By JOHN P. TRETBAR
Most of the year-end numbers for 2017 offer a brighter outlook for the new year in the Kansas oil patch. On Monday (1/15), the price for a barrel of Kansas Common crude at CHS was $54.50. That’s the highest price in McPherson since Nov. 2014. Experts say price is the most reliable barometer of the oil and gas industry, and it tends to drive some of the other gauges used by analysts.
The average price in December was $48.34, which is more than $20 higher than two years ago ($27.52/bbl in Dec. 2015), but about $40 less than ten years ago ($82.49/bbl in Dec. 2007). Drilling permits were up more than 31% for the year and well completions were up by 7% compared to a year ago.
Independent Oil & Gas Service reported that the success rate across the Kansas oil patch has dipped slightly. The five-year averages ending in December show 60.3% of Kansas infield wells hit pay dirt (compared to 61.1% in 2016). About 28.5% of the wildcat plays were successful, compared to 29.5% the year before.
Baker Hughes reported 939 active drilling rigs across the US Friday, showing increases of ten oil rigs and five gas rigs. Independent Oil & Gas Service reported nine active rigs in eastern Kansas, which is unchanged, and 26 west of Wichita, down two. Canada reported 276, reflecting a seasonal increase of 102 active rigs. Drilling was underway at sites in Russell and Stafford counties. Operators are moving in completion tools at two sites in Barton County, five locations in Ellis County, two leases in Russell County and two in Stafford County.
Out of 15 new permits for drilling at new locations across the state last week, two were in eastern Kansas and 13 were west of Wichita, including one in Barton County and one in Stafford County.
Independent Oil & Gas Service reported 14 new well completions over the last week, all of them in western Kansas, including one in Barton County and one in Ellis County.
The Kansas Geological Survey reports the state’s operators produced about 2.83 million barrels of crude oil in September, bringing the total through October to nearly 27 million barrels. Ellis County leads the state, adding 219 thousand barrels for a cumulative total of 1.99 million. Barton County operators produced an additional 134 thousand barrels of crude in September, for a third quarter total of 1.27 million barrels. In Russell County, operators pumped 131 thousand barrels, 1.2 million through October. And Stafford County producers added 82 thousand barrels for a third-quarter total of 782 thousand.
Here are the top ten oil-producing counties in Kansas through Oct. 2017:
Ellis County 1.99 million bbl (+219k)
Haskell County 1.81 million bbl (+200k)
Barton County 1.27 million bbl (+134k)
Finney County 1.21 million bbl (+130k)
Rooks County 1.203 million bbl (+130k)
Russell County 1.201 million bbl (+130k)
Ness County 1.12 million (+120k)
Harper County 781 thousand bbl (+74k)
Stafford County 782 thousand bbl (+82k)
Barber County 717thousand bbl (+68k)
(Source: Kansas Geological Survey)
Last year, energy operators filed 1,441 permits for oil & gas drilling at new locations across Kansas. There were more than seven thousand filed three years ago, but the numbers for 2017 are an improvement over the 1,096 permits filed the year before. Operators in eastern Kansas filed 727 new drilling permits last year. There were a total of 714 west of Wichita, including 39 in Barton County, 42 in Ellis County, 21 in Russell County and 28 in Stafford County.
Independent Oil & Gas Service reported 107 new well completions in December, for a year-end total of 1,317 completed wells. That’s also better than last year, but falls far short of the 3,600 completions reported in 2015 and the more than 5,800-plus completions in 2014. Last year, Barton County had 39 completions and Ellis County had 46. Russell County operators reports 18 completed wells and Stafford County reported 31 completed wells for the year. Of the 1,324 completions last year across Kansas, 324, or just shy of one out of four, were dry holes.
At a meeting last month, the Kansas Geological Society recognized and named nine new oil fields in Kansas. The total for 2017 was 55 new fields, an increase of 11, or 25%, from the year before. They also recognized an infield wildcat discovery and new a new pay source at plays in Ellis County.
The Oklahoma Independent Petroleum Association last week filed two separate challenges to a proposed ballot issue asking the state’s voters to impose a broad seven percent tax on oil and gas production. Proponents hope to fund teacher pay raises and early childhood education. In one petition, the litigants challenge the language of the ballot question. In the second, the petroleum association says the measure is too broad and that it creates a retroactive tax. Because the language is being challenged, the high court could intervene before backers can start collecting the 123,000 signatures they need to place the measure on the ballot.
Another major US city files suit, hoping to pin on oil companies the costs they say stem from climate change. As Bloomberg put it, “The Big Apple sues Big Oil.” New York City joined three local governments in California is efforts to recover what they say are the costs of climate change. New York filed suit in state court against BP, Chevron, ConocoPhillips, Exxon Mobil, and Shell claiming the defendants are the world’s largest industrial contributors to climate change. The litigants are using centuries-old concepts of “public nuisance” and “private nuisance.” Both theories have been used in pollution suits, though never before on this scale. The defendants that did offer a comment blasted the lawsuit as being without merit, and contrary to the kind of action required to reduce greenhouse gas emissions.
As expected, government roadblocks will likely derail a proposed rail-to-marine oil terminal in Vancouver, Wash. The Port Board of Commissioners voted to terminate a rolling lease if the developers don’t come up with all the necessary permits by March. A key state energy council has recommended the Governor deny the project, and he has until just before the deadline to decide. Opponents say this will make it nearly impossible for the backers to meet the deadline.
Be careful what you wish for. OPEC and others are discovering an unintended downside to rising prices, currently propped up by the cartel’s production cut agreement. They now fear it provides a growing incentive for US shale producers, and for possible central bank interventions to temper inflation. Goldman Sachs tells Bloomberg the cartel will try to “talk down” an oil rally above $70 per barrel to cushion the impact on the economy and the openings for rival suppliers.
