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Page added on July 31, 2015

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Texas Oil Production On Track To Break Record

Production

Just about everyone knows that crude oil and natural gas production in Texas has been on the increase for several years. But the size of the increase – especially in crude oil production – has been lost until just a few days ago when economist Karr Ingham told a gathering of reporters in Houston that he projects crude oil production will reach an all-time high in 2015, breaking the old record set in 1972.

Ingham, speaking to roughly a dozen reporters in Houston on July 27, pointed out that the decline in oil price, drilling rig count, drilling permits, and well completions would strongly indicate that oil production would decline, also. That has not been the case as crude oil production has increased to 107.6 million barrels in June, which is 15.8 million barrels (17.2 percent) more than in June 2014.

Ingham, who is author of the Texas Petro Index (TPI), projected that total oil production in 2015 will be 1.284 billion barrels, surpassing the record high of 1.263 billion barrels set in 1972.

TPI indicators illustrate the apparent economic disconnect between oil production and wellhead prices in Texas. According to the June 2015 TPI, in the past year the average wellhead price of crude oil has declined 44.7 percent, to $56.24 per barrel from $101.68/bbl in June 2014. Yet, in that same 12-month period, crude oil production in Texas grew a little more than 15.8 million bbls, a17.2-percent increase.

“The decline in the rig count and the number of drilling permits issued, and indeed in the number of wells drilled has yet to translate to a decline in Texas crude oil production, and in fact the rate of growth has yet to indicate a significant slowdown,” Ingham said. “It seems clear at this point that Texas crude oil production in 2015 will surpass its all-time high of 1.263 billion barrels in 1972, with estimated annual production in 2015 totaling 1.284 billion barrels.”

Natural gas production in Texas has increased, too. Though dramatically less pronounced, natural gas production and pricing in Texas also are trending inversely. According to the TPI, the gas wellhead price during the first six months of 2015 averaged $2.70 per thousand cubic feet (Mcf), 44 percent less than the average of $4.62 per Mcf through the first six months of 2014. Meanwhile, Texas gas output this year through June totaled 4.3 billion cubic feet, 3 percent more than in the same time last year.

Growth in Texas natural gas production remains driven by “casinghead gas”, or gas that is produced from wells drilled with the primary intent of producing crude oil. “For most of the last five years, less than 10 percent of rigs at work in Texas were drilling primarily for natural gas, and yet Texas natural gas production has continued to increase over that period of time,” Ingham said.

Again, it is no secret that the oversupply of crude oil and natural gas has created a drop in price and in virtually every category in the TPI, except production.

Noting the recent $10 per barrel plunge in oil prices that occurred when agreement on the Iranian Nuclear Accord was announced – fulfillment of which would allow presently embargoed Iranian crude oil to return to already-oversupplied global markets – Ingham said, “the retreat in price caused by the prospect of significant volumes of new oil entering the market suggests we are not out of the woods at this point in terms of the potential for a new round of price decline.  If oil prices decline further, the possibility still exists for additional declines in the Texas rig count, the continued loss of upstream oil and gas jobs in the state, and continued deterioration of other economic indicators.

“Increasingly, the new ‘optimistic’ view is that the industry in Texas stabilizes at roughly current levels of activity,” said Ingham. “If production in Texas and elsewhere in North America continues to grow at any rate over the course of the cycle produced by this price decline, it seems quite possible that the new price norm may be lower than we might have hoped,” he said.

Ingham said that crude oil prices will have to drop to a price so low that production will be curtailed and demand will rise to remove the oversupply of oil in the U.S. and worldwide. No one knows what that price is and how long it will take to turn the current situation around.

RIGZONE



42 Comments on "Texas Oil Production On Track To Break Record"

  1. Plantagenet on Fri, 31st Jul 2015 12:58 pm 

    Good to see Texas is breaking the “peak” in oil production it set back in 1972, in spite of low oil prices and the oil glut.

  2. steve on Fri, 31st Jul 2015 1:08 pm 

    Yes but isn’t this just a sign that they have to keep on drilling even if they are losing money…..can’t just stop and wait for prices to come up; creative financing has put them in this box.

  3. Plantagenet on Fri, 31st Jul 2015 1:22 pm 

    If a company is losing money it will eventually go out of business and some other company will buy their assets and land on the cheap and take over the operation.

    Thats a self-correcting problem.

  4. Davy on Fri, 31st Jul 2015 1:27 pm 

    Sure planter but where does it end? I guess the central banks of the world will eventually own everything per your Econ 101 thinking. Planter, have you ever heard of limits? Go grind some corn and bake your happy cornbread.

  5. Nony on Fri, 31st Jul 2015 2:13 pm 

    Based on EIA monthlies, it has already broken the old monthly peak of 1971 (3.6). We’ve had 3 months higher than that.

  6. Apneaman on Fri, 31st Jul 2015 2:21 pm 

    Planty why is increased Texas oil extraction good to see? Let me guess. Because more oil means more CO2 which means more global warming which means more fires in Alaska (along with permafrost melt, increased mud slides, avalanches and infrastructure destruction) which destroys lives. You some kinda sadists and masochist planty? Or maybe you don’t know if you’re a masochist cause you ain’t the one suffering yet. Patience planty, your turn will come. Maybe your unattended house will burn down while your off jet setting in India or maybe the A/C in your hotel will break in the middle of the next AGW jacked Indian heatwave and you will be among the next 2500 plus to die. See? there is hope for you yet planty. Horray for more Texas oil! Horray for more ape cancer!

    Map: Tracking Alaska’s wildfires

    Nearly 5 million acres of Alaska forest has been consumed in wildfires this summer, according to the Alaska Interagency Coordination Center, with some saying this year may be the state’s worst wildfire season on record.

    https://www.adn.com/article/20150730/map-tracking-alaskas-wildfires

  7. peakyeast on Fri, 31st Jul 2015 2:25 pm 

    @Nony: Is the method for calculating how much there is – the same as in 1971? Or have they started counting other things also?

    Like the change from BO –> BOE – and including biofuels and other unconventional resources without correcting for the input from already counted barrels?

    Just a question…

  8. Apneaman on Fri, 31st Jul 2015 2:30 pm 

    Nony, who gives a shit. It’s like you’re cheering cause your team finally won a game when we all know they were knocked out of the playoffs a long time ago. Playing out the string they call it. Cheering because you along with most of the other apes don’t know what else to do while waiting for the final season to end.

  9. Nony on Fri, 31st Jul 2015 3:01 pm 

    yeast: It’s C&C for both. But you can contest the EIA because the numbers are estimates (Texas doesn’t finish reporting the hard numbers for ~ 2 years).

    Ape, it is like me cheering for football a little. Point one for you. You peakers were looking good in the game a few years ago, but since then we cornies have pulled ahead. Our old school cornie option attack is beating your West Coast short passing attack.

  10. Beery on Fri, 31st Jul 2015 4:05 pm 

    Firstly, the numbers are early estimates. Secondly, the number barely topped 3.6 – the 1971 number is still higher. You can’t just round both figures down to 3.6 and claim victory – even rounding down, it’s only a tie.

  11. Jimmy on Fri, 31st Jul 2015 4:08 pm 

    Obviously the planet is a ‘magic porridge pot’ that will spew oil eternally lol fucking cornies!

    Just keep ignoring the fact that we’ve gone from Jed Clampton ‘shooting at some food’ to fracking and offshore. Anyone who doesn’t see that trend is a fucking moron. Yep, cornies got it all figured out alright. Fucking trolls.

  12. Plantagenet on Fri, 31st Jul 2015 4:09 pm 

    @apie

    Your suggestion that more oil is good because it makes more oil and more CO2 is truly wrong-headed.

    The last thing we need is more CO2—-it will just cause more global warming, more sea level rise, more drought and more killer heat waves.

    CHeers!

  13. Apneaman on Fri, 31st Jul 2015 4:48 pm 

    Then why are you continuing to jet all over the world to amuse yourself plant? Considering all the places you have already been why keep doing it? Airline travel is one of the worst culprits for CO2. How come so many people, even those aware of the late hour, still do it? Sounds like your aware and even concerned. I simply do not get why. Obviously most people don’t want to suffer and die soon and they at least care about their families. Something does not match up with what we say vs what we do.

  14. peakyeast on Fri, 31st Jul 2015 4:52 pm 

    @Nony: Peakers never lose – because the cornies only kick the can microscopically further down the road today. And for a very long time – when things were looking much brighter than today – they were also kicking the can down the road much too little to just keep distance to the peakers.

    Now the peakers&doomers are so close they are breathing on the neck of the cornies.

    😉

  15. Boat on Fri, 31st Jul 2015 7:11 pm 

    Things look bright today. Gas is down, housing is down. Food price is down. Unemployment is down. Fracking bought us some short term time so we don’t have to worry about oil for a couple decades. Don’t be paranoid, life life with joy. Have a slice of rainbow and drink some unicorn (______}.

  16. GregT on Sat, 1st Aug 2015 12:50 am 

    “Have a slice of rainbow and drink some unicorn (______}.”

    (urine}.

    And pretend that it tastes like a fine, well aged, cabernet sauvignon. No point in paying attention to reality, when fantasy is just so much easier to accept.

    WE don’t have to worry as much as YOU do, because WE have plans in affect for when WE need to worry about oil. WE does not include YOU.

    What are YOUR plans?

  17. Apneaman on Sat, 1st Aug 2015 12:58 am 

    Boat, what about the multi state mega drought, water shortages, and record setting forest fires all consequences of overshoot in all it’s forms?

    Stupidity has it’s privileges.

    It’s all gonna be OK

    https://www.youtube.com/watch?v=HrCAOXF8hCA

  18. Apneaman on Sat, 1st Aug 2015 1:13 am 

    Boat, apparently some of your fellow citizens are in a different state of mind than you. Ahhh they are probably just being paranoid.

    California Gov. Jerry Brown (D) has declared a state of emergency as wildfires blaze in 15 counties across the Golden State, one of which killed a responding firefighter.

    “California’s severe drought and extreme weather have turned much of the state into a tinderbox,” Brown said in a Friday statement. “Our courageous firefighters are on the front lines and we’ll do everything we can to help them.”

    http://www.huffingtonpost.com/entry/jerry-brown-wildfires-emergency_55bc043fe4b0d4f33a03014e

  19. Boat on Sat, 1st Aug 2015 1:17 am 

    Nothing new

    http://www.fire.ca.gov/communications/downloads/fact_sheets/20LACRES.pdf

  20. MrNoItAll on Sat, 1st Aug 2015 1:23 am 

    “Good to see Texas is breaking the “peak” in oil production it set back in 1972, in spite of low oil prices and the oil glut.”

    They couldn’t have done it without ZIRP, QE and gullible, ill-informed investors looking to make a killer profit. Cheap money keeps the zombie oil producers pumping. Yep. Truly good to see Texas oil producers pathetically limping along, racking up the debt, pumping more and more into an already saturated market. It just warms the heart to see those boys doing so well.

  21. Boat on Sat, 1st Aug 2015 1:23 am 

    GregT .
    What are YOUR plans?

    Mr T, what is the scenario. I have read hundreds of doomer scenarios.

  22. MrNoItAll on Sat, 1st Aug 2015 1:37 am 

    “I have read hundreds of doomer scenarios.”

    You can lead a horse to water, but you can’t make it drink.

    You can repeatedly explain the reasons and the realities behind the “doomer” point of view, but you can’t force somebody to understand what he simply refuses to understand.

  23. Boat on Sat, 1st Aug 2015 1:38 am 

    Noitall,
    Who cares. If some of the firms go bankrupt somebody will go drill that oil if a barrell is worth $80 again. Who loses and who wins is no concern of mine. Right now the consumer is. I am sure oil will win again. This history is the way commodities work and have worked.

  24. MrNoItAll on Sat, 1st Aug 2015 1:47 am 

    “if a barrell is worth $80 again”

    Big IF.

    They lost money at $100 per barrel. They’re desperately pumping at $48 – $50 just to stay alive. Yeah, who gives a shit about those poor suckers. Not you. I only care in a roundabout way because I tend to like hard-working people and I hate to see those oil guys trapped in a desperate struggle to maintain their jobs and their lifestyles.

    Are you one of those capitalists, Boat? Are you sure that’s something you want to confess to?

    Don’t hold your breath on the $80 per barrel oil. You might suffocate.

  25. Boat on Sat, 1st Aug 2015 1:57 am 

    MrNoItAll,

    I am proud to be a capitalists. I work, I get paid. I don’t expect the government to pay my way. I am pissed my generation and the one before me has racked up debt. I would like to see a lot of changes. But it is still the best system going. And easily fixable.

  26. Apneaman on Sat, 1st Aug 2015 2:14 am 

    Boat, Nothing new? are you serious? Everything about that list screams new and unprecedented. 12 out of 20 of the states biggest fires all within the last 15 years. 18 of 20 within the last 40. What more proof of climate chaos (new normal) could any rational person ask for? Thanks for winning my argument for me, boat. Obviously, it is also evidence that you are completely fucking clueless.

    http://www.fire.ca.gov/communications/downloads/fact_sheets/20LACRES.pdf

  27. Boat on Sat, 1st Aug 2015 2:36 am 

    You sure are an excitable young man. Prone to potty mouth. Yes Apneaman most of us are aware of the fires and the drought.

    According to the San Jose Mercury News, in the past 1,000 years, California has at certain times seen droughts that lasted up to 10 to 20 years. The two most severe were a 240-year-long drought that began in 850 A.D. and another that lasted at least 180 years.

    160 years to go before rain? Humans will adjust. They will go greener and apply desalination and many other ways to conserve water. Heard of Australia? They are much better at conserving water. Not like a lack of water and having fires is new.

  28. Apneaman on Sat, 1st Aug 2015 8:36 am 

    850 A.D. What was the population back then? How much water intensive industry were the natives doing? Building multi billion dollar desalination plants at sea level sounds like a winner to me. Who paying?

  29. rockman on Sat, 1st Aug 2015 10:09 am 

    ““The decline in the rig count and the number of drilling permits issued, and indeed in the number of wells drilled has yet to translate to a decline in Texas crude oil production, and in fact the rate of growth has yet to indicate a significant slowdown,”

    I must express my disappoint in our happy band of brothers (and a few sisters). First, the thread is about Texas oil production levels so let’s be a tad more focused. Second, and most important, not a single post pointed out the FACT I’ve made many times: there is a lag on many months between a rig spudding a well and when production begins. Most of the new production coming on in 1Q and 2Q 2015 came from wells spudded in 2014. And as pointed out before there’s no point in debating the Texas oil production trend: by the end of 4Q 2015 we’ll clearly be seeing the effect of the decrease in oil prices.

    Currently these are the last days for the cornies to hang on by their fingernails to their spin. Enjoy it while it lasts. LOL.

  30. Boat on Sat, 1st Aug 2015 10:55 am 

    rock.
    Your point about a lag time seems very reasonable to me. What does surprise me is the number of rigs still out there. 1600 or so high to 600 or so now. I have read a rig average is 1 1/2 well per month. Somebody still thinks the gamble of drilling with depressed prices is viable.

  31. antaris on Sat, 1st Aug 2015 11:03 am 

    Boat. Your fracking blip has only been going on for less than 4 years and is about to fall off the cliff. The next 3 months should be interesting with bankruptcies and investors loosing fleece.

  32. Apneaman on Sat, 1st Aug 2015 12:17 pm 

    Fracking a true revolution.

    Exactly once around at high speed, ending right back where it started from – broke and dizzy.

  33. Boat on Sat, 1st Aug 2015 12:39 pm 

    antaris
    Boat. Your fracking blip has only been going on for less than 4 years and is about to fall off the cliff. The next 3 months should be interesting with bankruptcies and investors loosing fleece.

    Why do you care, I don’t. My last gas cost 2.23. A year ago or so it was up to 3.80. My family saves approx $89 per week. Cry me a river. I do feel bad for the workers but as everybody knows most jobs are cyclical now.

  34. antaris on Sat, 1st Aug 2015 1:23 pm 

    Boat, I guess when things are static it gets a bit boring. I care because I have a 13 year old son. In his life time he will see big changes. My mother saw everything build up from not much and my Son will see the reverse of that.

  35. Nony on Sat, 1st Aug 2015 1:26 pm 

    http://www.resilience.org/stories/2013-03-19/commentary-texas-and-eagle-ford-where-the-action-is

    Here is one of your peaker brethren. Predicted EF would peak at 600,000 bpd and that Texas would not get close to a repeak. Both already proved wrong. We are close to a repeak. And EF went to 11,500,000 bpd. 250% more than the guy predicted. Of course he hasn’t written an article to say “I wuz wrong”.

  36. Nony on Sat, 1st Aug 2015 1:27 pm 

    1,500,000 bpd (typo).

  37. Kenz300 on Sat, 1st Aug 2015 3:10 pm 

    How many of those wells are profitable at $50 ?

    Keep pumping…. got to pay back the loan from the bank.

    The banks are not giving any more loans with prices this low…… they are all scared that they will not get their money back.

  38. Nony on Sat, 1st Aug 2015 8:12 pm 

    $50 will put a big chill in things. Existing wells will pump for a few years (although I hear EF depletes even faster than Bakken…it’s more of a true shale than the Bakken). But new ones will only happen in the very best rock and where there is infrastructure already set up.

    Bottom line though is Blanchard predicted 600,000 bpd peak with no rational of price dropping. And we got up to 250% of that number and were headed higher except for price dropping in half.

    And Blanchard hasn’t written an article on how he was wrong (nothing wrong with it…but a good scientist, a teacher of the young in the scientific method should himself be willing to question himself and to discuss when he is wrong on a hypothesis. That’s an ethic of the scientific method.)

  39. Davy on Sat, 1st Aug 2015 8:41 pm 

    NOo, you should read your last paragraph again and reflect on it. I have never read you admit to being wrong or acknowledge anything wrong with your cornucopian views. You dismiss peak oil dynamics out right. So what were you saying about the scientific method?

  40. Apneaman on Sat, 1st Aug 2015 9:26 pm 

    Nony, did you attempt to contact him to discuss?

  41. Nony on Sun, 2nd Aug 2015 6:17 am 

    Davy, when I’m wrong I admit it. I didn’t think RG3 would be so good in 2012 and I admitted that.

    Ape, no.

  42. Davy on Sun, 2nd Aug 2015 7:10 am 

    NOo, I guess you are rarely wrong with your message nor the cornucopian message you promote.

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