Pipeline conversion project to help reduce price spread
I wrote in Friday’s paper about how new and expanded pipeline projects over the next two years are expected to move more oil to the Gulf Coast and alleviate the backlog at Cushing.
An article in the Calgary Herald on Friday explains how another pipeline conversion project could further help move oil more freely throughout the country.
Calgary-based Enbridge Inc. and Houston-based Energy Transfer Partners plan to spend up to $3.4 billion over the next two years to convert an existing natural gas pipeline to transport crude oil from Patoka, Ill., to the St. James hub in Louisiana.
When completed, the line is expected to transport 420,000 to 660,000 barrels of oil per day.
Oklahoma City-based Continental Resources Inc. and other producers in the Bakken Shale in North Dakota and Montana could be among the biggest beneficiaries from the proposed line.
Continental transports most of its Bakken crude by train to refineries on the east and west coasts.
Report: Chesapeake to help EPA with hydraulic fracturing study
Chesapeake Energy Corp. will let the U.S. Environmental Protection Agency conduct extensive tests at one of its well sites to determine if hydraulic fracturing is safe, the Wall Street Journal reported Wednesday.
The process, commonly known as fracking, is used to extract oil and natural gas from dense rock like shale, but it has been dogged by concerns that it contaminates drinking water.
Chesapeake, one of the nation’s leading oil and gas producers, will allow the EPA to sample water at one of its well sites before and after the well is drilled, an Obama administration official told the Journal.
A Chesapeake spokesman declined to comment on the report Wednesday night.
Texas-based Range Resources Corp. may cooperate with the EPA as well, according to the Journal, if liability concerns can be addressed.
SandRidge shareholder: ‘We’re not typical activists’
TPG-Axon Capital did not buy into SandRidge Energy Inc. with an eye on involving itself in the Oklahoma City oil company’s affairs, according to its chief executive.
“We’re not typical activists,” CEO Dinakar Singh said Tuesday on CNBC.
But Singh said the hedge fund identified the stock as one with potential growth value, so it launched an effort to replace CEO Tom Ward and the rest of SandRidge’s board.
Singh, who served as a guest host Tuesday on CNBC’s Squawk Box, said SandRidge has valuable assets, but its overhead spending — including compensation for Ward — are too high.
“This company is the single worst-performing energy stock in the Russell 1000 since its IPO five-and-a-half years ago,” he said. “The stock is down over 70 percent.”
Singh said a leadership change at SandRidge seems to be the only way to rein in the company’s spending.
TPG-Axon, which owns about 6.7 percent of SandRidge’s outstanding stock, has launched a consent solicitation, asking its fellow SandRidge shareholders to approve its plan to replace the board. It has proposed a new board, headed by Singh.
SandRidge has urged shareholders to reject the TPG-Axon plan.
Chesapeake selling more acreage in Oklahoma, Texas
Chesapeake Energy Corp. has two more listings with broker Meagher Energy Advisors as it continues to sell assets to offset a looming budget gap.
The Oklahoma City-based oil and natural gas company has raised $11.1 billion from asset sales this year.
Chesapeake is trying to bring in $14 billion, plus another $19 billion next year, to fund its ongoing operations and reduce debt.
Some of Chesapeake’s smaller offerings have been handled by Meagher, including two recently posted listings.
Chesapeake is selling more than 37,000 net acres in four southern Oklahoma counties and 14 wells in Grayson County, Texas.
The Oklahoma acreage — in Love, Carter, Bryan and Marshall counties — includes 42 wells, with net sales of 1.443 million cubic feet of natural gas and 6 barrels of oil a day over the past year. Chesapeake holds a net royalty interest of 21.39 percent in those wells.
The Texas wells are spread over more than 3,200 acres. Chesapeake’s gross production from those wells last year averaged 1.064 million cubic feet of gas and 52 barrels of oil a day.
Chesapeake also is selling about 28,000 acres in three western Oklahoma counties. That listing has been active since October.
Oklahoma helps U.S. boost oil production to highest level since 1998
The United States produced almost 6.5 million barrels of crude oil a day in September, according to the U.S. Energy Information Administration. That is the country’s highest volume in nearly 15 years.
The last time the U.S. produced that much oil was in January 1998.
U.S. production has risen by more than 900,000 barrels a day since September 2011 due to the combination of horizontal drilling and hydraulic fracturing.
Texas and North Dakota have posted the largest increases, but EIA says production in Oklahoma has grown by more than 56 percent since January 2010. The state produced 250,000 barrels of oil a day in September.
Oklahoma was one of five states spotlighted by EIA as smaller-volume producers whose output has risen over the past few years.
Icahn boosts Chesapeake stake
Carl Icahn
Activist investor Carl Icahn has increased his stake in Chesapeake Energy Corp.
Icahn purchased almost 10 million shares of company stock since last week, according to a regulatory filing. That increases his holdings to nearly 60 million shares.
Icahn, who was part of an investor uprising at Chesapeake this year, now controls almost 9 percent of Chespeake’s 665 million shares of outstanding stock, making him the company’s second largest shareholder behind Memphis-based Southeastern Asset Management.
Icahn and his companies have spent about $951 million, including commissions, to amass its stake in Chesapeake, the filing states. He spent nearly $166 million in the past week to add 9.6 million shares at an average price of $17.42 each.
Chesapeake shares rose in early trading Tuesday after the U.S. Securities and Exchange filing on Icahn’s added stake. It was trading at $17.56 a share, up 9 cents, about noon Tuesday.
VIDEO: Chesapeake CEO Aubrey McClendon on CNBC
In case you missed it, here’s Chesapeake Energy Corp. CEO Aubrey McClendon talking to Jim Cramer on CNBC last night.
Chesapeake adds more Oklahoma acreage to sale list
Chesapeake Energy Corp. is selling more of its acreage in Oklahoma because the cash-strapped company cannot afford to develop it.
A listing for about 28,000 net acres held by Chesapeake in three western Oklahoma counties was listed Thursday on the website of broker Meagher Energy Advisors. The acreage is part of the Granite Wash and Hogshooter horizontal plays.
“Chesapeake is offering this unique exploration and development opportunity because its current drilling budget is not sufficient to fully develop its leasehold in this area,” according to the listing.
The acreage includes 113 producing wells, with net sales of 765 barrels of oil, 684 barrels of natural gas liquids and 9,935 thousand cubic feet of natural gas a day over the past year.
Chesapeake trumpeted its holdings in the Hogshooter play in June as a new discovery expected to provide a significant boost to the company, which is shifting its focus from land acquisition to asset harvest. Officials said that acreage is not the same as the holdings now listed for sale.
“The West Turkey Creek Granite Wash and Hogshooter Wash acreage that is for sale is a small non-core package of acreage and not connected to our significant Hogshooter discovery in Texas that was announced earlier this year,” spokesman Michael Kehs said.
The company has spent much of the year looking to sell assets to overcome a looming cash shortage.
Chesapeake has raised about $11.6 billion this year, but the company is looking to raise as much as $14 billion this year to offset an anticipated budget shortfall.
Chesapeake also is selling acreage in southern Oklahoma, Michigan, Ohio, Colorado and Wyoming through Meagher. Officials have said the company also is looking to find a joint venture partner for its acreage in the Mississippi Lime in northern Oklahoma and southern Kansas.
Devon Energy Corp. to consolidate operations in Oklahoma City
Devon Tower in Oklahoma City, Tuesday, June 12, 2012. Photo By Steve Gooch, The Oklahoman
Devon Energy Corp. is consolidating its operations in Oklahoma City and shutting down its offices in Houston.
“Consolidating our U.S. operations will improve our ability to quickly shift the focus of our workforce between project areas as economic conditions dictate,” said Dave Hager, Devon’s executive vice president of exploration and production. “In addition, this move will improve the sharing of best practices and enhance overall operational efficiency.”
Devon intends to relocate employees who oversee operations in south Texas, east Texas and Louisiana from Houston to Oklahoma City by early next year.
The move is expected to save the company about $80 million a year in lower administrative expenses and personnel costs.
Devon estimates the reorganization will cost about $125 million, with most of those costs being incurred this year.
The Oklahoma City-based oil and natural gas company recently completed a new 50-story headquarters building downtown. It has room for the employees who had been in Houston, but company officials declined to say how many of Devon’s 500 Houston employees would move to Oklahoma City.
Documentary “Switch” takes balanced look at global energy needs
A new documentary on energy, “Switch,” is getting good reviews from both environmentalists and those in the energy industry.
I had the chance to see it last night at a screening in Oklahoma City. (It continues tonight and Thursday.)
I’ve seen the controversial fracking film “Gasland” and the energy industry’s response, “Truthland,” so my tolerance for talking points on both sides of the debate was fairly low. I was pleasantly surprised by the depth and measured tone of “Switch.”
The movie, which was made with the help of the American Geosciences Institute foundation, follows geologist and University of Texas professor Scott Tinker around the world as he explores where and how our energy is harvested. It includes some spectacular shots of massive coal mines in Wyoming, hydro projects in the fjords of Norway and wind farms in Texas.
“Switch” also features a short interview with Chesapeake Energy Corp. CEO Aubrey McClendon and follows a Chesapeake “fracking” crew out in the field. The documentary doesn’t shy away from discussing the public concerns about hydraulic fracturing and has interviews with environmentalists, policy makers and industry officials.
But “Switch” is more than just fracking. It takes a comprehensive look at the world’s energy needs, with a particular emphasis on the rapidly growing demand for energy in China, India and other developing countries. The takeaway? Those countries will be using coal and oil to meet their future energy needs, and there’s little the developing world can do about it.
It doesn’t take long for serious discussions about energy to get complicated, but “Switch” boils down all the talk of megawatts and BTUs to a simple unit: the amount of energy an average person uses in a year. (If you’re curious, Tinker defines it as about 20 million watt-hours of energy.) From an oil platform in the Gulf of Mexico to a concentrated solar plant in Spain, the movie defines the energy produced in terms of how many people it would power.
For all the technology improvements in energy, “Switch” makes it clear that it comes down to scale. A technology advancement or discovery might be great, but if you can’t scale it up to serve large numbers of people, then it will remain a niche solution. Through a combination of renewables and nuclear power, the film estimates the world will reach a “switch” point in 2064. That’s when the use of renewables and nuclear will match the use of “foundational” fuels coal and oil.
The last part of “Switch” focuses on energy efficiency and what individuals can do at home to save money–and energy. The efficiency side of the equation is often forgotten about in the political fights over energy policy, but the film makes it clear that the energy we waste is just as important as the energy we create use.
If you can’t make it to the remaining screenings in Oklahoma City, check out the “Switch” website, which has short videos and some highlights from the documentary.
