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US running out of room to store oil; price collapse next?

Oil Tank Battery in Weld County Colorado with protective liner

Oil Tank Battery in Weld County

By JONATHAN FAHEY – Associated Press – NEW YORK (AP) — The U.S. has so much crude that it is running out of places to put it, and that could drive oil and gasoline prices even lower in the coming months.

For the past seven weeks, the United States has been producing and importing an average of 1 million more barrels of oil every day than it is consuming. That extra crude is flowing into storage tanks, especially at the country’s main trading hub in Cushing, Oklahoma, pushing U.S. supplies to their highest point in at least 80 years, the Energy Department reported last week.

If this keeps up, storage tanks could approach their operational limits, known in the industry as “tank tops,” by mid-April and send the price of crude — and probably gasoline, too — plummeting.

“The fact of the matter is we are running out of storage capacity in the U.S.,” Ed Morse, head of commodities research at Citibank, said at a recent symposium at the Council on Foreign Relations in New York.

Morse has suggested oil could fall all the way to $20 a barrel from the current $50. At that rock-bottom price, oil companies, faced with mounting losses, would stop pumping oil until the glut eased. Gasoline prices would fall along with crude, though lower refinery production, because of seasonal factors and unexpected outages, could prevent a sharp decline.

Continue reading story at Yahoo News

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Whiting Petroleum to run 3 rigs in Niobrara after 50% Capex reduction for 2015

'Whiting_Petroleum_Corporation_LogoFebruary 26, 2015 – At the Q4 2014 Whiting Petroleum Corp. Earnings Conference Call, the company announced a Q4 2014 Production of 131,260 BOE/d Up 13% Over Q3 2014, Proved Reserves to a Record 780.3 MMBOE an Increase of 78% and a $2.0 Billion 2015 Capex Budget, a 50% Decrease from Whiting+Kodiak 2014 Capex.

Press Release Highlights: James J. Volker, Whiting’s Chairman, President and CEO, when commenting about the companies activities in the Niobrara said that “In our Redtail area in Weld County, Colorado, results have been strong in the Niobrara “C” zone and Codell/Fort Hays formations with 120-day average rates of approximately 400 BOE/d. We believe returns could rival our Niobrara “A” and “B” drilling and after year-end 2014 we added 3,162 gross Niobrara “C” and Codell/Fort Hays locations to our potential drilling inventory. Given our high quality asset base, we are confident in our ability to navigate the current pricing environment.”

Mr Volker continued, “We are currently running 19 rigs, 16 in the Bakken/Three Forks and 3 in the Niobrara at Redtail. Our rig count will go to 13 rigs by mid-year, 10 in the Bakken/Three Forks and 3 in the Niobrara, down from 25 rigs for the combined companies in 2014. We will focus our operations on our highest rate-of-return properties. At the same time, we are seeing lower completed well costs through service company price reductions and technology applications. We expect our 2015 completed well cost in the Bakken/Three Forks to average $7 million, down from $8.5 million in 2014. We expect our 2015 Redtail Niobrara well cost to be $5.0 million.”

Read the full Whiting Petroleum Q4 2014 Press Release

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Carrizo Oil & Gas to Reduce Niobrara Drilling in Current Price Environment

Carrizo LogoOn February 24, 2015 Carrizo Oil and Gas held a Q4 and year end 2014 results earnings call. During the call the company reported a record 22,130 barrels per day production, an increase of 11% from the prior quarter and exceeding the high-end of their guidance due primarily to the strong performance from their Eagle Ford assets.

The company reported that “in the Niobrara Formation, Carrizo drilled 8 gross (4.2 net) operated wells during the fourth quarter, and completed 5 gross (1.8 net) wells. Crude oil production from the Niobrara was approximately 2,300 Bbls/d for the quarter, roughly flat with the prior quarter. Carrizo is currently operating one rig in the Niobrara and expects to drill 12 gross (4 net) operated wells during 2015. The Company also expects to continue to participate with Whiting and Noble in high-density projects in the play within its core area.”

During the Carrizo Oil & Gas Fourth Quarter and Year End Conference Call, President and CEO Chip Johnson said that “In the Niobrara we are producing from a 112 gross wells with 46 net wells, 7 gross with 3.7 net wells waiting on completion at the end of the quarter, representing about a 1000 net BOPD of potential initial production. During the fourth quarter, we confirmed 40-acre spacing in the B bench in Area 1 and part of Area 2 as a result we added about 75 net locations toward drilling into and deploying. We have minimal drilling commitments in the Niobrara during 2015, so we have elected to reduce activity in this play given the current commodity price environment.”

In response to a question on the company’s  break even price for the Niobrara by Analyst Dan McSpirit from BMO Capital Markets, Andy Agosto, VP of Business Development said that “What we said at Analyst Day average about 57 bucks for areas one and two. But within that our best area, area one, is about $48″

Read the Full Q4 and Year End 2014 Carrizo Earnings Call Transcript at Seeking Alpha

Read the Carrizo Q4 2014 and Year End 2014 Press Release 

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PDC Energy Increases 2015 Wattenberg Capex to $435 Million

pdc-energy-inc-logoOn PDC Energy’s Q4 2014 conference call the company announced their Q4 and year end 2014 earnings. The company announced a 2015 capital reduction of 84 million dollars, and a 50% expected production increase in 2015 to 14.5 MMBoe. The company plans to spend $435 million on its Wattenberg assets which is an increase to 92% of its capital, up from a 76% expenditure in 2014.

PDC Energy Q4 2014 Conference Call  - Operational Efficiencies in Wattenberg

PDC Energy Q4 2014 Conference Call – Operational Efficiencies in Wattenberg

In operational highlights, the company’s 2014 Wattenberg production was 23,243 Boe/d with proved reserves in Wattenberg totaling 245 MMBoe. PDC Energy’s inner Wattenberg Core wells are following a 580 MBOE Type Curve.

In 2015 the company expects to reap the benefits from the efficiencies of Extended Length Laterals, Increased stage density, an updated inner core type curve, and a drill program focused on middle/inner Wattenberg Field core.

View the PDC Energy Fourth Quarter 2014 Conference Call

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EOG Resources Follows Suit and Cuts CAPEX by 40%

EOG_Resources_LogoOn February 18th, 2015, EOG Resources announced Q4 earnings for 2014.  The company also announced a CAPEX cut of 40% of $4.9B-$5.1B this year, and will delay a “significant” number of well completions as part of a strategy to increase its net present value while capitalizing on future commodity price increases.

EOG has a minimum of 460 locations which equals up to 12 years of drilling in the DJ basin. EOG reported that the bulk of its capital expenditures in 2015 will go to its top plays which are the Eagle Ford, Delaware Basin and Bakken. EOG did not specifically call out its DJ basin CAPEX for 2015.

To view the EOG Resources Investor Presentation for Q4 Earnings click here

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Mapping project shows heavy oil, gas leasing in Arapahoe County

Arapahoe CountyBy Mark Jaffe – The Denver Post – February 17, 2015

Arapahoe County is a checkerboard of oil and gas leases and rights — with holdings adjacent to schools, parks and housing developments, according to an analysis by Conservation Colorado.

The nonprofit environmental group used county property records and data from the Colorado Oil and Gas Conservation Commission to plot leases and rights on maps.

The maps “bring home that this heavy industrial activity can occur anywhere,” executive director Peter Maysmith said.

The eastern, less-developed part of the county is almost all leased by oil and gas companies, the maps show. In the west, a patchwork of leases and mineral rights underlie 41 schools and abut Greenwood Village, Cherry Creek Reservoir and the Aurora Hills Golf Course, according to the maps.

“While not every lease will be developed, the fact these leases were so recently filed and that the oil and gas industry owns the mineral rights under so much of Arapahoe County is clearly a warning sign for elected officials and residents,” said Colorado Senate Minority Leader Morgan Carroll, D-Aurora.

The two biggest lease and rights holders are the Anadarko Petroleum Corp., based in The Woodlands, Texas, and Houston-based ConocoPhillips.

Continue reading story at The Denver Post

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Colorado Rig Count Surrenders to National Trend

Colorado Weekly Rig Count Chart showing statewide rig count since Jan 2013 - Data Source - Baker Huges

Colorado Weekly Rig Count Chart showing statewide rig count since Jan 2013 – Data Source – Baker Huges

The number of active U.S. land rigs plunged by 98 this week in one of the biggest declines in the past three decades as fallen oil prices continued to pummel the industry’s drilling ambitions as reported by Fuel Fix.

In the week ending February 13, the Colorado rig count had fallen to 49 as reported by Baker Hughes, a count that is lower than any count during the last four years of the current statewide oil boom.  Colorado’s oil industry had been resisting the national trend to idle rigs up until the last two weeks.

The latest weekly figures for Colorado’s oil industry, including rig counts, and permitting for the last the four years can be found in the staff reports at the COGCC.  View the latest (January 26, 2015) COGCC staff report.

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Colorado Senate Weighs Payments To Mineral Owners Over Fracking Rules

Hydraulic Fracturing Illustration - Idealized

Hydraulic Fracturing Illustration – Idealized

CBS Denver,  February 12, 2015

DENVER (AP) — Mineral owners would get compensation from local governments that restrict fracking under a Republican bill advanced by the Colorado Senate Thursday.

The question pits homeowners concerned over industrial activity in residential areas and mineral owners who want to develop their property. Sometimes the matter is further complicated in Colorado by the fact that minerals belonging to one person are underneath a house owned by someone else.

The sponsor of the compensation bill, Sen. Jerry Sonnenberg, R-Sterling, said his goal is to protect property rights when a local government implements restrictions on fracking, or hydraulic fracturing. It involves extracting oil and gas from rock by injecting high-pressure mixtures of water, sand or gravel, and chemicals.

“It’s basically a, ‘You ban it, you buy it,’ philosophy,” he said. “I would argue that it’s not much different than somebody that may buy a piece of property in the hopes to build a house someday and then government comes in and says, ‘I’m sorry, we’re not going to be allowing any more housing built along this street.’”

Sonnenberg’s proposal would require compensation to mineral owners if regulations reduce their property value by at least 60 percent.

A Senate committee voted 5-4 with Democrats in opposition. The full Senate now will consider the proposal.

Fracking is expected to be one of the most hotly debated questions lawmakers will take on this legislative session. A task force assembled by Democratic Gov. John Hickenlooper will deliver recommendations to lawmakers later this month about how to reduce land-use conflicts among local governments, homeowners and the energy industry.

Continue reading story at CBS Denver

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