Public and privately held producers working across the United States are shutting in wells and cutting expenses at an accelerated pace since Covid-19 became a demand killer, and curtailed oil and liquids output is forecast to climb to “at least” 2 million b/d in June.

Rystad Energy analysts said the shut-ins have become a “curtailment wave” after exploration and production (E&P) companies initially began the process slowly in late March. With profitability and storage limits increasing, domestic output is coming down.

“Net oil production cuts could reach 835,000 b/d in May and 877,000 b/d in June, compared to around 256,000 b/d in April,” according to a Rystad’s initial analysis of 31 U.S. oil producers.

“This represents gross curtailments (including royalties to the government) of over 1 million b/d in both May and June, and at least 1.5 million b/d if total gross liquids output is considered.

“Adding the potential uncommunicated...

Two more operators with dominant footprints in the Appalachian Basin have announced plans to curb some production as oil prices remain low and energy demand is weak because of the Covid-19 pandemic.

Gulfport Energy Corp., which produces the bulk of its oil and gas volumes in Ohio’s Utica Shale, said it plans to shut-in a minimal amount of output in the coming months, including a large number of vertical wells in its other operating area, the South Central Oklahoma Oil Province, or SCOOP. The shut-ins would amount to less than 20 MMcfe/d, but some of its nonoperated production is likely to be impacted by voluntary curtailments because of low commodity prices.

The company is also exploring opportunities to defer some new production into late 2020 or early 2021, when natural gas prices are expected to be higher. Given the variables, Gulfport withdrew this year’s production guidance of 1.1-1.5 Bcfe/d. Capital expenditures (capex) are likely to come in at...

The Haynesville Shale, the second largest dry natural gas producing area in the United States, is positioned for a 20% decline in output and activity to 2023 if Henry Hub prices were to maintain an average of $1.80-1.90/MMBtu, according to Rystad Energy.

The first quarter of 2020 has already witnessed a decline in the massive play, which straddles East Texas and North Louisiana, Rystad analysts said in a report on Tuesday. The team noted that well counts in each quarter between the fourth quarter of 2017 and the third quarter of 2019 were 110-120 wells. However, the well count fell to a mere 85 wells in the first three months of this year.

Rystad predicted that at the current rig count, the Haynesville well count could decline by an additional 10 wells in 2Q2020. As of last Friday (May 8), Baker Hughes Co. said the rig count in Louisiana, centered in Haynesville, was 32 units, compared with 52 units in 2019.

As a result, only an average of 20...

If there are any exploration and production companies that are stepping up activity in the Lower 48 today, they’ve yet to step forward, as operators have pulled back, shut in and cut off funding to some of the most prized assets.

Houston’s Callon Petroleum Co.,which had been eyeing big plans in the Permian Basin and Eagle Ford Shale this year after completing its takeover of fellow Texas operator Carrizo Oil & Gas Inc., has made some sharp changes to its 2020 plans as the energy world has been upended.

The Houston-based independent in its first quarter results noted that the Covid-19 pandemic has required a makeover in how it spends money and where. CEO Joe Gatto provided the update in a first quarter call.

“Our updated activity scenarios, which are dependent on an improving outlook for oil prices in the second half of 2020 and into 2021, reflect a minimum reduction of 40% compared to our initial budget and imply a maximum capital spend...

A Wyoming oil and gas industry group has sharply criticized a report by an environmental organization that slammed federal land leases for prioritizing them for alleged single use development by the oil and gas industry.

The Wyoming Outdoor Council (WOC) in its Public Lands Report Part I issued last week accused the Department of Interior’s Bureau of Land Management (BLM) of prioritizing the leases, which would go against the congressional standard for balancing the land for multiple uses, which range from recreational outdoor activities to industrial development, which includes oil and gas production.

At the same time, the WOC report criticizes oil and gas exploration and production (E&P) companies for leaving the leased land untouched, which the researchers claim blocks the public from these areas without producing economic stimulation for taxpayers.

PAW communications director Ryan McConnaughey told NGI that “WOC often repeats the...

TC Energy Corp.’s Keystone XL oil pipeline project has lost the opening round of a legal battle to overturn an April ruling by a U.S. federal court that canceled its water crossing permit.

U.S. District Judge Brian Morris rejected a request to revive Keystone’s Nationwide Permit 12, which the U.S. Army Corps of Engineers issued to enable TC to begin construction.

The second decision enforced a court order for the Army Corps to increase its environmental standards by consulting with the U.S. Fish and Wildlife Service on risks posed by pipeline projects to wildlife protected under the Endangered Species Act.

The contested permit has been restored for other utility projects deemed less hazardous, such as power transmission lines, and for maintenance of established services.

Opponents of Keystone called the court ruling “yet another victory in the fight to ensure that it is never built.” TC vowed to appeal.

With financial support...

Hess Corp. said it will further scale back capital spending in response to an oil-price collapse worsened by the coronavirus pandemic.

The exploration and production company in its first quarter results said it plans to reduce 2020 capital expenditures (capex) to $1.9 billion, with lower rig counts in North Dakota and slowed drilling elsewhere.

“The pandemic has had a severe impact on near-term oil demand,” necessitating the cuts, CEO John Hess told analysts on an earnings call.

The New York City-based independent said in March that it would trim capex by $800 million to $2.2 billion. The latest cuts to capex, by $300 million, have reduced spend by nearly 40% from its original $3 billion plan heading into 2020.

The reduction plans involve dropping five of six rigs in the Bakken Shale. Most discretionary exploration and offshore drilling activities were already to be deferred. Though discretionary work will continue in Guyana -- a...

California Resources Corp. (CRC) has shut-in 5,000 boe/d of output and warned in a federal filing that there is “substantial doubt” it may continue in the face of the decline in global energy demand and prices.

The independent provided the information in a Form 8-K filing with the U.S. Securities and Exchange Commission (SEC). It also has delayed filing the first quarter Form 10-Q report until mid-June. Chesapeake Energy Corp. also warned of potential bankruptcy on Monday.

Citing a Covid-19 exemption the SEC had granted in March, CRC said it was unable to meet the normal deadlines. Most staff have been working from home and as of early April had reduced hours “to preserve liquidity.”

“The Covid-19 pandemic has and will likely continue to affect CRC’s business in adverse ways,” the filing stated. California’s largest producer said it has been staggered by the combination of “unprecedented reductions” in oil demand and continuing declines in...

Goodrich Petroleum Corp. tapered production in the first quarter and further lowered its capital expenditures (capex) for 2020 in response to low natural gas prices spurred by a mild winter and amplified by the coronavirus pandemic that took hold in March.

However, the Houston-based independent, whose Haynesville Shale-heavy operations are weighted 98% to gas, said pullbacks in gas production and reduced oil drilling in response to the collapse in oil prices, are starting to produce pricing momentum.

“We are seeing the impact of the crude oil sell-off, including dramatic reductions in oil-directed rig count activity as well as crude shut-ins, which are reducing the amount of forecasted associated natural gas production,” CEO Gil Goodrich told analysts during a 1Q2020 earnings call Thursday. “This in turn has resulted in significant improvement in the forward-looking strip prices for natural gas...with calendar year 2021 strip prices now trading at...

Continental Resources Inc., the biggest operator in the Bakken Shale, said it dramatically cut oil production and intends to reduce its rig count after posting a steep first quarter loss amid the cratering in oil prices.

The Oklahoma City-based producer founded by Harold Hamm also pulled its 2020 guidance, citing the uncertainty of a market hamstrung by excess crude supplies and weak demand because of the coronavirus pandemic.

“We’re not going to oversupply an oversupplied market,” Hamm, executive chairman, told analysts on an earnings call Monday. “The market share capture rate that the U.S. was pursuing in the past probably was not sustainable.”

Production for 1Q2020 totaled 360,841 boe/d, compared with 332,236 boe/d a year earlier, driven by natural gas activity. Gas output increased 16%, while oil production rose 3%.

While curtailing oil production in the current quarter, the company is “selectively targeting sales that maximize...

Chesapeake Energy Corp., the trailblazing Lower 48 unconventional oil and natural gas producer, reported Monday an astounding first quarter net loss of $8.3 billion, with an earnings per share decimation of $852.97, and it acknowledged Chapter 11 is a distinct possibility. 

The Oklahoma City-based producer has withdrawn its financial guidance for the year and it elected not to hold a quarterly conference call. 

“The company has engaged advisors to assist with the evaluation of strategic alternatives, which may include, but not be limited to, seeking a restructuring, amendment or refinancing of existing debt through a private restructuring or reorganization under Chapter 11 of the Bankruptcy Code,” Chesapeake said in its Form 10-Q filed with the U.S. Securities and Exchange Commission. 

The first quarter loss compared with a year-ago net loss of $21 million (minus $6.37/share). The latest loss included a roughly $8.5 billion...

Denver-based PDC Energy Inc., which produced about 185,000 boe/d in 1Q2020 from the combined Wattenberg field in Colorado and the Permian Basin, is curtailing 20-30% of its oil and gas volumes this month, with additional curtailments likely in June and potentially longer, depending on the direction of prices.

The management team, led by CEO Bart Brookman, discussed first quarter performance during a conference call Friday, detailing how the independent has been hunkering down from Covid-19. PDC is doing what it must to manage through the downturn, he said.

“Today, the industry finds itself in uncharted waters due to a global pandemic and subsequent demand destruction forcing operators to make extremely difficult decisions. However, at PDC, the quality of our assets and our willingness to quickly and decisively alter our operating plan has once again positioned us to succeed in a time of extreme duress on the industry.”

The coming months are...

Black Stone Minerals LP is restarting development in East Texas of its Shelby Trough Haynesville/Bossier Shale acreage in Angelina County in an agreement with affiliates of Aetheon Energy.

The agreement entails minimum well commitments by Aetheon in exchange for reduced royalty rates and exclusive access to Black Stone’s mineral and leasehold acreage in the contract area, the partnership said Tuesday.

The deal mandates a minimum of four wells to be drilled in the initial program year, which begins in the third quarter, increasing to a minimum of 15 wells/year starting in the third program year.

Calling Aetheon “one of the most experienced operators” in the Haynesville, Black Stone CEO Thomas Carter Jr. said, “The Shelby Trough holds enormous resource potential, and our deal with Aetheon positions both companies to benefit from decades of attractive development opportunities.”

In a first quarter earnings call Tuesday, Carter told...

The bleeding continued in the U.S. onshore during the week ended Friday (May 8), with yet another steep decline in oil activity dropping the overall U.S. rig count 34 units to 374, according to the latest figures from Baker Hughes Co. (BKR).

The U.S. declines included 33 oil-directed rigs and one natural gas-directed. The domestic drilling total finished the week more than 600 units behind the 988 rigs active at this time last year.

The 34-rig week/week drop, while sizable by any measure, reflects a slower rate of decline compared to recent weeks as the economic fallout from the Covid-19 pandemic has forced a swift and severe response from operators. U.S. drilling activity has declined by 418 rigs since March 13, BKR data show.

Most of the departing rigs were working on land; the Gulf of Mexico dropped one rig to fall to 15, down from 20 in the year-ago period. Thirty-six horizontal rigs and two vertical rigs exited the patch, partially...

Denver-based Cimarex Energy Co., which plies its oil and natural gas expertise in the Permian Basin and Midcontinent, is digging in to cope with the turnabout in demand and pricing until it's time to begin drilling again.

CEO Tom Jorden shared a microphone with his executive team on Thursday to share insight into first quarter results. He also was upfront about the outlook for the entire energy industry.

The Cimarex team is anxious to resume activity, he told investors, but “any outlook for the future is at best murky.” With insight from past downturns, the plan is to be “inherently conservative financially, as if the downturn will last a long time.”

In one scenario, the plan is to bring back rigs by midsummer to drill but completions would be deferred into 2021.

“On the downside, we can forego this second half drilling and conserve cash,” Jorden said. “To the upside, if conditions improve, we can bring the rigs back and stage...

Houston-based EOG Resources Inc. began shutting in some production in March, with plans to curtail output through at least June, as it works to wait out the downturn in demand and pricing caused in part by Covid-19.

The super independent, which works in the Lower 48, Trinidad and China, issued its results late Thursday and held a conference call to discuss quarterly results on Friday.

“These unprecedented market conditions have super-charged our unique culture to vigorously lower costs and generate innovative productivity gains that will make EOG a much better company as we emerge from this downturn,” CEO Bill Thomas said.

EOG, which initially reacted to the pandemic by cutting capital expenditures by 31% in March, has again reduced spend, now set at $3.3-3.7 billion, down another $1 billion and off 46% overall from the original plan.

Houston-based Marathon Oil Corp., which works in the Bakken Shale, Oklahoma and the Permian Basin, has paused all completion activities and is shutting in some production as it joins the legions of operators at war with low demand and prices.

CEO Lee Tillman discussed the strategy for the super independent as he unveiled first quarter results.

"While the safety and health of our people remains my top priority, we continue to focus on the financial strength of our company,” he said. “We entered this unprecedented downturn on firm financial footing, and we believe we are taking the necessary steps to protect our hard-earned financial strength and flexibility,” Tillman said.

Marathon has slashed $1.1 billion from the 2020 capital expenditures and now expects to reduce cash costs by another $350 million. Spending this year is set at $1.3 billion or less, half of what it spent in 2019.

Tillman, corporate officers and the board all are...

North Dakota’s Department of Mineral Resources (DMR) has established the Bakken Restart Task force to help the state’s oil and gas industry and supporting sectors recover from the collapse in oil demand and prices caused by the Covid-19 pandemic.

DMR Director Lynn Helms said his state has 6,800 shut-in wells at the moment, equaling 450,000 b/d of production, with 27 rigs and five fracture crews still running.

“These are staggering numbers impacting North Dakota production,” Helms said. “However, it was clear during the first meeting of the Bakken Restart Task Force that many great efforts are already underway across agencies to secure, strengthen and stimulate North Dakota’s energy future.”

The task force is to meet weekly, focusing its efforts on three core areas dubbed Regulatory Relief, Economic Stimulus, and Bakken Smart Restart.

Goals include coordinating and streamlining relief measures across multiple regulatory agencies;...

Permian Basin independents Laredo Petroleum Co. and Pioneer Natural Resources Co. are joining their peers in adjusting to the new “normal” by reducing spending and activity to deal with the crushing reversal in energy demand wrought by Covid-19.

In their first quarter results, the Permian pure-plays each said they expect to come out on the other side of the pandemic in solid financial shape.

"The challenges presented to the oil and gas industry by the demand destruction and price volatility” from Covid-19 and the Saudi-Russia price war “are unprecedented," Laredo CEO Jason Pigott said.

Since the pandemic erupted, capital expenditures (capex) have been cut by more than 40%. Capex initially was cut to $290 million from $450 million, and it now has been reduced again to $265 million.

Still, for the fifth consecutive quarter, the Tulsa-based independent still surpassed total production guidance while reducing costs. Output climbed by 3%...

Efforts to mitigate the spread of Covid-19 caused daily weekday electricity demand in New York state to fall by 11-14% in March and April compared to expected demand, the Energy Information Administration (EIA) said Wednesday.

Using data from the New York Independent System Operator (NYISO), researchers compared daily power demand for each weekday in 2020 through May 1 to the average demand of all weekdays with the same daily average temperature from January through June in 2016-2019.

By comparing current demand to temperature-comparable days rather than just to similar calendar days from previous years, researchers can better isolate the effects of unexpected events such as coronavirus mitigation efforts, EIA said.

In NYISO Zone J, which includes New York City, the drop in demand has been slightly more pronounced than in the rest of the state, researchers said, noting that from late March through April, daily weekday power demand averaged...

Washington regulators are moving ahead to restrict oil rail offloading that has led North Dakota officials to call for federal assistance to move Bakken Shale crude to the West Coast.

It’s a standoff between the states, with North Dakota claiming U.S. Constitution violations and Washington contending a state law does not prevent crude shipments from entering the state but they require  vapor pressure testing when unloaded.

The Washington Department of Ecology is undeterred by a U.S. Department of Energy (DOE) report by Sandia National Laboratories that concluded Bakken crude can be safely transported by rail as there is difference among the oil supplies.

Washington regulators are planning hearings to implement a law passed last year, Senate Bill 5579. The rulemaking process should be completed by January, said Ecology Department spokesperson Ty Keltner. Keltner told NGI’s Shale Daily that state officials have discounted the DOE report as...

Stung by the untimely and expensive takeover of Anadarko Petroleum Corp. in 2019, debt-laden Occidental Petroleum Corp. (Oxy) is working to right itself after taking a battering in the first three months, joining other Permian Basin-heavy operators in reducing activity in reaction to plummeting demand.

Houston-based Oxy, whose operations are concentrated in the Permian, as well as in the Middle East and Latin America, noted that market disruption caused by the coronavirus pandemic has upended guidance; the full-year outlook was withdrawn. Capital expenditures, which began the year at $5.2-5.4 billion, have been cut for the second time since March to $2.4-2.6 billion, down by more than half from 2019.

Because of low energy demand and slumping prices, Oxy is “taking aggressive action to ensure our long-term financial stability,” CEO Vicki Hollub said during a quarterly conference call Wednesday.

“All of our long-term differentiators remain...

Drilling cuts and producer shut-ins amid historically weak oil demand forced Plains All American Pipeline LP to write down the value of its assets and swing to a steep first quarter loss.

The Houston-based pipeline and storage operator’s chief executive said the sudden pullback in energy demand and basement-level prices for crude oil imposed by coronavirus fallout also necessitated substantial spending cuts and asset sales.

Executives said during an earnings call Tuesday there are early signs of oil-price recovery as gasoline demand ticks up, a potential positive for future associated natural gas production.

But the near-term outlook is murky, clouded by shaken markets, economic recession and the uncertainty of the pandemic’s ultimate duration and severity.

The “pandemic has led to an unprecedented energy supply and demand imbalance,” said Plains CEO Willie Chiang. “The North American energy supply chain has responded swiftly with...

Lower 48 independent Devon Energy Corp., whose broad portfolio stretches across Texas, and into the Anadarko and Powder River (PRB) basins, has curtailed 10,000 b/d of oil through at least June, with future shut-ins to be made on a month-to-month basis given ongoing price volatility.

CEO Dave Hager helmed a conference call on Wednesday to discuss first quarter performance and detail how the producer plans to cope with the sharp downturn in prices and demand. The focus for now is on the Permian Basin within the Delaware sub-basin, with deferred business in the Anadarko, Eagle Ford Shale and PRB until conditions warrant.

“We have elected to continue to invest and preserve operational continuity in the Delaware Basin to generate the necessary cash flow to effectively operate our business,” Hager said.

However, “we’re suspending all capital activity in the Anadarko, Eagle Ford and Powder River plays until market conditions improve. We believe...