Twenty (20) New Permits; Active Rigs In North Dakota Plummet To 171 -- December 22, 2014

Dow: on the news I heard that the Dow ended at a new high today; I may have misheard; not sure, but it certainly traded near its all-time highs.

Active rigs:

	12/22/2014	12/22/2013	12/22/2012	12/22/2011	12/22/2010
Active Rigs	171	191	188	196	161

RBN Energy: consequences of a lower crude oil-to-natural gas price ratio.

And there is one more implication of a lower crude-to-gas ratio that is already starting to be felt by the operators of LNG export terminals being built along the U.S. Gulf Coast as well as their competitors in Canada and Asia. That is the downward pressure placed on LNG prices by a lower ratio. Traditionally most LNG prices have been priced using a crude oil formula in Asia  - the most likely market for U.S. LNG exports. When oil prices were riding high, LNG projects could attract buyers with the prospect of securing supplies here linked to low U.S. natural gas prices – making them quite competitive with LNG projects in Asia even after higher transportation costs were factored in. Lower oil prices have closed the gap between oil and gas based LNG pricing so that the U.S. is now only marginally competitive on price. If as we mentioned a minute ago, natural gas prices rise faster than expected because production falters, that disparity could become more problematic.

There are a lot of questions about how  the current crude price weakness will play out, but it is certainly possible that prices could remain low for a long time.  And for reasons described above, it is equally possible that natural gas prices could strengthen, assuming natural gas production is reduced by less drilling for crude oil.  Those conditions would imply that the crude-to-gas ratio remains at or below its current level. That in turn would increase the pressure on producers to concentrate their drilling in sweet spots. Natural gas processors would also have a tough time in such an environment. And we barely dare think about price trouble brewing for LNG export projects. Maybe after the holidays?

Wells coming off the confidential list over the weekend, Monday have been posted; see sidebar at the right.

Wells coming off the confidential list Tuesday:

• 28086, drl, CLR, Holte 4-32H, Stoneview, no production data,
• 28097, drl, Hess, EN-Dobrovolny A-155-94-2413H-5, Manitou, no production data,
• 28458, 2,361, MRO, Sommer 11-26H, Bailey, 4 sections, t11/14; cum --
• 28502, 291, Hunt, Alexandria 161-100-27-34H-1, Alexandria, t9/14; cum 15K 10/14;

Two (2) permits canceled, both MRO:

• 24092, PNC, MRO, Transtrom Trust USA 14-21H, Werner oil field, Werner oil field is just south of the reservation; it is active in the western half of the field; almost nothing in the eastern half; Transtrom would have been in the center of the field;
• 24222, PNC, MRO, State Voigt USA, Werner; this well would have been in the same area;

One (1) producing well completed:

• 26830, 2,443, XTO, Rolfson 14X-34E, Siverston, a Three Forks B1 well, background gas fluctuated between 500 - 2,000 units; highest gas show was 3,112 units; ideal target zone was 19 feet thick, an offset well suggested that the formation would stay nearly flat until a depth of 17,500 feet; TD = almost 21,000 feet; the lateral was 100% within the target interval; t12/14; cum --

Twenty (20) new permits --

• Operators: QEP (5), Hess (5), Slawson (4), EOG (3), Hunt (2), Whiting
• Fields: Blue Buttes (McKenzie), Spotted Horn (McKenzie), Parshall (Mountrail), Antelope (McKenzie), Robinson Lake (Mountrail), Big Bend (Mountrail), Ross (Mountrail), Sanish (Mountrail)

Comments: I track permitting status here.