The U.S. Energy Information Administration (EIA) reported a 109 Bcf injection into natural gas storage inventories for the week ending May 22, coming in on the higher end of expectations and well above the historical five-year average.

The triple-digit print sent Nymex futures prices, already slightly lower day/day, down another couple of notches. The July Nymex contract, on its first day at the front of the futures curve, was down 2.0 cents at $1.866 in the minutes leading up to the report. When the print crossed trading desks, the prompt month slipped to $1.837, and by 11 a.m. ET was trading at $1.844, off 4.2 cents from Wednesday’s close.

NatGasWeather analyst Andrea Paltrinieri characterized the EIA figure as “a no good number.” Participating on The Desk’s online energy chat platform Enelyst, Paltrinieri said he would have preferred to see an injection in the high 90s Bcf range in order to confirm some tightening of the supply/demand balance.

The Covid-19 crisis is expected to result in a sharp pullback in global natural gas and oil investments, with Lower 48 spending falling by half year/year, the International Energy Agency (IEA) said Wednesday.

The decline in investments worldwide has“serious implications” for security and the transition to alternative fuels, the global energy watchdog said in the World Energy Investment 2020 report.

Global energy investments are forecast to decline by nearly one-third. However, the unconventional industry, centered in the United States, which was under pressure already, has seen investor confidence and access to capital dry up, with investments in shale and tight resources taking a huge hit.

“The unparalleled decline is staggering in both its scale and swiftness, with serious potential implications for energy security and clean energy transitions,” researchers said. “At the start of 2020, global energy investment was on track for growth of...

Natural gas futures took a step back Wednesday, quickly erasing the gains mounted following the holiday weekend. With export demand remaining a threat and eyes on a plump storage injection, the June Nymex gas futures contract expired 7.1 cents lower at $1.722. July, which takes over the prompt-month position on Thursday, fell 5.9 cents to $1.886.

Spot gas prices also were mixed, but day/day changes were small. NGI’s Spot Gas National Avg. stayed flat at $1.685.

With expiration in sight, futures traders attempted to follow through on Tuesday’s strength, pushing the June Nymex contract to a $1.815 intraday high early Wednesday. The surge had several factors working in its favor.

Weather models continued to warm, with the overnight data being “a touch hotter” for the June 5-7 period across the southern United States due to upper high pressure strengthening, according to NatGasWeather. However, models still favor the upper ridge...

A U.S. district judge in Montana, who has butted heads with the energy industry in previous high-profile cases, reversed more than 400 oil and natural gas leases over habitat protection concerns for the sage grouse.

In a ruling last Friday that counters Trump administration efforts to boost output from public lands, U.S. District Court Judge Brian Morris in Montana unwound energy leases on more than 470 square miles in Montana and Wyoming.

Morris ruled that the Interior Department’s Bureau of Land Management (BLM) did not do enough to promote development outside of areas with habitat for sage grouse, a ground-dwelling bird whose numbers have dwindled in recent years amid development in the West. Morris said BLM had not properly followed a 2015 federal plan to do so on more than a million acres of public lands.

"The errors here occurred at the beginning of the oil and gas lease sale process, infecting everything that followed,"...

Tulsa-based Unit Corp. has filed for Chapter 11 bankruptcy protection in Houston, joining a growing list of distressed Lower 48 operators battling low oil demand and prices.

Like many of its peers, Unit was struggling to keep its share price afloat even before Covid-19 ravaged global oil demand and prices.

The situation “has only worsened” with the pandemic, CEO David Merrill said on Friday. “While facing this challenging environment, we have worked diligently to explore a variety of strategic alternatives to cut costs, improve our liquidity and address near-term debt maturities.”

The Chapter 11 reorganization would reduce the company’s funded debt obligations by $650 million, the company said, adding that it has secured $36 million in debtor-in-possession financing from its lenders under the agreement.

The financing, combined with Unit’s regular cash flows, allow the company to keep paying its employees, vendors and suppliers. Unit...

Pipeline natural gas exports from the United States to Mexico are coming in lower year/year, but the slow reopening of the Mexican economy may increase transported volumes heading south of the border.

Genscape Inc. said that pipeline exports from the Lower 48 to Mexico averaged an estimated 4.5 Bcf/d during the first half of May, which is down from 4.95 Bcf/d reported in May 2019 by the Energy Information Administration (EIA).

“This average will likely tick up by the end of the month as the Mexican government’s Covid-19 contingency plan allows for a gradual reopening of some industrial/business sectors,” Genscape natural gas analyst Ricardo Falcon told NGI’s Mexico GPI.

Because of Mexico’s heavy reliance on gas imports from the United States, Mexico prices tend to move more or less in lockstep with U.S. benchmarks Henry Hub, Waha and Houston Ship Channel, with transactions typically priced using one of these plus the cost of...

A U.S. district judge in Montana, who has butted heads with the energy industry in previous high-profile cases, reversed more than 400 oil and natural gas leases over habitat protection concerns for the sage grouse.

In a ruling last Friday that counters Trump administration efforts to boost output from public lands, U.S. District Court Judge Brian Morris in Montana unwound energy leases on more than 470 square miles in Montana and Wyoming.

Morris ruled that the Interior Department’s Bureau of Land Management (BLM) did not do enough to promote development outside of areas with habitat for sage grouse, a ground-dwelling bird whose numbers have dwindled in recent years amid development in the West. Morris said BLM had not properly followed a 2015 federal plan to do so on more than a million acres of public lands.

"The errors here occurred at the beginning of the oil and gas lease sale process, infecting everything that followed,"...

Oilfield services operator Basic Energy Services Inc. said Wednesday it has consolidated its operating regions to three from five in response to shrinking oil and gas demand brought on by Covid-19.

The Fort Worth, TX-based operator in late March cut capital expenditures for 2020 by 60% to $17 million and suspended all capital lease additions. In addition, cost controls were enacted across all business lines, and it began adjusting staffing to activity levels. Some regional district offices were being consolidated at that time, with some “lower performing” locations expected to be closed.

The internal consolidation is expected to result in additional general and administrative (G&A) savings of around $20 million annually. Basic already expected to add $17 million of cost synergies related to the acquisition of C&J Well Services, and the capital spend cuts and other changes two months ago were designed to save $20 million.

“Given the...

Domestic oil production, fueled by tremendous growth in unconventional fields nationwide, is predicted to claim a two-year low and bottom in June at around 10.7 million b/d before beginning a gradual northward turn.

Still, monthly output is unlikely to top 11.7 million b/d before 2022, a sharp detour from March, when production totaled 12.9 million b/d, according to Rystad Energy. Last November, U.S. production hit 12.885 million b/d.

Output is expected to recover “a bit in autumn,” and should end the year at around 11.1 million b/d, researchers said.

“Next year will not be the year of salvation: despite a gradual output increase, monthly production is expected to only touch 11.7 million b/d at the end 2021,” according to Rystad’s  base-case price scenario, which assumes an average $30/bbl West Texas Intermediate (WTI) price in 2020 and $39 in 2021.

“A major portion of the decline throughout 2Q2020 stems from production...

The president of Colombia’s National Hydrocarbons Agency (ANH) Armando Zamora said last week that working from home has made the regulatory environment more efficient, especially as it pertains to sanctioning hydraulic fracturing (fracking) pilot projects.

“Regarding the fracking opportunity, I would say that curiously enough, during the lockdown, actually the process of regulation has sped up,” Zamora said during the Institute of the Americas’ La Jolla Conference, which was held virtually. “Everything has continued with a faster pace so the timetable continues. And there is interest there from the companies.”

ExxonMobil and ConocoPhillips, along with Ecopetrol, are among companies that have expressed formal interest in these pilot projects, which the ANH expects to start in the first half of next year.

“There is a very comprehensive plan to make the pilots a scientific endeavor,” Zamora said.  “The pilots are to show what hydraulic...

Appalachian natural gas giant EQT Corp. said Tuesday the 1.4 Bcfe/d curtailment announced last week may extend through June.

The news comes on the heels of a $125 million deal with Diversified Gas and Oil plc to sell a bundle of assets in Pennsylvania and West Virginia. Proceeds from the sale, which relieves EQT of $47 million in obligations, are being used to pay down a term loan due 2021.

The sale “demonstrates our commitment to improving the balance sheet and reducing debt,” CEO Toby Rice said. “These assets sit outside our core focus area and the divestment will enable a heightened focus on our core asset portfolio. Additionally, the transaction relieves EQT of the higher relative operating costs and substantial asset retirement obligations associated with these assets and will improve our financial standing.”

Regarding the gas shut-ins, EQT in mid-May opted to curtail 1.4 Bcfe/d gross, equivalent to 1 Bcfe/d net. The decision...

Emissions from Pennsylvania’s existing natural gas and oil infrastructure, including at Marcellus and Utica shale sites, are facing more stringent oversight under a draft proposal.

The draft rulemaking covering volatile organic compounds (VOC) published by the Environmental Quality Board (EQB) for public comment over the next two months would be the first to address VOC emissions from the existing infrastructure.

The Pennsylvania Department of Environmental Protection (DEP) initially issued a proposal in late 2018 to curb emissions from existing production and midstream operations, and late last year the ECB gave it the green light.

Five source categories would be affected by the proposed VOC rules:

For the first time in more than three years, Pennsylvania’s unconventional operators reported a quarter/quarter decline in natural gas production in 1Q2020, according to the state’s Independent Fiscal Office (IFO). 

Based on data provided to the state Department of Environmental Protection, IFO said unconventional horizontal wells in the state produced 1.76 Tcf in the first quarter, up 6.8% from the year-ago period, but down from the 1.78 Tcf reported in 4Q2019.

Year/year production growth has decelerated over the last three quarters after a series of strong gains from 1Q2018 to 2Q2019. After reaching the lowest quarterly growth rate on record in 1Q2017 (2.3%), production growth accelerated in six consecutive quarters, reaching the strongest recorded year/year gain of 18.6% in 3Q2018. Since that peak, quarterly production growth has decelerated in five of the last six quarters.

Natural gas producers have faced their share of headwinds...

Stakeholders in North Dakota’s oil patch offered diverse opinions on Wednesday to the state’s oil and gas regulator on how to address the challenges facing operators and mineral owners in the Bakken Shale, where exploration and production (E&P) has been decimated by the collapse in demand and prices caused by Covid-19.

The North Dakota Industrial Commission (NDIC) sought testimony for a webcast hearing on how to determine the oil price at which production may constitute economic waste amid the current market turmoil, and input on how best to rebalance the market and restore activity levels.

Although the option of prorationing, i.e. mandatory production cuts, has gained little traction in other jurisdictions such as Texas and Oklahoma, the Bakken’s largest operator, Continental Resources Inc., expressed support for the measure in North Dakota, the country’s No. 2 oil producing state after Texas.

Citing market oversupply caused by Covid-19...

The U.S. rig count continued on its downward trajectory during the week ending Friday (May 22), albeit at a somewhat less dramatic pace, falling 21 units to finish at 318, according to the latest numbers from Baker Hughes Co. (BKR).

All of the declines came from the oil patch for the week, with natural gas-directed drilling holding steady at 79 rigs. The combined U.S. total ended the week 665 units behind its year-ago tally. The U.S. count has now plummeted by 474 rigs since March 13, BKR data show.

Two vertical rigs joined 22 horizontal rigs in exiting the patch, partially offset by the addition of three directional units. Gulf of Mexico activity finished unchanged at 12 rigs.

In Canada, a three-rig decline in gas drilling was partially offset by the addition of one oil-directed rig, dropping the Canadian rig count two overall to 21, down from 78 in the year-ago period.

The North American rig count fell 23 units to end at 339 for the...

National oil companies (NOC) across the world plan to cut exploration budgets by more than a quarter on average in 2020, according to new research by Wood Mackenzie.

The analysis is based on announcements of 11 top NOC explorers, including Mexico’s Petróleos Mexicanos (Pemex) and Brazil’s Petróleo Brasileiro SA (Petrobras). 

“While the range of exploration budget cuts for the NOCs is slightly more diversified than that of the majors, conventional exploration remains important for them,” said Wood Mackenzie senior analyst Huong Tra Ho.

NOCs spent 12-35% of their upstream budgets on exploration for an average of about 17% over the 2015-2019 period, higher than the majors’ average spend of 8%.  

“Exploration budget cuts, while necessary today, will impact companies’ future growth and sustainability,” said Ho. “Given how important exploration is for the NOCs and their growing share of global new discoveries, these...

With the Covid-19 pandemic still limiting energy demand, about 1.7 million b/d of existing oil production temporarily could be shut-in across the United States by early June, according to IHS Markit.

Researchers said the curtailments are coming quickly from operating cash losses, lack of demand and storage capacity, as well as “an unwillingness to sell resources at the very low prices” since Covid-19 usurped demand.

“North America has, by far, the greatest number of producers (15,000-plus) and producing wells (more than one million), as well as the greatest diversity of subsurface conditions and operational technologies,” said IHS Markit’s Raoul LeBlanc, vice president of financial services. “This creates immense optionality within the system as companies evaluate and execute the mass shut-ins in response to the market.”

The predicted shut-ins would not be permanent, with most of the oil volumes forecast to come back online through the summer...

The Covid-19 virus has delayed Canadian government approval of a C$2.3 billion ($1.7 billion) capacity expansion proposed by TC Energy Corp.’s Alberta and British Columbia (BC) supply collection network, Nova Gas Transmission Ltd. (NGTL).

The project includes 344 kilometers (km) of 48-inch diameter natural gas pipeline and three compressor station unit additions. The project would start near Grande Prairie and end north of Calgary on land that is mostly adjacent to existing rights of way and facilities.

Pandemic prevention measures have slowed down federal cabinet consultations on regulatory approvals with native tribes that constitutional treaty rights and legal precedents require, said Natural Resources Minister Seamus O’Regan.

O’Regan announced a postponed deadline of Oct. 19 for cabinet acceptance or rejection of the NGTL project’s February approval by the Canada Energy Regulator (CER).

The procedural delay potentially postpones...

Global completions specialist Superior Energy Services Inc. began the year with a merger in the works and plans to expand offshore and international services. Then Covid-19 happened.

The pandemic usurped activity only three months after the Houston operator launched a tie-up with Forbes Energy Services Ltd., designed to combine the North American business lines and wind down U.S. hydraulic fracturing services.

Significant progress had been made toward finalizing the merger, but the pandemic and dismal commodity pricing significantly disrupted those plans, CEO David Dunlap said Thursday as the company issued 1Q2020 results.

Market upheaval has led the near-partners to scratch the merger.

“This disruption has rendered the combination of our North America business lines with Forbes and our related note exchange offer impractical to complete on the terms originally contemplated, and we and Forbes intend to terminate the merger agreement,”...

Oklahoma legislation designating who owns and is responsible for wastewater resulting from oil and natural gas drilling operations was signed into law on Tuesday by Gov. Kevin Stitt.

The Oil and Gas Produced Water and Waste Recycling Reuse Act (Senate Bill 1875) clarifies that produced water and waste is the property of the oil and gas producer until it is officially transferred to another person. It also shields liability from companies that process wastewater into recycled water and/or transport the recycled water for further use in oil and gas production.

State Sen. Dave Rader (R-Tulsa) authored the bill.

By clarifying ownership and liability, “the measure aims to attract entrepreneurs to innovate and invest in technology to process and treat oil and gas produced water and waste, resulting in a beneficial resource and a reduction in wastewater injection,” said Rader.

“This law is the result of unprecedented negotiations between oil,...

A first-of-its-kind sensor network to monitor methane emissions across the Permian Basin in West Texas, dubbed Project Astra, may revolutionize the way leaks are found and repaired.

ExxonMobil, Pioneer Natural Resources Co., the Gas Technology Institute (GTI), The University of Texas at Austin (UT) and the Environmental Defense Fund (EDF) are collaborating in the endeavor, which is expected to have initial results by year’s end.

“Project Astra is an ambitious and innovative collaboration to develop comprehensive, continuous monitoring of methane emissions, a potential new capability that can be achieved with industry-wide participation,” said ExxonMobil’s Staale Gjervik, senior vice president of unconventional. “ExxonMobil is committed to the development of technologies and partnerships that advance cost-effective solutions to reduce methane emissions.”

Potentially, the sensor network could allow producers and regulators to find and fix...

Producers and analysts are cautiously -- but increasingly -- optimistic about the outlook for natural gas prices amid Lower 58 output declines, curtailed oil investments and idled rigs.

The actions are reducing the supply of associated gas from oil wells ahead of expected increases in demand as states lift stay-at-home orders and more Americans go back to work.

The U.S. Energy Information Administration (EIA) said that as of mid-May, exploration and production (E&P) companies were operating the fewest oil and natural gas rigs on record in the United States at 339, according to Baker Hughes Co. data dating to 1987. Most of the decline was concentrated in oil-focused plays, but gas-focused plays also fell.

“Gas producers are touting the macro impact of curtailments and associated gas supply declines, which should set up for a better price environment” for E&Ps in 2021, said U.S. Capital Advisors analyst Becca Followill.

Goodrich...

Wyoming-focused Ultra Petroleum Corp. is seeking Chapter 11 bankruptcy protection for the second time in four years to eliminate debt exacerbated by low prices and stinging demand destruction from Covid-19.

Ultra joins other U.S. operators that have sought bankruptcy protection since March, which now include Bakken Shale heavyweight Whiting Petroleum Corp., Diamond Offshore Drilling Inc., Gavilan Resources LLC, Freedom Oil & Gas Co. and Hornbeck Offshore Services Inc.

Englewood, CO-based Ultra, which plies its expertise in the natural gas-rich Pinedale Anticline of Wyoming, in 2016 sought voluntary bankruptcy protection and emerged a year later. However, last summer Ultra began trading over-the-counter after deciding against attempting to regain compliance with Nasdaq listing standards.

“After several months of liability management efforts and careful consideration of how best to navigate a challenging low commodity price environment and...

In a proactive approach to work with New Mexico regulators to reduce the amount of natural gas flared when wells are drilled, a statewide industry coalition is recommending regulators update the rules and work hand-in-hand with operators to improve gas capture in the oilfields.

The New Mexico Oil and Gas Association (NMOGA) highlighted strategies for regulators and exploration and production (E&P) companies in the report Flaring in the Oilfield.

Operators are encouraged to increase communication with midstream partners, as well as shutting in production on a short-term basis to mitigate flaring and deploying advanced technology solutions.

“Our industry is committed to protecting our environment and capturing as much natural gas as possible,” said NMOGA Executive Director Ryan Flynn. “This commitment includes doing our part to identify and promote sound, science-based regulatory approaches to reduce emissions, as this report seeks to...