Texas Drilling Observer
the oil and gas regulatory report  --  Patrick C. Forbis - Editor & Publisher

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Commodities on 12-12-2017

West Texas Intermediate Crude
Cushing Spot:     $57.13 per Bbl
Natural Gas
Henry Hub Spot: 
$2.82 per mmbtu
Baker-Hughes Texas Rig Count
as of 12-8-2017:         459 Rigs

 We Also Offer a Database of Active Disposal/Injection Well Applications & RRC Docket Applications - Updated Weekly - SAMPLE HERE

What We Cover:
Industry Headlines
Notice of New & Approved Disposal Well Applications
(Lease & Commercial)
Notice of New & Approved Enhanced Oil Recovery Applications (New Projects
& Expanded Projects)
New Field Discovery Approvals & New 'Wildcat' Well Completion Summaries
Summaries of Railroad Commission Hearings, New Notices of Hearing and Summaries of New Cases Awaiting Issuance of 
Notice of Hearing
Summaries of Proposals
for Decision Issued by the Railroad Commission in Protested Oil & Gas Cases
Summaries of Issued Notices of Application for Well Spacing and Well Density Exception Permits
» We List the Entities, Individuals, Trusts and Operators Affected by New Regulatory Applications
» Plus Summaries of New
Oil & Gas Well Completions, Recompletions & Re-Entries
» We Also Provide a "You're On Notice" Companion Report with each Newsletter that Alerts those Impacted
by New Applications

 Current Texas Oil & Gas Industry Statistics

» This past September there were 903 drilling permits issued statewide by the Texas Railroad Commission. By comparison there were 746 drilling permits issued by the Commission during September 2016. August 2017 crude oil production from Texas averaged 2.43 million barrels per day, up from the 2.42 million barrel per day average of August 2016 (these figures do not include condensate from gas wells). Natural gas production from Texas wells averaged 18.83 Billion cubic feet per day in August 2017. That’s down from the August 2016 gas production average of 19.57 Bcf per day (these figures include casinghead gas production volumes). These preliminary figures are based on oil and gas production volumes reported by operators and will be updated by the Texas Railroad Commission as late and corrected production reports are filed. Over the last 12 months, total Texas reported production was 999 million barrels of oil and 7.6 trillion cubic feet of natural gas. Texas production in August 2017 came from 179,726 oil wells and 92,729 natural gas wells.

 New RRC Rules go into Effect Regarding Gas Well Testing & Inactive Wells

» New Texas Railroad Commission rules went into effect at the start of this year that will ease burdens for required semi-annual testing of natural gas wells and reduce the monthly production levels required for oil and gas wells to be classified as active. The new gas well testing requirements allow for estimated shut-in well head pressures to be reported, rather than measured, so long as it is accompanied by a letter from a licensed professional engineer. The Commission identified this change as a significant cost saving measure for the industry. The rule changes regarding inactive wells that went into effect January 1st allow an active well to be defined as one that produces at least 5 barrels of oil per month or 50,000 cubic feet of gas per month for at least three consecutive months or at least 1 barrel of oil per month or 1,000 cubic feet of gas per month for 12 consecutive months. The old rules required double that amount of production for a well to be classified as active. Allowing more low volume producing wells to be classified as active will save operators time and money by exempting them from the additional regulatory requirements imposed on inactive wells across the state.

  RRC Asks for Additional Dollars, Changes to Funding Mechanisms

The budgeting woes of the state’s oil & gas regulatory agency were on display in early February, when Railroad Commission chairwoman Christi Craddock laid out the challenges the Commission has been facing during the down-turn before the Senate Finance Committee and asked for changes to the sources that fund the agency. According to Craddick, last year the agency faced a $16.6 million dollar shortfall in revenue from its permitting and licensing fees, representing about 21% of its overall annual budget. Beginning in 2011, the Legislature changed the funding mechanisms for the Railroad Commission to be based largely on the fees it collects from the oil and gas industry – fees that were previously dedicated solely to the oilfield cleanup fund – which is used to clean oilfield sites and plug abandoned wells left by defunct operating companies. The Commission is asking the Legislature for $4.3 million in additional funding over the next two years to better retain its staff. Craddick said that most critical staffing needs are for more oil field and pipeline inspectors that check on compliance and landowner complaints – especially in the Midland area. The Railroad Commission is also asking that the Legislature to redirect the $24 million that the Commission collects annually in gas utility taxes towards its budget rather than sweeping it into general state revenue.

  Vanguard Files for Bankrupcy

» Vanguard Natural Resources announced that it has filed for bankruptcy protection. The company operates more than 350,000 acres in the Permian Basin of West Texas and southeastern New Mexico, but also has operations in South Texas, east Texas and in the Northeastern Texas Panhandle.

  Parsley Makes Acquisition in Midland Area

» Parsley Energy announced that it was acquiring 71,000 acres in the Midland area of the Permian Basin from Double Eagle Energy is a $2.8 billion transaction. While this acreage is currently only producing about 3,600 barrels of oil equivalent per day, Parsley has identified about 3,300 possible new horizontal well drilling locations on the properties. With this acquisition Parsley now has about 227,000 acres under lease in the Permian Basin of West Texas.

  U.S.G.S. Gives 20 Billion Barrel Reserve Estimate for Wolfcamp Shale

» The U.S. Geological Survey reported that the Wolfcamp Shale covering a large section of West Texas could hold up to 20 billion barrels of oil, which would make it the largest accumulation of oil ever discovered within the U.S. The finding was issued in the agency’s report regarding the nation’s unconventional oil reserves. In addition to the 20 billion barrels the report finds that the Wolfcamp shale also contains 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas hydrocarbon liquids. While this report is not one that describes a discovery in the classical sense, it does skyrocket the reserve estimate and potential importance of the Wolfcamp Shale. So far more than 3,000 horizontal wells have been drilled into and produced from the Wolfcamp shale.

  Carthage Acquisition Announced by Castleman Commodities

» Connecticut based Castleman Commodities has closed a major acquisition from Anadarko Petroleum, a well known independent operator with extensive operations across the state. Castleman reported in a recent release that it had acquired over 160,000 acres of leasehold in East Texas from Anadarko in the Carthage area. This acreage is productive in the Haynesville Shale and other natural gas bearing reservoirs. The $1 billion deal also included purchase of Anadarko’s natural gas gathering and processing pipeline assets in the area.

  Halcon Energy Enters Delaware Basin

» Halcon Energy, which in recent months emerged from bankruptcy, is swapping its East Central Texas Eagle Ford oil properties for acreage in the southern Delaware Basin in west Texas. The company’s CEO indicated that this signals a shift in focus for the company away from the Eagle Ford near the College Station area towards West Texas’ Delaware Basin, which has been one of the hottest spots for transactions as of late and potential for significant growth in production. Denver based Hawkwood Energy bought Halcon’s 81,000 acres in the Eagle Ford for $500 million, while Halcon picked up over 20,000 acres in the Pecos, Ward and Reeves Counties for just over $700 million. The company has identified about 700 potential drilling locations on the west Texas land.

  Noble Acquires Clayton Williams Energy

Houston based Noble Energy has acquired Midland based Clayton Williams Energy in a $2.7 billion transaction. The deal allows Noble to gain significant assets in the Delaware Basin of West Texas, but not the long held properties held by Clayton Williams in the College Station area, which were sold of for $400 million this past fall. The properties Noble will gain in the acquisition includes 100,000 net acres in the Midland area and 71,000 acres in the Southern Portion of the Delaware Basin in Reeves and Ward Counties, Texas. Noble estimates that this acreage could yield more than 4,200 new drilling locations and over 2 billion barrels of oil equivalent in reserves.

  Compulsory Unitization Bill Filed

» Compulsory unitization will once again be considered during the 2017 legislative session. Current law requires that at least 66 percent of royalty owners agree to unitize their interests into a single project which is usually done to facilitate enhanced oil recovery operations in an oil field such as a waterflood project. Any royalty owner that does not agree to join the unit has their interests continue to be treated according to the terms of their lease. Compulsory unitization would force all owners to join the unit once a certain percentage of the overall interest owners in an area agree – making it easier for oil companies to conduct enhanced oil recovery operations in a field because they no longer have to worry about dancing around non-participating owners. The Bill, recently filed as Senate Bill 177 is titled the Majority Rights Protection Act, and represents the fourth time in recent years that a compulsory unitization bill and been argued during the legislative session. Proponents argue that it allows much higher oil recovery from fields and approval of project that would otherwise not be feasible – increasing the royalty revenue for landowners – while those against it argue that it runs afoul of private property rights.

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2017 Patrick C. Forbis

 Patrick C. Forbis
   Oil Industry Consultant on Compliance &
Regulatory Affairs

   Editor & Publisher
   Texas Drilling Observer

   P.O. Box 11648
   Capitol Station
   Austin, Texas
    (512) - 826-3732 - CELL

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