Business 2013 Look Ahead: Drilling boom comes with its own challenges
BY ROD WALTON World Staff Writer
Sunday, January 06, 2013
1/06/13 at 4:11 AM
The answers to questions about Tulsa energy prospects for 2013 go like this - good, bad and who knows what else.
The current boom is focused on oil drilling like producers haven't seen in a decade or more. Tulsa companies like Eagle Energy and Laredo are racheting up that pace, as are outside firms such as PetroQuest with strong local presences.
The darling of Oklahoma drilling right now is the Mississippi Lime trend in the northern part of the state and southern Kansas. The year ahead should see ample investment in horizontal drilling within the long-running limestone.
"The Miss Lime will continue to grow," said Mark Castell, who heads up PetroQuest's office in Tulsa.
"The Miss Lime is still in its development infancy," he said of horizontal drilling in the historical vertically drilled sites. "We are learning every day how to improve our well results."
Eagle Energy LLC CEO Steve Antry, who sold his company to Midstates Petroleum Co. last year, believes the boom will carry on, though challenges await. Those challenges include regulatory issues and whether midstream companies can keep up building pipeline infrastructure to move all the new oil.
The bummer to this oil party, however, is that other production component: natural gas. In fact, most Tulsa-based producers are traditionally natural gas heavy in their production mixes, and the historically low prices are hitting everyone harder.
Samson Resource Co. recently laid off 120 employees, including 70 locally, and blamed low natural gas prices for the struggle. Others, such as Apache Corp.'s Rob Johnston, warned that the pricing problem still play a tough role.
"The play we're in - the Anadarko Basin - is traditionally gas," he said. "Commodity prices are a problem."
WPX Energy Inc., the Williams spinoff, also is heavily weighed toward natural gas production. Low prices forced Unit Corp. and others into non-cash impairments on their earnings results.
"I expect natural gas prices to remain depressed for much if not all of 2013 due to the supply/demand imbalance," Castell said. "Hopefully, efforts to utilize plentiful clean-burning natural gas will continue to increase in sectors like the transportation industry."
Government regulation could play a role, depending on how the U.S. Environmental Protection Agency, which is looking for a new leader since Lisa Jackson stepped down, handles its studies into hydraulic fracturing. Tulsa oil and gas producers are confident about state oversight but cast wary eyes toward the feds.
"I expect government regulation to be fairly consistent with previous years," Castell said. "The Oklahoma Corporation Commission does a very good job regulating our industry in Oklahoma. Although there is risk that additional federal government intervention could occur in 2013 on federal controlled lands, I would expect operators to adjust according to the federal government revised regulations."
Original Print Headline: Drilling boom has hurdles
Rod Walton 918-581-8457
WPX Energy's drilling operation is shown in the Bakken Shale of North Dakota. WPX will also be heavily weighed toward natural gas production in 2013. Courtesy