To better understand the recent news about the precipitous drop in crude prices, it is helpful to review the global picture of world oil production and consumption. (click on images to enlarge.)
In 2018, the US produced 18% of total world oil production, the most of any country. If Saudi Arabia increases its production by a million barrels a day, that would increase world production by about 1%.
In 2017, the US consumed 20% of total world oil consumption.
The post below is from my partner Nicholas Miller. Nicholas has developed a specialty helping mineral owners evaluate offers to purchase their minerals and advising them through the sale process.
John and I often receive questions from clients and interested parties about selling mineral assets. John previously wrote about our work in marketing and selling minerals here.
A few years ago when fielding these questions, I would pass along the family mantra I so commonly heard growing up in a mineral and land-owning family; don’t ever sell your minerals. You never know if and when the low-producing or non-producing asset will suddenly become exponentially more valuable. This unknown still rings true today, but I believe to a lesser degree. Continue reading →
I attended the Symposium of the Texas Journal of Oil, Gas and Energy Law at UT last week. One of the speakers was Giji M. John, Partner at Orrik, Houston, on renewable energy. Here are some takeaways. (click on images to enlarge.)
Renewable energy’s contribution to US energy consumption in 2018 was 11%. Of that 11%, wind energy contributed 21% and solar 6%. Remarkably, “wood” was 19% of that 11%. So solar and wind combined contributed 27% of 11%, or less than 3%, of energy consumed in the US.
Texas is by far the leader in wind energy production, with 24,895 megawatts of installed capacity. The next state is California with 5,840 MW.
I highly recommend a podcast sponsored by Texas Monthly, Boomtown. It’s a series about the history of the Permian Basin and the people who live and work there in the recent boom. Its host is Christian Wallace, who grew up in Andrews. You’ll get to meet his grandmother, who still lives there – quite a lady. You can download it on Apple Podcasts.
If you’d like to know when there has been a new post on this blog but you don’t want to keep going back to see if there have been any updates, you can subscribe to my blog. There is a link to the right, “how to subscribe to RSS feeds.” Click on that and it will tell you how. Also, I always post on LinkedIn and Twitter when I post a new blog, you can follow me there.
The oil and gas industry is at the beginning of a significant downturn. Oil and gas prices are down, supply is up, demand is flat. Another in the never-ending cycle of a boom-and-bust industry, now exacerbated by appearance of a potential coronavirus world epidemic and a sharp reduction in demand for hydrocarbons in China.
As in the past, a downturn in the industry results in a rise in bankruptcies, and this downturn is no exception. Two recent bankruptcy cases illustrate a new wrinkle in disputes arising from failed companies: Monarch Midstream, LLC v. Badlands Production Co., 608 B.R. 854 (Bkrtcy.D.Colo. 2019), and Alta Mesa Holdings, LP v. Kingfisher Midstream, LLC, 2019 WL 7580122 (Bkrtcy.S.D.Tex. Dec. 20, 2019). Continue reading →
The Texas Supreme Court issued its opinion in ConocoPhillips Co. v. Ramirez, No. 17-0822, a family dispute over ownership of minerals in 10,058 acres in Zapata County, and ConocoPhillips’ claim to an oil and gas lease covering those minerals.
In 1995, ConocoPhillips bought oil and gas leases from EOG covering 1,058 acres, the Las Piedras Ranch, in Zapata County. At the time there was one producing well on the leases. The minerals belonged to the Ramirez family. One member of that family was Leonor, who died in 1990, owning all of the surface estate and a 1/4 mineral interest in the Ranch. Her will devised to her son Leon Oscar Sr. “all of my right, title and interest in and to Ranch Las Piedras … during term of his natural life,” and on his death “to his children then living in equal shares.” Leon Oscar Sr. signed an oil and gas lease on the Ranch, which was acquired by ConocoPhillips. Continue reading →
Last April the Fort Worth Court of Appeals issued its opinion in Bluestone Natural Resources II, LLC v. Randle, No. 02-18-00271-CV, 2019 WL 1716415. The Court decided that, under Randle’s lease, Bluestone could not deduct post-production costs and owed royalty on plant fuel and compressor fuel. Bluestone has petitioned the Supreme Court for review and the Court has asked for briefs on the merits.
Randle’s lease was a printed form with an exhibit. The printed form provided that royalties on gas would be “the market value at the well of one-eighth of the gas so sold or used …” Exhibit A provided that “the language on this Exhibit A supersedes any provisions to the contrary in the printed lease hereof.” One provision in Exhibit A dealt with post-production costs:
Lessee agrees that all royalties accruing under this Lease (including those paid in kind) shall be without deduction, directly or indirectly, for the cost of producing, gathering, storing, separating, treating, dehydrating, compressing, processing, transporting, and otherwise making the oil, gas and other products hereunder ready for sale or use. Lessee agrees to compute and pay royalties on the gross value received, including any reimbursements for severance taxes and production related costs.
Significant cases on oil and gas issues in 2019:
In Texas Outfitters v. Nicholson, the Texas Supreme Court again addressed the duty of the older of executive rights to minerals owned by another.
In Trial v. Dragon, the Supreme Court delved into the arcane theories of the Duhig rule and estoppel by deed.
Happy New Year.
The decade now ending was the decade of the Permian Basin. Its rise in production changed the US to a net oil exporter.
Permian gas production, a byproduct of the search for oil, drove down gas prices and resulted in a frenzied effort to build pipelines to move the gas to the coast.
