"World Oil" U.S. Forecast | Russell T. Rudy Energy LLC
John Higgins, the publisher of “World Oil” magazine, was the speaker at the February meeting of the Houston Chapter of the American Petroleum Institute (API). Predictably, his comments were quite interesting and provocative. While they are not at great variance with what many other analysts have forecast, his are backed up by a wealth of experience and data. In a previous post I presented an overview of his remarks, and the publication’s specific crude oil and natural gas forecasts. In this post I summarize “World Oil’s” domestic forecast with primary focus on onshore, lower 48. In a future post I plan to cover the international outlook, in as much as it impacts onshore U. S. prospects.
Last year the U. S. surpassed both Saudi Arabia and Russia to become the largest producer of oil and natural gas liquids (NGLs) in the world. Production averaged as much as 11 million barrels per day (bpd) at one point. However, in November prices collapsed and rig counts quickly followed and continue to fall. Overall, 18% fewer wells are expected to be drilled in 2015 than in 2014.
While a number of significant offshore projects contributed to record production, the real story was shale. Unfortunately, these unconventional plays, plagued with high economic break-even points, will bear the brunt of the industry downturn.
Many of the independent operators who led the shale revolution are divesting non-core assets and/or reducing budgets and rig counts. Chesapeake has sold over 400,000 acres in the Marcellus and Utica shales to Southwestern Energy. Continental Resources has reduced its rig count by 40%, and sold off its gas plants and pipeline operations, and Pioneer is contemplating selling its midstream operations as well.
Texas, the largest producing state, will see a 23% reduction in new wells. The Eagle Ford Shale and the Permian Basin will be especially hard hit. Louisiana will see an 18% drop in new wells, primarily in the shale plays. North Dakota’s Bakken shale will be especially hard hit with a 30% reduction in new wells anticipated. Oklahoma is looking at a 20% cutback.
Pennsylvania is the lone bright spot, powered by the prolific Marcellus shale. Even though the largest operator, Range Resources, is cutting its budget, the state overall will see a slight increase in new wells of 1.1%.
To learn more, please go to www.worldoil.com .
