The Permian Basin land grab has slowed in recent months as the availability of lucrative and reasonably priced acreage shrinks and oil prices remain depressed. The number of transactions in West Texas dropped by one-third to 30 in the second quarter, while their value was down 85% to $2.8 billion compared with the first three months of the year.
Oil prices will likely fluctuate between $40 and $60 per barrel through 2022, according to Citi analysts, who also said prices could fall below $40 per barrel or climb above $60 if supply disruptions worsen or improve significantly. Citi believes US shale drillers will be able to bring the market into balance in the event of supply shocks, thanks to their flexibility in oil production.
The Texas Permian Basin Petroleum Index, which measures the health of the oil and natural gas industry in the region, rose in June for the ninth consecutive month and was 18.7% higher than a year earlier -- with all components posting gains. The June rig count was up 147.2% year-on-year to 309 rigs, the number of drilling permits issued during the month rose 77.7% to 750, and June employment in the industry grew 9.8%.
Permian Basin drillers could see logistics costs drop by as much as 40% as the planned construction of several frac sand mines in West Texas means hydraulic fracturing in the area will no longer depend on expensive rail transportation to bring sand from Wisconsin. Oil companies pay up to $140 to have a ton of sand shipped by rail to West Texas, but that cost could drop to $85 per ton once producers will be able to buy sand from local mines and haul it by truck, according to IHS Markit.
US gasoline production has run at near-record levels for the first seven months of 2017, but above-average exports have helped gasoline inventories decline, according to the Energy Information Administration. "Gasoline is highly likely to take direction from crude oil, so while high production should mean lower prices, it's actually reducing oil inventories, and future gasoline prices may feed more off future oil prices, and thus reflect oil's supply and demand balance," said GasBuddy senior analyst Patrick DeHaan.
Reduced sand usage by US shale drillers, rising prices and the planned openings of new mines could lead the frac sand market into oversupply. Rystad Energy expects average sand volumes for each foot of well drilled to decline 2.5% this quarter as shale producers turn to alternative strategies and designs that require less frac sand to cut costs and avoid logistics problems.
Houston-based Sanchez Energy has reached an agreement to sell 39,500 acres producing dry natural gas in the Eagle Ford Shale's Javelina region for $105 million. "This transaction accelerates the value of the asset, while building our liquidity and providing value to our shareholders," Sanchez Energy Director and CEO Tony Sanchez said.
The Ohio Department of Natural Resources issued 38 drilling permits in July as higher natural gas prices increased producers' appetite for new drilling following a steep decline to 32 applications in June, compared with 46 in May. The Energy Information Administration reported natural gas production of 4.42 billion cubic feet per day from the Utica Shale in July, an increase of nearly a fifth from a year earlier.
Virginia Gov. Terry McAuliffe wrote in a letter to the Interior Department on Thursday that he opposes drilling off his state's coast, citing concerns over revenue sharing. McAuliffe previously said he would support offshore drilling only if the administration establishes a revenue-sharing program, but President Donald Trump's recent proposal to ax royalty sharing with Gulf Coast states makes this highly unlikely.
API Specification 17E, Specification for Subsea Umbilicals, Fifth Edition
This document specifies requirements and gives recommendations for the design, material selection, manufacture, design verification, testing, installation, and operation of umbilicals and associated ancillary equipment for the petroleum and natural gas industries. Ancillary equipment does not include topside hardware. Topside hardware refers to any hardware that is not permanently attached to the umbilical, above the topside hang-off termination. This also applies to umbilicals containing components, such as electrical cables, optical fibers, thermoplastic hoses and metallic tubes, either alone or in combination. The document also applies to umbilicals that are for static or dynamic service, with surface-surface, surface-subsea and subsea-subsea routings. To purchase this publication, visit the API Publications Store.