And With This Willie Nelson Song, I'm Heading To Bed -- February 25, 2016

Back To Gas Lines In Los Angeles Tonight -- February 25, 2016

The Los Angeles Times is reporting:

The slide in California’s gasoline prices could abruptly end Friday, with prices possibly jumping 30 cents a gallon due to seasonal changes in the state’s refinery operations, a consumer advocacy group predicted Thursday.

“The move marks an end to fire-sale prices on remaining winter stocks” of gasoline, Consumer Watchdog said.

Prices often climb in California this time of year because refineries switch from the winter blend of fuel to the more expensive summer blend required in the state.

Also, in the LA Times: SpaceX scrubs rocket launch again, two minutes before launch. This reminds me of NASA in the early days. No link. Not worth the effort.

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You Had To Be There

Our 19-month-old granddaughter helped with the circuit but when it came time to to photograph it, she wanted to run the camera. Needless to say there were too many things to keep track of, but all in all, I think we did a pretty good job with the snap-on circuits and the camera.


The more I watch this, the more I enjoy it. I had two problems: Sophia, 19-months-old, wants to handle the camera to film the action, and I'm having trouble getting the "helicopter" to do what it is supposed to. But Sophia is a trooper and doesn't give up. Tomorrow, I will try to teach her that the electricity only runs one way in diodes. LOL.

Four (4) New Permits; MRO Reports Two High-IP Wells -- February 25, 2016

Active rigs (we first hit 38 rigs on February 18, 2016; then back to 39, then back to 38 today):

	2/25/2016	02/25/2015	02/25/2014	02/25/2013	02/25/2012
Active Rigs	38	121	190	181	204

Four (4) new permits --
Operators: Oasis (2), SM Energy (2)
Fields: North Tobacco Garden (McKenzie), Burg (Divide)
Comments:
Four producing wells reported as completed (this corrects an error from an earlier report that said these permits were canceled:

• 29381, 2,449, MRO, Trinity 14-21H, Bailey, 4 sections, t2/16; cum --
• 29382, 1,100, MRO, Ringer 14-21TFH, Bailey, 2 sections, t2/16; cum --
• 29536, 862, Hess, EN-Sorenson B-155-94-3526H-5, Alkali Creek, t1/16; cum --
• 29767, 673, Hess, EN-L Cvancara-155-93-2627H-9, Robinson Lake, t1/16; cum --

Wells coming off the confidential list Friday:

• 24276, 543, Triangle, Triangle 150-101-36-25-8H, Rawson, t9/15; cum 68K 12/15;
• 29685, SI/NC, Statoil, Richard 8-5 XW 1 TFH, Banks, no production data,

 *********************************

24276, see below, Triangle, Triangle 150-101-36-25-8H, Rawson:

Date	Oil Runs	MCF Sold
12-2015	9137	11981
11-2015	17837	19345
10-2015	12384	10434
9-2015	20674	23207
8-2015	7263	5605

EOG Reports -- February 25, 2016

EOG Resources: Q4 EPS of -$0.27 beats by $0.04. Revenue of $1.8B (-61.3% Y/Y) misses by $380M.

CLR: transcript; 

Halcon Resources: forecast a gain of 23 cents; a loss of $3.56/share but adjusted, 41 cents / share; huge beat;

Apache: forecast a loss of 47 cents; actual $19.07 per diluted common share, but when adjusting, only 6 cents per share loss; will cut CAPEX by 60%;

WPX: forecast a lost of 20 cents/share; reports a loss of 24 cents/share;

CHK: On Wednesday, Colorado-based FourPoint Energy LLC announced it would take on some 3,500 Chesapeake wells in Oklahoma and Texas for a price tag of $385 million in a deal that sent Chesapeake’s stock up 23 percent. The asset sale will mean a full withdrawal of Chesapeake from the Western Anadarko Basin, but the market loves the idea. It’s a lifeline for Chesapeake, which has reported an annual loss of some $14.7 billion and needed a big savings win to get back in the game and keep bankruptcy fears at bay. In the fourth quarter, the company reported a $2.2 billion net loss. For FourPoint, it means it will now own all of Chesapeake’s Western Anadarko basin assets. Last July, the Colorado company moved to acquire $850 million in assets owned by two Chesapeake subsidiaries in Oklahoma. The new deal is expected to close by 29 April this year.

CLR: a loss of 23 cents vs a projected loss of 21 cents/share; Revenue of $575.5 million topped expectations of $569.3 million but declined from $1.3 billion a year ago. stock is soaring 13.25% to $20.30 Thursday after the company released its fourth quarter 2015 earnings yesterday after the market closed and said it would cut planned capital spending this year by 66%. 

Yergin Ahead Of The Conference -- February 25, 2016

Over the weekend I rambled on about the Bakken and in passing mentioned an article sent to me by a reader about a recent speech Daniel Yergin had made. I had not yet had a chance to read it but said I would get back to it. (Unfortunately it did not say anything we did not already know; overall, somewhat disappointing, but the quick 30-second historical soundbite was nice.)

FuelFix is reporting:

Prominent energy expert Daniel Yergin believes the energy industry’s day of reckoning is here, amid the sudden and unrelenting rush of crude that has drowned oil markets for a year and a half.

This has happened before. In the 1930s, Texas suddenly overflowed with oil. Twenty years after that, it happened in Russia and the Middle Eastern countries. Then, in the 1980s, a tidal wave of oil from the United Kingdom’s North Sea, Alaska’s North Slope and Mexico presaged a ruinous oil bust. Now, the rapid-drilling shale oil producers in Texas and North Dakota that brought on the bulk of the world’s supply growth in recent years are dealing with the self-inflicted wounds of overproduction and high levels of debt.

A new reality which requires a "re-adjustment:

Such a cut is still unlikely, Yergin said, because of how shale oil has changed the industry. Unlike virtually every other way to extract crude from the earth, shale drilling doesn’t take longer than a few months. It has an average cycle time of 80 days, according to Goldman Sachs, meaning local oil companies can put oil on the market almost as fast as Saudi Arabian oil can arrive in the United States by ship.

That means if OPEC cut production, it couldn’t support prices for long. Higher-cost shale drillers would have an incentive to restart their rigs in West Texas and soak up any market share left behind. In November 2014, OPEC decided not to curb its production.
“OPEC said if there’s going to be some effort to stabilize the market, it’s not just going to be us,” Yergin said. “It was an adjustment to a new reality.”

Yergin doesn't have much to add to what has already been written here, there, and everywhere.
This is his conclusion:

“If we have decent global growth, then it does seem to you’ll see the rebalancing of the market will happen in the second half of 2016 or 2017 and under those circumstances you could see prices in the $40 to $50 range later in the year,” Yergin said.

My thoughts: at $50-oil, the US shale industry survives; Saudi Arabia struggles; and Venezuela implodes. Even at $75-oil Saudi Arabia won't fare well. It budgets for $100-oil and that was before things turned nasty for them in the Mideast.

Venezuela -- Tick-Tock, Tick-Tock -- February 25, 2016

Being reported at CNN Money today: Venezuela is shipping gold to pay its debts. Russia is selling a lot of gold:

Venezuela sent $1.3 billion worth of gold bars to Switzerland in mid-January, according to data from the Swiss Federal Customs Administration.

That gold was shipped out just weeks before two big debt payments due this month, totaling $2.3 billion. On Friday alone, Venezuela has to pay bondholders $1.5 billion.

Venezuela is running out of cash and many experts believe there's a high chance it will default by this fall when a string of big debt payments are due.

"It's a question of when Venezuela will default, not if," says Russ Dallen, managing partner at LatInvest, a firm that invests in Latin America. "They're running out of options." 

Actually, there is another option: sell its oil reserves to Russia:

Russia's major oil company Rosneft has signed an agreement with Venezuela's PDVSA for an additional investment of $500 million in the development of the Orinoco oil belt project.

Maybe we've gone from "tic-tic-tic" to "tick-tock-tick-tock." 

Putin Goes About His Business -- Re-Establishing The Old Soviet Union -- February 25, 2016

Updates

February 27, 2016: apparently The Washington Post has finally caught up with current events.
 

Original Post

 

I would normally add to to an earlier post, but I can't find an earlier post where this really fits and it's one of those articles that may be a "sleeper" now but continues a theme on the MDW blog, and may be a bit more important down the road. For the archives.

Forbes is reporting that Putin has a new satellite state as he continues his quest to rebuild the "old" Soviet Union. Call it the Putin Union, I suppose.

Two days before Christmas, as American policymakers were settling into the holidays, Russia quietly signed a sweeping air defense agreement with Armenia, accelerating a growing Russian military buildup that has unfolded largely under the radar. It was the most tangible sign yet that Putin is creating a new satellite state on NATO’s border and threatening an indispensable U.S. ally.

The buildup in Armenia has been glossed over in Washington, despite being a key piece of Vladimir Putin’s plan to dominate the region — along with its proxy Syria and growing military ties with Iran. Most importantly, Armenia shares an approximately 165 mile border with Turkey, a NATO member and the alliance’s southern flank. 

Over the last six months — as Russia’s war in Syria and pressure on Turkey has intensified — the flow of its arms and personnel into Armenia has escalated to include advanced Navodchik-2 and Takhion UAV drone aircrafts, Mi-24 helicopter gunships and Iskander-M ballistic missiles. Last July, Putin ordered snap combat readiness checks in Armenia to test the ability of his forces to react to threats to Russia’s interests abroad. 

Earlier this month on orders of Russian Defense Minister Sergei Shoygu, Russia began a massive military exercise in its “southwestern strategic direction,” which includes Armenia. The total strength of the regional operation included approximately 8,500 troops, 900 ground artillery pieces, 200 warplanes and 50 warships.

The growing Russian military presence in Armenia is but the latest indicator of a worrisome trend: Putin’s threat to NATO and America’s interests in Europe. 

Many, many story lines:

• Putin takes advantage of the grudge match between Turkey and Armenia
• even if no one else sees it (or admits to it), Turkey soon to become the next Muslim state
• this will remind some folks of the Cuban missile crisis; how JFK resolved the stand-off so that Russia could claim some victory while removing missiles from Cuba
• Putin takes advantage of Obama's lame-duck status
• Putin moves into a political vacuum created by President Obama's anxiety about playing hardball with Putin in this part of the world
• Saudi Arabia needs to figure out a way to co-exist with its arch enemy, Russia
• the chess game continues

Yup, There Were Ten (10) New Permits; Wednesday's Daily Activity Report Has Been Posted -- February 25, 2016

Ten (10) new permits --

• Operators: Whiting (6), QEP (4)
• Fields: Camp (McKenzie), Poe (McKenzie), Grail (McKenzie)
• Comments:

One permit was renewed:
30786, a Crescent Point Energy permit for a well in Divide County.

I'm not sure why the Wednesday report was delayed a day. There was not much to it. No producing wells were reported as completed.

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The Little Red Riding Hood Story In The Modern Museum Of Art

Little Red Riding Hood

An Original Series By Our Granddaughter, Age 19 Months Old

Little Red Riding Hood is in the middle; the big, bad witch is on the end (you should be able to discern the two eyes and the long nose); and, the hunter on the left who killed the big bad wolf disguised).

It Depends On The Definition Of "Swing Producer" -- February 25, 2016

I guess it depends on what the definition of a "swing producer" is. From a SeekingAlpha contributor:

There is some conjecture among analysts and market pundits as to who the next swing producer will be, given that OPEC has given up that mantel in favor of ruthlessly pursuing market share. It was originally thought that U.S. shale oil producers would fill this role but to date there has been no sharp decline in U.S. oil output and there are signs that the shale oil industry will keep the spigots open and pumping crude.

Now an emerging favorite among some pundits as a swing producer is Canada. Some analysts argue that the high costs associated with oil sands will cause Canada's oil sands companies to cease oil sands production with much of it uneconomic in the current harsh operating environment where oil or more specifically WTI is hovering around $32 per barrel.

In the past, when global crude supplies exceeded demand OPEC would act as a swing producer, cutting output and bring the market back into balance. But as we all know in 2014 as the U.S. overtook Saudi Arabia to become the world's largest oil producer the cartel or more specifically Saudi Arabia and its Gulf State allies boosted production in order to keep prices low.

I had always assumed a "swing producer" was one who could move the supply of crude oil quickly to move the markets in either direction, generally, to smooth out the volatility.

This linked article suggests to me that the contributor's definition of a "swing producer" is one who can quickly cut production when oil prices slump. I think a swing producer needs to be able to do it quickly in either direction.

My thoughts on the linked SeekingAlpha article, an in e-mail to a reader who sent me the link:

I agree with the contributor that Canadian oil is not going to be the next swing producer.

Until this guy wrote that, I don't think anyone thought Canada would be the swing producer. If there was going to be a swing producer, it would be Russia or Saudi Arabia .... except ... conventional wisdom is that now US shale oil will be the swing producer.

I'm not so sure. I still think Russia and Saudi Arabia are the swing producers. They may be producing near their full capacity but "swing producer" works both ways. Russia and Saudi Arabia have to agree to cut production if they want oil prices to go back up. Obviously, there is no "US national oil company" like Saudi Aramco nor a "one-man Putin" to call the shots for the 150 oil companies in the US.

The US still imports 5 million bopd. The supply of oil will start to plateau over the next 12 months (move up and down very little month to month). Russia will join Saudi Arabia as the "next" wing producer (moving the market one way or the other) only if they work together. The US shale industry would simply move up / down in a classical free market supply and demand pattern, reacting to the new Russian-Saudi Arabian cartel.

Perhaps US shale oil can help prevent a spike in oil prices (and even there, I have my doubts) but I don't think US shale can do the reverse, prevent a free fall. To me, "swing producer" means going both ways, up and down, and Russia and Saudi Arabia are the only ones, if they work together, who can do that.

As Russia's footprint grows larger in the Mideast, it may behoove Saudi Arabia to find a better working relationship with Russia. This business about Saudi Arabia and US shale "living together" is not the story. The story is whether two arch enemies, Russia and Saudi Arabia can coexist.

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Ultra-Majors, Ultra-Problems

Rigzone/Bloomberg is reporting:

This may not be the best time to be bigger than big. The $64 billion tie-up of Royal Dutch Shell Plc with BG Group Plc and the steady growth of Exxon Mobil Corp. are creating a new league of two: the ultramajors. Executives at smaller companies are even starting to joke that Chevron Corp., Total SA, BP Plc, ConocoPhillips and ENI SpA are merely the mid-cap sector of Big Oil.

But as oil and gas prices have tumbled, Exxon and Shell have been forced to retreat. With oil barely above $30 a barrel, they’re cutting spending, including some costly, high-risk mega-projects. Shell abandoned construction of the 80,000 barrel-a-day Carmon Creek oil sands project in Alberta, Canada, last year after having started to build it. Exxon is slashing investment by 25 percent this year compared with 2015.

“Scale was very important in the late 1990s and 2000s,” said Michele Della Vigna, the top oil industry analyst at Goldman Sachs Group Inc. “In the past there was scarcity of capital. Being big was an advantage. The last 15 years were about being bigger. Today is about being nimbler and lower on the cost curve.”

The problem for the ultramajors is that they’re so big that they need to put off more or bigger projects every year to make a difference in production. The scale of Exxon and Shell has reached a point that it’s creating its own problems, said Tom Ellacott, vice president of corporate analyst at oil consultants Wood Mackenzie Ltd. “You need much bigger projects to move the needle,” he said.

When oil was at $100 a barrel, the two companies had sought to move the needle through developing reservoirs in the roughest, deepest and coldest parts of the world, spending billions of dollars over up to a decade in places like Kazakhstan, the remote corners of Australia, off the shores of Angola and in the Arctic. But as companies adapt to an era of low oil prices, most of those projects may fail to deliver the 15-to-20 percent return the Big Two hope for, industry executives and analysts said.

Saudis Admit That Their Assault Was Aimed Directly At US Shale Industry -- Bloomberg -- February 25, 2016

I think we learned everything we needed to know about the currently global oil situation the first two days of the Houston conference. I posted the comments of the energy minister from Saudi Arabia at this post. I suggested that his comments were a lot of double-talk. A reader said it much better: the 81-year-old energy minister spoke with a forked tongue. He's been doing this so long, his tongue is shredded. He's being doing this so long, he could be the energy czar for President Obama.

I say all that because Bloomberg wrote their story about the same time. Bloomberg agrees: the Saudi Surge was a direct attack on the US shale revolution as suspected all along.

After first ignoring it, later worrying about it and ultimately launching a price war against it, OPEC has now concluded it doesn't know how to coexist with the U.S. shale oil industry.

OPEC launched a price war against U.S. shale and other high-cost producers, including Canadian oil sands and Brazilian deep-water oilfields, in November 2014 by not reducing output despite a global oversupply. [This is so cool; the MDW blog uses October, 2014, as the "start" date for the Saudi Surge/Saudi Slump.]

Since then, oil prices have plunged by more than half, hitting a 12-year low of about $26 on February 11, 2016. In a rare admission that the policy hasn't worked out as planned, El-Badri said that OPEC didn't expect oil prices to drop this much when it decided to keep pumping near flat-out.

US shale oil will not disappear:

The International Energy Agency earlier on Monday gave OPEC reason to worry about shale oil, saying that total U.S. crude output, most of it from shale basins, will increase by 1.3 million barrels a day from 2015 to 2021 despite low prices.

While U.S. production from shale is projected to retreat by 600,000 barrels a day this year and a further 200,000 in 2017, it will grow again from 2018 onward, the IEA said. "Anybody who believes that we have seen the last of rising" U.S. shale oil production "should think again," the IEA said in its medium-term report.

I am particularly happy/reassured/pleasantly surprised that the Saudi energy minister (El-Badri) said

.... low oil prices have caused companies to cut too much spending on developing new output, which could plant the seed for "a very high price" in the future. "The concern is no investment now, no supply in the future. It's as simple as that," he said. "If there's no supply coming to the market, prices will go up." 

Well, duh, what did he expect? Over-supplying the market with Saudi oil what did he expect? That oil prices would climb and companies would to out and drill even more oil? 

I am so happy that the Saudis are worried about high prices, the US consumer, and the US economy. LOL. 

Frack-Stop: CLR And Whiting To Stop Fracking In The Bakken -- John Kemp -- Thursday, February 27, 2016; Unemployment Rates Below 2007 Recession Levels In Just 14 States

Updates

February 26, 2016: see notes on first time unemployment claims below, in the original post. Now, The Wall Street Journal provides additional background: in 36 states, unemployment rates still linger above pre-recession levels. The Obama administration has been a job killer: killing pipeline projects; ordering a Clean Power Plan by executive action; invigorating the EPA.

The Labor Department reported Friday that average annual jobless rates fell in 2015 from the prior year in 47 states plus the District of Columbia. Unemployment was unchanged in North Dakota and rose slightly in West Virginia and Wyoming.

In 2014, unemployment fell in every state and D.C. for the first time since 1984.

Even so, the average annual unemployment rates in 36 states plus D.C. in 2015 were higher than the average unemployment rate for those states in 2007.

The recession began in December 2007 and ended in June 2009.

Unemployment rates in just 14 states had returned to or fallen below their 2007 averages in 2015: Arkansas, Iowa, Kansas, Kentucky, Maine, Michigan, Minnesota, Missouri, Nebraska, New Hampshire, North Dakota, Ohio, Vermont and Wisconsin.

Original Post 

From John Kemp, tweeting now: FRACK-STOP: Continental and Whiting to stop fracking and well completions in the Bakken (but drilling goes on).

Regular readers of the blog already knew that -- at least with regard to CLR; I haven't seen a CLR completion in months. Whiting has still reported some completed wells recently. Financial Times is reporting:

The moves will lead to significant cuts in their production this year, part of a forecast decline in US oil output that is expected to help curb the oversupply in global crude markets.

Continental said it had stopped completing wells in the Bakken in the third quarter of last year and was focused on covering its capital spending from its operating cash flows.

Whiting said it planned to stop completing wells in the second quarter of this year in North Dakota and the DJ Basin formation in Colorado. The two companies made their statements as they reported earnings for 2015, showing net losses of $354m for Continental and $2.2bn for Whiting, including a $1.5bn writedown in the value of its oilfields.  

New crude oil threat: a huge glut of gasoline, and that's why the "moratorium" on new pipelines through Minnesota and Iowa no longer matter. From The Wall Street Journal:

Refineries in the U.S. Midwest are losing their thirst for oil, posing a new risk for the battered crude market.

The Midwest accounts for nearly a quarter of the crude processed in the U.S. and is home to shale producers that have few other outlets for their oil. But refiners there are already swimming in gasoline and other fuel, forcing them to cut back production until the excess can be worked off.

The result has been more crude oil available in the market, worsening a glut that has been undermining oil prices for the past year and a half. With U.S. crude inventories at the highest level in more than 80 years, some storage hubs have little room left to store oil.

CVR Refining LP is among the companies that have scaled back. The company said recently that it reduced runs at its 70,000-barrels-a-day refinery in Wynnewood, Okla., by as much as 10,000 barrels a day.

Refiners in the Department of Energy’s Midwest region, which stretches from North Dakota to Ohio and south to Oklahoma and Tennessee, ran at 92.9% of capacity last week, down from 98.2% a month ago. [Actually, I think I recently saw capacity at 88% recently.]

Natural gas: the US natural gas story is simply incredible. The draw last week brings the overall inventory down, but it's still above the 10-year high. Simply incredible.

More on natural gas from CNBC yesterday:

"We are now perhaps at the 10-year mark of what has been a real natural gas revolution in this country. Gas [is] now the biggest supplier, biggest fuel for electricity — overtaking coal; [the] revival of manufacturing and now getting into the export market."

Coal production dropped 32.5 percent year over year in the week that ended February, 2013. 
As recently as 2005, the Department of Energy reported that natural gas consumption in the U.S. outpaced available domestic supplies and imports were needed, but Moniz said Wednesday that position has "changed dramatically."

The secretary thinks America may be on its way to "probably … being among the very biggest exporters of natural gas in the world."

Coal: it's beyond me why this is still an issue. President Obama and his supporters will take the credit but it was the revolution in shale natural gas that should get the real credit. From CNBC yesterday:

With Washington locked in a fight over whether to wait until next year to fill the seat of the late Supreme Court Justice Antonin Scalia and the likelihood high that the next Justice will ultimately decide the fate of President Obama's climate-change plan, available evidence suggests that the economic cost of the transition away from coal-fired electricity is fairly modest.

As Environmental Protection Agency administrator Gina McCarthy prepares to defend the plan in a speech at the IHS CERAWeek energy conference on Wednesday, politicians in the 27 states challenging the plan in court are focused on two main impacts: How the rules hurt the coal industry, since limits on carbon emissions would push utilities to rely on lower-carbon natural gas or carbon-free renewable energy and nuclear power, and the effect on utility rates as utilities pay for new plants. 

If the case comes back to the Supreme Court for hearing on the merits, probably next year, it's likely the next Justice will cast the deciding vote. If the standoff between President Obama and the Senate prevents the seat from being filled before then, the ruling of the D.C. Circuit after the June hearing would be preserved by a 4–4 vote on appeal. On Tuesday, the Senate Republicans made it clear they had no intention of even acknowledging a Supreme Court nominee from President Obama.

Angola, so what gives?

Tweeting now: Angolan crude oil exports rise to 5-year high of 1.767 mil b/d in 2015. 

UK, so what gives?

Tweeting now: UK crude oil output surges 14% in 2015, first rise since 1999.

Canada:

Despite lower crude oil prices, EIA expects Canadian oil production to continue increasing through 2017. Canadian oil sands projects that were already under construction when prices began to fall in 2014 and that are expected to begin production in the next two years are the main driver of production growth…According to EIA's February Short-Term Energy Outlook, production of petroleum and other liquids in Canada, which totaled 4.5 million barrels per day (b/d) in 2015, is expected to average 4.6 million b/d in 2016 and 4.8 million b/d in 2017. This increase is driven by growth in oil sands production of about 300,000 b/d by the end of 2017, which is partially offset by a decline in conventional oil production. -- EIA

Job watch, CNBC/Reuters is reporting:

• first time claims surge
• first time claims jump 10,000 to 272,000
• up more than forecast (which was 270,000)
• four-week average declines; due to an anomaly in the report two weeks ago

There is one interesting thing that was not addressed, which makes the entire report fishy. Last week's number was an estimate because Virginia, Pennsylvania, and Puerto Rico numbers from last week were only an estimate. The federal government must have gotten that estimate exactly correct (LOL) because last week's number does not appear to have been revised.

***************************

Back To The Bakken

NDIC's daily activity report for Wednesday still not posted. 

Active rigs:

	2/25/2016	02/25/2015	02/25/2014	02/25/2013	02/25/2012
Active Rigs	39	121	190	181	204

RBN Energy: Central Oklahoma STACK And SCOOP Crude Infrastructure Build Out Continues (archived).

Crude oil production growth in Oklahoma over the past two years has been so rapid that apparently the State of Oklahoma “misplaced” (under-reported?) as much as 100 Mb/d of output according to a recent Energy Information Administration (EIA) report. Whatever the true production numbers a couple of central Oklahoma plays continue to attract new drilling and infrastructure investment in the face of the oil price meltdown. Today we describe new infrastructure in the region.

In Episode 1 of this series we described continued producer interest in the South Central Oklahoma Oil Province (SCOOP) and Sooner Trend Anadarko Basin and Canadian and Kingfisher counties (STACK) plays that are part of the 60,000 square mile Anadarko Basin. The Anadarko is an “old” play - in past decades successfully exploited using conventional vertical drilling. Over the past four years, producers have used horizontal drilling and fracturing technology to extract unconventional oil and condensates from shale in the basin. Crude production (mostly from Oklahoma and Kansas) grew by 300 Mb/d between 2011 and March 2015 according to the latest monthly estimates by the EIA.

Crude output has since declined by 15% between March and November 2015 in the face of crashing oil prices. But within the larger Anadarko basin production continues to increase in the “sweet spot” SCOOP and STACK plays. Although these plays present geological challenges for producers - those companies that have cracked the shale code there have enjoyed superior results with high initial output from oil and condensate wells. The plays are also located conveniently close to the Cushing, OK crude market hub. These factors have encouraged a number of large producers such as Devon, Marathon and Continental Resources (the founder of the SCOOP play) to continue investing and expanding their acreage even as they pull back from other regions. In this second episode we look at recent infrastructure developments to get SCOOP and STACK crude and condensate production to market.