Thursday, Part I, Active Rigs Plummet To 77-- June 11, 2015

Wow, this is starting out as another incredible day. The stories coming out of the Bakken are incredible, especially when one starts connecting the dots. The NDIC daily activity report did not get posted last night, but it is up now.

Eight (8) wells come off the confidential list today:

• 27735, 517, Oasis, McCauley 5601 41-34 5T, Tyrone, t2/15; cum 30K 4/15; choked back
• 28958, 976, Hess, BL-Iverson-155-95-1819H-8, Beaver Lodge, t4/15; cum 17K 41/5;
• 29429, SI/NC, BR, Teton 5-8-10MBH, Camel Butte, no production data,
• 29544, 871, Hess, EN-Madisyn-154-94-0706H-4, Alkali Creek, t41/5; cum 22K 4/15;
• 29731, drl, Hess, EN-Weyrauch B-LW-154-93-3031H-1, Alkali Creek, no production data,
• 29733, drl/NC, XTO, Eckert 41X-6G, Indian Hill, no production data,
• 29853, SI/NC, WPX, Beaks 36-35HZ, Mandaree, no production data,
• 29896, 1,226, Slawson Howo 7-33-4TFH, Big Bend, t41/5; cum --

Active rigs:

	6/11/2015	06/11/2014	06/11/2013	06/11/2012	06/11/2011
Active Rigs	77	188	187	210	169

This is a new post-boom low and somewhat surprising. I track milestones in rig counts at this post.

Seven (7) new permits: 

• Operators: Slawson (3), XTO (2), BR (2)
• Fields: Big Bend (Mountrail), North Fork (McKenzie), Grinnell (Williams), Clear Creek (McKenzie)
• Comments: the Clear Creek field is a sweet spot in the Bakken; northeast McKenzie County; part of CLR's multi-well, multi-year TFS study (October, 2012)

Four (4) producing wells completed:

• 23517, 1,411, Newfield, Johnson 150-99-34-27-2H, South Tobacco Garden, t3/15 cum 31K 4/15;
• 28681, 595, CLR, Leonard 4-12H, Northwest McGregor, t5/15; cum 10K 41/5; choked way back
• 28682, 583, CLR, Leonard 3-12H1, Northwest McGregor, t5/15; cum 6K 4/15; choked way back
• 28683, 346, CLR, Leonard 2-12H, Northwest McGregor, t5/15; cum 4K 4/15; choked way back

One (1) permit canceled, an EOG well in Parshall oil field. No big deal.

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Condensate Update

RBN Energy: Will Gulf Coast Condensate Splitting Trump The Export Market?

Two years ago production of super light crude known as condensate in the South Texas Eagle Ford was surging.

Most Gulf Coast refineries did not want to process this light material and it was discounted to regular crude. The discounts led to a number of project announcements to build stand-alone condensate splitters – a kind of simple refinery that would process it into refined products.

During 2014 these projects were cast into doubt by the easing of condensate export restrictions that appeared to offer a less expensive solution to the condensate challenge. More recently the possibility of declining production could also threaten splitter economics. But splitters are still being built and coming online this year and next – with two new projects announced recently.  Today we review current splitter projects in the light of market developments.

We have devoted a lot of space in the RBN blogosphere to the topic of condensate – a material that has numerous definitions. In this blog we are talking about lease condensate – a very light form of crude oil with a high API degrees gravity level typically between 55 and 70, and sometimes lighter.

Lease condensate starts life as a gas underground and condenses from the gas stream at surface temperature and pressure. Although many of the crudes being produced from shale basins in the U.S. are very light the volume of condensate produced in the South Texas Eagle Ford basin is higher than most. Because lease condensate has a lot of light end hydrocarbons (and varies considerably in quality) it is less attractive (valuable) to most Gulf Coast refineries that are configured to handle heavier crudes and as a result its price is discounted.

Attempts to extract value from lease condensate in the past four years have variously involved shipping it to Canada for use as a diluent to blend with heavy oil sands bitumen crude – although that market generally prefers natural gasoline (plant condensate) produced by NGL plants as well as processing it locally in simple refineries known as condensate splitters. A third market to export condensate to Asia and Europe developed in 2014 after the Bureau of Industry and Security (BIS) clarified regulatory interpretations that had prevented the export of condensate (except to Canada).

The BIS began to recognize partially processed condensate to be exported as a refined product. However, as we explained earlier this year the export market for processed condensate is quite competitive and depends on wide discounts to international crude prices. In this blog series we look at the ongoing build out of condensate splitter capacity at the Texas Gulf Coast despite the easing of export rules and the now very real impact of slowing production growth.