Texas Drilling Permits and Completions Statistics for October 2015
11/10/2015

AUSTIN –– The Railroad Commission of Texas (Commission) issued a total of 822 original drilling permits in October 2015 compared to 3,046 in October 2014. The October total included 689 permits to drill new oil or gas wells, four to re-enter plugged well bores and 129 for re-completions of existing well bores. The breakdown of well types for those permits issued in October 2015 included 198 oil, 54 gas, 524 oil or gas, 34 injection, one service and 11 other permits.

In October 2015, Commission staff processed 1,138 oil, 196 gas, 53 injection and nine other completions compared to 2,035 oil, 354 gas, 63 injection and three other completions in October 2014. Total well completions for 2015 year to date are 17,545 down from 25,604 recorded during the same period in 2014.

According to Baker Hughes Inc., the Texas rig count as of November 6 was 340, representing about 44 percent of all active rigs in the United States.

For additional drilling permit and completion statistics, visit the Commission’s website at http://www.rrc.texas.gov/oil-gas/research-and-statistics/well-information/monthly-drilling-completion-and-plugging-summaries/.

TABLE 1 – SEPTEMBER TEXAS OIL AND GAS DRILLING PERMITS AND COMPLETIONS BY RAILROAD COMMISSION OF TEXAS DISTRICT*

DISTRICT PERMITS TO DRILL OIL/GAS HOLES OIL COMPLETIONS GAS COMPLETIONS
(1) SAN ANTONIO AREA 106 190 46
(2) REFUGIO AREA 92 105 14
(3) SOUTHEAST TEXAS 39 31 8
(4) DEEP SOUTH TEXAS 30 14 16
(5) EAST CENTRAL TX 6 6 2
(6) EAST TEXAS 29 10 12
(7B) WEST CENTRAL TX 22 20 3
(7C) SAN ANGELO AREA 89 89 2
(8) MIDLAND 256 551 27
(8A) LUBBOCK AREA 80 39 0
(9) NORTH TEXAS 52 45 5
(10) PANHANDLE 21 38 61

HOUSTON — Climbing oil production and higher refining earnings couldn’t stop Exxon Mobil Corp.’s third-quarter profits from sliding 47 percent.

But company officials say the Irving-based oil behemoth, unlike some of its smaller rivals, isn’t waiting for an oil-price recovery to expand its operations and doesn’t anticipate mass layoffs. Instead, it will keep squeezing service providers to get lower prices for equipment and crews.

Exxon Mobil has saved about $7 billion in operating costs and $1 billion in capital expenditures this year but it’s on track to boost production to 4.1 million barrels of oil equivalent a day by the end of the year. It even repurchased $500 million worth of shares and continued paying out dividends — worth $3.1 billion — in the third quarter.

It hasn’t cut its capital spending plans even though falling oil prices have prompted several other oil companies to trim billions in expenses and investments. Much of its savings have come through more efficient operations in the oil field as well as discounts on tools and services.

“We are never satisfied with our cost structure,” Jeff Woodbury, Exxon Mobil’s vice president of investor relations, said in a conference call with analysts on Thursday.

He said Exxon Mobil has focused on whittling down costs from its service providers rather than making deep payroll reductions, and despite market speculation that efficiency gains in the oil patch are starting to peter out, he said the company expects “we’ll be able to continue to drive meaningful improvement in our cost structure.”

“I would never tell you that we’re done,” he said. Oil field service companies “realize we’ve got the financial capability to invest if we have the right cost structure and ultimately the right economics.”

The oil producer doesn’t expect to take any restructuring charges this year related to layoffs. Woodbury said through the years the company has worked to trim its organizational structure. Its headcount has declined some 30 percent since the merger of Exxon and Mobil in 1999.

Some analysts expect Exxon Mobil to buy a smaller oil company before the oil bust is over, but corporate oil mergers have been rare this year. Still, Exxon Mobil said it grew its position in the Permian Basin by a third in the quarter after it bought an interest in 48,000 acres in the Permian Basin adjacent to its footprint in West Texas.

Exxon Mobil has its most prominent shale positions in the Bakken Shale in North Dakota, the Permian and the Woodford Shale in Oklahoma, but Woodbury said the Permian has the most running room for technological advances and drilling efficiency.

“The Permian has got multiple reservoir objectives and I think that presents unique opportunity to further optimize the value, more so than the Bakken. And the Woodford is very early stages,” Woodbury said. The company has 34 rigs running in U.S. shale plays, lower than its peak, he said.

In the third quarter, Exxon Mobil’s profits were sliced nearly in half as its oil-production business took a loss in the United States and sank internationally amid lower crude prices.

The 47 percent drop in earnings came even as the Irving oil giant boosted daily production by 87,000 barrels of oil equivalent to 3.9 million barrels.

But cheap energy prices helped to nearly double Exxon Mobil’s downstream profits, and its chemical business improved as well.

Exxon’s income fell to $4.24 billion, or $1.01 a share, in the third quarter, down from $8.1 billion, or $1.89 a share, in the same July-September period. Revenues sank from $107.1 billion to $67.34 billion.

Repeal Of Oil Export Ban Passes U.S. House

In a 261 to 159 vote, the U.S. House of Representatives voted early Friday afternoon to repeal the general ban on oil exports imposed in 1975 amid the Arab oil embargo. The bill will now go to the Senate, where its prospects are less certain.

The Genesis Of Friday’s Vote
In early September, H.R. 702, sponsored by Rep. Joe Barton (R-Tex), was passed by the House Energy and Power subcommittee by a voice count. The following week, the legislation was taken up and passed by the full Energy and Commerce committee.

enter image description hereTexas Republican House Representative Joe Barton

This past summer, House Speaker John Boehner pledged his support for ending the ban, saying that he hoped repealing the prohibition would be a key piece of an energy legislation package to be introduced in the fall to “keep prices affordable, help create jobs and boost our economy.” Friday’s passage of the bill marks the realization of the Speaker’s objective.

Earlier this week, the White House reiterated its threat to veto the House bill when it reaches the president, saying “legislation to remove crude export restrictions is not needed at this time.” The Obama administration has also said that the Commerce Department alone is invested with the authority to amend current oil export law.

Supporters of lifting the oil export ban in the Senate include Senators Lisa Murkowski, a Republican from Alaska, and Heidi Heitkamp, a Democrat from North Dakota, who coordinated the passage of similar legislation by the Senate energy panel earlier this summer. Another bill ending the oil export ban cleared the Senate Banking Committee last week. The only Democrat to support that bill was Senator Heidi Heitkamp (D-N.D.), who sponsored the measure.

Recent Measures Taken To Relax The Ban
One exception to current law is oil exports to Canada. Currently, US oil sales to Canada are 10 times higher as they were five years ago, due largely to the shale revolution. The Commerce Department earlier this year green-lighted U.S. crude exchanges with Mexico and has also rewritten regulations governing exports to make condensate legal to sell abroad.

In June 2014, the Commerce Department issued private rulings to allow two Texas companies to export lightly distilled condensate to foreign customers. Specifically, Enterprise Products Partners and Pioneer Natural Resources were given permission to sell unrefined condensate to foreign buyers who will convert the condensate to refined products like diesel, gasoline, and jet fuel abroad.

Upstream Vs. Downstream
The run-up to Friday’s vote was marked by a growing divergence between the upstream and downstream sectors of the industry regarding the repeal of the ban.

Proponents of lifting the oil export ban have stepped up lobbying and advertising efforts in recent months, gaining momentum recently as the upstream sector has made the case that oil exports would create jobs and revenue.

Encana, Continental, and Chevron are among the companies that have been urging Congress for over a year to lift the ban. They argue that green-lighting oil exports would create jobs, eliminate market distortions, and catalyze more domestic oil production.

Meanwhile, many in the downstream sector, particularly US refiners and consumer groups and major unions (e.g. the USW) oppose rescinding the ban, arguing that doing so would raise gasoline prices for US consumers.

For example, Valero Energy Corp has expressed concern that its profits would decrease, as lifting the ban would possibly raise domestic oil prices and in turn push gasoline prices northward, leading to refinery closures that only recently recovered from earlier high oil import prices.

Context Is Key: The 1970s, The Arab Oil Embargo, & The Imposition Of The Oil Export Ban
The US government was in the early throes of Watergate in 1973. This meant that there was no one to lead the West on behalf of the world’s oil consumers when, in October, the Arab OPEC states decided to institute an oil embargo on non-western customers. The embargo was retaliation for the US decision to increase its military support of Israel in the Arab-Israeli War.

The OPEC measure prohibited petroleum exports to targeted countries and introduced production cuts. Negotiations between oil-producing countries and oil companies in the years leading up to the embargo had already destabilized a decades-old pricing system, which exacerbated the effects of the embargo.

The onset of the embargo yielded a spike in oil prices with global implications. The price of oil per barrel soon quadrupled, imposing skyrocketing costs on consumers and threatening the stability of whole national economies. Because the embargo coincided with a devaluation of the dollar, the world seemed on the cusp of a global recession.

The US, confronted by a growing reliance on oil consumption (from 11.5 M/bd in 1965 to 17.3 M/bd in 1973) and falling domestic reserves, found itself significantly dependent on oil imports.

US refiners instituted short-term changes in oil purchasing and began importing crude oil from any source. Roughly 30% less of the more costly crude oil was imported during the embargo. At the time, Iran appeared to be a stable, long-term source. The country moved to expand sales to the US, and these imports served to offset losses from Libya and Kuwait until Libyan crude oil imports resumed in early 1975.

In total, crude oil imports more than doubled from 1973 to 1977, reaching a record level of 6.6 M/bd in 1977, representing nearly half of total US petroleum consumption.

By the end of the embargo in March 1974, the price of oil had risen from $3 per barrel to almost $12. The US responded to these seismic upheavals of the global balance of oil power by circling the wagon and putting into motion a series of proposals intended to secure domestic oil supplies, moderate prices and lessen overall dependence on foreign oil.

These efforts were crystallized in the 1975 Energy Policy and Conservation Act (EPCA), which created the Strategic Petroleum Reserve and allowed for the institution of the ban on oil exports.

The 1975 Energy Policy and Conservation Act (EPCA)
“The time has come to end the long debate over national energy policy in the United States and to put ourselves solidly on the road to energy independence…This bill is only the beginning,” President Gerald Ford said at the signing ceremony for the bill that spawned what we now know as the often referenced “US Oil Export Ban”.

The EPCA was intended to shield the US from volatile and frequently unpredictable global crude markets in the wake of the aforementioned upheaval that ensued from the 1973 embargo.

Here is an excerpt from the text of the EPCA, specifying the nature and purpose of the legislation:

To grant specific standby authority to the President, subject to congressional review, to impose rationing, to reduce demand for energy through the implementation of energy conservation plans, and to fulfill obligations of the United States under the international energy programs;
To provide for the creation of a Strategic Petroleum Reserve capable of reducing the impact of severe energy supply disruptions;
To increase the supply of fossil fuels in the United States, through price incentives and production requirements;
To conserve energy supplies through energy conservation programs, and, where necessary, the regulation of certain energy uses;
To provide for improved energy efficiency of motor vehicles, major appliances, and certain other consumer products;
To reduce demand for petroleum products and natural gas through programs designed to provide greater availability and use of this Nation’s abundant coal resources; and
To provide a means for verification of energy data to assure the reliability of energy data.
The oil export ban was principally an outgrowth of Section 103 of the EPCA, which made explicit the president’s authority with regard to executing the provisions of the act:

“The President may, by rule, under such terms and conditions as he determines to be appropriate and necessary to carry out the purposes of this Act, restrict exports of –

coal, petroleum products, natural gas, or petrochemical feedstocks, and
supplies of of materials or equipment which he determines to be necessary (A) to maintain or further exploration, production, refining or transportation of energy supplies, or (B) for the construction or maintenance of energy facilities within the United States.”
The subtext here is clear. In the wake of the global oil market convulsions produced in the aftermath of the 1973 embargo, the US was circling the wagons, providing the executive and legislative branches the authority to craft and engineer energy policy according to US national interests.

Subsection B of Section 103 emphasized the authority of the president to directly ban oil exports and offer exemptions thereto based on the national interest:

“The President shall exercise his authority provided for in subsection a [above] to promulgate a rule prohibiting the export of crude oil and natural gas produced in the United States, except that the President may…exempt from such prohibition such crude oil or natural gas exports which he determines to be consistent with the national interest and the purposes of this Act.”

Since the initial passage of the EPCA, there have been many accretions to the law, the most important of which was the 1979 Export Administration Act (EAR) of the Bureau of Industry and Security (BIS), an agency of the Commerce Department, which enacted many of the particular provisions currently governing oil exports.


* Brent, U.S. crude oil benchmarks both up about $1 a barrel

* US output to fall by 255,000 bpd from Q2-Q4 2015 -Goldman

* $1.5 trln of oil projects uneconomic at $50/bbl -Woodmac (Updates market activity and comments to U.S. session; changes byline and dateline, previous LONDON)

By Barani Krishnan

NEW YORK, Sept 21 (Reuters) – Oil prices rallied on Monday, with U.S crude up as much as 3 percent, amid a jump in gasoline prices and on concerns that U.S. oil output may slow as drilling steadily declines.

Gasoline futures on the New York Mercantile Exchange surged more than 3 percent after a fire was reported Saturday at a unit of Husky Energy’s 155,000 barrel-per-day refinery in Lima, Ohio.

The premium for refining gasoline from crude, known as gasoline crack CLc1-RBc1, reached its highest in nearly two weeks, rising a combined 17 percent over the past two sessions.

In crude oil, focus was also on the soon-to-expire front-month contract in the West Texas Intermediate (WTI), which serves as the U.S. benchmark. WTI’s October contract will go off the NYMEX board after Tuesday’s settlement, and November will move up as the front-month.

“We’re seeing some crackspread action as we move towards WTI expiration and it’s all contributing to the bump higher,” said Donald Morton, energy trader for Herbert J. Sims & Co, an investment banking house based in Fairfield, Connecticut.

U.S. crude’s front-month was up $1.27, or 2.8 percent, at $45.95 a barrel by 11:15 a.m. EDT (1515 GMT).

The front-month in Brent, the global crude benchmark, rose 88 cents, or about 2 percent, to $48.35.

U.S. drillers have cut the number of oil rigs in operation for three straight weeks.

Those oil-rig reductions suggest a decline of more than 250,000 barrels per day (bpd) in U.S. crude production between the second and fourth quarters of this year, Goldman Sachs said in a report.

Energy consultancy Wood Mackenzie estimated that $1.5 trillion of “uncommitted spending on new conventional projects and North American unconventional oil” was uneconomic at even $50 a barrel.

“While operators are seeking an average cost reduction of 20-30 percent on projects, supply chain savings through squeezing the service sector will only achieve around 10-15 percent on average,” Wood Mackenzie said in a report.

Crude has halved in value over the past year as soaring global production has overwhelmed demand and the much-lower prices have now begun to hit drilling, particularly in the United States.