating exploration and production (E&P) assets globally, with traded volumes in 2019 growing year/year by 10% crude, 20% for gasoil and 13% for gasoline.
“Vitol’s strong balance sheet and global operating experience, coupled with Don’s extensive U.S.-focused technical and operating experience, is a powerful com-bination of capabilities for success,” said Vitol Americas head Ben Marshall.
Dotson said he was looking forward to leveraging his industry experience, most recently at the helm of Sable Bay Energy, to “build a large-scale oil and gas enterprise.” Dotson also served for 14 years as president and COO at Plantation Petroleum LLC, which since has been sold to various E&Ps.
Permian Gains Give Oomph to U.S. Drilling Permits in June, but Recovery to 2019 Levels Not in SightContinued from Page 1
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play, the Haynesville Shale, private operators drove an uptick in permits during June, with 25 more requests m/m. Gas permits in the play stood at 142 in June, up by 40 m/m.
Meanwhile, Ohio regu-lators, who oversee per-mitting in the Utica Shale, authorized 16 wells to be drilled, up by 15 m/m, with 36% for plugging and aban-donment (P&A),
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does not “have the unrestrained ability to decide whether another citizen’s property rights can be restricted” without due process of law, Perry said.
Jointly owned by Energy Transfer LP (ET) and Phil-lips 66, Bayou Bridge is a 162-mile, 480,000 b/d 30-inch diameter pipeline that runs along the Texas and Louisiana coast from Nederland, TX, to Lake Charles, LA. It then extends to St. James, LA, via a 24-inch diameter segment. The Atchafalaya Basin through which Bayou Bridge runs is said to be the largest remaining river swamp in North America, containing many old growth trees and endan-gered species.
Despite the larger payout for the landowners, Perry said BBP had the right to build the pipeline without landowner permission through eminent domain, which is allowed in Louisiana.
Meanwhile, the larger DAPL system finds itself in the midst of a separate legal battle. ET has been granted an administrative stay by the U.S. Court of Appeals for the D.C. Circuit of a lower court’s July 6 order vacating water-crossing permits. In his order vacating the permits, Judge James Boasberg instructed ET to shut down and empty the pipeline while the U.S. Army Corps of Engi-neers completed an environmental impact statement.
Louisiana Property Owners Awarded Larger Payout in Court Fight Against Bayou BridgeContinued from Page 1
according to Evercore.The pace of P&A permitting has slowed elsewhere
in the biggest oil plays, according to Evercore. Permian
P&A permits declined in June to 480, down 64% m/m, while Bakken permits decreased by 13, or 13%.
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Source: Tallgrass Energy LP, NGI calculations. For more info and daily 10am ET updates of this chart, go to natgasintel.com/rextracker
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North Dakota Reports ‘Five-Alarm Fire’ as Production TumblesContinued from Page 1downward slide in the most recent statistics entirely to the global pandemic. Echoing comments by other energy executives, he said the world may see some permanent energy demand erosion from Covid-19.
“The last time we were below a million b/d was 2017 and only slightly below, but we were well below 1 million in May,” Helms said. “We’re seeing some of that return so hopefully in the next month or two we may be back at
the 1 million number. May had the lowest production since June of 2013.”
Since January, North Dakota’s rig count has de-clined to around 10 on Friday from 17 in May and 35 in April, Helms said. “In seven months time we’ve seen 82% of the drilling rigs go idle in North Dakota.”
Inactive wells almost tri-pled to more than 6,100 from April to May, matching up with production
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Tuesday, July 21, 2020Vol. 10, No. 199
ISSN 2158-8023 (print)
declines as an all-time month-to-month record. After conventional wells were targeted in April for shut-in, but in May the situation flipped with 1,200 conventional well brought back online, and more than 4,000 Bakken unconventional wells shut-in, according to Helms.
A lone bright spot was gas capture, in which the statewide Bakken figure was 90%, and when the Fort Berthold Reservation was not counted the capture figure was 92%. The reservation operations continued to struggle with flaring with a capture rate of 82%.
Helms extrapolated from the Bakken’s ongoing experience and his global assessment of energy matters to note that the U.S. Energy Information Administration projection for oil prices to recover to from pre-Covid-19 levels by mid-2021 as too optimistic.
“I think whatever demand recovery we are going to get by that time, but I think there is going to be permanent demand destruction as the result of the shift globally [to more electrification,” Helms said. “I think we will see a permanent change in the world economy and the demand for liquid petroleum fuels. I’m not sure the world is ever going to return to pre-Covid-19 demand numbers.”
In the 2021 legislative session, North Dakota lawmak-ers may need to determine what the declines mean to budgets and policy programs. “It’s going to be a huge topic in the next legislative session,” said Helms.Given current conditions, Helms predicted there are more bank-ruptcies for North Dakota operators, “unless we get some significant price improvement and some certainty about the Dakota Access Pipeline‘s future.”