Noble Energy Focusing Efforts On Horizontal Play In Colorado

One million dollars used to be a lot of money; now it almost seems like pocket change.
Peter

Unit buying Noble Energy fields for $617 mln

9:08 AM ET, 07/11/2012 - MarketWatch Pulse News Bullet

NEW YORK (MarketWatch) -- Unit Corp. said Wednesday it will pay $617 million in cash to buy Noble Energy Inc. acreage in Texas and Oklahoma. Noble said the transaction is part of an effort to sell non-core assets. "It will provide additional flexibility in the implementation of our international program and the acceleration of the horizontal oil play in the DJ Basin (of Colorado and Wyoming)." The deal includes 84,000 acres in the Granite Wash, Cleveland and Marmaton fields of western Oklahoma and the Texas panhandle. Unit said the deal will add to its earnings in 2013. "We look forward to accelerating development of these assets and delivering growth to our shareholders over the next several years," Unit said. Unit plans to finance the acquisition with long-term debt.

Hydraulic Fracturing Continually Being Improved

The fact that hydraulic fracturing is becoming more efficient should be no surprise.  Unencumbered free enterprise and competition always leads to better results.
Peter

COLUMN-Smart fracking will cut costs and save environment: Kemp

Thu Jul 5, 2012 11:29am EDT

source: http://www.reuters.com/article/2012/07/05/column-kemp-fracking-efficiency-idUSL6E8I5A9S20120705

By John Kemp

LONDON, July 5 (Reuters) - Pressure to respond to falling oil and gas prices by cutting operating costs, coupled with the need to reduce the social and environmental footprint on host communities, will force fracking firms to employ a more targeted approach to drilling wells and hydraulic fracturing in future.

More than a million fracturing operations have been conducted in the United States since 1947, according to the U.S. National Petroleum Council, yet in many ways the technology is still immature.

In many instances, fracturing remains an expensive, brute force exercise that wastes resources while causing unnecessary disruption to affected communities.

The relative inefficiency of current fracking approaches was highlighted by Paal Kibsgaard, chief executive of oilfield services company Schlumberger, in a speech back in March .

Too many wells are being drilled into parts of shale formations that have poor production potential, Kibsgaard said.  (This is why all wells should be geosteered...Peter)

The horizontal section of wells are often being fracked at regular intervals along the entire length even though significant parts of the laterals have limited or no production potential because the geology is not favourable.  (Yes, geologists play a vital role....  Peter)

And in many cases the amount of horsepower and water being applied in each fracking operation is excessive. Massive fracturing networks are being created that extend more than can be propped open with frack sand, and where the unpropped part offers little or no contribution to production.



FINDING SWEET SPOT

In a recent report, researchers for the U.S. Geological Survey (USGS) concluded that "production from the most productive wells in an area is commonly more than 100 times larger than from the poorest productive wells."

For gas wells drilled into the Haynesville Sabine Platform, which lies under parts of eastern Texas and Louisiana, the most productive are expected to yield 20 billion cubic feet of natural gas over their lifetime. But expected ultimate recovery (EUR) from the median well is just 2 billion cubic feet, and at the low end some wells will yield just 20 million cubic feet, according to the USGS.

In the case of oil wells drilled into heart of the Eastern Expulsion Threshold of North Dakota's Bakken Formation, which is the most productive part of the whole area, the best wells are expected to yield as much as 5 million barrels, but the median expected is just 120,000, and some of the worst wells may yield as little as 2,000.  (Doing it right separates the winners from the losers.....Peter)



MINIMISING TRAFFIC

Indiscriminate drilling and fracking imposes enormous unnecessary disruption on local communities and is hugely expensive for drilling firms.

For a gas well "each hydraulic fracturing stage pumps around 300,000 gallons of water and up to 200 tons of sand down a well" according to Rick Carr and Sam Pearson of Deloitte Consulting in an article published in "Oil and Gas Journal" ("Unconventional drilling requires managing transportation logistics" June 4).

"A typical development in the Marcellus region can result in 20,000 to 30,000 truckload movements per (drilling) rig per year. Compound these requirements by the fact that there are a total of 138 rigs operating in Marcellus and it becomes easy to understand how transportation is such a concern. Similarly, an estimated 270 rigs are now active in the Eagle Ford, and capacity constraints are becoming a concern" they write.

Carr and Pearson emphasise the importance of careful logistics management to minimise disruption and reduce costs.

According to Deloitte's Wellsite Logistics Model, four wells drilled from a single pad can involve 1,200 truckloads of water for the fracturing and over 800 truckloads of gravel, with more truck movements for equipment and other supplies.

Moving a single rig can involve "50-60 truckloads of large, heavy equipment over a 10-mile distance over a six-day period, while fluid hauls involve the constant movement of more than 200 loads of fresh and produced water each day".



INTELLIGENT FRACKING

Careful management can minimise traffic, but the most effective way to cut costs and disruption is to avoid drilling unnecessary wells in low productivity areas, and avoid unnecessary fracturing stages in parts of laterals that have little or no chance of yielding gas, condensates or crude.

"The combination of optimised well location, well path and completion design is the key in achieving more with less, in terms of production, recovery and costs" according to Schlumberger's Kibsgaard.  (Just in case anyone wonders why engineers and geoscientists are in such high demand.....Peter)

Schlumberger cites one completion in the Marcellus where the client achieved 40 percent higher production, in part by fracking only the intervals around the best quality shale rather than spreading them evenly over the horizontal length.

Schlumberger hopes its UniQ seismic surveying system, with improved imaging quality, "will help better predict the variations in shale reservoir quality" and permit better targeting.

Rather than be in the business of providing vast amounts of horsepower, which Schlumberger sees becoming commoditised, the firm wants to focus on technology like imaging and specialist fracking fluids, where it will continue to have more market "leverage".

With natural gas prices under intense pressure in North America, and at least some analysts predicting oil prices have peaked for the time being, other production and services companies seem set to follow Schlumberger in following a more sophisticated system.

The focus is shifting from brute-forcing fracking to a more targeted and technology-intensive approach that seeks to minimise waste and costs, while boosting output per well, thereby doing more with less, and reducing the damaging effects on the environment and local residents.



References:

(1) "Kibsgaard speaks at 40th annual Howard Weil energy conference" March 26, 2012:

(2) "Variability of distributions of well-scale estimated ultimate recovery for continuous (unconventional) oil and gas resources in the United States" USGS, 2012:

Money Flowing Into American Oil and Gas From Overseas

We hear very little about the large investments foreign companies are making in oil and gas exploration and production activities in the United States.  I don't know why this is not talked about much in the news, but during these difficult economic times, we Americans should be grateful.
Peter

Big overseas investors supply momentum for North American shale growth

 

July 5, 2012

Don Warlick, Warlick International
Entities outside the US and Canada are funding a surprisingly large share of development in unconventional oil and gas plays -- and that trend should continue.
Typically these are IOCs (international oil companies), state-backed investment groups or other foreign-based entities investing not only for financial gain but also to acquire technical knowledge about unconventional oil and natural gas development that can be applied in undeveloped shales in their own countries. In return US and Canadian energy companies receive funding to develop important shale plays and establish new reserves.

These investments are significant -- in a recent analysis by PricewaterhouseCoopers, 191 M&A deals worth $187 billion were announced in 2011. That was an increase over 2010 which had 196 deals worth $139 billion. The average deal in 2011 was $979 million (up more than 38%, on average over 2010).
Who is making these investments? Companies based in France, China, Japan, Spain, South Korea, Norway and Australia are among recent investors making financial commitments. Some examples:

Continued here: http://www.ogfj.com/articles/2012/07/big-overseas-investors-supply-momentum-for-north-american-shale-growth.html

Oil and Gas Industry Creates Jobs: America Should Be Proud And Thankful

Let's look at the bright side of things in America: the oil and gas industry.  During these unusually hot summer days I wonder how many people understand how the electricity is generated that powers their air conditioners enabling them to live so comfortably.  The same applies to heating in the winter, and the abundance of food made available to us year-round.  The source of these wonders is mostly oil and gas and coal.  And of course the production of these commodities creates jobs, which creates taxes, which pays (at least partly) the government's bills.  Let's take some time to be thankful for the oil and gas industry and all the people making this possible.
Peter

Oil and Gas: America’s Brightest Job Spot

by Robert Bradley Jr.
July 5, 2012

source: http://www.masterresource.org/2012/07/brightest-jobs-oil-and-gas/

“For many American families, struggling to make ends meet in the jobless recovery, energy development is an answer to a prayer. The fact that the oil and gas boom has been done without taxpayer subsidies—and despite reactionary public policies at the federal level and in some states (such as New York)—means that more economic opportunity is on tap.”

In this so-called “jobless” recovery, aka the Great Recession, an estimated 20 million American workers are unemployed or underemployed. One out of every two college students cannot find work in their chosen fields. Competition for well-paying jobs is likely to become even tougher when thousands of men and women in uniform return home from Afghanistan and look for ways to support their families.

Although many U.S. industries have been reluctant to hire new workers due to political and economic uncertainty, the oil and natural gas industry is booming worldwide. Jobs are available on offshore rigs, at service companies that support energy production activities, and onshore where technologies are unlocking energy supplies from impermeable rock deep underground.

Hydraulic fracturing, directional drilling, and 3- and 4-D computer modeling, among other high technologies, are helping to produce oil and natural gas from shale formations that once were believed to be too difficult or too expensive to tap. In the process, they are creating jobs at large and small companies in dozens of states. In the bigger scheme of things, this renaissance means that the hydrocarbon energy era has an open-ended future.

In North Dakota, where drillers are producing crude oil from the Bakken Shale, workers are finding jobs offering wages that are significantly higher than the national average. Truck drivers are being paid $80,000 a year to start. Some workers on oil rigs are being paid six figures. And yet many jobs are going begging. According to the mayor of Williston, “A lot of jobs get filled every day, but it’s like for every job you fill, another job and a half opens up.” In April, North Dakota had a jobless rate of 3.0 percent, the lowest in the country.

In Pennsylvania’s Marcellus Shale region, tens of thousands of jobs have been created, opening opportunities for unskilled laborers to obtain training and earn excellent wages. According to the state’s Department of Labor and Industry (Center for Workforce Information and Analysis), jobs for drill operators are expected to grow by nearly 85 percent this year, while the job growth rate otherwise in Pennsylvania is projected to be less than three percent.

The expansion of the oil and natural gas industry is also occurring at Texas’s Eagle Ford, Louisiana’s Haynesville Shale, Arkansas’ Fayetteville Shale and other energy-rich rock formations. Taken together, they are increasing domestic energy supplies, making energy more affordable, and spawning subsidiary investments in the private sector creating additional jobs.

A steel plant in Ohio is adding 200 jobs to produce more drill pipe. A new ethane plant in Texas, which will use natural gas to produce plastics, is expected to generate 400 jobs. Frito-Lay is purchasing natural gas-powered trucks to deliver consumer products around the country. New cleaner-burning gas-fired power plants are being built to replace old coal-fueled electricity generating facilities. (But expect coal-fired power to improve its technology too to remain competitive in many respects.)

These jobs are being created by companies, not the federal government. And they are based on “made in the USA” technologies that have the potential to greatly increase nation’s energy security and alter the world’s balance of power. As U.S. oil and natural gas supplies increase, some experts believe American energy independence is on the horizon.

Philip Verleger, an economist at the Peterson Institute for International Economics, believes the United States could be energy self-sufficient in the next 10-plus years and could become a net energy exporter.

Yet, some environmental groups are reluctant to embrace this good news scenario. They see domestic energy’s success as a threat to their green agenda. In their continuing push to reduce carbon dioxide emissions, they are working to stop hydraulic fracturing, shut in oil and natural gas wells, and in the process, slow or stop progress.

Their strategy is to promote fear of hydraulic fracturing worldwide. Concerns over groundwater contamination have prompted France and Bulgaria to ban fracturing and other countries are considering moratoria. Yet, despite efforts to find a link between fracking and drinking water pollution, U.S. Environmental Protection Agency (EPA) investigations have found no credible evidence to support the claim
.
Energy experts believe the reluctance of other countries to develop their shale resources is giving the United States a market advantage, prompting interest in exporting liquid natural gas (LNG) from the Gulf Coast. Italy, Lithuania, and Poland are building terminals to accept LNG imports, and LNG imports to the European Union are expected to grow by nearly 75 percent by 2035. Energy expert Daniel Yergin calls Europe “an obvious market” for U.S. LNG.

The home-grown energy renaissance could become a major reversal of fortune, wiping out 40 years of worry over U.S. reliance on foreign energy sources. According to an analysis by Wood Mackenzie, it also could create an additional one million jobs by 2018 if the government opened more onshore and offshore areas to exploration and development.

For many American families, struggling to make ends meet in the jobless recovery, energy development is an answer to a prayer. The fact that the oil and gas boom has been done without taxpayer subsidies—and despite reactionary public policies at the federal level and in some states (such as New York)—means that more economic opportunity is on tap.
—————-
Note: An earlier version of this op-ed appeared in The Hill (Washington, DC

Fast Pay-Out For Shale Wells

It looks like these wells have a fast pay-out, with the majority of revenue coming within the first five years of production.  That may not make everyone happy, but I think investors like it.  However, with such low current natural gas prices, most operators are just leaving the gas in the ground for the time being.
Peter

Production Profiles: Shale Play WellsJuly 2, 2012 | Energy Information Administration
The EIA Annual Energy Outlook 2012 report includes information about projected average production profiles for shale gas wells in major United States shale plays by years of operation.


Thanks to geology.com for the link.

Huge Economic Impact Of Eagle Ford Shale, Largely Unknown Outside Of Texas

Much of this development and its significant economic impact is due to the combination of the relatively new technologies of horizontal drilling and hydraulic fracturing.  Amazingly, the oil and gas industry derives very little positive recognition from these feats, including equally important oil and gas development plays like the Marcellus Shale in the northeastern U.S., the Barnett Shale in north central Texas, the Haynesville Shale in northwestern Louisiana, and the Bakken Formation development in North Dakota.

The environmental lobbyists and global warming scare-mongers have been so effective with their propaganda they have managed to effectively squelch these great achievments and largely hide them from the American public.  As some might say, "go figure", are they with America or against her?
Peter

Eagle Ford Shale Generated More Than $25 Billion in Revenue for South Texas in 2011

UTSA projects the shale to create 117,000 jobs by 2021

Source: http://ccbr.iedtexas.org/

Click to Downlaod the Eagle Ford Shale Impact Report

Written by Christi Fish
Associate Director of Media Relations, The University of Texas at San Antonio

SAN ANTONIO, May 9, 2012 – Development of oil and natural gas in the Eagle Ford Shale contributed $25 billion in total economic output to the region in 2011, according to a study released today by the Center for Community and Business Research at The University of Texas at San Antonio Institute for Economic Development (UTSA).
"The Eagle Ford Shale has proven to be one of the most important economic engines in the state," said Dr. Thomas Tunstall, director of the UTSA Center for Community & Business Research, and the study’s principal investigator. "In 2011 alone, the play generated over $25 billion in revenue, supported 47,000 full-time jobs in the area, and provided $257 million in local government revenue."
The study also concluded that in 2011 shale development:

• Paid $3.1 billion in salaries and benefits to workers;
• Provided more than $12.6 billion in gross regional product;
• Added more than $358 million in state revenues, including $120.4 million in severance taxes;
• And spurred a triple-digit sales tax revenue increase in various local counties.
  

  Download the Eagle Ford Shale Impact Presentation

"We view the Eagle Ford activity as an economic opportunity of a lifetime," said Mario Hernandez, president of the San Antonio Economic Development Foundation. "The key goal is the increase in investment and jobs. And if the communities will partner with the private companies that are creating these jobs, it can be a win-win for everybody."

The increased revenue from the Eagle Ford Shale is rebuilding local communities. New schools and new hospitals are being built, and new training programs have been launched to maximize hiring from the local workforce. The study projects the creation of approximately 117,000 full-time jobs by 2021.

View the video recording of the Eagle Ford Shale Impact Presentation and Study Release from May 9, 2012

HUGE Numbers For Apache..

67,000 drilling locations in Texas and Oklahoma alone!  That ought to keep a lot of people busy for a long time.  These so-called "resource plays", which are basically low porosity and permeability rocks containing oil and gas that become economic to produce because of the combined technologies of horizontal drilling and hydraulic fracturing. 

These are truly revolutionary developments in the history of the oil and gas industry.  It amazes me how few people are aware of the significance of this.  Try to grasp the magnitude of the numbers Apache is throwing around in the following article.  To say the least, it looks like "Peak Oil" has been pushed into the future.  Make your plans accordingly.
Peter

Apache Details Liquids-Rich Identified Resource Inventory

9.2 billion net barrels of oil equivalent, 67,000 drilling locations in Permian and Anadarko
New U.S. resource plays: 580,000 acres in Mississippian Lime, 300,000 acres in Williston Basin
48 Tcf net sales gas in British Columbia's Liard Basin

RELATED QUOTES

Symbol	Price	Change
APA	85.42	+2.45

HOUSTON, June 14, 2012 /PRNewswire/ -- Apache Corporation (NYSE, Nasdaq: APA) today released new, detailed resource estimates of its oil- and liquids-rich portfolio, including substantial Permian and Anadarko basin holdings, recently acquired acreage in the liquids-rich Mississippian Lime and Williston Basin resource plays, and significant new plays and oil exploration prospects in Canada, Argentina, Alaska and Kenya.
"For Apache, this is the time to drill more wells: We have captured a vast, liquids-rich resource base and drilling costs are declining," said G. Steven Farris, Apache's chairman and chief executive officer. "By remaining committed to Apache's historical focus on returns and preserving our conservative financial structure – which means living within our cash flow – our portfolio is positioned to continue to deliver long-term growth and value for our shareholders."
Resource estimates released Thursday at the company's annual investor day include:

• Apache, the second-largest producer and acreage owner in the Permian Basin of West Texas and eastern New Mexico, has identified approximately 34,500 drillable locations with an estimated net resource of 3.8 billion barrels of oil equivalent (Boe).
• In the Anadarko Basin in western Oklahoma and the Texas Panhandle, Apache has identified approximately 32,500 drillable locations primarily in the Granite Wash, Cleveland, Tonkawa and Marmaton formations with an estimated net resource of 5.4 billion Boe.
• In northern British Columbia, Canada, Apache has validated an outstanding new shale play in the Liard Basin with net estimated sales gas of 48 trillion cubic feet of natural gas (8 billion Boe) across 430,000 acres held with a 100-percent working interest.
  The resource estimate at Liard is based on recent drilling, test results and earlier well control points. "The D-34-K well is one of the best shale wells we've seen in any play," Farris said. "Our analysis indicates that the formation characteristics are remarkably consistent across this large basin."
• In Argentina, Apache estimated that its 450,000-acre position in the Vaca Muerta oil shale has a net potential recoverable resource of 800 million Boe.

New exploratory oil prospects include:

• Apache has built a 580,000-acre (net) position in the Mississippian Lime play in Kansas and Nebraska with an inventory of 7,200 potential locations and an estimated resource potential of 2 billion barrels of oil.
• Apache assembled a 300,000-acre position (net) in the Williston Basin in Daniels County, Montana, with more than 1,900 potential locations and potential resource of 1 billion barrels of oil.
• In Alaska – where this year Apache plans to drill its first well – the company has identified 1.3 billion barrels of oil of yet-to-be-found potential.
• In Block L-8 offshore Kenya, Apache has identified eight prospects with net potential of 1.4 billion barrels of oil. Apache expects to commence drilling its first well in the deepwater block in the third quarter.

"Apache has captured the largest inventory of liquids-rich drillable locations in our history, including additional upside potential from exploration activities in the deepwater Gulf of Mexico, Egypt and Australia," Farris said. "We are well-positioned to deliver long-term profitable growth with our balanced portfolio, focus on rate of return, and prudent financial structure."

About Apache

Apache Corporation is an oil and gas exploration and production company with operations in the United States, Canada, Egypt, the United Kingdom North Sea, Australia and Argentina. Apache posts announcements, operational updates, investor information and copies of all press releases on its website, www.apachecorp.com.