More Budget Cuts for Continental Resources

December 30, 2014 Elizabeth Alford

For the second time in as many months, Continental Resources announces huge adjustments to its 2015 budget in response to plummeting oil prices.

In a press release before Christmas, the energy giant announced the details including plans to slash their 2015 capital expenditures to $2.7 billion. Additional cuts will come as they decrease the number of operated rigs, which they predict to drop from 50 to approximately 31 operated rigs by the end of 2015.

In an interview with Forbes, CEO Harold Hamm explained that the company is taking the necessary precautions to weather this storm and protect bondholders. Seemingly unfazed in his comments, Hamm credits his confidence to his past experience with these types of scenarios.

“Harold Hamm tells Forbes that “It’s all part of our plan. If prices go down, we are going to cut back to save our wealth — which is oil in the ground.” Hamm goes on to say that, “I’ve seen this six or seven times. We have ample liquidity, our total revolver available, no near-term debt, a lean organization with just 1,100 people, production of 200,000 barrels per day, and a low-cost, high-margin operation. We’re going to navigate right through it.”

Read more at Forbes.com

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Low Oil Prices Offer Uneven Economic Effect

December 28, 2014 Elizabeth Alford

As consumers enjoy the benefits of plunging gasoline prices this holiday season, it is still unclear how cheaper crude will impact the overall health of the U.S. economy.

One Washington think tank has estimated that, though many parts of the country will experience a slight economic stimulus in 2015, the lower oil prices will bring a significant downturn in the economic health of energy dependent states.

Unprecedented production in the United States shale plays have contributed to an increase in worldwide oil supplies, resulting in gasoline prices plummeting to their lowest level in almost five years. This has proven to be an economic boom of sorts to American families who are pocketing an additional $25-$75 per month. An additional perk will come as reduced fuel costs will eventually affect the pricing of consumer goods and services.

“Stephen Brown with Resources for the Future writes that, “The reduction in oil prices provides US consumers with what amounts to an annual increase in disposable income of $350 billion (about 2.0 percent of US GDP) through reduced prices for gasoline, diesel fuel, other petroleum products, and goods and services whose production uses petroleum products. The average US household will see a raw gain that amounts to $2,790 per year.”

The economic picture is not so rosy for everyone. Energy producers and states that are heavily invested in oil production will take a hit in 2015. Some companies have announced they will slash their budgets, with many predicting cuts in their exploration efforts. This will have a ripple effect that will impact local economies and support industries as tax revenues are reduced and layoffs are inevitable.

Download the entire report from rff.com.

North Dakota Proposes New Bakken Waste Rules

December 23, 2014 Elizabeth Alford

On December 12th, the ND Department of Health (DoH) proposed new limits for oil waste disposal that would drastically alter the way the industry does business in the Bakken region. This comes after a study conducted by Argonne National Laboratory concluded that the level of radioactive material (TENORM) found in waste can actually be much higher than current rates and still be safe for oil and landfill workers.

Amounts of radioactivity are measured in units called picocuries, and the new proposal would multiply the amount allowed in waste material by ten times. Landfills choose to accept the higher TENORM material will be required to go through a new permit modification process, which will provide better accountability for the tracking of the radioactive waste.

“Currently, approved landfills can accept waste of up to 5 picocuries per gram, which is approximately equivalent to background radiation. Extremely low standards were established because of a lack of available scientific data at the time,” said Dave Glatt, Environmental Health section chief for the NDDoH. “Our proposed rules are based on the best available science and will allow for the responsible and safe disposal of TENORM generated in North Dakota.”

As with other shale oil industry issues that have potential environmental and health concerns, this change brings mixed emotions from people with competing interests and those who are refuting the science of the report. The ND DoH has scheduled a series of special meetings in January to hear testimony and public comments concerning the proposal.

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Keystone Showdown Likely for New Year

December 21, 2014 Elizabeth Alford

President Obama’s strong remarks at Friday’s press conference set the stage for what is likely to be a New Year’s showdown over the future of the Keystone pipeline. As the new Republican-led Congress is poised to make this issue its top priority when it reconvenes in January, Obama expressed his concern that the benefits to the U.S. have been exaggerated.

Congress narrowly rejected a bill in November that would approve continued construction that would wind through the Bakken formation of Montana and North Dakota. The votes fell predictably along party lines, but with recent elections bringing Republicans into the majority, a new bill is likely to pass quickly in the new year. It isn't clear whether the President will veto new legislation, but it will not be smooth sailing.

“Commenting on the pipeline, President Obama said that, “It’s very good for Canadian oil companies and it’s good for the Canadian oil industry, but it’s not going to be a huge benefit to U.S. consumers.”

At issue is whether the benefits of the new section of the Keystone pipeline outweighs the potential dangers espoused by democrats and environmental groups. These opposing voices claim that the pipeline will potentially bring great risk to the climate, air quality, the ecosystem, public health, the water supply and landowner rights.

Certainly this issue is complicated, and with the continued debate and outcry over the current methods of transportation for Bakken crude, alternatives must be explored and genuinely considered. Living in the modern world means risk, and at some point it becomes a matter of which risk we are more willing to take. We cannot continue to enjoy, even demand, the lifestyle that this crude affords us without also being willing to make the hard choices that its production demands.

Bakken Operators Slash Budgets for 2015

December 19, 2014 Elizabeth Alford

North Dakota Oil Tax Reductions — Bakken Producers Slash 2015 Budgets

As the free-fall in crude prices continues, major Bakken operators are expressing their caution by slashing their budgets for 2015.

Marathon Oil is the latest giant to announce that its projected budget will curb exploration spending by a whopping 20% for 2015. Though the company still forecasts spending in upwards of $4.4 billion, the decrease is another sign that the spiraling oil prices are casting a dark shadow over the incredible growth that is taking place in the shale regions.

“We remain confident in our investment opportunities in the three U.S. resource plays,” Marathon Oil President and Chief Executive Officer Lee Tillman said in a statement. “Our 2015 capital program is not opportunity constrained but will reflect sound discipline in managing cash flows in the current price environment.”

This news comes as oil plunged Thursday to an incredible $54.11, prices not seen since 2009. And Marathon is not the only E&P company to back off on growth plans. ConocoPhillips is also shaving 20% off for 2015, by deferring investment in unconventional plays. The company, however, is continuing to affirm its commitment to Bakken region, which continues to be a major source of growth for the company. Bakken’s largest operator, Continental Resources, also seems to be getting skittish as it announced Wednesday it will reduce spending in 2015 by $600 million and delay new rig starts while they wait out the current situation.

For more on 2015 budgets visit Reuters.com