Iranian Oil and Crude Prices

January 19, 2016 Elizabeth Alford

Iranian oil may soon be flooding the market and giving the Eagle Ford producers a run for their money.

Last Saturday the new arrangement between the U.S. and Iran went into affect that would free the country from international sanctions that were imposed in 1979.

“A new wave of oil from Iran will flow into a global market awash in oil where prices are plunging to depths not seen in a dozen years. With a historic nuclear deal between Iran, the U.S. and five other world powers set into place this weekend, a European oil embargo on the world’s seventh-largest oil producer will end.”

— Daniel Yergin, Vice Chairman of IHS

The International Energy Agency says that Iran has about 38 million barrels of oil in reserve that can enter the market quickly at a rate of 400,000 to 500,000 barrels a day.

Some speculate that the recent decline in crude prices to below $30 is a reaction to the anticipated deluge of oil from Iran and there are predictions of barrels going for $20 soon. But now everyone believes that the Iranian oil will affect prices.

“In the case of Iran bringing more oil to market, it’s going to happen, and even if it takes a little longer than the market believes at this time, it won’t have an impact on the price of oil; although it could give it a temporary boost if it is found the export time frame isn’t a near as supposed.”

— Analyst from Seeking Alpha

BHP Writes Down Billions

January 18, 2016 Elizabeth Alford

Texas Job Growth Slows — BHP Writes Down Assets

BHP Billiton Ltd., a major operator in the Eagle Ford, announced immediate plans to write down US$7.2 billion pretax charges on its U.S. shale value.

In a recent news release, BHP set in motion the latest in a string of impairment charges for the company, which will reduce its onshore U.S. net operating assets to approximately US$16 billion.

BPH is also reviewing it 2016 CAPEX for additional places to cut costs.

Although the company plans to pull back rigs, they will keep three rigs in the Black Hawk field in southern Texas' Eagle Ford region.

“Oil and gas markets have been significantly weaker than the industry expected. We responded quickly by dramatically cutting our operating and capital costs, and reducing the number of operated rigs in the Onshore US business from 26 a year ago to five by the end of the current quarter. While we have made significant progress, the dramatic fall in prices has led to the disappointing write down announced today. However, we remain confident in the long-term outlook and the quality of our acreage. We are well positioned to respond to a recovery.”

— BHP Billiton Chief Executive Officer, Andrew Mackenzie

The U.S. Energy Information Administration (EIA) recently announced that the volumes from the seven major shale regions in the U.S. will drop by 116,000 barrels a day in February. The Eagle Ford Shale Play is predicted to take the biggest hit of all the shale plays and is expected to drop 72,000 barrels a day to 1.15 million, according to the EIA. The Bakken in North Dakota losing 24,000 barrels to 1.1 million.

Eagle Ford Rig Count Drops below 80

January 15, 2016 Elizabeth Alford

The Eagle Ford Shale rig count declined by three this week with 78 rigs running across our coverage area by midday Friday.

In recent Eagle Ford news, the U.S. Energy Information Administration (EIA) indicate that volumes from the seven major shale regions in the U.S. will drop by 116,000 barrels a day in February with the Eagle taking the biggest losses.

A total of 650 oil and gas rigs were running across the United States this week. 135 were targeting natural gas (13 less than the previous week) and 515 were targeting oil in the U.S. (one less than the previous week). The remainder were drilling service wells (e.g. disposal wells, injection wells, etc.)301 of the rigs active in the U.S. were running in Texas.

Baker Hughes reports its own Eagle Ford Rig Count that covers the 14 core counties. The rig count published on EagleFordShale.com includes a 30 county area impacted by Eagle Ford development. A full list of the counties included can be found in the table below.

Eagle Ford Oil & Gas Rigs

Natural gas rigs in the Eagle Ford are at five this week as natural gas prices dipped, trading at $2.10/mmbtu, a $.17 decrease from the previous week.

The Eagle Ford oil rig count fell to 73 with WTI oil prices ending the week at $29.42, a decrease of $3.74. A total of 72 rigs are drilling horizontal wells, zero are drilling directional wells, and six are vertical rigs. Karnes County leads the region in development with 18 rigs this week. See the full list below in the Eagle Ford Shale Drilling by County below.

Eagle Ford Shale Drilling by County

Eagle Ford Shale News

Eagle Ford Retailers Hang On

Texas Severance Taxes Fall ~49%

Eagle Ford Headed for Big Losses

ZaZA Energy Directors Resign

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas. The South Texas rigs referred to in this article are for ALL drilling reported by Baker Hughes and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count.

Eagle Ford Retailers Hang On

January 14, 2016 Elizabeth Alford

Mineral Owners May be Losing Money — Money to be Made in Eagle Ford

Eagle Ford retailers are hanging on despite the downturn in the Texas economy.

During the height of the boom communities in the Eagle Ford were magnets for new retail, foodservice and hospitality businesses who flocked to the area to get a piece of the financial pie. But since things went bust last year, there are fewer dollars to go around.

With over 60,000 layoffs this year, many in the oil patch are struggling to pay bills, which means little left over for restaurants, hotels and new clothes. But the San Antonio Business Journal reported this week that several Eagle Ford communities are staying afloat and even adding businesses, despite the tough economic situation.

“Pleasanton emerged as a winner with companies like Dover Artificial Lift, Conquest Completion Services and National Oilwell Varco adding new buildings on their existing facilities in order to consolidate their services under one roof. Other retailers who moved in during the oil boom and even after the crash are managing to keep their doors open while a couple of new shopping centers, restaurants and retail outlets continue to move in.”

The article goes on to list businesses who have recently moved into Eagle Ford counties including:

Atascosa County: Hibbett Sports, AT&T, Wing Stop, Granzin's Meat Market, Bealls and Ewald Kubota tractor dealership
Karnes County: Cadillac Jacks Western Wear, Flash Burger, Golden Wok, Domino's Pizza, Dr. Sumeet Singh Malhotra dental clinic, Great Clips hair salon, Sonic Drive and Family Dollar
Wilson County: Emergency Clinic, Donny's Brew Pub, The Den Restaurant, AT&T , Taco Bell, CVS Pharmacy, Dollar General, Dr. Dharval Thakkar Dental Clinic and Pollok Storage

In a recent survey conducted by the Federal Reserve Bank of Dallas, business executives expressed optimism regarding future business conditions. The index of future general business activity rose three points to 7.3, and the index of future company outlook rose six points to 16.2. The survey also revealed that factory activity across the state of Texas increased for the second consecutive month in November.

Texas Severance Taxes Fall ~49%

January 13, 2016 Elizabeth Alford

Texas joins other energy states to see a hefty decline in mineral severance taxes, according to the EIA.

The Energy Information Administration released a report yesterday that showed the tax consequences of the months of falling crude prices. States assess severance taxes on companies that remove nonrenewable resources like crude oil, natural gas, and coal and when less is taken from the ground, there is less to tax.

Learn more about oil severance taxes by state

The comptroller of Texas reports that as of November 2015, revenues from the oil and gas industry have declined significantly over the previous year. These decreases include:

Natural gas production tax -48.14%
Oil production tax -48.91%

“Lower fossil fuel prices, and in some cases, lower production, have led to lower severance tax receipts than were expected when revenue estimates were developed.”

— Robert McManmon and Grant Nülle, Energy Information Administration (EIA).

The good news is that the Texas economy is more diversified than it has been during previous downturns. This means that severance taxes make up a lower percent the total state tax receipts (11% in 2014), so there will likely not be a need to make drastic changes to the 2016 budget.

Other states that are feeling the pinch include Alaska, North Dakota, Oklahoma, West Virginia and Wyoming. These states get most of their tax revenues from their energy sectors with severance taxes ranging from 40% to even as high as 75% of a state’s overall tax receipts.