Daily Energy Blog

Oil-Weighted exploration and production companies (E&Ps) are slashing capital spending in 2015, as they need to regain control of their costs in today’s lower oil price environment. With robust oil prices over the past three years, these companies only posted middling profitability as capital and operating costs ate up much of their incremental revenue. The Large Oil Weighted E&Ps are cutting back less than the Small/Mid-Sized Oil Weighted E&Ps as they are more financially secure and have more ability to spend through the price cycle. The Small/Mid-Sized Oil Weighted E&Ps are focused on getting their spending in line with cash flows and to get to a point where they are self-funding their capital investment. Today we explore how each of the companies in the two oil-weighted peer groups is trying to resolve these issues.

[Note: We will not post an RBN Blog on Memorial Day - Monday May 25]

The past four years have seen a boom in U.S. refining with strong margins and increased throughput.  The balance of refinery feedstock has changed from a majority of imports to a majority of domestic crude. Market inefficiencies – in the distribution system, crude quality mismatches and export restrictions have kept U.S. crude prices below international levels – bringing refiners high margins and competitive product exports. Today we look at how refiners have benefited from changing U.S. crude supplies.

Last Friday (May 8, 2015), Baker Hughes data showed the Permian basin oil rig count up by two – suggesting that drilling may be picking up in West Texas. A week earlier at the end of April, Enterprise Products Partners (EPD) announced they are moving ahead with a new pipeline from the Permian basin to the Houston area – set to come online in 2017. The new pipeline will add 540 Mb/d of takeaway capacity and comes on top of 450 Mb/d being added in the Permian this year by the Plains All American Cactus and Energy Transfer Partners Permian Express II pipelines. Today we look at the new project and whether the incremental takeaway capacity is necessary.

According to the Energy Information Administration (EIA), liquids production from the Utica shale in Ohio (identified as crude oil but more likely all lease condensate) has more than trebled since January 2014 from 19 Mb/d to a projected 64 Mb/d in May 2015. Regional production of plant condensate from natural gas processing has also increased with the build out of gas processing capacity in the Utica and nearby Marcellus plays and could reach 50 Mb/d by the end of 2015. Midstream companies have been busy developing infrastructure to get this condensate to market. Today we look at developing infrastructure and markets for Utica condensate.

Estimates of how much oil or natural gas are “technically” or “economically” recoverable are moving targets. Until just a few years ago, the hydrocarbon-producing potential of the Bakken, the Permian and the Marcellus were vastly underestimated—hardly anyone would have wagered in 1995 that North Dakota, West Texas and northeastern Pennsylvania would emerge as oil and gas hotspots. So what are we to make of California’s Monterey tight oil play, which as recently as 2011 was hailed as the next big thing for tight-oil production, but which is now on just about no one’s mind? Today, we consider what it might take to turn a hydrocarbon frog into a prince.

The major re-plumbing of the U.S. crude pipeline distribution network to get 4 MMb/d of new domestic production as well as incremental Canadian barrels delivered to refineries is getting close to completion. The price crash and an expected slow down in production will almost certainly slow the pace of infrastructure development. The result is likely to be intensified competition between rival midstream companies and industry consolidation. Today we look at the larger implications of a small pipeline project in Houston.