Every fad runs its cycle: The ’50s gave us the hula-hoop, the ’60s gave us tie-dyed t-shirts, the ’70s gave us leisure suits, the ’80s gave us Cabbage Patch Dolls, the ’90s gave us Pokemon, and the ’00s gifted us with The Atkins Diet (on which I once lost 36 pounds and then gained it all back in a single year). Fads come and fads go, but the thing that they all have in common is that, when we look back from the viewpoint of history, we wonder how they ever became so popular to begin with?
Thus begins the saga of “Fracking” and its application to the very safe, heavily-regulated industrial process of hydraulic fracturing by activist conflict groups, the news media and the entertainment industry that has run a similar course over the past ten years. Starting around early 2008, we began to see groups like the Natural Resources Defense Council (NRDC), the Sierra Club and other major environmentally-focused conflict groups using the term “Fracking” ubiquitously in their messaging campaigns to oppose the oil and gas industry the U.S.
The use of the term – which is adopted from the remake of the Battle Star Galactica series that aired during the early years of this century – quickly spread into the media, which is not surprising. After all, the term is stark, it is sexy, and it is adopted from a cuss word (In Battle Star Galactica, the term “Frakking” was used to describe the act of sexual intercourse) that had become well-known in pop culture. We first began seeing the term used in left-wing media outlets like ProPublica, but it quickly spread to the mainstream outlets, as journalists and editors began to see the use of the term attracted traffic to their websites.
Over the following few years, the use of the term expanded almost exponentially in the media and then into the entertainment industry, as the public became increasingly aware of the boom in shale oil and natural gas that “fracking” had made possible. (Nevermind, though, that “fracking” had to be wedded to horizontal drilling in order to achieve that feat – , and thus almost never appeared in headlines, articles or movies.)
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If you read the Dallas Morning News for information about the oil and gas industry, you’d be best advised to do more than just scan the headlines. Here are two examples of headlines that just don’t really match the content of the articles:
Trump Won’t Declare Dallas Firm’s Dakota Access Pipeline A Major Disaster – Well, no, that’s not at all an accurate description. The state of
Governor Burgum did ask the President to declare the site of the months-long protest/riot action against the Dakota Access Pipeline to be a “major disaster” in an effort to seek federal help in footing the $38 million bill for policing the often-violent protesters and cleaning up the epic mess they left behind when they finally cleared their illegal site. Given that it was the federal government, under Barack Obama, that allowed these rioters to illegally occupy the site for half a year, it would seem that the Governor had a valid complaint. President Trump disagreed, which is his right. Either way, it would have been nice for the headline writer to accurately portray the content of the article.
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There is no question that , one that can legitimately be referred to as a revolution. Though the national news media, with its myopic focus on presidential tweets and scandal-mongering, has largely missed it, there is no denying that our energy policy world has had a radical shift since last November 8.
For the oil and gas industry, this shift has been mostly positive: the rollback of a series of ill-advised, poorly-constructed, often unnecessary regulations, the opening up of new tracts of federal lands and waters to leasing, the speeding up of permitting processes and lease sales are all policies designed to stimulate the production of U.S. oil and gas resources, in keeping with the Administration’s “America First Energy Plan”, and the President’s goal of U.S. “Energy Dominance.” After eight years of little but bad news coming out of Washington, DC, the industry has been very grateful for these and other efforts by the Administration to encourage increased domestic production, the industry’s new-found optimism reflected in the rising rig counts and drilling permit applications of the first 6 months of 2017.
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Last Friday I wrote about the single rig-drop in the Baker Hughes U.S. rig count, noting that it could be an early harbinger of a second-half 2017 slowing of the somewhat frantic pace of drilling we saw during the year’s first six months. We’ll need to wait to see what happens in the next two weeks to be fairly sure whether or not that is the case.
But here’s the funny part: as they are wont to do, many “experts” in the energy media are already telling their audiences that the trend is already here (which, again, is possible), which means the domestic industry is going to slow rapidly (not likely at all), which in turn means the crude price is about to rise back up above $50 in short order (again, not likely at all), which in turn means that, after a month or two, the U.S. industry will then again begin activating a bunch of additional rigs and drilling a bunch more wells before the end of 2017.
That last part is really, really unlikely, given current circumstances.
First, there was the report on Monday that OPEC’s June production rose significantly, to its highest level of 2017. This indicates that more OPEC member countries are beginning to exceed their agreed-to quotas as time goes on. Given that this has been a consistent OPEC pattern throughout its history, this comes as no surprise.
Second, as I wrote a couple of weeks ago, my belief based on discussions with industry contacts, and on 38 years of participating in oil and gas industry corporate budgeting processes, is that, barring a true price collapse into the $30s that lasts for at least a couple of months, the rig count will not fall rapidly, as some are predicting today. Instead, we will most likely see a stagnation or very modest decline in the rig count in coming weeks as companies begin to execute on revised, lower capital budgets for the second half of the year.
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In The Oil Patch – Episode 109: host Kym Bolado and her cohost Alvin Bailey welcome our associate editor of SHALE Oil & Gas Business Magazine and resident politics/energy expert, David Blackmon back onto the show. This week’s show is completely focused on OPEC and the recent agreement they reached to extend the oil production output cut.
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