Skip to comments.Black gold comes to Texas’ rescue again
Posted on 07/20/2012 2:07:29 PM PDT by thackney
While low natural gas prices may help you with your utility bill, it isnt helping energy companies bottom line.
Low gas prices have slowed drilling in shale plays where gas is predominant because the wells arent bringing in a decent return.
But no one is sounding an alarm that the boom in the Eagle Ford Shale of South Texas is soon to bust. In fact, drilling activity in the Eagle Ford Shale is intensifying because its blessed with oil.
With gas prices falling, many, many companies are rebalancing their portfolios and going to oil, said Stephen Trammel, senior manager of industry affairs at consulting firm IHS/CERA. The fallen price of natural gas has squeezed profits for many drillers. It closed Thursday at $2.99 per million British thermal units after reaching a high of $4.58 per million Btu as recently as July 21, 2011. By contrast, crude oil hit a two-month high Thursday at $92.66 a barrel.
Thats made shale formations that also have oil the hot plays in North America right now.
The Eagle Ford Shale is one of the hot ones. Not only is it vast stretching 400 miles from East Texas south of San Antonio to Mexico it also has a sizeable oil window in the northern part of the play, where most of the drilling activity now is based.
It now boasts 251 working rigs in the whole play compared with 182 a year ago.
Two other major shale plays where drillers are going after oil the Permian Basin of West Texas and the Williston Basin-Bakken Shale of Montana and North Dakota also have logged an increase in the number of rigs, according to data from Houston-based Baker Hughes Inc. The Permian Basin has 528 rigs now, up from 445 last July, and the Bakken has 218 rigs now, up from 166 a year ago.
By contrast, in the Haynesville Shale of northeast Texas and northwest Louisiana, there are 42 rigs running now compared with 134 a year ago. The Haynesville Shale contains mostly natural gas.
Oil production in the Eagle Ford Shale is accelerating, too. It produced 27.1 million barrels for the first four months of this year, Texas Railroad Commission figures show, while Eagle Ford oil production for all of 2011 totaled 36.6 million barrels.
So were already 75 percent of the way to equaling last years number, said Thomas Tunstall, director of the Center for Community and Business Research at the Institute for Economic Development at the University of Texas at San Antonio.
Thats not to say that natural gas drilling isnt profitable in all cases.
The break-even point for natural gas drilling varies almost by every individual development, said Bruce Bullock, director of the Maguire Energy Institute at Southern Methodist Universitys Cox School of Business. Where companies can extract natural gas liquids that include ethane and propane, its still pretty economical to drill, he said.
In some cases, though, energy companies continue to drill in natural gas areas to hold on to their leases in the hope that prices will recover. Usually, a drillers lease includes a deadline to drill wells. If the company doesnt meet the deadline, it gives up the right to drill.
R.T. Dukes, a director at the website EagleFordShale.com, which posts news about the shale, said oil companies budgets are being pressured by natural gas prices, but drilling activity hasnt really slowed down in the Eagle Ford. However, if the price of oil should drop again and gas prices remain low, youll probably see some sort of slowdown in the second half of the year.
Yet Dukes remains bullish on the Eagle Ford.
Its a first-class play in the United States, he said. That usually doesnt change over short periods of time. On a relative basis, its still better than most plays in the U.S., he said.
Should natural gas prices go much higher, youll see additional capital come to the Eagle Ford, he said.
Elected officials in DeWitt and Dimmit counties previously have expressed concerns about the longevity of the play. They worry that the Eagle Ford boom could end as quickly as it has begun.
Not to worry, said Trammel of IHS/CERA.
Drilling shows no sign of slowing down in the oil window of the Eagle Ford Shale, he said. I think the play has legs.
Eagle Ford Information
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Permian Basin Information
Or does it even exist?
Great News for Texas Bump!
Farmers hit the jackpot in Kansas oil boom
Oil Boom Fueling Fortunes in Kansashttp://abcnews.go.com/Business/MadeInAmerica/oil-boom-creating-overnight-millionaires-kansas-us-energy/story?id=16297143#.UA1GImGXt8E
Still quite early in the process. Most money being made selling land rights as opposed to selling oil. But the second will follow the first.
High School and College in the area.
Russell, Kan home of Sen Bob Dole.
Nothing big here in this press release, but it is an example for Kansas Oil:
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Graystone Begins Re-Working Kansas Wells
The Graystone Company has begun re-working the oil wells it acquired in Kansas. The Company acquired a 50% working interest in up to 100 oil and gas leases in Kansas. The Company began re-working the oil wells to return the oil wells to commercial production. The initial re-working efforts have determined that the wells contain oil sufficient to begin commercial production. The company expects to provide an update of the wells production in the next 45-60 days. Additionally, the Company will update shareholders on the Companys sale of silver and gold for the month of July.
Under the terms of the acquisition of the leases, the Company paid $700,000 for a 50-percent working interest in the oil and gas wells. The Company’s cost of the rework and re-drilling is to be between $25,000 and $75,000 per oil well.
Paul Howarth, CEO of Graystone, stated, “The recovery and drilling in these shallow well Kansas oilfields is a great opportunity for the Company. The commercial production of these oil and gas wells will allow Graystone to improve the diversity of our holdings in natural resource commodity properties.”
Upon the completion of re-working as needed all 100 wells, GYSTs petroleum division expects annual revenues of approximately $2,000,000.
If your map is a response to my statement about shale, I may have been wrong. Was not aware of that in extreme SE, or NW KS.
However, the area discussed in the main article about Anthony, is west of the shale shown in your map.
I once lived in Wichita, and had tax clients in Anthony (a bank), also at Harper, Medicine Lodge, and Attica, all in Harper County, SW of Wichita. This area is not represented on your map as being “shale” oil territory.
Are those annual net revenues of $2mm?
So they’re investing $5.7mm now to garner $2mm going forward or do they split that with the owner?
The revenues don't stop after one year.
GYSTs petroleum division expects annual revenues of approximately $2,000,000.
$2MM is Graystone's share.
That’s fine. The way the article was written didn’t make it clear who earned what.
That’s a great deal if the revenue stream keeps up. Are there additional costs annually to maintain the leasehold and keep the oil flowing?
There is an operating and maintenance budget for oil field facilities. It would be included in the first year as this is not a new field with new equipment. Like all facilities with mechanical equipment, it will likely grow over time.