What do you do when prices are in the cellar, hundreds of rigs are idle, production growth has evaporated and the whole industry seems to be wondering how the numbers are going to work. Well of course, it’s time to head back to school to understand the new realities of energy markets. That is what School of Energy Spring 2016 is all about. This is nothing like other natural gas, crude oil or NGL conferences! The course work is hands-on. In each module we’ll drill down on an important aspect of the market, explain how it works, download spreadsheet models and learn how to use them. This time we’ve added more models than ever, crunching the numbers that explain everything from production economics to petrochemical margins in the context of today’s prices. You walk out the door with the how-to Powerpoints and the Excel models on your hard drive. Warning - today’s blog is a blatant commercial for our upcoming Houston conference.
Daily Energy Blog
The CME/NYMEX Henry Hub contract for January delivery hit a 17-year low yesterday (December 10, 2015) of $2.015/MMBtu, 46 % below year-ago price levels. But US gas production has been humming along near 73 Bcf/d, more than 3.0 Bcf above a year ago and about 1.0 Bcf below the all-time high earlier this year. It’s a similar story for crude oil, with oil prices closing at $36.76/Bbl yesterday, but production hanging in there above 9 MMb/d. This is a testament to lower drilling service costs and producers’ ability to improve drilling productivity. But can productivity gains and drilling costs keep up with continually lower commodity prices? Today we look at how productivity gains and falling drilling costs are impacting producers’ rates of return.
The New York market for residential and commercial heating oil is traditionally tight in the winter months when demand exceeds local production and supplies are supplemented from storage and inflows/imports from outside the region. Coming into winter this year inventory levels were above normal for the time of year and market prices are in contango (a condition where future prices are higher than today) – encouraging further storage. Today we explain how the result is an extension of traditional seasonal storage trade opportunities and a shortage of available inventory capacity.
Mexico has emerged as an important and growing market for U.S. natural gas producers, and for U.S. midstream companies scrambling to develop gas pipelines to serve Mexico’s gas consumers. Meanwhile, U.S. gasoline, diesel and liquefied petroleum gas (LPG) exports to Mexico are also up. Petróleos Mexicanos (Pemex)—the state-owned hydrocarbon giant, now in the midst of a major reboot—is on the hunt for private-sector partners to help revive Mexico’s sagging oil and gas production, and U.S. oil producers and Pemex are planning their first swaps of crude. Today we highlight RBN Energy’s latest Drill Down report examining the changing yins and yangs of cross-border energy relations.
Eager to boost oil and natural gas production, the government of Mexico is in the midst of a multi-year effort to introduce more private-sector involvement and competition. The hope is that a series of reforms will lead to more investment and—over time—a Mexican energy sector that more closely resembles that of Mexico’s amigos North of the Border. Today, we continue our look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for energy companies on both sides of the Rio Grande.
In connection with third-quarter earnings announcements, North American exploration and production companies (E&Ps) continued to announce large reductions in 2015 and 2016 capital budgets. But the most dramatic news is that RBN’s analysis of a study group of 31 E&Ps fourth quarter forecasts indicates that oil and gas production is now expected to level off in the fourth quarter of 2015 and into 2016. Today we update our analysis of E&P capital spending and oil and gas production guidance.
Mexico’s energy relationship with the U.S. is undergoing radical changes as its oil production sags, its refineries produce too much high-sulfur fuel oil and too little gasoline and diesel, and its imports of U.S. natural gas and transportation fuels rise. Add to this already complicated story the Mexican government’s efforts to inject competition and private-sector participation into a national energy sector long-dominated by state-owned Petróleos Mexicanos (Pemex) and that company’s plan to swap light U.S. crude for heavy Mexican oil. In today’s blog, “With A Little Help From My Friends—Mexico’s Oil Sector in a State of Flux,” Housley Carr begins a look at the ongoing transformation of U.S.-Mexico hydrocarbon trade and what it may mean for U.S. players—and Pemex.
Did you miss our School of Energy a few weeks back in Houston? Not a problem! The entire School of Energy conference is now available online in streaming video format. The conference video, presentation slides and spreadsheet models are available for purchase as individual Modules or as a full conference package. It’s the next best thing to being there! School of Energy is unlike other natural gas, NGL or crude oil conferences. It combines all three! And the curriculum includes a comprehensive analysis of current energy markets and in-depth instruction on how to use RBN spreadsheet models covering everything from production economics to gas processing. We walk through key developments for each of the three hydrocarbons including the increasingly important links between them. Fair warning – today’s blog is a blatant advertorial.
Although many industry observers predicted draconian cuts to the credit lines of North American E&Ps during the fall borrowing base redeterminations by their lenders, the average reduction for 17 companies disclosing the results to date is just 4%. Today we describe how these results may indicate that significantly lower industry costs and less dramatic reductions in long-term commodity price forecasts could be partially offsetting the negative factors used to determine borrowing capacity under secured and unsecured credit lines.
In a $38 Billion transaction announced September 28, 2015, Energy Transfer Equity (ETE) agreed to gobble up The Williams Companies in a deal expected to close during the first half of 2016. The combination of these two companies creates a U.S. midstream giant that will own infrastructure including gas pipelines carrying as much as 45% of U.S. Lower 48 dry gas production, processing capacity producing16% of domestic natural gas liquids (NGL’s) and crude oil pipelines in the Permian, Eagle Ford and Bakken. Today we take a look at the liquids infrastructure assets in this giant deal and provide a download of RBN’s maps of the infrastructure involved.
For nearly two months -- Since late July -- WTI crude oil prices have averaged $45/bbl, never once closing above the $50/bbl mark. Over the same period, the natural gas price at Henry Hub has averaged $2.70/MMbtu and now languishes $.20/MMbtu lower. Is this a time to be wallowing in misery and self-pity? Absolutely not!! This is the time for midstreamers and producers to reposition their businesses with a laser-like focus on the opportunities that low prices have served up. There are bargains out there in the oil (and gas) patch. If producers are in the right locations, with drilling costs much lower than last year, there is good money to be made. And likewise, opportunities abound for midstreamers to pick up assets at very attractive prices to get that production to market. But to execute such a strategy, you must have a rock-solid understanding of what is really going on in today’s markets for crude oil, NGLs and natural gas. Our goal for the upcoming State of the Energy Markets Conference scheduled for October 28, 2015 in Denver, CO is just exactly that - to give you a rock-solid market knowledge based on hard data and thorough analysis. Today’s blog is an advertorial for the conference.
Another round of big changes are coming to the markets for natural gas, natural gas liquids (NGLs) and crude oil. The surging production growth that has characterized these markets has slowed and in some basins is starting to fall as the mass exodus of drilling rigs begins to take its toll on shale production. But what about all that infrastructure that has been and continues to be built? Billions of dollars are going into pipelines, processing plants, petrochemical plants, terminals, storage, etc. based on a much higher production growth scenario than now seems likely. Where are the opportunities in this new energy market reality? The answer depends on a discernable pattern of events tied to production volumes, infrastructure capacity, commodity flows and project expenditures. Those are the themes of our latest State of the Energy Markets Conference scheduled for October 28, 2015 in Denver, CO as well as the subject of today’s blog – also an advertorial for the conference.
There are only three more days to take advantage of the Early Bird Rate for RBN’s next School of Energy, and there are three more reasons to attend! We have finalized the agenda for the first day we are calling Pre-School International Energy Day, with three additional experts joining us to discuss international destination markets for U.S. crude oil, gas, and NGLs, including the regulatory issues involved and the latest developments concerning Federal approval of full-blown crude oil exports. The full three day School of Energy is scheduled for September 28, 29 and 30. As we’ve said many times before, this is nothing like other conferences! The course work is hands-on. In each module we’ll drill down on an important aspect of the market, explain how it works, download a spreadsheet model and learn how to use it. Be forewarned - today’s blog is a commercial for our upcoming Houston conference.
With crude oil prices just over $40/bbl you might think producers would be reducing capex and cutting their 2015 production estimates. But not so. RBN’s analysis of second quarter guidance in 2015 indicates that 31 E&Ps as a group kept their capex outlook at about the same level as they indicated in Q1. And as a group they still expect oil and gas production in 2015 to increase versus last year. But there were significant differences between the peer groups we examined. The Small/Mid-Size Oil-Weighted E&Ps upped 2015 investment by $730 million versus Q1 and now expect 2015 production to be up 16% over last year versus the 13% increase expected last quarter. The Large Oil-Weighted E&Ps slashed capex by another $630 million, yet production is still expected to rise, in this case by 4% versus a 3% growth expectation last quarter. In contrast, capital spending and production guidance were little changed among the gas-weighted peer groups. Today we provide an update to our Q1 analysis of capital spending and production trends.
It’s that time again! Vacation is behind us and it’s time to gather the school supplies and get ready for class. Of course, we are not talking about high school or college. If you want to know about energy markets, the campus is the Houstonian in Houston and the class is RBN’s School of Energy, scheduled for September 28, 29 and 30. This is nothing like other natural gas, crude oil or NGL conferences! The course work is hands-on. In each module we’ll drill down on an important aspect of the market, explain how it works, download a spreadsheet model and learn how to use it. You walk out the door with the how-to Powerpoints and the Excel models on your hard drive. Warning today’s blog is a blatant commercial for our upcoming Houston conference. But we hope you will read on, because we have a very special addition this time – a full day dedicated to the export markets.
