Dillard Center for Energy Management

04/18/2017

Strange Bedfellows! On what major environmental policy issue do the Sierra Club, ExxonMobil, Peabody Coal, and Cheniere Energy all agree? They are all encouraging the Trump administration not to withdraw from the Paris Climate Agreement. Why would some fossil fuel energy companies do that? It's hardest for me to understand Peabody because coal is the biggest loser if the goal is to reduce CO2 emissions. I guess they hope the US government will fund a lot of research into carbon capture such that the CO2 of coal power plants could be reduced more economically. For ExxonMobil and Cheniere it's probably because they think natural gas will continue to replace coal for electrical generation. Needless to say, there are plenty of E&P companies that strongly support withdrawing from the Paris Agreement. Like I said, strange bedfellows!

01/26/2017

The Permian Basin is the epicenter of deal-making right now in the upstream business. Not surprisingly, midstream companies are taking part in the action too. This Bloomberg article talks about how a leading pipleine company is buying a connector system in the Delaware basin for over a billion dollars. That indicates Plains sees the good times lasting a long while in the Permian. https://www.bloomberg.com/news/articles/2017-01-24/plains-expands-permian-pipeline-reach-with-1-2-billion-deal

The Permian Basin land rush is spreading to oil and gas pipelines.

01/23/2017

Natural gas has become the #1 fuel for generating electricity in the U.S., which is the major reason why CO2 emissions have dropped sharply over the past 10 years in this sector. Turns out Mexico is following suit. Last year NG generated just over 50% of the electricity in Mexico, up from 34% 10 years ago. And it's expected to keep going higher! That's good news for our E&P and midstream industries.

01/19/2017

That big economic meeting in Davos, Switzerland is underway. I think I'd rather be skiing if I visited Switzerland this time of year, but I digress. This story http://www.cnbc.com/2017/01/18/shale-now-part-of-the-game-says-ihs-markit-chairman.html suggests OPEC is "adjusting" to US shale. They had better! Although the break-even prices for oil in the US shale plays is higher than production break-even points for most OPEC producers, that's not the point. OPEC countries are "petro states," meaning the oil revenue supports much of their governments' spending. These petro states need a higher oil price to balance their countries budgets than most US shale oil producers need to turn a profit. And that will continue to be a thorn in OPEC's side until and unless global demand picks up substantially.

10/24/2016

This is part of the Wichita Falls advantage for the Dillard energy program -- real expertise. Joining the class a few weeks ago were three highly pros in the drilling/completion/production business. Tom Perkins (Trio Engineering), Charlie Gibson (Cobra Oil and Gas), and Bob Gilmore (SJOC) shared their insights with the introductory energy management class.

07/07/2016

Interesting article in Bloomberg today about the gap in oil industry leadership. What's bad for the industry is an opportunity for those interested in careers in the O&G inddustry. http://www.bloomberg.com/news/articles/2016-07-07/lost-generation-of-oil-workers-leaves-few-options-for-next-boom

The oil industry is fighting a generation gap.

06/16/2016

I'm currently reading a book about acquisitions and divestitures in the O&G industry. The Dallas Morning News today has an article that illustrates several points. Devon is selling 28,000 acres in the Permian Basin to Pioneer for $435 million ($15,500 an acre). Not only does the acreage have some production (unspecified in the article) but some of the land is adjacent to current Pioneer leases, giving Pioneer more flexibility to develop horizontal wells. That makes the land more valuable to Pioneer than would normally be the case. It's interesting that Devon, itself a major player, is choosing to sell this Permian Basin acreage simply because in a world of $50-60 oil, the Permian is seen as the most profitable play. Here's the article: http://www.dallasnews.com/business/energy/20160615-irving-based-pioneer-natural-resources-already-big-in-permian-oil-just-got-bigger.ece

Oil and gas companies -- and their customers -- who are wondering if the recent rise in crude oil prices will have an impact on Texas production got a clue Wednesday: Dallas-based Pioneer Natural Resources just announced it's buying 28,000 acres in the Permian basin.

06/07/2016

Just read an interesting article about a potential "long term casualty" from the recent low oil price era: deepwater drilling. The article discussed how several majors are paying to terminate deepwater contracts and responsibilites. The author, Keith Schaefer, contended that the risk and long-term investment needs of deepwater development doesn't fit the likely volatile / reduced price environment he sees as the "new norm." Given that offshore production currently accounts for about 22MM bbl a day, where will the oil come from as deepwater production declines? Shale, according to Schaefer. Shale offers shorter drilling to production timelines, less exploration risk, and decreasing costs.

05/24/2016

Talk about prime (subterrainian) real estate! A company just bought the mineral rights to almost 30,000 acres in the Permian Basin for .... $280.5 million dollars! If you do the math that's about $9,000 per acre. There's some existing production, about 280 BOE/day, but that's still a lot of money to pay. Black gold indeed!!!

04/12/2016

Some politiicans are talking about banning fracking because it's "bad for the environment." The reality is the opposite; fracking is good for the environment. CO2 emissions in the US are falling, and falling faster than just about anywhere else in the world. The main reason for this reduction is fracking, because fracking has vastly increased the amount of natural gas being produced in the U.S. This abundance has led to lower NG prices and triggered a shift away from coal-fired electrical generation to NG-powered plants. If you are worried about CO2 emissions this shift is a great thing, as a NG-powered plant produces about half the CO2 a coal-fired plant produces per unit of electricity generated. Plus, NG plants can be brought on and off-line easier than can coal-fired plants. This "dial up-dial down" flexibility of NG plants makes it easier to incorporate variable generation sources like solar and wind into the electrical grid. The Texas ERCOT grid is a great example of this success: Texas has far more wind generation capacity than any other state and is able to successfully incorporate this unpredictable resource because it has more NG powered capacity than it does coal-fired capacity. I hope the next time you hear someone say fracking is ban for the environment you can help them see a more complete picture.

04/11/2016

Keep you eye on Germany. Seeking to close all of its nuclear power plants and reduce fossil fuel use for electricity generation, Germany moved aggressively to promote solar and wind adoption. Now the Daily Caller is citing a German newspaper http://dailycaller.com/2016/04/08/germany-to-abandon-1-1-trillion-wind-power-program-by-2019/ to say that Germany is scaling back its wind push. If true, that's a big deal. As I said, keep your eye on Germany.

Germany plans to stop building new wind farms by 2019, gradually turning away from its $1.1 trillion wind power program, according to a Thursday report in Berliner Zeitung. The government plans t

04/05/2016

Sometimes you have to search hard to find a silver lining in dark clouds. A WSJ writer did fine one for the current dark clouds of low crude prices http://blogs.wsj.com/economics/2016/04/05/cheap-oil-means-record-u-s-trade-surplus-with-opec/. Seems the U.S. ran a trade surplus with the OPEC nations in Febuary. It's only the second time it's happened in 30 years. What the author didn't add was that US imports of OPEC oil has been declining steadily since 2008. Thanks to the all that have boosted US production over the past eight years!

The U.S. posted a record trade surplus with OPEC in February thanks to cheap oil.