Ernest Scheyder http://blogs.reuters.com/ernest-scheyder Ernest Scheyder's Profile Fri, 06 Nov 2015 05:15:35 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.5 U.S. shale producers see big budget cuts for 2016 http://www.reuters.com/article/2015/11/06/oil-results-capex-idUSL1N1302CK20151106?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/11/06/u-s-shale-producers-see-big-budget-cuts-for-2016/#comments Fri, 06 Nov 2015 05:00:02 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10293 HOUSTON/NEW YORK, Nov 6 (Reuters) – U.S. shale oil
producers, having slashed fat from 2015 budgets after a
50-percent drop in crude prices, risk cutting to the bone next
year as they pare spending further and get ready for a prolonged
downturn.

Top shale companies including Devon Energy Corp,
Continental Resources Inc and Marathon Oil Corp
this week released preliminary 2016 plans for capital spending
that may fall by double digits.

The cuts, following reductions of 30 percent to 40 percent
by many in the industry this year, would leave budgets at a
fraction of levels seen during the height of the shale boom that
lasted to mid-2014. Lower costs and improved productivity would
allow them to hold shale oil production largely flat.

While he did not provide a specific figure, Doug Lawler, the
Chief Executive Officer of Chesapeake Energy Corp, said
2016 spending would be “cut in a meaningful way” at the
Oklahoma-based company.

“We expect further spending cuts as exploration and
production companies attempt to live within cash flow,” said
Peter Speer, a Moody’s analyst. The debt rating agency expects
capital spending cuts of at least 10 percent to 15 percent in
2016.

Devon said it expects to spend $2 billion to $2.5 billion on
exploration and production next year, down from about $4 billion
this year. Marathon Oil is cutting about $1 billion from its
projections.

Oasis Petroleum Inc, which produces oil in North
Dakota, said it expects to spend $350 million in 2016 on
drilling and completion of new wells, roughly $200 million below
what it plans to spend for those services this year.

About half of the spending reduction is due to lower well
costs, with the Houston-based company pushing down well costs 30
percent so far this year, and the other half coming from vendor
cost cuts, Oasis executives said.

“We anticipate that much of the cost improvement is more
structural in nature and should remain when (oil) prices
rebound,” Taylor Reid, Oasis chief operating officer, told
investors on Wednesday.

Continental Resources, North Dakota’s second-largest oil
producer, said it will need to spend $1.5 billion to $1.6
billion next year to maintain output of roughly 200,000 barrels
of oil equivalent per day. That would be less than half the
roughly $3.4 billion the company expects to spend this year.

Both Oasis and Continental said they would release detailed
plans for 2016 in the next two months.

(Reporting by Anna Driver in Houston and Ernest Scheyder in New
York; Editing by Terry Wade and Bill Rigby)

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EOG Resources profit widely beats Street on cost cuts http://www.reuters.com/article/2015/11/05/eog-resources-results-idUSL1N1303Q620151105?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/11/05/eog-resources-profit-widely-beats-street-on-cost-cuts/#comments Thu, 05 Nov 2015 22:10:19 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10291 Nov 5 (Reuters) – Oil producer EOG Resources Inc
posted a better-than-expected profit on Thursday as cost cuts
and efficiency gains helped offset falling crude prices.

The company, which operates in North Dakota and Texas,
slashed costs to pump, transport, process and market oil and
natural gas, signs that Chief Executive Bill Thomas said show
the company is working “to be successful in a low commodity
price environment.”

Bucking an industry trend, EOG did not raise its production
forecast, opting to keep more oil in the ground longer to wait
for higher prices.

EOG posted a net loss of $4.08 billion, or $7.47 per share,
compared to a net profit of $1.1 billion, or $2.01 per share, in
the year-ago period.

Part of the loss was due to a $4.1 billion write-down in the
value of some shale acreage in line with plunging crude prices.
EOG said these were older and “marginal” assets.

Excluding hedging gains and other one-time items, the
company posted a profit of 2 cents per share.

By that measure, analysts expected a loss of 30 cents per
share, according to Thomson Reuters I/B/E/S.

The volume of the crude the company produced fell 7 percent
to 569,600 barrels of oil equivalent per day (boe/d).

EOG has hedged 10,000 boe/d of production for November and
December at an average price of $89.98 per barrel, and has
hedges for 82,500 boe/d of production with a floor price of $45
per barrel for November. U.S. oil prices are trading around $45
per barrel.

Houston-based EOG cut its capital budget earlier this year
by about $200 million, but still expects to spend $4.9 billion
to $5.9 billion this year.

The company has scheduled a conference call with investors
on Friday to discuss the results.

Shares of EOG, which closed unchanged on Thursday at $86.47,
have lost about 6 percent of their value so far this year.

(Reporting by Ernest Scheyder; Editing by Chris Reese and
Richard Chang)

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Continental Resources boosts crude output forecast http://www.reuters.com/article/2015/11/04/contl-resources-results-idUSL1N12Z3EX20151104?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/11/04/continental-resources-boosts-crude-output-forecast/#comments Wed, 04 Nov 2015 22:16:45 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10289 Nov 4 (Reuters) – Continental Resources Inc, North
Dakota’s second-largest oil producer, boosted its production
forecast on Wednesday despite posting a quarterly loss, betting
technological advancements and cost cuts will help it extract
more oil at a cheaper price.

The bold bet, just as the company’s credit line was
increased, matches an evolving industry trend. Companies have
been raising output projections, banking on efficiency gains to
help offset the steepest oil price crash in six years.

“We continue to deliver on cost controls and operating
efficiencies, while maintaining our exploration focus,” Harold
Hamm, Continental’s chief executive and largest shareholder,
said in a statement.

The Oklahoma-based company now expects to pump 24 percent to
26 percent more oil than last year’s output of roughly 174,000
barrels of oil equivalent per day (boepd). Previous guidance had
called for a boost of 16 percent to 20 percent.

While Hamm canceled Continental’s oil hedges last fall, much
of his confidence stems from the company’s increasing ability to
use innovative ways to extract oil from the 1 million acres of
North Dakota shale it controls.

In the past 11 months, Continental said it has cut its
drilling and completion costs for new wells by 25 percent.

Still, Continental slashed its 2015 capital budget two
months ago for the third time this year, saying it planned to
temporarily end fracking of its North Dakota wells, a strategy
it did not alter on Wednesday.

The company, which is still fracking in Oklahoma, plans to
discuss its forecast in a conference call with investors on
Thursday.

QUARTERLY LOSS VS PROFIT

For the third quarter ended Sept. 30, the company reported a
net loss of $82.4 million, or 22 cents per share, versus net
income of $533.5 million, or $1.44 per share, a year earlier.

Excluding impairment charges and other one-time items,
Continental lost 12 cents per share, matching what analysts had
expected, according to Thomson Reuters I/B/E/S.

Production rose 25 percent to 228,278 boe/d.

Continental did increase its commitments on a credit line to
$2.75 billion, though it only has used $880 million so far.

“I want to emphasize these transactions do not indicate
plans to grow debt,” said John Hart, Continental’s chief
financial officer. “Our focus remains on balancing capital
expenditures with cash flows, and therefore not incurring
additional debt.”

Continental shares rose 0.3 percent to $33.30 in after-hours
trading.

(Reporting by Ernest Scheyder; Editing by Chris Reese and David
Gregorio)

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Despite gloom, four U.S. shale oil firms lift output views http://www.reuters.com/article/2015/11/04/us-oil-results-production-idUSKCN0ST0ET20151104?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/11/04/despite-gloom-four-u-s-shale-oil-firms-lift-output-views/#comments Wed, 04 Nov 2015 05:04:44 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10287 By Anna Driver and Ernest Scheyder

(Reuters) – A handful of U.S. shale oil producers are pushing up their production forecasts, saying efficiency gains from drilling in prime rock are helping them eke out more crude in the middle of the worst price crash in six years.

The slightly bolder outlooks this week from Oasis Petroleum Inc (OAS.N: Quote, Profile, Research, Stock Buzz), Devon Energy Corp (DVN.N: Quote, Profile, Research, Stock Buzz), Pioneer Natural Resources Co (PXD.N: Quote, Profile, Research, Stock Buzz) and Diamondback Energy Inc (FANG.O: Quote, Profile, Research, Stock Buzz) show that the confident swagger that typified the U.S. shale boom’s early days has yet to be fully tempered by the more than 50 percent drop in oil prices CLc1 since last year.

Though the consensus view is that rig productivity in U.S. shale basins is stalling to portend a drop in national output as companies struggle to pump more with less, some firms appear to still be finding new ways to drill wells faster and frack them more intensively at a lower price.

“Over time, we continue to think we’ll need less rigs than we’re even saying now,” Pioneer Chief Executive Officer Scott Sheffield told investors on Thursday.

Shares of Oasis, Devon and Pioneer rose more than 2 percent after their respective forecasts were announced. Shares of Oasis and Devon have lost about a quarter of their value this year, while those of Pioneer have held mostly steady.

Sheffield said Pioneer, which is adding rigs, expects to grow production 11 percent this year, up from a previous view of 10 percent. The company also confirmed it would grow 15 percent per year through 2018 thanks in part to cost cuts and tweaked technology. It produced 211,000 barrels of oil equivalent per day (boepd) in the third quarter.

Some of the flatlining of U.S. rig productivity has come as producers experiment with lower cost techniques for fracking, which involves injecting liquids and sand at high pressure into wells to coax oil from rock.

Pioneer said some of its well performance in the Eagle Ford shale of Texas was hurt recently when it tried to complete wells with lower fluid concentrations. In the future, it said wells would be fracked with more fluid and more sand so as to boost production.

At Oasis, executives now expect the company to produce 49,700 to 50,100 boepd, up from a previous estimate of 49,000 to 50,000 boepd.

Oasis Chief Executive Thomas Nusz cited the company’s use of ceramics and other techniques to boost production, and touted a drop of more than 50 percent in capital spending and other costs.

And at Devon, Chief Executive Dave Hager raised the company’s full-year production growth outlook for the second time this year.

“We are delivering this incremental production growth with significantly lower costs,” Hager said in a statement, adding he expects Devon to cut about $1 billion from its budget by year end.

Diamondback raised the lower end of the range for its production guidance to 31,000 boepd from 30,000 boepd while saying it would come in at the low end of its expected capital spending of $400 million to $450 million. The top end for production stayed at 32,000 boepd.

“We continue to deliver robust well results … while lowering both well costs and total expenses,” stated Diamondback CEO Travis Stice.

(Reporting by Ernest Scheyder in New York and Anna Driver in Houston; Editing by Terry Wade and Lisa Shumaker)

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Oasis Petroleum profit beats thanks to cost cuts http://www.reuters.com/article/2015/11/03/oasis-petroleum-results-idUSL1N12Y37520151103?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/11/03/oasis-petroleum-profit-beats-thanks-to-cost-cuts/#comments Tue, 03 Nov 2015 22:09:08 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10283 Nov 3 (Reuters) – North Dakota oil producer Oasis Petroleum
Inc posted a better-than-expected quarterly profit on
Tuesday as it successfully slashed costs to offset plunging
crude prices.

Bucking the industry trend to hunker down, Oasis also
boosted its production forecast for the year and locked in
hedges for 2017, steps that signal the Houston-based company’s
confidence it can weather the low-price storm.

For the third quarter, the company posted net income of
$27.1 million, or 20 cents per share, compared with $121.6
million, or $1.21 per share, in the year-ago period.

Excluding one-time items, including a gain from oil hedges,
Oasis earned 9 cents per share.

By that measure, analysts expected earnings of 6 cents per
share, according to Thomson Reuters I/B/E/S.

Oasis slashed its capital budget by 54 percent from the
second quarter to $78 million, sharply curtailing spending on
its exploration projects as well as its wastewater disposal
division, which the company is marketing to potential
investors.

Production rose 10 percent in the quarter to 50,546 barrels
of oil equivalent per day (boe/d).

For the year, Oasis now expects to produce 49,700 to 50,100
boe/d, up from a previous estimate of 49,000 to 50,000 boe/d.

Oasis also hedged 4,000 boe/d of production for 2017 at
$53.62 per barrel, in line with Wall Street’s expectations on
where oil prices should be that year. <0#CLCAL:>

OPERATIONS & LIQUIDITY

Oasis, which only operates in North Dakota’s Bakken shale,
said it plans to continue to operate three drilling rigs for the
foreseeable future, though it likely will continue to expand its
backlog of drilled-but-uncompleted wells from the current 87 due
to cold winter weather.

Oasis and other oil producers received a lifeline last month
from regulators who approved a plan to extend the time required
to bring a well online.

The change will let the industry preserve cash. Oasis had
$1.34 billion left to draw on its $1.53 billion credit line as
of Sept. 30.

The company received permission from its bondholders last
month to make changes that restrict its ability to take on
second-lien debt, a step that maintain its access to that line
of credit.

An Oasis well blew out last month and for nearly three days
leaked more than 70,000 gallons of oil.

Shares of Oasis rose 2 percent to $12.39 per share in
after-hours trading. As of Tuesday’s close, the stock had lost
27 percent of its value so far this year.

(Reporting by Ernest Scheyder in New York; Editing by Bernard
Orr and Lisa Shumaker)

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Chevron slashes jobs and spending to weather low oil prices http://in.reuters.com/article/2015/10/31/uk-chevron-results-idINKCN0SP01H20151031?feedType=RSS&feedName=everything&virtualBrandChannel=11709 http://blogs.reuters.com/ernest-scheyder/2015/10/31/chevron-slashes-jobs-and-spending-to-weather-low-oil-prices/#comments Sat, 31 Oct 2015 01:23:52 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10281 By Ernest Scheyder

(Reuters) – Chevron Corp (CVX.N: Quote, Profile, Research) is slashing 10 percent of its workforce and sharply paring back its budget, with Chief Executive Officer John Watson giving a downbeat view on Friday of an industry beleaguered by low oil prices.

A more than 55 percent decline in crude oil CLc1 since last year has rippled through the global energy industry, forcing producers and their suppliers to make tough decisions.

For Chevron, that means cutting its budget by 25 percent next year by spending less in Australia, Angola and the U.S. Gulf of Mexico, where the No. 2 U.S. oil company has major growth projects.

“We need to be more efficient at what we do,” Watson said on a conference call with analysts and investors. While he said prices should rise eventually, he is “sober about the current realities of lower prices” for the next few years.

The news came as Chevron also reported a sharp drop in third-quarter earnings that still beat Wall Street’s expectations due to cost cuts and strong refining margins.

The company’s pain was all the more stark given that larger rival Exxon Mobil Corp (XOM.N: Quote, Profile, Research) not only posted stronger-than-expected results on Friday but also had not announced any massive layoffs.

Chevron plans to spend $25 billion to $28 billion next year and expects to further slash spending in 2017 and 2018, an acknowledgment that it does not expect oil prices to rebound soon.

The San Ramon, California-based company also said it would lay off 6,000 to 7,000 workers.

Under pressure from Wall Street, Watson committed to keeping Chevron’s dividend, now at $1.07 a share.

“Our first priority is to maintain the dividend and grow it as a pattern of earnings and cash flow permit,” he said.

GROWTH PROJECTS

The company is spending more than $20 billion on five new projects it hopes will boost production 20 percent by 2017.

Two of them, the Gorgon and Wheatstone liquefied natural gas facilities in Australia, should open next year, Watson said. Such a step would help reduce construction costs and alleviate concern on Wall Street, where analysts have grown anxious about overspending.

“We’re going to see disproportionately strong growth through 2017, frankly into 2018,” Watson said.

Yet he said Chevron would “pace” the timeline for the other large LNG projects, in western Canada and Angola.

In the Gulf of Mexico, the Big Foot deepwater oil project is now not expected to produce any oil at least through 2017, Watson said. Big Foot, which was slated to be online this year, had a major setback last summer with the sinking of at least nine giant tendons, designed to connect the platform to the sea floor.

RESULTS

Chevron reported net income of $2.04 billion, or $1.09 per share, compared with $5.59 billion, or $2.95 per share, a year earlier. Analysts on average were expecting 76 cents per share, according to Thomson Reuters I/B/E/S.

Production fell 1 percent to 2.5 million barrels of oil equivalent per day.

Profit at the downstream unit, which is smaller than the oil-producing part of the company and which makes gasoline, lubricant and other refined products, jumped 49 percent. Refiners tend to be more profitable when oil prices are low.

Chevron cut operating and administrative expenses by 7 percent during the quarter, but it was not enough to fully offset the price drop.

Shares of Chevron were up 1.9 percent at $91.54 in afternoon trading.

(Reporting by Ernest Scheyder; Editing by Terry Wade, Phil Berlowitz and Lisa Von Ahn)

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Chevron slashes 2016 budget to weather low oil prices http://www.reuters.com/article/2015/10/30/us-chevron-results-idUSKCN0SO1LS20151030?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/10/30/chevron-slashes-2016-budget-to-weather-low-oil-prices/#comments Fri, 30 Oct 2015 13:18:57 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10279 By Ernest Scheyder

(Reuters) – Chevron Corp (CVX.N: Quote, Profile, Research, Stock Buzz), the second-largest U.S.-based oil producer, slashed its 2016 capital budget by 25 percent and said it would lay off roughly 10 percent of its workforce, one of the most-drastic reactions to date to the plunge in crude prices CLc1.

The price drop has forced Chevron and dozens of its peers to make tough decisions about what projects to fund or not fund in order to offset natural declines at its existing fields.

The choices are that much starker at large international oil giants like Chevron that rely heavily on their massive budgets to fund exploration projects crucial to finding new energy sources.

Chevron said on Friday it plans to spend between $25 billion to $28 billion next year and expects to further slash spending in 2017 and 2018 as well, an acknowledgment that oil prices are not expected to rise at all in the near future.

The San Ramon, California-based company also said it would lay off 6,000 to 7,000 workers as part of the cuts.

“We are focused on improving results by changing outcomes within our control,” Chief Executive John Watson said in a statement.

Chevron posted a sharp drop in quarterly profit that still beat Wall Street’s expectations due to cost cuts and strong refining margins.

The company reported net income of $2.04 billion, or $1.09 per share, compared with $5.59 billion, or $2.95 per share, in the year-ago period.

By that measure, analysts expected earnings of 76 cents per share, according to Thomson Reuters I/B/E/S.

Production fell 1 percent to 2.5 million barrels of oil equivalent per day (boe/d).

Profit at the company’s downstream unit, which makes gasoline, lubricant and other refined products, jumped 49 percent. Refiners tend to be more profitable when oil prices are low.

Chevron cut operating and administrative expenses by 7 percent during the quarter, but it was not enough to fully offset the price drop.

Shares of Chevron rose 1.4 percent to $91.15 in pre-market trading on Friday.

(Reporting by Ernest Scheyder; Editing by Chizu Nomiyama and Phil Berlowitz)

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Whiting writes off $2.57 bln in assets, including Kodiak http://www.reuters.com/article/2015/10/28/whiting-petrol-results-idUSL1N12S32R20151028?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/10/28/whiting-writes-off-2-57-bln-in-assets-including-kodiak/#comments Wed, 28 Oct 2015 21:03:53 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10277 , Oct 28 (Reuters) – Whiting Petroleum Corp
, North Dakota’s top oil producer, wrote down $2.57
billion in assets on Wednesday, including its 2014 buyout of
rival Kodiak Oil, the latest sign the energy industry is under
immense pressure from the crude price slump.

The Denver-based company wrote down the $870 million in
goodwill it was carrying on its balance sheet from its December
2014 buyout of Kodiak, which was valued at $1.55 billion at the
time.

The writedown was all the more surprising because much of
the Kodiak acreage that Whiting acquired is in the core of North
Dakota’s Bakken shale formation, where costs typically are
lower. Whiting effectively paid $23.77 per barrel for Kodiak’s
proven reserves of 167 million barrels of oil equivalent.

Whiting also wrote down $1.7 billion in Texas assets that
historically have been developed using carbon dioxide flooding,
saying they were not economic at current oil prices.

The writedowns were announced at the same time Whiting
reported a quarterly loss.

Whiting Chief Executive Jim Volker stressed in a press
release that the company has enough cash and access to credit to
weather the price storm and “focus on enhancing returns through
cost control and technology improvements.”

Shares of Denver-based Whiting fell 3.3 percent to $16.50 in
after-hours trading. Occidental Petroleum and Anadarko
Petroleum Corp. also booked charges this week related to
the oil slump.

QUARTERLY LOSS

The writedowns and low oil prices led Whiting to post a
third-quarter loss that still beat Wall Street’s expectations,
thanks in part to cost cuts.

The Denver-based company cut its capital spending by 46
percent from the second to third quarters and reaffirmed a goal
to be cash-flow neutral – to spend as much as it makes – by next
year.

Whiting posted a net loss of $1.87 billion, or $9.14 per
share, compared with net income of $158 million, or $1.32 per
share, in the year-ago period.

Excluding the writedowns, gains from hedging and other
one-time items, Whiting lost 17 cents per share.

By that measure, analysts expected a loss of 25 cents per
share, according to Thomson Reuters I/B/E/S.

Production rose 38 percent to 160,590 barrels of oil
equivalent per day (boe/d) even as the average price Whiting
received for its oil fell 49 percent.

(Reporting by Ernest Scheyder; Editing by Terry Wade and Tom
Brown)

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Green incentives seen as key to lifting U.S. oil export ban http://www.reuters.com/article/2015/10/25/commodities-summit-north-dakota-oil-reut-idUSL1N12N1MB20151025?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/10/25/green-incentives-seen-as-key-to-lifting-u-s-oil-export-ban/#comments Sun, 25 Oct 2015 10:00:01 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10275 , Oct 25 (Reuters) – Legislation crawling its
way through Congress that would end the U.S. ban on crude oil
exports will succeed only if tied to renewable energy
incentives, said Senator Heidi Heitkamp, a moderate Democrat
working to convince others in her party to support ending the
decades-old restrictions.

Heitkamp, who represents oil giant North Dakota, said she is
convinced her bill or a similar one can pass by the end of the
year, though getting the White House and others on board will
require some kind of financial support for wind, solar and other
renewable energies, energy efficiency and water conservation
funds.

“The notion that we would be able to do this without some
kind of broader compromise in the energy sphere is probably
unrealistic at this point,” Heitkamp told the Reuters
Commodities Summit on Friday in Williston, epicenter of North
Dakota’s oil industry. “Washington is a place where people don’t
give up something for nothing.”

The United States has limited most oil exports since the
early 1970s. The U.S. House of Representatives passed a bill
ending the oil export ban earlier this month, but President
Barack Obama issued a veto threat, saying Congress should work
to move the country to cleaner sources of energy.

Two bills in the Senate similar to the House version have
passed through committees – including the one co-sponsored by
Heitkamp – but backers are struggling to find enough Democrats
to pass legislation in the full chamber.

Heitkamp’s acknowledges the political antipathy many of her
fellow Democrats have toward fossil fuels, but says she is
convinced she can get enough votes. She mentioned that work last
month when she opted against a 2016 North Dakota gubernatorial
bid.

“Why would we prevent anything from being exported? How is
it different from corn? How is it different from any other
commodity?” said Heitkamp, a senator since 2013 and a former
director of a coal gasification company

Heitkamp declined to discuss specific renewable incentives
that could be added to the export ban legislation, citing
ongoing negotiations.

Lifting the ban has broad support in North Dakota, where, in
an unusual display of political comity, many Republicans have
cheered Heitkamp’s bill.

“It’s very puzzling the (Obama) administration feels this is
something with which they want to draw a line in the sand,” Jack
Dalrymple, North Dakota’s GOP governor, told Reuters. “There’s a
broad base of support for crude oil exports across the country.”

Follow Reuters Summits on Twitter @Reuters_Summits

For more summit stories, see

(Reporting by Ernest Scheyder; Editing by Marguerita Choy)

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North Dakota throws a two-year lifeline to oil ‘ducks’ http://www.reuters.com/article/2015/10/22/north-dakota-wells-idUSL1N12M38B20151022?feedType=RSS&feedName=everything&virtualBrandChannel=11563 http://blogs.reuters.com/ernest-scheyder/2015/10/22/north-dakota-throws-a-two-year-lifeline-to-oil-ducks/#comments Thu, 22 Oct 2015 20:37:48 +0000 http://blogs.reuters.com/ernest-scheyder/?p=10273 By Ernest Scheyder

WATFORD CITY, N.D. (Reuters) – North Dakota regulators
approved a plan on Thursday to give oil producers an extra year
to bring a new well online, a change designed to give the energy
industry breathing room during the crude price downturn.

Companies will now have up to two years to hydraulically
fracture, or frack, drilled-but-uncompleted wells, or DUCs,
under changes approved unanimously by the North Dakota
Industrial Commission (NDIC), which is comprised of the
governor, attorney general and agriculture commissioner.

Previously, firms only had one year to bring wells online.
Many companies have delayed completing wells after a 50 percent
plunge in crude since last year.

The rule change means the oil industry would not be forced
to spend billions of dollars come January to frack an estimated
1,000 DUCs, most of which hit their one-year deadlines in
December. Some price bears had feared a new glut in output if
the DUC backlog was cleared.

For the state, the change means delayed, but higher tax
revenue.

“The state would prefer to tax the oil at a higher price in
the future,” said Lynn Helms, director of the state’s Department
of Mineral Resources and a key lieutenant to the NDIC.

Producers must still apply for an extension on a
well-by-well basis, and Helms warned that any objection from
mineral or land owners would likely scuttle extension requests.

Under prior rules, firms had a year to drill, frack and
start producing oil from a well. If that window passed, the
state would give them six months to plug the well, start
producing or face confiscation.

Helms said he expects roughly half of the 1,000 DUCs to be
granted delays, which likely will affect statewide oil output by
roughly 100,000 to 150,000 barrels per day (bpd) next year.

The state currently produces about 1.2 million
bpd.

FLARING CREDITS

Separately, the NDIC approved a credit system for oil
producers who are collecting more natural gas than required from
their wells in order to curb flaring, the wasteful burning of
such gas.

Producers will now have a rolling three-month window to
build up credits that can be used to offset any future declines
in gas collection due to weather or other issues.

Exxon Mobil’s XTO Resources has been granted the
largest number of temporary exemptions to flaring restrictions,
followed by privately held Zavanna LLC.

Helms said he hopes the credit system prods XTO, Zavanna and
others to “get some credits in the bank.”

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