December 30, 2015

CRUDE OIL INVENTORY/’000 bbls (Week Ended 12/25/15)

Current: 487,409

Actual Build/(Withdrawal): 2,629
Economist Average Estimate: (1,766)
Previous: 484,780

Click here for the chart with five year averages.

Stephens Investment Banking - Building Blocks of a Stronger Oil & Gas Industry
Source: Department of Energy (DOE), Bloomberg, and Wells Fargo Securities, LLC

*Energy Market Upside: Callon Petroleum Bumps Footprint, Liquidity; Targets Self-Funded Growth – Oil & Gas 360®

The lower price of crude oil has put a significant squeeze on earnings for oil and gas companies in the last year. With both U.S. crude oil benchmark WTI and international benchmark Brent trading at 35% and 33% of their value in June of 2014, the whole industry is facing hard times. Despite the historic low price of crude oil, Callon Petroleum (ticker: CPE) has managed to maintain its EBITDA margin, increase production, increase its borrowing base, and has a goal of being self-funded next year. – Read More

*Hoping for a Price Surge, Oil Companies Keep Wells in Reserve – The New York Times

The price of oil keeps dropping. But that didn’t stop a work crew from drilling a well recently on what was once a cornfield, carefully guiding the last sections of 13,000 feet of pipe spiraling into the hard Niobrara shale with a diamond-tipped bit. Their well, one of hundreds drilled by Anadarko Petroleum in eastern Colorado’s Wattenberg field this year, could someday gush as many as 800 barrels of crude oil a day. But Anadarko is not planning to produce a drop of crude from the well for at least another year because the price of oil is now so pitifully low. – Read More

*Prepare For A Dramatic Decline In Oil Reserves – Forbes

According to the 2015 BP Statistical Review of World Energy, in the past 10 years global proved oil reserves grew by 334 billion barrels to reach a global total of 1.7 trillion barrels. To put that in perspective, Saudi Arabia’s proved oil reserves stood at 267 billion barrels at the end of 2014. That means that the global proved oil reserves added to the books in the past decade were equal to one and a quarter Saudi Arabias. – Read More

*Suncor vs. Canadian Oil Sands: As Deadline Approaches, War of Words Heats Up – Oil & Gas 360®

Ernst & Young is one of many analyst firms expecting energy-related divestitures and stock-for-stock deals to rise in 2016, and one of the year’s first deals could involve Canadian Oil Sands (ticker: COS) and Suncor (ticker: SU). But if Canadian Oil Sands gets its wish, the potential merger will be nothing more than a failed attempt. Suncor has been in pursuit of COS since March 2015, but buyout offers aimed at the Canadian Oil Sands board of directors have been unsuccessful. – Read More

*In World With Too Much Crude Oil, 1,100-Foot Steel Monsters Rule – Bloomberg

The most destructive oil crash in a generation is giving ship owners a billion-dollar windfall. With the Organization of Petroleum Exporting Countries abandoning output limits in a drive for market share, ships that carry as much as 2 million barrels a trip are in demand to haul crude from the Middle East to Asia and North America. While oil prices fell about 35 percent in 2015, average earnings for these carriers jumped to $67,366 a day, the most since at least 2009, according to Clarkson Plc, the world’s largest shipbroker. – Read More

*Not Even OPEC Can Fix Oil Glut – The Wall Street Journal

Surprisingly strong crude output in the U.S. and Mideast over the past year pushed oil prices to their lowest levels in more than a decade. But for investors trying to determine whether the oil market is close to a bottom, the pace of production elsewhere in the world is a key source of uncertainty. Producers in Russia, Brazil and Norway pumped more oil in 2015 than the closely watched forecasters International Energy Agency and Energy Information Administration had projected. – Read More

*Offshore Pain Continues: Shell Cancels $600,000/Day Transocean Rig – Oil & Gas 360®

Royal Dutch Shell (ticker: RDS.B) delivered some bad news for Transocean (ticker: RIG) as companies returned to their respective offices following an extended Christmas weekend. According to a RIG press release, Shell elected to cancel its contract for the Polar Pioneer rig, which was originally scheduled to expire in July 2017. The Polar Pioneer is a harsh environment semisubmersible rig with maximum drilling depth of 25,000 feet. Shell originally contracted the rig for operations in the Arctic, but it was returned to Washington State in October 2015 following exploration in Alaska’s Chukchi Sea. – Read More

*Recession, retrenchment, revolution? Impact of low crude prices on oil powers – The Guardian

A glut of oil, the demise of Opec and weakening global demand combined to make 2015 the year of crashing oil prices. The cost of crude fell to levels not seen for 11 years – and the decline may have further to go. There have been four sharp increases in the price of oil in the past four decades – in 1973, 1979, 1990 and 2008 – and each has led to a global recession. By that measure, a lower oil price should be positive for the world economy, with lower fuel costs for consumers and businesses in those countries that import crude outweighing the losses to producing nations. – Read More

*US shale companies can’t do more with less anymore – Houston Chronicle

U.S. shale drillers can’t seem to pump bigger bounties of crude with fewer rigs anymore. Newly drilled oil wells in the nation’s three biggest shale plays have produced roughly the same amount of crude during each of the past three months, signaling an end to big productivity gains that helped keep gas and oil flowing from shale even as producers sidelined more than 1,200 drilling rigs. The development could sting next year as U.S. drillers struggle to keep churning out as much oil as they can to keep cash flowing, even with oil prices roughly $15 to $20 a barrel lower than it costs to produce. – Read More

*U.S. Rig Count Falls to 700 – Oil & Gas 360®

The total number of rigs drilling for oil and gas in the United States hit 700 in the week ended December 23, 2015, down nine rigs from the previous week. The data collected by Baker Hughes (ticker: BHI) showed losses in rigs drilling for natural gas led the decline last week. The number of rigs drilling for oil fell by three last week, reaching 538 after several rigs were added in the week ended December 18. The fall in the oil rig count this week could signal that the trend of fewer rigs in the oil patch could continue the steady decline that started in September after slight increases in July and August. – Read More

*Permian operators don’t have high expectations for 2016 – Midland Reporter-Telegram

Santa’s sleigh and reindeer are parked at the North Pole until next Christmas, and now attention turns to the arrival of the new year. Permian Basin oil operators hoping 2015 would end with healthier commodity prices were disappointed as crude supplies continued to flood the market, sending prices near $30 a barrel at the end of the year. Few are holding out hope for improvement in 2016. “In a nutshell, there is no catalyst that is moving supply or demand in any particular direction,” said Joseph Castillo, president of Bold Energy III in Midland. – Read More

*Colorado Oil Patch: Trouble is Brewing – Oil & Gas 360®

Eleven initiatives aimed at Colorado’s oil and gas development were issued on December 22, 2015, marking the start of a new chapter in the Centennial state’s ongoing tug of war between the energy industry and neighboring communities. Eight of the proposed initiatives targeted setbacks for operations, but two of the measures are generating the greatest response from Colorado’s oil and gas proponents. One calls for the outright ban of hydraulic fracturing, while the other aims to shift regulations to local authority rather than that of the state. – Read More

Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable.  This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note.  This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results.  EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services.  In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies.  As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note.

Legal Notice