(28-10-2014, 08:56 AM)specuvestor Wrote: [ -> ]A bit ironic that I was championing shale more than a year ago in this forum when people were still skeptical but when people are fearful now i am saying shale production likely plateau if oil price remains $80 WTI or below
Shale Drillers Idle Rigs From Texas to Utah as Oil Rout Deepens
2014-11-08 01:00:00.0 GMT
By Lynn Doan
Nov. 8 (Bloomberg) -- The shale-oil drilling boom in the
U.S. is showing early signs of cracking.
Rigs targeting oil sank by 14 to 1,568 this week, the
lowest since Aug. 22, Baker Hughes Inc. said yesterday. The
Eagle Ford shale formation in south Texas lost the most,
dropping nine to 197. The nation’s oil rig count is down from a
peak of 1,609 on Oct. 10.
Drillers are slowing down as crude prices tumbled 24
percent in the past four months. Transocean Ltd. said yesterday
that its earnings would take a hit by a drop in fees and demand
for its rigs. The slide threatens to curb a production boom in
U.S. shale formations that has helped bring prices at the pump
below $3 a gallon for the first time since 2010 and shrink the
nation’s dependence on foreign oil imports.
“We are officially seeing the slowdown in oil drilling,”
James Williams, president of energy consulting company WTRG
Economics, said by telephone from London, Arkansas, yesterday.
“There’s no doubt about it now. We’re already down 49 rigs
since the peak in October. It’ll have fallen by more than 100
rigs by the end of year.”
U.S. benchmark West Texas Intermediate crude for December
delivery rose 74 cents to settle at $78.65 a barrel on the New
York Mercantile Exchange yesterday. Prices are down 17 percent
in the past year.
Chesapeake, EOG
Executives at several large U.S. shale producers, including
Chesapeake Energy Corp. and EOG Resources Inc., have vowed to
maintain or even raise production as they reported earnings this
week. They say their success in bringing down costs means they
can make money even if prices slump further.
The oil rig count will drop to 1,325 by the middle of next
year amid lower prices, Genscape Inc., an energy data company
based in Louisville, Kentucky, said in a report Nov. 6.
Drillers from Apache Corp. to Continental Resources Inc.
have said this week that they’re laying down rigs in some oil
plays.
Transocean, owner of the biggest fleet of deep-water
drilling rigs, is delaying the release of its third-quarter
results after saying its earnings would be hit by $2.76 billion
in charges from a decline in the value of its contracts drilling
business and a drop in rig-use fees. The company had been
scheduled to report earnings yesterday.
Transocean’s competitors will probably have to take similar
measures as “this is going to be an industry wide phenomenon,”
Goldman Sachs Group Inc. said in a research note yesterday.
Self-sufficient
While the drop in oil prices limits spending in shale
plays, production will continue to boom next year and North
America may become self-sufficient in oil by 2016, Per Magnus
Nysveen, head of analysis for Oslo-based consulting company
Rystad Energy AS, said by e-mail yesterday. Liquid output from
North American shale will rise to 6.5 million barrels a day in
December and to 12 million barrels by 2020, he said.
U.S. oil production climbed 2,000 barrels a day in the week
ended Oct. 31 to 8.972 million, the highest level in at least
three decades, Energy Information Administration data show.
WTI futures are still a “long way off” from rebounding,
said Mike Wittner, the head of oil market research at Societe
Generale SA.
“The market needs to see much more significant reductions
in the rig count on a steady, sustained basis for it to have any
impact on production and prices,” he said by telephone from New
York yesterday. “Growth is so strong now that it’s going to
take a long time and many months for it to actually peter out
and turn into negative growth.”
Second Half
Halliburton Co., the second-largest oil and gas services
company by market value, was told by its U.S. customers that
they won’t be changing frac activities for the first or second
quarters of next year, UBS AG analysts including Angie Sedita in
New York said in an e-mailed research note Nov. 6. Customers
said they would start cutting back in the second half of 2015
should oil prices remain low, she said.
Gas rigs were up 10 at 356, Baker Hughes said in data
posted on the Houston-based field services company’s website.
U.S. gas stockpiles rose 91 billion cubic feet last week to
3.571 trillion, according to the EIA. Supplies were 6.8 percent
below the five-year average and 6.3 percent under year-earlier
inventories.
Natural gas for December delivery gained 0.8 cent to $4.412
per million British thermal units yesterday on the Nymex, up 25
percent in the past year.
“The gas rig count is responding to prices a little
higher,” Williams said.
