The Canadian oil surplus generated by the Covid-19 pandemic and demand contraction has spun off a new storage revenue stream for Enbridge Inc. worth up to C$8.7 million ($6.5 million) over the next eight months.

Shippers agreed to pay a monthly per-cubic-meter tariff of C$7.55 ($5.66) to keep up to 145,000 cubic meters of oil in facilities left idle after the 2019 Line 3 pipeline replacement project, according to a notice filed at the Canada Energy Regulator (CER).

The agreement lasts from June 1 through Jan. 31, 2021, according to Enbridge. On the Imperial measurement scale, the special storage tariff works out to C$1.20/bbl (90 cents) for up to 912,050 bbl.

“Given the impacts of the pandemic and the collapse in crude oil prices, demand for incremental crude petroleum storage throughout North America and even more urgently in Western Canada is high,” said Enbridge.

No objections have surfaced to postpone the June 1 start of the new...

Planned production curtailments and delayed well completions continue to grow in the Appalachian Basin as more exploration and production (E&P) companies are continuing to announce less activity in the face of Covid-19 and the corresponding slide in commodity prices.

Appalachian heavyweight Antero Resources Corp., which continues to guide for a 9% year/year production increase to 3.5 Bcfe/d, said last week it would slash spending from $1.15 billion to $750 million this year. While the spending cut is partly driven by the lower well costs that have been achieved under an initiative launched last year, the near-term pricing environment is a factor.

The company plans to defer 20 well completions until next year given the decline in liquids prices that has occurred along with the oil rout. Antero noted, however, that it does not expect significant wet or dry gas production curtailments despite current market conditions. The company is primarily...

Argentina’s rig count dropped to zero in April as activity ground to a halt from the country’s stringent lockdown that is keeping citizens, and oil and gas workers, at home.

The nationwide lockdown put in place in the middle of March to slow the spread of the coronavirus is ongoing; the government has said it will announce news of changes to the restrictions – if any -- next week.

Western Argentina is home to the vast Vaca Muerta shale deposit, hailed by many as one of the best unconventional oil and gas prospects outside of the United States.

“In Vaca Muerta, there was no activity for drilling rigs and frac sets during April,” Wood Mackenzie Argentina analyst Igancio Rooney told NGI’s Shale Daily. “These operations have been affected by the quarantine measures at a national level. It’s not good news for the sector, as growth projections have been curtailed under a scenario of depressed demand.”

The oil and gas sector in Argentina...

TC Energy Corp. CEO Russell Girling said last Friday during a quarterly earnings call the company still expects the Keystone XL crude oil pipeline to enter service in 2023, even though a U.S. court in mid-April vacated the conduit’s nationwide water crossing permit.

The ruling came a couple weeks after the Calgary-based operator had secured financial backing from the Alberta government and begun construction on Keystone, which is meant to transport oilsands output to refining markets on the Gulf Coast.

Although the official in-service date remains unchanged, TC’s Bevin Wirzba, vice president for liquids pipelines, cautioned during the call that the April ruling could potentially result in “up to a year delay on the ultimate project, much like many of the circumstances that we’ve faced historically.”

Wirzba said management “had always anticipated...the need to be agile in our construction management and our planning,” adding that “there is the...

The Railroad Commission of Texas (RRC) on Tuesday turned back a motion that would have required the state’s producers to reduce oil output by 20%.

Chairman Wayne Christian and Commissioner Christi Craddick voted against the proposed prorationing, while Commissioner Ryan Sitton, who had pushed to mandate the quotas, was opposed. “We received thousands of comments...in this tremendously important time in the industry,” Christian said. “Whether for or against, Texans care about getting our once thriving energy sector back on top.”

However, “I do not believe proration is the magic bullet to save the industry.”

The RRC held a marathon 10-hour hearing in April to consider the curtailments, initially requested by Permian Basin producers Pioneer Natural Resources Co. and Parsley Energy Inc. Pros and cons were offered by exploration and production (E&P) companies and other energy groups, both large and small.

Christian, who long signaled he...

Fuel demand is slowly returning as social distancing measures from Covid-19 are eased, but while consumption may be edging higher, Phillips 66 plans to maintain the prudent approach to 2021, CEO Greg Garland said last week.

The Houston-based management team discussed first quarter performance for the energy manufacturing and logistics company during a conference call with analysts.

For now, Phillips 66 is focused on “conserving cash and maintaining strong liquidity to manage through this unprecedented downcycle,” Garland said. Share repurchases were suspended in March. Actions are underway to reduce costs by $500 million this year. Consolidated capital spending has been cut by $700 million from guidance.

[Want to see more earnings? See the full list of NGI's 1Q2020 earnings season coverage.]

Projects also have been deferred, including the Red Oak Pipeline, which would move crude from the Midcontinent to the Gulf Coast by way of the...

Impacts of coronavirus mitigation efforts continue to reverberate through the economy, with a decline in transportation fuel demand since early March prompting a nearly 21% decline in crude oil and other inputs at refineries compared with the previous five-year average for this time of year, according to the U.S. Energy Information Administration (EIA).

Such refinery runs fell for four consecutive weeks to 12.8 million b/d in the week ending April 17 before increasing slightly to 13.2 million b/d for the week ending April 24, EIA said.

Finished motor gasoline consumption was 5.1 million b/d in the week ending April 3, the lowest recorded since EIA began tracking the date in 1991. Gasoline product supplied has increased to 5.9 million b/d since then – still 37% below the previous five-year average for this time of year.

 Jet fuel product supplied set a record low during the week of April 10, falling to 463,000 b/d, EIA said. But while jet...

Tulsa-based rig specialist Helmerich & Payne (H&P) has decommissioned dozens of rigs and laid off close to 3,000 people, with the biggest impact felt on its Lower 48 operations, but Covid-19 is having one positive impact as customers look for social distancing solutions through automation and technology.

CEO John Lindsay and CFO Mark Smith discussed the good, the bad and the ugly during a  fiscal second quarter conference call and what they foresee for their global exploration and production (E&P) customers.

Lindsay, who has worked at H&P for 33 years, said this downturn has “unique characteristics,” as lower oil and gas demand has led E&Ps to shun drilling. Those rigs left standing, such as H&P’s super-spec FlexRig fleet, are likely to survive and thrive going forward as customers lean into technology and efficiency.

“We are drawing on learnings from the 2015/2016 downturn to idle rigs more efficiently, and we're...

Canadian oil and natural gas drilling is plummeting to the slowest pace in half a century, report the industry’s field contractors.

An updated forecast by the Petroleum Services Association of Canada (PSAC) predicts only 3,100 wells in 2020 – the fewest since activity slid to 2,934 in 1971, show records of the Canadian Association of Petroleum Producers (CAPP).

The projected 2020 well count would be 88% less than the 2005 Canadian peak of 25,068, 31% below the 4,499 drilled after the 1980s oil and gas price slump, and 63% lower than the 8,137 bottom in the 2008-2009 global financial crisis.

“Punishing blows continue to batter the health of this vital industry,” said PSAC acting president Elizabeth Aquin.

Canadian setbacks began before the Covid-19 virus pandemic with pipeline protests that erupted into a national railway blockade, an oilsands project cancellation, and loss of investor support by a Quebec liquefied natural gas...

Continued strong production in the Permian Basin helped drive Chevron Corp.’s first quarter earnings higher. But the San Ramon, CA-based major said production would drop with planned curtailments, and it warned that distressed market conditions imposed by coronavirus fallout necessitated further budget cuts and could depress future earnings. 

“Chevron is responding to these unprecedented challenges by making changes to what we control, and with a commitment to protect the long-term health and value of the company,” CEO Michael Wirth said Friday.

Wirth noted the plunge in commodity prices in March and continued weakness in April linked to a drop-off in energy demand amid stay-at-home orders and travel limitations intended to slow spread of the coronavirus.

Houston’s ConocoPhillips said Thursday it is taking on the epic decline in energy demand from the coronavirus by shutting in 200,000 boe/d combined in the Lower 48 and Canada, around 25% of output, and taking a knife to carve out more capital spending.

CEO Ryan Lance warned during a conference call that U.S. crude storage capacity likely will be exhausted in May. The shut-ins, which impact oil, natural gas and natural gas liquids output, are a sign of the times, he said.

“I would expect to see a lot more of this going forward,” said the CEO. “Actions are coming as there is no place to move crude, whether inland or on water as inventories reach tank top….

“We are not going to sell our crude for these kinds of prices. As the Covid-19 situation works through the situation here and globally, demand will start to return. There are better prices in the future for us.”

The actions are a reflection of management’s view “that near-term oil...

Only three weeks after winning Canadian financial backing and starting construction, TC Energy Corp.’s Keystone XL project has suffered a defeat by pipeline foes in a U.S. federal court.

In late March TC and the Alberta government announced a C$7.5 billion ($5.3 billion) financing agreement and immediate start on construction for the oil export pipeline into the United States. The deal included a C$1.5 billion ($1.1 billion) government ownership stake plus a C$6 billion ($4.2 billion) provincial loan guarantee to kickstart the growth project for Canada’s top natural gas user, Alberta thermal oilsands production. The pipeline would be able to export up to 830,000 b/d.

However, U.S. District Judge Brian Morris in Montana has overturned the contested export conduit’s Lower 48 water crossings permit after accepting expert testimony that fish and beetles protected under the Endangered Species Act (ESA) may be threatened.

Morris ordered the U.S....

The Pennsylvania Department of Environmental Protection reached agreements this month with two leading shale producers in the state to resolve erosion and air quality violations.

The agency said Tuesday an affiliate of Range Resources Corp. has agreed to pay $198,920 to resolve violations of the state’s Air Pollution Control Act for transgressions at the Costanzo 1H and 2H and Cross Creek County Park 6H and 8H well pads in Washington County.

The pads contain storage tanks and associated equipment that surpassed emissions thresholds in 2013, 2014 and 2015 in a way that would have required special permitting, DEP said. Range installed air cleaning devices to reduce volatile organic compounds (VOC) without applying for DEP authorization as required.

The agency said, however, the air cleaning devices reduced the VOC emissions to levels below the special permitting thresholds. Range is required to pay emissions fees for the years when VOCs...

Citing global Covid-19 containment measures that have brought mobility “almost to a halt,” the International Energy Agency (IEA) said Wednesday it expects year/year (y/y) global crude demand to fall by a record 9.3 million b/d in 2020 to 90.5 million b/d after nearly a decade of growth.

In its April Oil Market Report (OMR), the intergovernmental organization projected April oil demand would fall by 29 million b/d y/y, to a level not seen since 1995.

For the second quarter of 2020, IEA sees demand falling by 23.1 million b/d from the year-ago period. Amid a gradual second half 2020 recovery, the global energy watchdog expects December demand to be 2.7 million b/d lower than in December 2019.

Following a historic pact reached Sunday by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to cut supply by 9.7 million b/d during May and June from an agreed baseline level, IEA expects global supply to fall by a record 12...

One month after it cut expenditures by almost one-third, Houston’s Noble Energy Inc. has joined a growing group of peers in reducing even more spend, with the hit mostly to U.S. onshore operations, while it furloughs employees and cuts salaries in response to the never-ending impacts from the Covid-19 pandemic and sharp decline in oil and gas demand.

The global exploration and production (E&P) company last month reduced capital expenditures (capex) by $500 million, or nearly 30%, to $1.1-1.3 billion. Capex now has been reduced by another 20%, or $350 million, to $800-900 million.

“Recent events have had an unprecedented and unpredictable impact on the global economy and the oil and gas industry,” said CEO David L. Stover. “We are acting quickly and aggressively to confront today’s economic challenges with a focus on Noble Energy’s financial strength and to position the company to improve shareholder value.”

An employee-based furlough...

North Dakota’s robust Bakken Shale hasn’t reached its all-time low points for rig count and well shut-ins, but it will be there soon enough, the state’s chief oil/natural gas regulator Lynn Helms said Tuesday during a report on the latest monthly production statistics.

Offering data from February just ahead of the full force of the coronavirus lockdown and the global oil meltdown, Helms, director of the Department of Mineral Resources, said “the data we’re looking at are two months old, and a great deal has happened since then, but my remarks will try to be more contemporary.”

Production for oil and gas on an average daily basis continued to increase back then, including a 6.4% jump in gas production and an increase in gas capture to 87%. Turning to rig count, Helms said about 40% of the state’s rigs were lost in “three short weeks,” settling on Tuesday at 34 after holding in the low to mid-50s for several months.

“This has all come since the...

Ring Energy Inc. said Tuesday it has entered a deal to sell a portion of its Permian Basin acreage to an undisclosed party for $31.5 million.

The property covers about 20,000 net acres in the Delaware sub-basin in Culberson and Reeves counties, TX, and is currently producing 575 b/d of oil and 2 MMcf/d of natural gas.

Engineering firm Cawley, Gillespie and Associated estimated the property’s year-end proved developed producing reserves to be 3.48 million bbl oil and 10.06 Bcf of natural gas, with a pre-tax discounted present value (aka PV-10) of about $43 million, assuming average oil and gas prices of $52.41/bbl and $1.47/Mcf, respectively.

Ring CEO Kelly Hoffman said that proceeds would be used to pay down the company’s senior credit facility. “The current environment mandates a cautious, conservative approach going forward, and strengthening our balance sheet is a step in the right direction.”

Ring is focusing efforts on the...

Devon Energy Corp. has amended the terms of its Barnett Shale asset sale to Thailand’s Banpu Kalnin Ventures (BKV), with the Oklahoma City-based independent agreeing to divest the North Texas assets for $570 million in cash at closing and contingent payments of up to $260 million.

In the initial agreement reached in December, BKV offered $770 million for the assets, which gave Devon entry into the unconventional natural gas business in 2002.

Under the amended terms, BKV agreed to pay an increased deposit of $170 million, and the scheduled closing date was extended to Dec. 31 from Wednesday (April 15). The closing payment is subject to customary price adjustments that, among other things, allocate revenues and expenses based on a Sept. 1, 2019, effective date.

Contingent cash payments, that would begin Jan. 1 over a four-year term, would be based upon future commodity prices, with “upside participation” beginning at either a $2.75/Mcf Henry...

Oil and natural gas operators have begun taking a second look at spending cuts implemented in March and are shelving projects as a return to “normal” is not forecast until demand comes closer to matching supply.

A hearing Tuesday conducted by the Railroad Commission of Texas (RRC) made the situation clear, as commissioners considered a request by Permian Basin pure plays Pioneer Natural Resources Co. and Parsley Energy Inc. to require the state’s oil producers to reduce output by 20% starting May 1.

Enterprise Product Partners LP’s Jim Teague, CEO of the general partner, told the RRC that the coronavirus had “destroyed 25 million b/d of hydrocarbon demand, which fell off a cliff overnight.” Wholesale gasoline is selling for as little as 25 cents/gal, and refineries have cut operating capacity by up to 40% as they scramble to adjust to the new market conditions.

“It’s not just a Texas issue,” Teague said. “These are global issues...The RRC...

As the U.S. oil supply declines from shut-in wells, analysts expect natural gas prices will see some relief, with the likelihood they could increase above $3.00/Mcf.

Tudor, Pickering, Holt & Co. (TPH) and Goldman Sachs Commodities Research each weighed in with somewhat optimistic -- but cautious -- notes about the outlook for U.S. natural gas, driven by reduced oil supply.

“In our view, as the oil price collapse is set to drive 5.5 Bcf/d of supply declines” from the end of 2019 to the end of 2020, “putting the market 4-5 Bcf/d undersupplied heading into 2021,” the TPH analysts said in a note Monday. “At $3/Mcf, we expect gas producers to continue to show restraint, with just 1 Bcf/d of gas-directed growth expected, meaning demand destruction may ultimately be the required path to a balanced market.”

If crude prices were to remain depressed to the end of this year, the 5.5 Bcf/d of expected associated gas declines may set the stage for...

Chesapeake Energy Corp. shareholders have authorized a reverse stock split allowing the company to combine 200 shares into one.

The common stock is scheduled to begin trading on Wednesday as a split-adjusted basis after shareholders approved it in a special meeting on Monday. The move is aimed at lifting the stock price, which has traded at a 52-week low of 12 cents/share, and regaining compliance with a NYSE delisting notice issued in December.

The 1-for-200 split doesn’t require any action from shareholders. Chesapeake also said no fractional shares would be issued, with any shareholder entitled to them instead paid cash. Once effective, the number of outstanding common shares would be cut to about two million from nearly two billion. The number of shares to be issued also would be reduced to 22.5 million from three billion.

The reverse stock split is one in a series of moves that Chesapeake has executed since last year to better manage financial...

An oil price war has unleashed global supply and sent prices into a tailspin. At the same time, the Covid-19 pandemic has slashed energy demand. The one-two punch has upended the oil and natural gas industry, and more uncertainty lies ahead. NGI is exploring what energy companies up and down the supply chain are doing to weather the storm in this first quarter earnings preview.###

NGI's Hub & Flow is a podcast for busy natural gas professionals interested in a quick take on the North American energy market. Join NGI’s trusted reporters, editors and analysts as they discuss what is driving supply and demand fundamentals, prices and movements in the natural gas and LNG markets in the U.S., Canada and Mexico.