Reflecting the impact of both the coronavirus pandemic and the global oil price war, natural gas and oil production from seven of the most prolific onshore U.S. unconventional plays is expected to decline in May compared with April, according to the Energy Information Administration (EIA).

Total gas production from the Anadarko, Appalachian and Permian basins, and the Bakken, Eagle Ford, Haynesville and Niobrara formations, is expected to be 83.16 Bcf/d next month, compared with 84.03 Bcf/d in April, according to EIA’s latest Drilling Productivity Report (DPR), which was released Monday.

Declines in gas production are expected next month in all seven plays, EIA said. The DPR includes forecasts of 6.83 Bcf/d in the Anadarko in May (compared with 7.05 Bcf/d in April); 31.89 Bcf/d in Appalachia (compared with 32.22 Bcf/d); 2.97 Bcf/d in the Bakken (compared with 3.01 Bcf/d); 6.84 Bcf/d in the Eagle Ford (compared with 6.95 Bcf/d); 12.00 Bcf/d in the...

U.S. oil prices reacted tepidly on Monday to an agreement by the Organization of the Petroleum Exporting Countries (OPEC) and its allies to slash output by an unprecedented 9.7 million b/d during May and June, illustrating the formidable challenge posed to the market by the Covid-19 pandemic.

The May West Texas Intermediate futures contract lost 35 cents to settle at $22.41/bbl, despite the historic deal and a Monday morning tweet from President Trump suggesting that the so-called OPEC-plus alliance was actually considering a 20 million b/d curtailment. The June, July and August contracts gained 44 cents, 96 cents and $1.30, respectively.

“After a four-day marathon of global meetings and arduous and sometimes frustrating negotiations involving the U.S., Mexican, and Russian presidents as well as the Crown Prince of Saudi Arabia, the OPEC-plus group agreed to collectively cut production in May and June by 9.7 million b/d, and to return to market...

Oil and natural gas companies are continuing to trim their capital spending plans for 2020 because of the lack of demand exacerbated by the Covid-19 pandemic, but on a related note, there was some good news as Murphy Oil Corp.’s CEO returned from medical leave after recuperating from the virus.

The El Dorado, AR-based independent said Roger W. Jenkins, who was sidelined in March with a presumptive diagnosis of the virus, “has recovered and resumed his responsibilities with the company as president and CEO following his temporary medical leave.” Interim chief David R. Looney has returned to his day-to-day role as executive vice president and CFO, management said.

Meanwhile, exploration and production (E&P) firms and oilfield services (OFS) operators have continued to reduce capital expenditures (capex).

Among them was one of the largest OFS operators in North America, Baker Hughes Co., which has announced a 20%-plus reduction in capex over...

Field trials of eight emerging methane detection technologies that use satellite and aerial emission surveillance are getting the once over by ExxonMobil at nearly 1,000 sites across Texas and New Mexico.

The supermajor is evaluating the effectiveness and scalability of a range of next-generation detection technologies, which in addition to satellites, use drones, planes, helicopters, ground-based mobile and fixed-position sensors.

All of the technologies and deployment methods that get the green light could be used to detect leaks and identify potential solutions, which could be shared with other oil and natural gas operators.

“By testing the most promising methane detection technologies in a field environment, we are providing viable solutions that can be adopted by other producers to detect and reduce methane emissions,” said ExxonMobil’s Staale Gjervik, senior vice president of unconventional. “We are applying scientific rigor and taking...

Diversified Gas & Oil plc said Wednesday it is again negotiating to expand its massive conventional oil and natural gas asset position in Appalachia with a conditional agreement to acquire thousands of old wells and midstream infrastructure.

The company said it has struck a tentative $110 million deal with Denver-based Carbon Energy Corp. to buy 6,500 wells spread across Kentucky, Tennessee and West Virginia, where it already operates. Diversified stressed that it is still negotiating terms of the agreement and conducting due diligence.

Alabama-based Diversified has drilled few wells, instead relying on a steady drip of production from legacy assets to drive cash flow. The company has utilized its lower overhead to take advantage of other down markets in the past to build its 60,000 well portfolio, which also extends into Ohio, Pennsylvania and Virginia, and includes unconventional assets too.

The company said the wells it wants to...

An analysis indicates that Canada’s oil production appears to be the most affected by the Covid-19 pandemic and from reduced oil demand, with shut-ins estimated to climb above 1.1 million b/d between April and June.

Canada’s shut-in oil output already is at least 325,000 b/d, according to Rystad Energy’s review, followed by Iraq (300,000 b/d), Venezuela (235,000 b/d) and Brazil (200,000 b/d).

The United States is likely to shutter “hundreds of thousands” of oil barrels but the numbers were not yet official and not included in Rystad’s estimates, which were issued on Thursday.

“Due to the severity of demand destruction in North America in April and May, we estimate that shuttered oilsands and heavy oil curtailments in Western Canada could exceed 1.1 million b/d in the second quarter of 2020, with additional near-term downside risk,“ said Rystad’s senior analyst Thomas Liles. “Our curtailment forecasts for the rest of the year have increased to...

Permian Basin pressure pumping expert ProPetro Holding Corp.’s board, executives and officers have voluntarily elected to reduce compensation at different levels up to 20%. The company also is evaluating additional strategic actions to benefit the cost structure of the Midland,TX-based operator.

“With the uncertainty that currently faces our company and our sector, our leadership team will continue to focus on taking actions to protect our capital structure while promoting safety and operational excellence,” said CEO Phillip Gobe, who took over in March.

During a recent conference call to discuss quarterly results, ProPetro’s Sam Sledge, chief strategy and administrative officer, said it was a “fluid situation” in the Permian, which “tends to change on a daily basis, sometimes multiple times in a single day.”

The OFS operator began January with about 20 pressure pumping fleets, and it exited March at slightly under 16 fleets, but “we do think it goes...

Market observers breathlessly awaited the outline of an agreement Thursday between the Organization of the Petroleum Exporting Countries (OPEC) and its allies to curb production and begin balancing a global market awash in crude.

Reports varied on crucial points such as the volume, duration and baseline starting point of the cuts being discussed via teleconference by delegates from the so-called OPEC-plus alliance and other invited producer countries.

What appeared clear, however, was a desire by the parties to reach some sort of deal amid an unprecedented demand collapse and build-up of crude stocks from the Covid-19 pandemic.

By most published accounts, Saudi-led OPEC and its allies were nearing an agreement to temporarily slash production by at least 10 million b/d, thereby ending the price war between Saudi Arabia and non-OPEC heavyweight Russia that has exacerbated the global supply glut since March 6, when the two countries last...

U.S. operators continued to dramatically rein in activity during the period ended Thursday (April 9), with the domestic count falling 62 rigs to 602, according to the latest numbers from Baker Hughes Co. (BKR).

Responding to the global economic shocks of the Covid-19 pandemic and a collapse in crude markets, the U.S. patch as of Thursday had shed nearly 200 rigs since March 13. In the previous week BKR reported a 64-rig decrease, which followed a 44-rig drop reported the week before that.

For the most recent week, U.S. operators sent 58 oil-directed rigs packing, along with four natural gas-directed. That left the United States down more than 400 rigs from the 1,022 units active at this time last year.

All of the weekly declines occurred on land, with the Gulf of Mexico maintaining 18 rigs. Eight vertical units and six directional units joined 48 horizontal rigs in exiting for the week.

The Canadian rig count also declined week/week,...

The energy sector was quick to take a red pen to the 2020 budget in March as the coronavirus turned into a pandemic and the price war continued overseas, but some operators are finding they have to cut deeper in the face of uncertain demand for oil and gas.

For North American exploration and production (E&P) companies, a consensus appears to be building around average capital expenditure (capex) reductions of 35-40% from 2019, as Evercore ISI reported earlier this month.

In another calculation, IHS Herold said to date, North American E&Ps have slashed spend on average by 36%, translating to a $24.4 billion reduction. International oil companies have cut capex by 20-30%, with substantial reductions taken in U.S. operations.

“The ‘Big Cut’ is here,” IHS Markit’s Daniel Yergin, vice chairman, said Thursday. “The U.S. government can’t order cutbacks like other countries. But economics and the market are mandating dramatic budget cuts that...

California on Monday issued its first permits for well stimulation following a third-party review mandated as part of an oil and gas permitting audit process.

The California Geologic Energy Management (CalGEM) Division has approved 24 permits including for Aera Energy LLC in Kern County near Bakersfield.

“These are the first permits issued since the process went under review last July,” said CalGEM spokesperson Don Drysdale. Aera’s permits cover wells it plans to stimulate in the North and South Belridge oilfields in the San Joaquin Valley. Another 282 permit applications are pending, he said.

The state crackdown on well stimulations followed a revamp of the oil and gas division to create CalGEM following an extended oil and water leak at a Chevron Corp. site. The state asked the Lawrence Livermore National Laboratory to review the pending permits, and the lab plans to continue its work until an ongoing state audit is completed later this...

New measurements by atmospheric scientists in the most productive part of the Permian Basin indicate methane is escaping from oil and natural gas wells at around three times the nationwide rate.

The scientists, using the Environmental Defense Fund (EDF) PermianMAP initiative, detected a 3.5% loss rate in a study area, roughly 15 times higher than targets set by some of the region’s leading exploration and production (E&P) operators and higher than many have reported.

The rate detected represents an estimated loss of 1.4 million metric tons/year of natural gas, the nonprofit said.

“Oil and gas companies have a core responsibility to protect health, safety and the environment,” said EDF’s Matt Watson, vice president for Energy. “This data shows that operators in the Permian are failing to meet that basic obligation. As company staffing and state oversight are stretched thin, it’s all the more crucial to maintain close watch on these...

The Energy Information Administration (EIA) said Tuesday domestic oil and natural gas production are likely to fall this year as the coronavirus takes a chunk out of demand at home and abroad, but the federal agency maintained the same gas price it forecast in March.

EIA warned of “heightened levels of uncertainty” in the latest edition of its Short-Term Energy Outlook (STEO). The world is awash in oil and gas, a factor that’s created significant volatility in prices, particularly for oil as a showdown between Russia and the Organization of the Petroleum Exporting Countries has suspended previously agreed upon production cuts.

The EIA is still guiding for Henry Hub spot prices to average $2.11/MMBtu as it did in March, but expects prices to head higher next year and average $2.98 because of lower production. Henry Hub spot prices averaged $1.74 in March.

“The April STEO assumes that the Henry Hub spot price will remain low compared with...

The U.S. horizontal oil rig count is poised to drop by an estimated 65% amid the unprecedented effects of the oil price war and Covid-19 pandemic, according to new analysis by Rystad Energy.

“From a peak of about 620 rigs in mid-March 2020, the oil rig count is forecast to free-fall to a potential bottom of around 200,” the Rystad team said Tuesday, citing guidance from exploration and production (E&P) companies. “Most of the anticipated decline will come already by the end of April. The horizontal rig count has so far dropped to roughly 500, falling by 19% from the recent apogee just three weeks ago.”

To put the speed and magnitude of the impending rig count fall in context, the Rystad team said horizontal oil drilling is down 19% over a three-week period since peak activity level, while in the down cycles of 2015 and 2016, it took 10-16 weeks to see the same level of decline.

“The speed of this decline exceeds the initial...

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Having already downgraded the debt of Mexican state oil company Petróleos Mexicanos (Pemex) to junk status in 2019, Fitch Ratings on Friday lowered the firm’s long-term foreign and local currency issuer default ratings (IDR) another notch to ‘BB’ from ‘BBB+’ with a negative outlook.

The downgrades, which apply to about $80 billion of notes outstanding, reflect “the downturn in the global oil and gas industry, Fitch’s lower oil price assumptions and the weakening credit linkage between Mexico and Pemex,” said Fitch analysts, who also cited the company’s “limited flexibility to navigate the downturn in the oil and gas industry given its elevated tax burden, high leverage, rising per barrel lifting costs and high investment needs to...

ExxonMobil has reset its capex at $23 billion, versus original guidance of $33 billion. The reduction in cash operating expenses is driven by “deliberate actions” to increase efficiencies and reduce costs, which include expected lower energy costs.

“After a thorough evaluation of the impacts of the pandemic and market conditions, we have worked closely with business partners to plan and execute capital adjustments that preserve long-term value, maximize cost efficiency, and put us in the strongest position when market conditions improve,” said CEO Darren Woods.

“The long-term fundamentals that underpin the company’s business plans have not changed -- population and energy demand will grow, and the economy will rebound. Our capital allocation priorities also remain unchanged. Our objective is to continue investing in industry advantaged projects to create value, preserve cash for the dividend and make appropriate and prudent use of our balance sheet.”

Until people are traveling again, on the road or in the air, the economic benefits of cheap oil “remain largely theoretical,” as Covid-19’s hit to global demand is worse than the impact of the financial crisis, according to Raymond James & Associates Inc.

The untold number of capital expenditure (capex) reductions announced by the exploration and production (E&P) sector is going to reduce supply, but not for a while, said analysts John Freeman and Pavel Molchanov in a note to clients Monday.

“By contrast, shut-ins of existing production would lead to less supply right now,” the analysts said. “This issue only comes up when prices are truly depressed, but it can be perhaps surprisingly needle-moving.”

On a small scale, they wrote, shut-ins already are visible, and more are expected, including across the United States. However, when the pandemic subsides and demand returns, some of the shut-in wells may never resume producing, which...

Pressured by global oversupply wrought by the coronavirus and the price war, most North American producers have slashed their capital spending on average by 35-40% year/year versus original guidance, but revisions globally are playing out differently, according to Evercore ISI.

The analyst firm in its sixth Budget Barometer this year tracked 88 exploration and production (E&P) companies with an estimated $230 billion of capital expenditures (capex) scheduled around the world. Analysts are “fairly certain” that the directional change of negative upstream capex revisions globally is going to be down by 31% from 2019.

“For North America, ‘40 is the new 30’ as a number of companies made further cuts to reflect $20 West Texas Intermediate and also due to the short-cycle nature of unconventional shale oil and gas,” Evercore analyst James West said. “Nothing is sacred in this downturn with nearly all regions impacted as we now project international...

The global natural gas and industry undoubtedly will see a dramatic pullback in sanctioned projects this year, with only 10 of more than 50 now in the pipeline likely to proceed, with well financed deepwater and niche liquefied natural gas (LNG) facilities the possible bets to rise above the carnage, according to Wood Mackenzie.

Researchers said Thursday nearly all global oil and gas projects still in the pre-final investment decision (FID) phase are going to be paused or scrapped.

“Of the 50-plus projects we identified with potential to go ahead this year, only 10 have a chance of proceeding, but all are at risk,” the global natural resources consultancy said.

Wood Mackenzie upstream researcher Rob Morris said an estimated $110 billion of investment “will almost certainly be deferred, with another $100 billion at risk. New committed investment could be as low as $22 billion if only the most advantaged projects progress.&rdquo

Worldwide energy demand has plummeted on the combined effects of Covid-19 and the ongoing price war, but natural gas flaring levels in the Permian Basin are down and should continue to fall through the rest of the year, according to Rystad Energy.

Rystad’s preliminary estimate for levels in the first three months of 2020 indicate an emerging downward trend in gas flaring to 700 MMcf/d, with around 550 MMcf/d flared at the wellhead, the lowest quarterly rate since 3Q2018.

“The basin-wide wellhead flaring ratio fell below 3.5% in the first quarter of 2020, and additional improvements are expected to materialize throughout the remainder of 2020,” said Rystad’s Artem Abramov, head of shale research. “This is especially true now, in this period of collapsing basin-wide completion activity amid an oil price crash and prolonged price weakness.”

Wellhead flaring in the Permian accounts for more than 70% of total flaring since the beginning of last...