U.S. Shale Output may Start Dropping Next Year

6 hours ago, Ian Austin said:

Ok, I don’t see the need to continue this - we will call it a day. 

By the way, have you actually done anything in the industry, or is our knowledge limited to “talking to friends”?

Well geez, I did work a couple days roughnecking on a couple rigs. Just a couple though so I am no "expert". 78 through 85 and left when Reaganomics killed the industry. I normally try not to be a smarta** but when you jumped in and made your first comment I felt disrespected and you kept on. Typed words can't tell the tone of ones thoughts. I took your remarks as flippant. Maybe that wasn't your intention, but as dumb ol' ruffneck I sometimes have no control over what my fingers are typing in responses. No harm no foul friend. I will be civil from now on. My apologies, k?

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@Ian Austin and @Old-Ruffneck no worries, just some verbal differences.  Nothing to get upset about.  Both of you have your own unique experiences in the oil patch.  Oil experience is not the target here, but how about them there Oil Hates club over yonder, they could prolly use a good browbeating for p*ssing in the oil patch and stopping oil pipelines.

Up to you...

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(edited)

1 hour ago, Old-Ruffneck said:

Well geez, I did work a couple days roughnecking on a couple rigs. Just a couple though so I am no "expert". 78 through 85 and left when Reaganomics killed the industry. I normally try not to be a smarta** but when you jumped in and made your first comment I felt disrespected and you kept on. Typed words can't tell the tone of ones thoughts. I took your remarks as flippant. Maybe that wasn't your intention, but as dumb ol' ruffneck I sometimes have no control over what my fingers are typing in responses. No harm no foul friend. I will be civil from now on. My apologies, k?

Apologies, the comments were meant with the best of intentions. I tend to be skeptical of a lot of things, mainly because of some of the garbage I’ve seen pulled from the inside (I’m definitely not Yota, but could down quite a few beers telling stories about things being manipulated economically). 

No harm no foul. We both probably got a little “misunderstood”. I apologize as well

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Deal to acquire Anadarko positions Chevron as Permian leader

HOUSTON, Apr. 12
04/12/2019

Chevron Corp. has agreed to buy Anadarko Petroleum Corp. in a cash and stock deal that values Anadarko at $50 billion and creates growth opportunities for Chevron in areas that play to its operational strengths.

“The combination of Anadarko’s premier, high-quality assets with our advantaged portfolio strengthens our leading position in the Permian, builds on our deepwater Gulf of Mexico capabilities, and will grow our LNG business,” said Michael With, Chevron chairman and chief executive officer.

In 2018’s fourth quarter, Anadarko produced 691,000 boe/d (nearly 60% oil) from the Denver-Julesburg (DJ) basin (40%), the Permian basin (20%), and the Gulf of Mexico (20%), Cowen analysts said in a research note Apr. 11.

Upon close, Chevron would become the second-largest producing major in 2019 terms from its current position at number four, according to Wood Mackenzie analysts, and puts ExxonMobil, Chevron, Shell, and BP “in a league of their own,” said Roy Martin, Wood Mackenzie senior analyst, corporate analysis.

The new entity would move ahead of Shell and BP in terms of oil and gas production, trailing only ExxonMobil and the five biggest national oil companies in terms of the world’s largest producers of oil and gas, according to Rystad Energy.

Tight oil

As of Feb. 5, Anadarko was operating 14 drilling rigs in the US onshore, with 9 in the Delaware basin, 4 in the DJ basin, and one in the Powder River basin.

Anadarko is the largest producer in Colorado’s DJ basin, where its 400,000 net acres are estimated to hold more than 2 billion boe of recoverable resources. In the Permian’s Delaware basin, Anadarko holds nearly 600,000 gross acres and 8,500 ft of stacked oil potential. The combination of the two companies will create a 75-mile-wide corridor across Delaware basin acreage.

“By buying Anadarko, they take on a highly contiguous Delaware basin position in the Permian. Chevron ought to be able to do more with the acreage than Anadarko, which lagged behind in terms of well productivity,” WoodMac's Martin said.

“We have always considered Anadarko as having the best positioned acreage in the sweetest spot of the Permian Delaware basin,” commented Per Magnus Nysveen, Rystad Energy founding partner and head of research. The combination of Anadarko’s Permian assets with Chevron’s positions the company to emerge “the clear leader among all Permian players, both in terms of production growth and as a cost leader,” he said.

“By 2025 the merged entity will be able to produce as much 1.6 million b/d of oil from the Permian basin alone,” Nysveen said.

Chevron expects the combine to enhance its existing position in the deepwater Gulf of Mexico and extend its deepwater infrastructure network. Anadarko is a large leaseholder and producer in the deepwater gulf, with infrastructure that includes 10 operated deepwater facilities. The company’s newest spar facilities, Lucius and Heidelberg, began production respectively in January 2015 and January 2016.

Chevron would gain a resource base in Mozambique to support growing LNG demand. Anadarko is a 26.5% owner and operator of Mozambique LNG, a 12.88 million-tonne/year LNG project expected to take final investment decision in the first half of this year. Plans for the onshore consists of two initial LNG trains to support Golfinho-Atum field, which lies entirely within Offshore Area 1, where the company and its partners have discovered 75 tcf of recoverable natural gas resources.

With the deal, Chevron gains access to Western Midstream Partners LP.

“Chevron has been noticeably absent in the midstream rush of the past couple of years. It now takes a 55% stake in Western Gas, which goes a long way toward fixing that,” said RT Dukes, WoodMac research director, Lower 48 oil and gas. The structure was simplified last year, “giving Chevron a vehicle to spin assets down in the future if needed,” Dukes said.

Transaction details

The 25% cash, 75% stock deal values Anadarko at $50 billion. The offer is priced at $65/share, representing a 39% premium over Anadarko’s close on Apr. 11. In aggregate, upon closing, Chevron will issue some 200 million shares of stock and pay about $8 billion in cash. Chevron will also assume estimated net debt of $15 billion.

The transaction is expected to generate annual run-rate synergies of $2 billion and will be accretive to free cash flow and earnings one year after close, said Michael Wirth, Chevron chairman and chief executive officer.

Using the deal size as a marker, RBC analyst Scott Hanold sees synergies moving upward to $4-5 billion “as the portfolios get rationalized and priorities are clarified,” subject to “the success of Chevron’s asset sales program, which has now been upgraded from $5-10 billion over 2018-20, to $15-20 billion over 2020-22.

“Looking through the lens of assets with limited growth potential,” he said, Chevron could divest assets in Canada, Colombia, Azerbaijan, and select parts of its Asian portfolio.

The transaction, approved by both companies’ boards, is expected to close in the second half of this year, subject to Anadarko shareholder approval, regulatory approvals, and other customary closing conditions.

Upon closing, the combine will be led by Michael Wirth as chairman and chief executive officer and remain headquartered in San Ramon, Calif.

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Argus launches new crude price reflecting shifting Permian crude quality

Houston, 10 April 2019

Global energy and commodity price reporting agency Argus today launches a new light crude price assessment to reflect growing light oil production in the Permian basin of west Texas and New Mexico. The new West Texas Light (WTL) price, published daily in the Argus Crude report, is for Permian basin crude with a gravity of 44.1-49.9°API traded at terminals in Midland, Texas.

Midland is the chief gathering hub for Permian basin crude, the fastest growing source of oil in the world. An increasing share of Permian crude is lighter than 44°API, and midstream companies have created the WTL stream to separate lighter crude from the denser main Permian WTI grade, which is typically at 40-44°API.

Much WTL trade is taking place at differentials to Argus’ benchmark WTI Midland price, which is assessed at terminals in Midland, Texas. Argus will publish its new WTL price assessment as a differential to WTI Cushing as well as an outright number.

WTL has also begun to trade at Houston at a differential to the benchmark Argus WTI Houston price, which is widely used to price US exports. Argus WTI Houston, which is assessed at Magellan’s MEH terminal, is also the settlement price for derivatives contracts on the Ice and CME exchanges, where open interest currently stands at 200mn bl with daily trading volumes topping 10mn bl. Argus intends to publish a separate WTL Houston index as volumes grow.

"Argus welcomes the opportunity to provide greater transparency to the market for Permian crude as production continues to grow and as more of the output is lighter than traditional WTI,” Argus Media chairman and chief executive Adrian Binks said. “Argus WTI Houston and Argus WTI Midland are two of the most liquid and transparent physical spot crude price indexes in the world. We expect to see the liquidity of the WTL market at Midland and later at Houston grow rapidly as well.”

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Concho Resources Forms Permian Midstream JV To Support Midland Basin Growth

Concho Resources agreed to form a JV with Frontier Midstream Solutions, which will build and provide crude oil gathering, transportation and storage services in the Northern Midland Basin.

Concho Resources Inc. formed a midstream joint venture (JV) on April 15 to support its continued oil production growth in the Midland Basin region of the Permian.

The Midland, Texas-based shale producer said it agreed to form Beta Crude Connector LLC (BCC) through a JV with Frontier Midstream Solutions IV LLC. BCC will build and provide crude oil gathering, transportation and storage services in the Northern Midland Basin.

Concho and Frontier will each own a 50% equity interest in BCC, with Frontier serving as operator.

The new gathering and transportation system will consist of a roughly 100-mile gathering system, 250,000 barrels of crude oil storage facilities as well as truck terminals. The pipeline system will have the initial capacity to deliver 150,000 barrels per day of crude oil to multiple delivery points, accessing local refineries and connecting to several downstream pipelines, according to a joint press release.

Concho’s planned activity for 2019 is expected to deliver oil growth of 26% to 30% across its roughly 640,000 net acres in the Permian Basin. In the Midland Basin, the company has about 260,000 gross acres.

Jack Harper, president of Concho, commented, “Through the joint venture, we will leverage Frontier’s midstream expertise and enhance the value of our high-quality footprint in the Midland Basin with a reliable, cost-efficient gathering and transportation solution. Importantly, this is a compelling investment opportunity that we can make with no changes to our capital plans.”

Currently, Concho plans to spend between $2.8 billion and $3 billion in 2019, which represents a 17% reduction from the company’s prior capital guidance.

In conjunction with the JV agreement, Concho also agreed to enter into a long-term acreage dedication agreement with BCC.

Following an open season set for April, construction on BCC will commence, targeting initial flows in mid-2019.

BCC will file for FERC authority to operate as a common carrier pipeline and solicit interest from other producers and marketers for capacity on the new system.

Frontier Midstream Solutions, headquartered in Tulsa, Okla., is owned by Frontier Energy Partners II LLC and certain funds of Energy Spectrum Capital. 

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