Shutdown not expected to slow Oklahoma oil industry

by Jay F. Marks and Adam Wilmoth and Paul Monies Modified: October 1, 2013 at 11:13 am •  Published: October 1, 2013
OPUBCO energy writers Jay Marks, Adam Wilmoth, and  Paul Monies  Monday, March 12, 2012. Photo by Doug Hoke, The Oklahoman
OPUBCO energy writers Jay Marks, Adam Wilmoth, and Paul Monies Monday, March 12, 2012. Photo by Doug Hoke, The Oklahoman

Our NewsOK Energy team chatted with readers Tuesday about how a government shutdown might impact the Oklahoma oil industry.

You can join our energy Q&A’s on the second Tuesday of every month at 10 a.m. and submit your questions about energy companies and developments across the state. Below is an unedited transcript of Tuesday's chat.

Paul Monies 9:50 a.m. Hello, everyone, we're going to get started in about 10 minutes.
Paul Monies 9:55 a.m. I'll be your moderator this morning, and I'll be joined by Energy Writer Jay F. Marks and Energy Editor Adam Wilmoth.
Jay F. Marks 9:56 a.m. Looks like we're about five minutes out. Hope you have some questions for us...
Paul Monies 9:58 a.m. We've already got some good questions in the queue. Send us more on local energy companies, oil and gas, wind and utilities.
Matt 10:02 a.m. Any word on a new CEO for Enable Midstream? Updates on employee relocations from Houston? Hard to imagine they have much more room in Enogex's current Leadership Square space for many more employees.
Jay F. Marks 10:02 a.m. Enable (plus OGE and Centerpoint, for that matter) has been quiet since July 31, when it announced its new name and some senior management appointments.
Jay F. Marks 10:03 a.m. The only thing we know about the CEO is it won't be the former head of Centerpoint's midstream operations. He stepped down a while back.
Jay F. Marks 10:04 a.m. An OGE spokesman told me in July that there weren't expected to be many people moving between offices as a result of this partnership.
Jay F. Marks 10:04 a.m. Enable intends to keep the principal offices of the gathering and processing leadership team will be in Oklahoma City, while the interstate pipeline’s principal offices will be in Houston.The principal office of the executive management team is also expected to be in Oklahoma City.
Matt 10:06 a.m. Big news this week on AEP's $1.8 billion in equity and financing deal. Any more updates on what's in store for Aubrey's new venture?
John 10:06 a.m. What's the latest word from Aubrey and American Energy Partners?
Jay F. Marks 10:07 a.m. Mr. McClendon has been playing things close to the vest since he returned to the private sector.
Jay F. Marks 10:07 a.m. He hasn't responded to any requests for comment from The Oklahoman.
Adam Wilmoth 10:07 a.m. I don't think it's a surprise to anyone that Aubrey is jumping back into the industry and specifically into natural gas.
Adam Wilmoth 10:09 a.m. CNBC reported yesterday that American Energy Partners is set to close on a $1.8 billion deal in the Utica in Ohio. Aubrey and more than a dozen other American Energy Partners employees recently joined the Oklahoma Independent Petroleum Association.
Jay F. Marks 10:10 a.m. All of the stories about Aubrey's plans for his new businesses have been sourced by Wall Street insiders, such as yesterday's CNBC report: http://www.cnbc.com/id/101073538
Jay F. Marks 10:10 a.m. He is not talking about his plans, but the people he is asking for money seem to be willing to share some details.
Adam Wilmoth 10:11 a.m. American Energy Partners also appears to be filling up its Harvey Parkway building, including a gym on the ground floor.
Matt 10:11 a.m. The S-1 filing from Devon Midstream indicates that the public offering will comprise 20% of Devon's stake in contributed assets, but would eventually include 100% of the assets over the next couple of years. Any thoughts on what this means for the future of Devon Energy and Devon Midstream?
Jay F. Marks 10:12 a.m. Devon expects this move to help investors realize the true value of its assets.
Paul Monies 10:12 a.m. Thanks for your questions, everyone. We've got a few in the queue that we'll get to as soon as we can.
Jay F. Marks 10:12 a.m. Those who invest in Devon will be buying into its oil and gas holdings, in Texas, Oklahoma, Canada and elsewhere.
Jay F. Marks 10:13 a.m. The midstream company will eventually hold most of Devon's U.S. midstream assets, which the company felt has been undervalued in its current share price.
Jay F. Marks 10:13 a.m. That give investors another way to buy in.
Jay F. Marks 10:14 a.m. The new MLP will be a purely paper venture, with no employees of its own.
John 10:14 a.m. Great article on Sandridge today. What does this mean for their future in OKC?
Mike 10:14 a.m. Will Repsol buy SandRidge?
Mike 10:14 a.m. Anyone know any news on SandRidge being bought by Repsol?
Jay F. Marks 10:14 a.m. The Repsol question is a good one.
Jay F. Marks 10:14 a.m. The Spanish company reportedly wants to buy into the U.S. shale market.
Jay F. Marks 10:15 a.m. Some observers have listed SD as a potential target for them, but I'm not sure it has the kind of diverse asset base that would draw a foreign investor like that.
Adam Wilmoth 10:15 a.m. The large put sale from one of SandRidge's largest shareholders appears to be a fairly strong endorsement of what the company is doing.
Jay F. Marks 10:16 a.m. Most are looking for shale know-how as much as oil and natural gas, so I'd think Repsol would look to buy a company with holdings in a variety of areas.
Jay F. Marks 10:16 a.m. SD is focused on the Miss Lime in Oklahoma and Kansas, with some offshore holdings. That doesn't really fit the bill.
Adam Wilmoth 10:16 a.m. Repsol has made it clear it intends to get into the U.S. oil patch. The Spanish company has the money to buy up a midsize player.
Adam Wilmoth 10:17 a.m. SandRidge executives have said they have no intention of selling.
Paul Monies 10:18 a.m. Mike, which company? Are you talking about CHK?
Mike 10:19 a.m. SandRidge
Adam Wilmoth 10:19 a.m. But the hedge funds that are controlling SandRidge -- and most public companies -- are in it for profit. Everyone's for sale for the right price.
Mike 10:19 a.m. What do you think the company is trying to do? A lot of employes have left
Jay F. Marks 10:19 a.m. SD is in recovery mode.
Jay F. Marks 10:20 a.m. The activist shareholders that led to Tom Ward's ouster identified some spending issues that SD's new leadership is trying to address.
Jay F. Marks 10:20 a.m. That is why new CEO James Bennett has laid out a plan to focus on certain parts of the company's Miss Lime acreage that will be less expensive to develop.
Mike 10:21 a.m. If they were in recovery mode, then why are so many people leaving the company for other opportunities. The atmosphere around there is get out while you can.
Adam Wilmoth 10:21 a.m. SandRidge has invested heavily in building out electrical and pipeline infrastructure in the Mississippian in northern Oklahoma. The company is banking on increased production and profits from that field.
Jay F. Marks 10:21 a.m. The free-spending ways that critics say marked the Ward era are over, so the company is trying to spend within its means...
Adam Wilmoth 10:22 a.m. There is clearly still uncertainty at SandRidge at a time when many others in the energy industry are growing.
John 10:22 a.m. The U.S. House Oversight and Government Reform Committee is holding a hearing tomorrow on the continuation of the Wind Energy Production Tax Credit. If this credit were to expire how would it affect the Oklahoma wind energy sector?
Paul Monies 10:23 a.m. The wind production tax credit was extended until the end of 2013 as part of the deal over the "fiscal cliff" negotiations last year.
Paul Monies 10:23 a.m. It seems to be perennially mixed up in a lot of the issues that has dragged Congress to a standstill.
Paul Monies 10:24 a.m. What the wind industry wants, like other industries, is certainty. There was some talk last year of renewing it and phasing it out over a period of years, but then they got the one-year extension at the last minute.
Paul Monies 10:25 a.m. The PTC has been important in wind development, but don't forget about all the renewable energy standards and mandates that have been passed by various states. That's had a big impact, too, in pushing the industry to its current state.
Paul Monies 10:27 a.m. Oklahoma has a renewable energy goal because we don't like mandates in this state. It was to be 15 percent of renewable capacity by 2015, but we passed that percentage last year, well ahead of schedule. There was some talk in the last legislative session on upping that goal to 20 percent, but it got put off until the 2014 session.
Michael Duane 10:27 a.m. What do you think about the SCOOP or Southern Oklahoma Oil Province? Is it a viable resource for "home grown" energy for the future? Are you familiar with the plan to drill multiple wells per section in the Woodford? Thank you!
Jay F. Marks 10:27 a.m. Continental is still high on the play.
Adam Wilmoth 10:28 a.m. The two large players in the field are Continental Resources and Newfield. They both are very bullish on the play.
Jay F. Marks 10:29 a.m. CLR estimates its acreage there could yield 1.8 billion barrels of oil equivalent, from 2,200 drilling locations.
Michael Duane 10:30 a.m. Are these new deep directional wells that are drilled into shale formations going to hold up as long as the old verticals of the 60's and 70's?
Adam Wilmoth 10:30 a.m. Much of the geology in Oklahoma includes several oil layers on top of each other. The companies are improving on drilling up to a dozen wells from one pad, often in different directions and different layers.
Paul Monies 10:32 a.m. We've got a couple more questions in the queue, but send along any more you have.
Adam Wilmoth 10:32 a.m. The industry expects modern wells to continue producing for decades to come. The technology and procedures have improved, so they expect the wells themselves to remain operational for many decades.
Adam Wilmoth 10:33 a.m. Horizontal wells tend to have steeper decline curves, meaning they produce more initially and the production drops off quickly. But they are expected to continue producing for decades.
Adam Wilmoth 10:34 a.m. Most of the horizontal wells that are being drilled today are in the source rock just below what was drilled previously.
Adam Wilmoth 10:36 a.m. The industry has known the oil was there, but the technological and cost issues prevented companies for going after it. Now that they have found a way to economically recover oil from the source rock, they expect to be busy for quite a while.
John 10:36 a.m. Mexico is currently debating whether or not to open up its energy sector for foreign investment. Do you see any opportunities here for Oklahoma companies?
Jay F. Marks 10:36 a.m. That would be an opportunity for any oil company.
Jay F. Marks 10:36 a.m. Most are willing to go where the oil is.
Jay F. Marks 10:37 a.m. There aren't many Oklahoma companies at present with operations outside the U.S., but Continental could be drawn to the oil potential in Mexico.
Jay F. Marks 10:37 a.m. CLR President Rick Bott has a wealth of experience in international operations.
Adam Wilmoth 10:37 a.m. It would make sense. Mexico apparently has good assets and it's nearby.
Jay F. Marks 10:38 a.m. CHK could be another possibility, since south Texas' Eagle Ford Shale (a key operating area) reportedly extends into Mexico.
Jay F. Marks 10:38 a.m. The key question is how much of a risk operating in Mexico would be...
Jay F. Marks 10:39 a.m. Any company that sets up show there would want to be able to guarantee the safety of its employees, while ensuring it would not be over-burdened with government regulations.
Jay F. Marks 10:39 a.m. (I meant to type "sets up shop" but you get the point)
Adam Wilmoth 10:40 a.m. One of the main barriers to shale oil and natural gas production throughout the world is that most places do not have the oilfield services industry and infrastructure like we have here.
Jay F. Marks 10:40 a.m. Business costs would have to be favorable for any company to proceed in a new area.
Adam Wilmoth 10:40 a.m. That could be easily extended into Mexico.
Paul Monies 10:42 a.m. Any more questions out there? We seem to have exhausted those in the queue.
Paul Monies 10:42 a.m. Adam, Jay: What impact does the federal shutdown have on oil and gas development?
Jay F. Marks 10:42 a.m. It likely won't have any major impact in Oklahoma.
Jay F. Marks 10:43 a.m. The only place under federal regulation in this state is Osage County.
Jay F. Marks 10:43 a.m. It's safe to say there won't be any drilling permits issued soon, but the industry complains that wasn't happening anyway.
Jay F. Marks 10:44 a.m. As for state companies, most have chosen to avoid operating on federal land so it may not bother them much at all.
Michael Duane 10:44 a.m. Is the Keystone XL Pipeline off the table all together?
Jay F. Marks 10:44 a.m. Not at all.
Jay F. Marks 10:44 a.m. TransCanada still wants to build it, but there doesn't seem to be a decision coming anytime soon.
Adam Wilmoth 10:44 a.m. It's still in play. We're still waiting for a decision from the president.
Adam Wilmoth 10:45 a.m. In the mean time, other companies are building new pipelines that would essentially do the same thing as Keystone.
Jay F. Marks 10:46 a.m. Plus there's a whole lot of oil moving by train.
Adam Wilmoth 10:46 a.m. Enbridge is working to add a new line parallel to its line from the Chicago area to Cushing. The company also is planning a line from the Bakken in North Dakota to the Chicago area.
Jay F. Marks 10:46 a.m. But industry leaders maintain pipelines are the best way to transport oil, so they likely won't abandon such projects anytime soon.
Jay F. Marks 10:47 a.m. Protesters want to keep diluted bitumen from Canada's oilsands out of the U.S., but the original Keystone line has been bringing it to Cushing since 2010.
Michael Duane 10:47 a.m. Can you shed any light on the race to export natural gas from the US?
Jay F. Marks 10:48 a.m. It's going to happen.
Jay F. Marks 10:48 a.m. The U.S. is producing so much natural gas that it has to go somewhere.
Michael Duane 10:48 a.m. who are the main players?
Jay F. Marks 10:49 a.m. It is a cheap commodity here, but it much more expensive in Europe and the Far East, markets that would welcome a cheaper supply of it.
Adam Wilmoth 10:49 a.m. Some in the chemicals industry are concerned that exports would drive up prices. Environmentalist groups are concerned exports will boost the industry.
Adam Wilmoth 10:50 a.m. Dominion Energy received preliminary approval last week for an LNG export in Maryland that would export gas from the Marcellus in Pennsylvania.
Jay F. Marks 10:50 a.m. Most producers are on board with exports. Who wouldn't want to sell a product for $15-$20 abroad rather than $4 here?
Adam Wilmoth 10:50 a.m. Four or five have received some approval. More than a dozen more have submitted permits.
Adam Wilmoth 10:50 a.m. Producers say exports won't significantly increase domestic prics.
Adam Wilmoth 10:51 a.m. *prices.
Paul Monies 10:51 a.m. We've got about 10 minutes left. Get your last questions in while you can.
Adam Wilmoth 10:52 a.m. Because natural gas prices have been so low, most producers have moved away from dry gas wells. If there were more demand, producers could boost production quickly.
Guest 10:52 a.m. Just heard that Tom Ward has started hiring staff for a new company. Any word on the name, etc? I understand he has leased space next to SandRidge offices.
Adam Wilmoth 10:53 a.m. Again, I don't think it's a surprise that Tom Ward is working to remain active in the local oil and gas industry.
Adam Wilmoth 10:54 a.m. We're trying to stay in touch with him. We'll report more when we can confirm details.
Bill 10:55 a.m. More layoffs coming to CHK?
Jay F. Marks 10:55 a.m. CEO Doug Lawler says he is aiming to complete restructuring at CHK by Nov. 1, so that is certainly a possibility.
Jay F. Marks 10:56 a.m. The company has not really addressed any layoff reports, other than to confirm last week that 86 people were let go.
Jay F. Marks 10:56 a.m. The Oklahoman also has confirmed CHK laid off its chaplains, beekeeper and seven-person natural gas vehicle team.
Jay F. Marks 10:57 a.m. Eventually though, the company likely will have to give some accounting of its current staffing level, which included more than 12,000 employees earlier this year.
Adam Wilmoth 10:57 a.m. The company has sent out WARN notices to laid off employees, but has not filed a notice with the city or state. Chesapeake would have to file a notice if it laid off 500 employees.
Paul Monies 10:58 a.m. Standby for the last question....
Brent 10:58 a.m. If you were betting men, what company(ies) in OKC would you next bet on being able to grow to Continental's size? Any diamonds in the rough out there?
Jay F. Marks 10:58 a.m. I'm not much of a gambler, but I've been looking over quarterly stock performance figures for state companies.
Adam Wilmoth 10:58 a.m. There are many small and mid-size companies that are growing.
Jay F. Marks 10:59 a.m. Laredo Petroleum Holdings in Tulsa was up 44 percent, while Gulfport Energy Corp gained 36 percent.
Adam Wilmoth 11:00 a.m. Chaparral Energy is up to 750 employees and plans to become publicly traded soon.
Adam Wilmoth 11:01 a.m. Of course we've been reporting Chaparral's IPO plans for nearly 10 years.
Adam Wilmoth 11:01 a.m. I wouldn't be surprised if any of the state's small to mid-size energy companies grow rapidly.
Paul Monies 11:02 a.m. OK, thanks everyone for joining us today. We're going to stop it there.
Paul Monies 11:02 a.m. Join us again next month on Nov. 12 at 10 a.m. for the next chat. Have a good day.

by Jay F. Marks
Energy Reporter
Jay F. Marks has been covering Oklahoma news since graduating from Oklahoma State University in 1996. He worked in Sulphur and Enid before joining The Oklahoman in 2005. Marks has been covering the energy industry since 2009.
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by Adam Wilmoth
Energy Editor
Adam Wilmoth returned to The Oklahoman as energy editor in 2012 after working for four years in public relations. He previously spent seven years as a business reporter at The Oklahoman, including five years covering the state's energy sector....
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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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