.The Texas Energy Report

By Alex Mills

January 1, 2024 — Texans are blessed. It’s true.

The Good Lord has blessed us in many ways, especially with an abundance of natural resources. The same could be said about the United States, and the people who develop these resources into energy products that we consume around the clock every single day.

I have had the good fortune of writing this column since 2006, and working for energy associations in Texas and Washington, D.C. since 1980. I am constantly amazed at the drive and ingenuity of the wildcatters who explore and produce crude oil and natural gas, the pipeliners who transport the products, the refiners who make the petroleum products, and the retailers who sell to the public.

It’s not easy. It’s complicated from beginning to end with potholes and roadblocks at every turn.

During this year I wrote columns about production increasing in Texas and across the U.S., prices rising and falling and rising again, efforts by the President of the U.S.A. to put the oil and gas industry out of business, OPEC attempts to manipulate oil production and price, an international conference on climate change concludes proclaiming its desire to “transition” …
 

By Alex Mills

Last week had many big stories. Below is a summary of some.

Petroleum prices decline. Record oil and natural gas production in Texas and across the U.S. have created an oversupply causing prices to drop. West Texas Intermediate (WTI) crude oil prices traded on the New York Mercantile Exchange slipped below $70 on Wednesday and natural gas prices dropped to $2.55 per British thermal unit (Btu). The decline in prices in the oil patch is being felt by consumers as retail prices for gasoline went as low as $2.45 a gallon in many locations across Texas.

The Energy Information Administration (EIA) at the Department of Energy predicts Brent crude oil, which is traded on the international market in London, will drop from its previous forecast of $93 per barrel to average $83 in 2024. EIA forecasts natural gas will average $2.80 per Btu from November to March (the major consumption period) because of the high production rate and warmer weather.

EIA believes crude oil and natural gas production will set records in 2023 and again in 2024.

Capital expenditures expected to increase. U.S. oil producers will increase capital spending by 2% in 2024, according to…
 

December 19, 2023 — Texans responding to a UT poll disapprove overall of the job the state legislature did in ensuring the reliability of the ERCOT grid (among other issues), but the results unsurprisingly vary along ideological and partisan lines.

The Texas Politics Project at the University of Texas at Austin poll released Tuesday indicates that 44% of Texans “disapprove somewhat” or “disapprove strongly” of how the legislature handled grid issues this year, versus only 28% who approve either somewhat or strongly. Surprisingly, a full 20% neither approve nor disapprove, with 8% saying they “don’t know,” indicating more than one quarter of respondents to the poll didn’t register even a mild opinion.

However, in a “religiosity” subset of the poll, those to whom the legislature’s moves were “extremely important” registered a 38% approval as opposed to a 29% disapproval, while those identifying the issue as “not important at all” were overwhelmingly disapproving (71% disapproved while only 8% approved).

Along party lines, 39% of self-identifying Republicans…
 

December 17, 2023 — Cyber Enviro-Tech, Inc has developed a water remediation system that could help reduce the increased seismic activity in the Permian Basin by treating and repurposing oil production wastewater.  The current practice of deep underground injection of corrosive, high-sodium wastewater from oil production has not only exponentially increased fluid pressure, but also created salty contaminants, trapped gases and bacteria. All of these triggered earthquakes by decreasing the tight fit or clamping between rocks along natural faults through corrosion and extreme pressure. The Railroad Commission of Texas (RRC) has suspended more than 30 wastewater disposal sites aka SWDs (Salt Water Disposal wells) north of Odessa to Midland due to this surge in seismic activity.

Cyber Enviro-Tech’s solution is simple – remediate the wastewater instead of injecting it deep underground so it can be repurposed back into the communities. CETI uses its Sludge Master Series of products which employ a variety of cutting-edge, multidisciplined technologies to efficiently convert wastewater into environmentally friendly water that can be used for irrigation and, with further remediation, drinking water. Their Sludge Master Series wastewater remediation systems are portable, eliminating the need for expensive infrastructure and allowing for easy deployment.

The size of this problem is considerable.  In 2021, Rystad Energy reported a 400% increase in wastewater injections in Texas from 54 billion gallons in 2011 to 217 billion gallons in 2021. During this period, the US Geological Survey and the University of Texas reported that earthquakes in the Permian Basin were partially caused by the practice of disposing high-pressure saltwater…
 

A new Customs and Border Patrol (CBP) decision will make compliance with the Jones Act even more onerous for natural gas producers.

The Jones Act, a law that is over 100 years old, requires all ships used to move goods from one US port to another be US-owned, -built, -crewed, and -registered. This makes it impractical to ship goods from one US port to another because the amount of ships that meet these requirements is incredibly limited. Just 93 vessels worldwide were Jones Act compliant in January 2023, according to Statista. These problems are compounded for Hawaii, Alaska, and Puerto Rico because of their geography (e.g. distance, accessibility).

The law causes particular problems for the transportation of Liquefied Natural Gas (LNG). There is currently not a single LNG tanker that meets Jones act requirements. There are some smaller vessels in compliance, including barges, but nothing that can move LNG at scale. This means that US terminals…
 

By Railroad Commissioner Wayne Christian

Christmas came early for radical environmentalists at the end of the United Nations’ climate conference (COP 28). These anti-humanists got their wish of a UN pledge to end fossil fuels.

More than 190 governments feverously approved an agreement telling the world and global economy to start limiting use of coal, oil, and natural gas. This will certainly have an impact for producers who will see more bureaucratic red tape and increasing limits to an already drought-ridden financial capital market.

I’d love to put some coal in their stockings this Christmas. This pledge isn’t worth the paper it’s printed on—it denies reality.

It denies the fact fossil fuels power 80% of world energy. Are we going to replace that with wind and solar power? The U.S. has spent more than $15 billion on unreliable energy subsidies for them to…
 

December 14, 2023 — Hydrogen will soon become a vital component in the expansion of the energy industry in Texas, providing greater energy production and further boost the economy with job creation. After House Bill 2847 was passed by the 88th Legislature, The Texas Hydrogen Production Policy Council, (TxH2 Council) was established within the Railroad Commission and clarifies the agency’s regulatory jurisdiction over hydrogen pipelines and underground storage facilities.

The Council is tasked with making recommendations to the Legislature on updates necessary for the oversight and regulation of production, pipeline transportation, and storage of hydrogen. Duties of the Council will include developing a state plan for hydrogen production oversight by the RRC, analyzing the development of hydrogen industries around the state, and monitoring regional efforts for the application and development of a clean hydrogen hub authorized under the federal Infrastructure Investment and Jobs Act.

Pursuant to the bill, the chair of the Council is Chairman Craddick of the Commission, and RRC appointed 11 additional members…
 

December 11, 2023 — As expected, Occidental Petroleum on Monday said it will acquire CrownRock for $12 billion, adding an additional 170,000 barrels of oil equivalent per day to Oxy’s production….
 

By Railroad Commission of Texas Commissioner Wayne Christian

December 4, 2023 — Texas made headlines this weekend after the State Board of Education (SBOE) rejected efforts to villainize oil and gas in textbooks used by our public schools.

In the Lone Star State, education and fossil fuels have a symbiotic relationship. Here, 99% of the state’s oil and gas royalties are deposited in the Permanent School Fund and Permanent University Fund—meaning in 2021 alone, hydrocarbons contributed $2 billion towards educating the next generation of Texans. In return, the oil and gas industry gets an educated workforce.

Some basic facts. In Texas, our oil and gas industry employs about 350,000 workers at an average salary of $139,000—103% higher than other private sector jobs. Many of these jobs are trade labor, where skills can be acquired at a technical college, with lower tuition and easier admissions. At a time of record student loan debt and a stagnant economy, these are the kinds of jobs that the American economy needs, and it’s how you build a strong middle class.

It was with this in mind, that as an energy policymaker and regulator for Texas’ oil and natural gas industry, I felt compelled to weigh in on the…
 

Update: Add Cantium to the list of companies that have shut in production

November 25, 2023 — Although rough Gulf of Mexico waters have disspated most of the crude and therefore most of the threat, officials continue searching for the source of an oil spill that caused at least five companies to shut in production since last week.

No impact on coastlines has been observed, and OSHA, which is investigating along with the Coast Guard, hasn’t confirmed the amount spilled.

NOAA spokeswoman Brandi Todd said Friday only “very, very small sections of very, very light water sheen” have been observed about 50 miles south of the Louisiana coast during most recent aerial and satellite surveys.

The spill is estimated…
 

November 20, 2023 — A University of Houston engineering research team is pioneering a new method, based on percussion, to detect pipeline elbow erosion.  

It is no small problem.  

Below the surface of the earth, a veritable superhighway of piping carries corrosive liquids and transports elements like carbon dioxide, hydrogen, methanol and others for a variety of industrial needs from oil well cementing to chemical mining. And at each turn, a pipeline elbow is affixed to shepherd the flow in new directions.

Research reveals that due to erosion, the mass loss of the pipeline elbow is around 50 times larger than that of the straight pipe and the wall thickness of the pipeline elbow becomes thinner through continuous operation. This may lead to bursting or piercing of the pipeline elbow, resulting in economic losses, environmental pollution and other safety issues. 

Since the 90-degree pipeline elbows are prone to erosion caused by the transported medium, detection of pipeline elbow erosion is critical to the health of the pipeline system. Currently, most of the detection…
 

This Texas Energy Report database is published each quarter and is updated as earnings are released throughout the reporting period.

Click on the name of the company for more information about the quarterly earnings report, usually from the company’s own press release

AEP

• Third-quarter 2023 GAAP earnings of $1.83 per share; operating earnings of $1.77 per share
• 2023 operating earnings (non-GAAP) guidance range narrowed to $5.24 to $5.34 per share, midpoint maintained at $5.29
• Long-term growth rate of 6% to 7% and FFO/Debt target of 14% to 15% reaffirmed
• “We’ve made significant progress on our five-year, $8.6 billion regulated renewables investment plan, with $6 billion in approved projects and $800 million currently pending commission approval. These projects provide fuel savings for our customers and are aligned with our integrated resource plans. The transmission and distribution investments we’re making to enhance service and reliability for customers also continue to support our earnings results,” said Julie Sloat, AEP chair, president and chief executive officer.

__________________________

Amplify Energy

• During the third quarter of 2023, the Company:
  • Achieved average total production of 20.6 Mboepd, while successfully implementing the planned turnaround at Bairoil
  • Generated net cash provided by operating activities of $18.0 million and a net loss of $13.4 million
  • Delivered Adjusted EBITDA of $19.5 million
  • Generated $6.1 million of free cash flow
• On October 5, 2023, the Company announced the appointment of Vidisha Prasad to its Board of Directors
• As of October 31, 2023, net debt was $104 million, consisting of $120 million outstanding under the revolving credit facility and $16 million of cash on hand
  • Net Debt to Last Twelve Months (“LTM”) Adjusted EBITDA of 1.2x¹
• The Company is reaffirming full-year 2023 guidance

__________________________

APA

• Reported production of 412,000 barrels of oil equivalent (BOE) per day; adjusted production, excluding Egypt noncontrolling interest and tax barrels, was 340,000 BOE per day;
• Year-over-year U.S. oil volumes increased 16% driven by operating efficiencies and strong well performance in the Permian Basin;
• Confirmed an estimated recoverable resource of 700 million barrels of oil at Sapakara and Krabdagu discoveries on Block 58, offshore Suriname;
• Generated net cash from operating activities of $764 million and free cash flow of $307 million during the quarter; and
• In the first three quarters of 2023, APA returned 65% of free cash flow to shareholders through dividends and buybacks, including the repurchase of 5.5 million shares at an average price of $37.91.

__________________________

Archrock Inc.

• Revenue for the third quarter of 2023 was $253.4 million compared to $213.7 million in the third quarter of 2022.
• Net income for the…
   

November 17, 2023 — Today, the Texas State Board of Educations voted on its Proclamation 2024 which determines the types of textbooks and materials students will use in the 2024-2025 school year. Following the SBOE’s actions, Texas Railroad Commissioner Wayne Christian applauded the outcome and said the following:

“Students need to learn about fossil fuels and real-world energy, where it comes from, how it works, and most importantly how it creates a better world,” said Commissioner Wayne Christian. “America’s future generations don’t need a leftist agenda brainwashing them in the classroom to hate oil and natural gas. Our economy needs STEM students that…
 

November 17, 2023 — Ask a cross section of Texans, and about half are likely to say there is a link between climate change and severe weather events, suggests the newest report in the Texas Trends 2023 survey series.

“But among Texans who have experienced hardship due to an extreme weather event, there is likely to be more certainty in the belief that a direct link does exist,” said Sunny Wong, associate dean for graduate studies at the University of Houston’s Hobby School of Public Affairs and an author of the survey.

The Climate Change: Beliefs and Actions report was released today by the UH Hobby School and the Texas Southern University Barbara Jordan–Mickey Leland School of Public Affairs. In addition to examining perceptions of a link between climate change and weather, it also asked Texans who or what they believe is at the root of the increase in weather-induced crises – including hurricanes, wildfires, drought, severe freezes and heatwaves – and what actions they take at home to prepare for emergencies and cope with widening fluctuations in seasonal weather.

“When we looked closely at the numbers, we found opinions dividing along generational and political lines,” said research associate Maria P. Perez Argüelles…
 

By Alex Mills

As wind and solar energy continue their quest to become major players in the energy production game, each face stiff head winds as financing and equipment costs rise and inflation eats away at the bottom line.

The Wall Street Journal reported this week about presentations of executives during the Super-Return Energy Conference in New York that revealed some companies that invest in energy projects are wondering about the profitability of wind and solar projects.

“The irrational exuberance, all the excitement about clean energy, is clearly getting squeezed out” of a market than can no longer afford it, said David Foley, a senior managing director at Blackstone, who leads the asset managing group.

The stock indexes tracking clean energy companies have dropped significantly recently, Foley said, making it more challenging for companies to raise capital and …
 

By Alex Mills

The price of crude oil, natural gas, and gasoline has dropped more than 10% in recent weeks, but the U.S. Energy Information Administration (EIA) believes higher prices are in the future even though several economic indicators create questions.

West Texas Intermediate crude has declined 13% since November 2022 to average $80 per barrel so far in November compared to $92 last year, according to EIA. WTI closed at $75.65 on Wednesday.

The national average for retail gasoline has followed suit declining from $3.804 per gallon in November 2022 to $3.405 this week, which is an 11% decline, according to AAA. The average price in Texas this week was $2.871, which is 10% less than last year. Many locations across Texas reported retail gasoline prices as low as $2.61 on Wednesday.

Natural gas witnessed the largest decline this year of 49%. Natural gas traded on the spot market at Henry Hub in November 2022 averaged $6.40 per million British thermal units (mmBtu) compared to $3.264 this year. Natural gas closed at $3.12 on …
 

The latest: Lanes of Highway 59 were being reopened late this afternoon as firefighters brought the plant fire under control, but crews are expected to remain at the plant through the night.

As many as 400 customers are reported without electrical power in the area of the plant

November 8, 2023 — Officials say firefighters are making progress in gaining control over what has been reported as a “chemical fire” north of Houston.

The location is identified as Sound Resource Solutions, a plant near Shepherd, Texas, about halfway between Houston and Lake Livingston along Highway 59 (which has been closed in the area most of the day) — a petroleum products processing plant that works with Xylene and other chemicals in the making of solvents among other materials.

The fire, which began with an explosion about 8:30 this morning, has been sending thick black smoke into the air since, but San Jacinto County officials say there has so far been no trace of dangerous chemicals in the air around the plant, which is in a rather sparsely-populated section of Central Texas.

The smoke, however, is…
 

November 3, 2023 — State taxes gathered from Texas oil companies appears to be stabilizing after a couple of years of volatility, with year-over-year income that’s varied between 14% and 78% over the past 12 months; natural gas income remains volatile

The oil production tax income for October 2023 is reported up 8% at $586 million, when compared to October 2022, according to the latest report from Texas Comptroller Glenn Hegar.

Natural gas severance tax income was down, however, by 53% when compared to a year ago, at $192 million.

Motor fuel tax income was up one-percent year-over-year at $316 million.

Motor vehicle sales and rental taxes were up 3% in October at $606 million when compared to a year ago.

Comptroller Hegar attributed some of the up-and-down nature of the overall state tax picture on…
 

October 25, 2023 — The Railroad Commission of Texas assessed $2,425,495.50 in fines involving 597 enforcement dockets against operators and businesses at the Commissioners’ Conference on Tuesday. The Commission has primary oversight and enforcement of the state’s oil and gas industry and intrastate pipeline safety.

Fifty-nine dockets involved $1,010,697 in penalties after operators failed to appear at Commission enforcement proceedings.

Operators were ordered to come into compliance with Commission rules and assessed $151,986 for any oil and gas, LP-Gas, critical infrastructure, or pipeline safety rule violations. Pipeline operators and excavators were assessed…
 

On October 20, the Baker Hughes Company reported 118 natural gas-directed rigs were active in the United States, a decrease of 38 rigs since the start of 2023. The decline in active drilling rigs coincides with lower natural gas prices for most of 2023, compared with relatively high natural gas prices for most of 2022.

When natural gas prices are low, producers often decrease their drilling activity, reducing the number of active drilling rigs deployed. Producers may not respond immediately to decreases in natural gas prices; it typically takes four to six months for producers to respond to price changes. The extent to which producers…