Flying into the Yellowstone Regional Airport in Cody, Wyoming, last week gave me a much-needed dose of the Cowboy State. Cody, a quiet and welcoming cowboy town named after Colonel “Buffalo Bill” Cody, is an amazing gem of the West.

I had a little free time so I stopped into the Buffalo Bill Center of the West for the first time and toured the Whitney Western Art Museum, the Buffalo Bill Museum, the Plains Indian Museum and the Draper Natural History Museum. If you haven’t already been – trust me, it is worth the trip! It is a truly amazing place to get a one of a kind glimpse into the American West.

I haven’t provided you with an update in a while. The trip got me thinking – what is new in the Cowboy State?

Wyoming Rig Count

WOGCC Creates New APD Approval Policy

  • The Wyoming Oil & Gas Conservation Commission (“WOGCC”) recently came out with a new policy for the approval of Applications for Permits to Drill (“APDs”). The WOGCC press release on the new APD policy can be found here. The official WOGCC Memo on Application for Permit to Drill Processing can be found here.
  • This new policy sparked my interest because we have been dealing with the exact same kind of issues here in Colorado when it comes to competing APDs and determining which is first in line. The commissions are being bombarded with APDs – the WOGCC Memo provides that “an unprecedented number of applications for permit to drill” are being received; “the monthly average for APDs received for 2017 was 1,050, which is an increase of 83% compared to the average for 2015.”
  • The new WOGCC policy provides that a basic completeness check will be conducted in order to prioritize the approval process. Simply put, the WOGCC will make sure submitted APDs are complete and contain all required information prior to processing for final approval. Operators cannot file an incomplete APD and expect to have the effective APD just because it was filed first– completeness of the APD is required for priority.

Demand for Energy Jobs Increasing

Emissions Rule Stayed

In sum, there is a lot going on in the Cowboy State!

For many, this month has been very good to us. January is traditionally a month of hope and resolutions that many feel will set the tone for the upcoming year.  Based on this month, we are looking forward to a great 2018!

Crude oil is in a similar position – January has been very good for it.

According to the Bloomberg article entitled, Dollar Helps Propel Oil to Three-Year High as Supplies Tighten, “[o]il just got an extra tailwind from a weakening dollar as this month is shaping up to be the best January for black gold in 12 years.”

As I write this, according to Bloomberg Energy, WTI Crude is at $66.20 per barrel and Brent Crude is at $70.48 per barrel.

Basically oil is rallying and prices are increasing as the dollar is weakening…

In other news, Baker Hughes released its U.S. rig count today, which can be found here. According to Baker Hughes’ Rig Count Overview & Summary Count, as of today, the U.S. rig count has increased 11 from the prior count on January 19, 2018 and a whooping 235 rig increase since the same time last year.  Huge increase since January of 2017!

The U.S. Energy Information Administration (“EIA”) also released its Drilling Productivity Report for January 2018, which can be found here. The report shows that oil and natural gas production are up through the month of December 2017 for the Anadarko region, Bakken region, Eagle Ford region, Niobrara region, Permian region and projected oil and natural gas production through February 2018 are also on the increase for all regions except the Appalachia and Haynesville regions.

January has been good to us.

Side note, I recently read in The Old Farmer’s Almanac that there are two full moons this month – the Wolf Moon, the first full moon of the year, was on January 1, and we have another full moon coming on January 31. According to The Old Farmer’s Almanac, since the second full moon that will occur January 31 has no given name, that makes it a Blue Moon.

Things really do happen once in a Blue Moon!

And for that, I think we should celebrate how good January has been to us by cracking open a Blue Moon beer!

Just recently, oil prices hit a two-year high – but now, this week they have started to head lower. What is going on? Are sliding oil prices a reflection of cold feet?

As I write this, according to Bloomberg Energy, WTI Crude is down to $56.96 per barrel (a -1.03% change) and Brent Crude is at $62.77 per barrel (a -1.32% change).  This is down about $1 per barrel from yesterday.

So what is causing folks to be nervous and uncertain and to have cold feet? Shouldn’t our toes be cozy and warm with WTI in the high $50s?

Contributing Factors to Cold Feet:

  • Rig Count

The rig count may be a factor contributing to the uncertainty in oil prices. As we all know, the rig count is typically used as an indicator of demand – increasing rig count should hopefully correlate to increasing demand for oil and gas. Increasing rig count can become an issue if it is out of sync with demand – if it outpaces demand.

According to the Baker Hughes Rig Count Overview & Summary Count, the last U.S. rig count was from November 22, 2017 and the total domestic rig count was 923 rigs – up 8 from the prior count and up a whopping 330 from the same time last year. The Canadian rig count has reportedly similarly increased 7 rigs since the prior count and 41 from the same time last year, while the International rig count is also reportedly on the rise with 20 more rigs in October 2017 from the prior count in September of 2017 (a 31 rig increase from the same time in October 2016).

  • OPEC Meeting – Tomorrow

The 173rd meeting of the Organization of Petroleum Exporting Companies (“OPEC”) is tomorrow, November 30. The upcoming OPEC meeting could be contributing to price uncertainty because it is unclear whether OPEC will continue to extend production cuts. Prices have been holding relatively steady and have been on the rise, which makes folks wonder about the future of OPEC production cuts. Many are reportedly concerned that “[t]he Nov. 30 gathering is likely to have a different tone than the last two OPEC meetings, because global oil demand has strengthened, inventories have tightened, prices are on the rise, and trading technicals appear bullish.” In the Bloomberg article, “War of Words Threatens to Upend OPEC Meeting,” geopolitical tensions are also listed as a factor that could potentially end hopes of extended oil production cuts.

The New York Times took a different perspective of the upcoming OPEC meeting in its article entitled, “OPEC Leader Cites ‘New Optimism’ With Oil Prices on the Rise” – namely, that the prior production cuts to some extent, appear to have worked. Political issues from across the world – from Venezuela to Russia – are also noted as contributing factors by The New York Times.

  • Supply Concerns

Concerns over supply also may be contributing to the cold feet – the headlines say it all:

  1. Wall Street Journal: “Oil Near Flat After Data Shows Drop in U.S. Inventories
  2. Nasdaq: “U.S. Oil Production Hits 4th Straight Record High Ahead of OPEC Meeting
  3. Bloomberg: “OPEC’s Clash with U.S. Oil Is Nearing Its Day of Reckoning

As usual, predicting what is going to happen with oil prices is darn-near impossible. For now, all we can do to temper the uncertainty is to be sure to wear really warm socks…

After reading this weekend’s headlines and checking the stock market, Tom Cruise in the movie Jerry Maguire yelling, “SHOW ME THE MONEY” has been ringing in my head this afternoon.

So here we go, let me give you a quick summary of what has been going on to bring you up to speed and show you the money:

  1. The price of oil is up! As I write this, according to Bloomberg Energy, WTI Crude Oil is at $52.17 per barrel, up 2.98%, and Brent Crude is at $58.99 per barrel, up 3.75%.  According to MarketWatch, WTI is at its highest level in about five months as of today and Brent crude has been lifted to a more than two-year high!!
  2. Also, Forbes put out an article today entitled, The Biggest Global Tax Break Ever Bubbles Up from Texas Oil Industry, which reports that, “According to the Energy Information Administration’s (EIA) most recent report on drilling productivity, total U.S. shale oil output is expected to climb above 6 million barrels a day for the first time in September.”  Production is increasing.
  3. In Cowboy State News:  The State of Wyoming reportedly netted $19 million from a federal oil and gas lease sale on Friday, largely in the Powder River Basin. The full article, Federal Lease Sale Nets $38.7 million from Oil and Gas Developers, can be found here.
  4. Things are looking good in North Dakota too.  The NDIC September Director’s Cut from Lynn Helms shows oil production up in late summer – reporting 32,473,305 barrels for the month of July from a new all-time high of 13,981 producing wells in July.
  5. Lastly, the Baker Hughes Rig Count is reflecting the rig count as of September 22, 2017 as 935 rigs, a 424 increase from September 2016.  That sounds like a monster increase over the course of one year.

This is all good news – it is great for our local economies and the folks who have been forced to tighten their belt while the energy industry saw extreme lows and experienced significant volatility.  Those of you who know me know that I am an eternal optimist and I love good news. And good movies. In the words of Jerry Maguire, you…complete me – well, good news does!  It is the best way to start the week.

 

127 years ago today, on July 10, 1890, Wyoming was entered into the Union as the 44th state. As we celebrate the date of Statehood, here is an update from the Cowboy State:

According to the Casper Star Tribune’s Energy Journal of today’s date, which can be found here, activity in the energy sector is picking up in Wyoming.

The rig count in Wyoming as of July 7, 2017, according to Baker Hughes, is sitting at 25 rigs – this is up 17 rigs from one year ago, when the tally was 8 rigs.

Recent headlines in Wyoming have included the following:

The talk around the Cowboy State has shifted from its normal energy-related focus to the upcoming solar eclipse, The Great American Eclipse – on August 21. The eclipse’s path is expected to make its way through the entire central region of my home state and reportedly spans more than 365 miles of Wyoming. The center of the eclipse path will reportedly pass slightly south of Dubois, Wyoming.

Happy birthday to the Cowboy State!

Drain

I am not sure if you have been watching, but the price of oil, gold futures and platinum futures are on the decline, according to Bloomberg Markets.

When oil prices drop below that $50 per barrel mark, I have noticed that folks start getting heartburn and start to worry if prices are going down the drain…

Although other commodity prices are declining, let’s focus on the price of oil and breakdown the important information concerning the same:

According to an article in Bloomberg this morning entitled, Oil Falls Sixth as U.S. Rig Count Gain Seen Boosting Output, “[o]il retreated below $50 a barrel amid concern that rising U.S. crude output will offset efforts of the Organization of Petroleum Exporting Countries to trim a global glut.”

  • PRICE

As I write this article, Bloomberg Energy is reporting the prices of oil as follows:  WTI Crude at $49.20 per barrel (a 0.85% change) and Brent Crude is at $51.58 (a 0.73%) change.

The Bloomberg article states, “[o]il fell a sixth day as the ramp-up of U.S. drilling signaled further production gains in the world’s biggest crude-consuming nation.”

  • RIG COUNT

On the issue of a ramp up in the United States, the Baker Hughes Rig Count as of Friday, April 21, 2017 was 857, an increase of 10 rigs from April 13, 2017 and a whooping 426 increase in rigs since the same time last year.

  • OPEC PRODUCTION DEAL

On Friday, Reuters published an article entitled, OPEC Panel Recommends Six-Month Extension of Oil Output Cuts: Source, that discusses the issue of extending the OPEC production cut deal.

By way of a reminder, the OPEC production cut deal was originally agreed upon to cut production by 1.8 million barrels per day from January 1, 2017 for a period of 6 months.  It is now coming to a close so folks are discussing whether the production cut deal should be extended.

According to the article in Reuters, “[o]verall compliance with pledged cutbacks stood at 89 percent in March, a source said” and that the recommendation is that “producers extend a global deal to cut oil supplies for another six months from June.”

  • TAKEAWAY

Several, including the folks at CNBC, according to a recent article this afternoon, are stating that one of the causes of today’s decline in oil prices is a “lack of confirmation that OPEC will extend output cuts until the end of 2017 and as Russia indicated in can lift output if the deal on curbs lapses.”  Uncertainty is never good for oil prices.

We will keep you posted as we continue to monitor where prices are headed – we all have our fingers crossed that they are not going down the drain…

Director's Cut

Yesterday, Lynn Helms, Director of Mineral Resources for the North Dakota Industrial Commission, Department of Mineral Resources (“NDIC”), issued his monthly Director’s Cut newsletter. The full Director’s Cut can be found here.

To me, reading the monthly Director’s Cut is like sitting down to coffee with Lynn Helms and picking his brain – its like having a conversation with the man in the know in North Dakota. I wish every oil producing Rocky Mountain state put one of these newsletters out every month…

So what are the takeaways from the March Director’s Cut?  Here’s the skinny on North Dakota:

  • Oil Production

January 2017 oil production was up from December 2016: Up roughly 38,000 barrels/day

  • Gas Production

January 2017 gas production was up from December 2016: Up over 550,000 MCF

  • Permitting

Drilling permits spiked from 35 in December 2016 to reportedly 81 in January and 45 in February

  • Rig Count

Holding pretty steady – reportedly 40 in December 2016, 38 in January 2017 and 39 in February 2017

BUT THERE’S MORE…the rig count as of the issuance of the March Director’s Cut on March 8, 2017 was up to 44

The comments to the Director’s Cut state that, “Operators are shifting from running the minimum number of rigs to incremental increases throughout 2017, as long as oil prices remain between $50/barrel and $60/barrel WTI.”

In addition, the comments state that:

  • “The number of well completions decreased significantly from 84 (final) in December to 54 (preliminary) in January.”
  • “Low oil price associated with lifting of sanctions on Iran, a weak world economy, and capital movement to the Permian basin continued to depress drilling rig count.”

And that is the skinny on the March Director’s Cut!

energy industry takeaways Q1 2017As we are about midway through the first quarter of 2017, we wanted to provide you with the takeaways from the energy industry so far this year:

Baker Hughes Rig Count

According to Baker Hughes’ announcement of the rig count for January 2017 – rig counts are up:

  • The international rig count for January 2017 was 933, up 4 from the 929 counted in December 2016, and down 112 from the 1,045 counted in January 2016.
  • The average U.S. rig count for January 2017 was 683, up 49 from the 634 counted in December 2016, and up 29 from the 654 counted in January 2016.

Oil Prices – Increased due to OPEC Production Cuts

According to CNN Money’s article entitled, “Oil Prices have Doubled in a Year. Here’s Why,” “the market has mounted a stunning turnaround, with crude prices doubling to trade at $53.50 per barrel.”

The cause? Compliance with OPEC production cuts is credited as a BIG factor.

According to Nasdaq article from Investing.com entitled, “OPEC Compliance on Production Cuts at 93%, oil pares losses”:

  • Recently, an OPEC monthly report showed a registered 93% compliance in their agreement to reduce production.
  • The report (citing secondary sources) revealed that oil production decreased by 890,200 barrels per day to average 32.14 million barrels per day.

Current Oil Prices Are Actually Down a Bit

As I write this post, according to Bloomberg Energy, prices are down a little bit:

  • WTI Crude Oil Price: $52.82
  • Brent Crude Oil Price: $55.50

In fact, Yahoo Finance reports in its article entitled, “Oil Prices Head Lower In Spite of Bullish OPEC Data,” that “oil is charging lower to start the week.”

How do industry folks feel so far this year?

In my view, people in the industry remain optimistic as to the future of the energy industry. Some are skeptical as to whether oil prices will hold as the domestic rig count increases and as more wells that had been previously drilled but not completed have production that comes online.  Many seem to feel calmer than they did this time last year.  Overall though, industry people have recognized how technologies have refined and how operations have become more efficient in recent years and they are looking forward to the future of the oil and gas industry.

 

Hummingbird Cake

There certain things we rely on in this life – things we consider absolute and reliable staples.

Sometimes, we try to use our staple items as an indicator for other things – as a sort of litmus test. We impose some kind of symbiotic relationship stemming from our staple concept and attempt to use that single factor to make a judgment about the future success or failure of something else.

For many, they rely on the U.S. rig count as an indicator of future production and the overall “health” of the oil and gas industry. According to Petropedia, the rig count is “an official listing of all of the oil and gas rigs that are operational at a certain location” and the tally “helps in collecting data that helps in analyzing several factors and indicating the status of drilling activities.” We previously discussed “The U.S. Rig Count – What it means in Layman’s Terms” here.

For me, baking is my staple and it is the outcome when baking a cake on a Sunday that has the ability to set the tone for my week. Case in point – the Hummingbird Cake.

  • Wait, Why Do We Rely on the Rig Count?

The answer is simple – because we always have. We have historically considered the rig count to be an indicator of production.

Some would say that with the volatility in oil prices over the past 2 years, the rig count alone is not much of an indicator of anything. In fact, we previously discussed this earlier in the spring in our post, North Dakota Stats: Reduced Rig Count Not Significantly Impacting Production. We opined that with the relatively drastic decline in the rig count in North Dakota, one would expect to see a more significant decline in production.

According to a Bloomberg article this morning entitled, Private Explorers Lead U.S. Rig Count to Longest Rally in Years, Baker Hughes Inc. is reporting that “[t]he total U.S. rig count has climbed 19 percent since bottoming out at the end of May.”

The currently reported number of rotary rigs in the U.S, as of August 12, 2016, was reported to be 481. When compared to the low point in May of 404, the next question becomes does this recent increase in rig count correspond with a projected increase in production?

  • Is the Increase in the Rig Count Expected to Increase Production?

Not yet.

The U.S. Energy Information Administration (“EIA”) released its Drilling Productivity Report today.  A full copy of the EIA’s report can be found hereAccording to the EIA, “[t]he Drilling Productivity Report uses recent data on the total number of drilling rigs in operation along with estimates of drilling productivity and estimated changes in production from existing oil and natural gas wells to provide estimated changes in oil and natural gas production for seven key regions.”  In general, the Drilling Productivity Report appears to be projecting decrease in oil production by region, from August to September this year.

  • What is the Take-Away?

In this volatile and unusual price environment, no one factor can truly be relied on to predict future production, industry highs and lows, or industry recovery. There are too many factors at play internationally to be able to pin analysis on the rig count alone.

Luckily for me, things are much less volatile and unpredictable in my kitchen and the quality of my Hummingbird Cake, an unusual cake made with oil instead of butter that contains more fruit than flour, is still a reliable indicator of how my week will go.  The classic recipe filled with bananas, pineapple and spices, first submitted by Mrs. L.H. Wiggins in 1978, became one of the most requested recipes of Southern Living Magazine and it is still a staple for my life.

“Because we always have relied on this” may not work with rig counts anymore and may only work in the kitchen…

Lynn Helms, Director of the North Dakota Industrial Commission Department of Mineral Resources, released his monthly “Director’s Cut” today showing North Dakota’s oil and gas stats. The full Director’s Cut can be found here.

North Dakota’s rig count as of today is 29 – representing the lowest number of rigs since October of 2005.  The all-time high was reportedly 218 rigs in May of 2012.  The statewide rig count is down 87% according to the Director’s Cut.

The Director reportedly opines that “Operators are committed to running the minimum number of rigs while oil prices remain at current low levels.”

However, while production is also decreasing, the numbers do not reflect significant decline.

The Director’s Cut reports January, 2016 oil production at 34,796,333 barrels = 1,122,462 barrels/day and February, 2016 oil production at 32,431,669 barrels = 1,118,333 barrels/day.

The Wall Street Journal noted today that “[s]lumping oil prices are starting to affect output in U.S. shale fields, including the prolific Bakken formation in North Dakota.”

That is a great way to put it – prices are starting to affect output.

In reality, a slight decline in production has occurred, but it is not really notable in light of the rig count in January being nearly double today’s count.  In January the rig count stood at 52…

According to the Wall Street Journal article, “North Dakota crude oil production fell for the third month in a row, ticking down 0.4% in February and hitting its lowest level in 18 months.  The slightly lower production in February follows a 2.6% drop in January and a 2.5% slide in December, data from the department show.”

With the relatively drastic decline in the rig count, one would expect to see a more significant decline in production.