Articles Posted in OIl and Gas News

WoodMackenzie has recently come out with its 2013 ranking of the world’s twenty largest oil companies, and their change in production over the last ten years:

(BOE is barrels of oil equivalent.)  As you can see, most are state-owned companies. Russia re-acquired its privately-owned companies. Saudi Arabia has increased its production 28% in the last 10 years.  Iran, despite the embargo, has increased its production by 24%, in part because of increased export of natural gas. Venezuela’s production has suffered from politicization of its national oil company. Shell’s efforts to increase production by acquiring a position in U.S. shale plays has not been successful. BP has sold off a substantial part of its production. China has invested big-time to fuel its economy. And the world economy has managed to survive $100 oil.  For comparison, the total world production in 2010 was about 137 BOE/day. These top twenty companies together produced about 60% of that total.

For a good article on these numbers, see Forbes’ article, The World’s Biggest Oil Companies – 2013, here.

Last week I attended the State Bar Annual Advanced Oil, Gas and Energy Law Conference in Houston. This year is the 75th anniversary of the Oil, Gas and Energy Section of the Texas Bar (older than the State Bar itself), and there was a special dinner to honor the occasion, at which Daniel Yergin spoke.  He is the author of the Pulitzer-prize-winning book The Prize, a history of the global prusuit of oil, money and power — a great read. More recently Yergin published his follow-up, The Quest: Energy, Security, and the Remaking of the Modern World, updating the history of global energy production and demand from the first Gulf War to the present.

Some tidbits from Yergin’s talk:  politically, the biggest risk to the industry is the opposition to hydraulic fracturing — not a big issue in Texas, but a huge issue in eastern states and California — and the pressure for increased federal regulation of drilling.  The biggest practical challenges to the industry in the US are dealing safely with wastewater from oil and gas operations, and, in some parts of the US, the industry demand for fresh water for fracing. Once again, peak-oil predictors have been proven wrong, by the triumph of technology.  Texas has long been a leader in the industry not only because of its abundance of natural resources but also because of private ownership of oil and gas and the development of the legal theories and framework for the industry by the Texas bar and courts in the 20th century. 

To see Yergin’s “world energy timeline, click here.

Range Resources

Range Resources’ battle with the Lipskys and Alisa Rich continues, now in a confusing appeal of the trial court’s order denying the Lipskys’ and Rich’s motion to throw out Range’s counterclaim under the Texas law prohibiting so-called Strategic Lawsuits Against Public Participation, or SLAPPs.  http://www.star-telegram.com/2013/04/02/4745433/appeals-judges-return-range-suit.html

Earthquakes and Disposal Wells

The fall of Aubrey McClendon, CEO of Chesapeake Energy, has been meteoric. He was forced to step down as Chairman of its board, and yesterday he was replaced as board chair by Archie Dunham, the 73-year-old former CEO of Conoco. Aubrey’s fall from grace started only a few months ago with articles in the business press about his deal with Chesapeake to own a small interest in every well Chesapeake drilled. Aubrey was borrowing heavily against his personal interests, to the tune of $1 billion, to keep his ship afloat. Then there were allegations about McClendon’s personal trading in futures that “could have been” opposed to the company’s interests, for which the he and the company are now under an SEC investigation. Chesapeake’s shares started falling, and shareholders began complaining about him and his board. At the company’s recent shareholder meeting four board members were forced out, and two who stood for election were soundly defeated. Carl Icahn smelled blood, bought 7.6% of the company, and installed one of his own as a board member. For now, McClendon remains CEO. Archie Dunham’s job is to sell some $7.4 billion of Chesapeake’s properties to get it out of its hole.

McClendon co-founded Chesapeake with Tom Ward in 1989, with $50,000 and 10 employees. He made the company into the nation’s largest domestic gas producer by investing heavily in shale gas plays across the country. In my opinion, he is responsible for the huge resurgence in domestic exploration, and in the rapid increase in gas production — and the precipitous decline in natural gas prices — over the past few years. McClendon and Boone Pickens were the promoters of natural gas, touted as the fuel of the future and the solution to global warming. McClendon is hated by other independents for sweeping into new shale plays with his pocketbook open and offering $25,000 per acre for leases.  

I’m no financial expert. But it seems clear to me that Chesapeake’s problems arise from the huge decline in oil and gas prices, and not from any sculduggery by McClendon. In all the press coverage, I have not read anything to indicate that McClendon actually did anything for his personal benefit and against the interests of his company. He may have had bad judgment in betting so big on natural gas, but that is his nature. He is a landman, a speculator, and a wildcatter.