As crude oil prices hang low, about $43 per barrel Monday, some North Dakota operators are trying to divest interests in the Bakken.
Two debt-heavy operators in the state, Tulsa, Okla.-based Samson Resources and Denver-based American Eagle Energy, filed for Chapter 11 bankruptcy, planning to sell off Bakken assets to pay back what they owe.
Samson, with production acres in the Three Forks and Middle Bakken plays, has not yet succeeded in selling off acreage, spokesman Brian Maddox said.
“We have not currently entered into agreements to divest other larger packages, including our Bakken, Wamsutter, San Juan and non-core Mid-Con assets, because we perceived the value offered was less than the value of retaining those properties when economic factors and the impact to our credit position were considered,” the company said in first-quarter 2015 filings with the U.S. Securities and Exchange Commission.
“Even if we are successful at reducing our costs and increasing our liquidity through asset sales, we do not expect to have sufficient liquidity to satisfy our debt service obligations, meet other financial obligations and comply with restrictive covenants contained in our various credit facilities.”
The company is the most recent operator in the state to declare bankruptcy, filing in mid-September in hopes of clearing more than $3.25 billion in debt.
As part of the company’s restructuring agreement, second lien lenders own all of the equity of the reorganized company in exchange for providing at least $450 million of new capital to increase liquidity.
“The steps we are taking will allow our company to maximize future opportunities and compete more effectively with significantly less debt on our balance sheet,” Randy Limbacher, CEO of Samson Resources, said in a statement. “We fully expect to operate our business as usual throughout this process and to emerge as a financially stronger company.”
According to 2012 reports, Samson had 400,000 acres in the Bakken. Later that year, it would sell 116,000 acres, primarily in Divide and Williams counties, to Continental Resources for $650 million. No other sale of assets has been reported by the company since then.
And no substantial plans have been announced as to the fate of what does remain, Maddox said.
“We are planning on a Dec. 3 emergence date,” he said of bankruptcy proceedings.
Between June and late September, 10 oil and gas companies have filed for bankruptcy — 19 have filed in the past year since mid-October.
American Eagle Energy, which buys and develops oil wells in the Bakken, was the fourth, filing in mid-May.
American Eagle missed an interest payment on its debt. It listed assets of $222 million and liabilities of $215 million at the time of filing.
American Eagle held 54,262 acres in the Bakken in late 2014. In early 2015, it sold 1,185 leasehold acres in Divide County for $9.5 million.
American Eagle could not be reached for comment.
Outside of those companies filing for bankruptcy, Occidental Petroleum Corp. agreed to sell all of its North Dakota shale oil acreage and assets to private equity fund Lime Rock Resources for $500 million, according to the Reuters news agency. The sale includes 300,000 acres and a recently built, 21,000-square-foot regional office building in Dickinson.
Locally based MDU Resources Corp. is also trying to sell off its oil and gas exploration subsidiary, Fidelity Exploration and Production Co., but has not announced a deal to date.
MDU is scheduled to report its most recent quarterly results next week.
By Tom Hayden, April 24, 2015 4:32pm
LOST HILLS, CA – MARCH 24: The sun rises over an oil field over the Monterey Shale formation where gas and oil extraction using hydraulic fracturing, or fracking, is on the verge of a boom on March 24, 2014 near Lost Hills, California. Critics of fracking in California cite concerns over water usage and possible chemical pollution of ground water sources as California farmers are forced to leave unprecedented expanses of fields fallow in one of the worst droughts in California history. Concerns also include the possibility of earthquakes triggered by the fracking process which injects water, sand and various chemicals under high pressure into the ground to break the rock to release oil and gas for extraction though a well. The 800-mile-long San Andreas Fault runs north and south on the western side of the Monterey Formation in the Central Valley and is thought to be the most dangerous fault in the nation. Proponents of the fracking boom saying that the expansion of petroleum extraction is good for the economy and security by developing more domestic energy sources and increasing gas and oil exports. (Photo by David McNew/Getty Images)
Jerry Brown perhaps should put his DOGGR to sleep. Not his family dog, Sutter, but DOGGR — the Division of Oil, Gas and Geothermal Resources — the 100-year-old agency that’s been handing out permits for drilling in the Central Valley without records, oversight or enforcement of 21st century environmental laws.
The agency was created prior to Upton Sinclair’s 1927 novel, “Oil!,” on which Daniel Day-Lewis’ 2007 film, “There Will Be Blood,” was based. Oil was to California what cotton was to Mississippi, a booming industry based on subsistence labor, migration, racism, vigilantism, and government officials looking the other way.
Oil wells in the Midway-Sunset oil field in Fellows (Kern County). Monterey Shale, largely untouched territory near Midway-Sunset, could represent the future of California’s oil industry and a potential arena for conflict between drillers and the state’s powerful environmental interests. Photo: Jim Wilson, New York Times
Times change but slowly. Current Kern County Sheriff Donny Youngblood, who says Kern ought to be a county in Arizona, opposes President Obama’s immigrant-rights policy. There are an estimated 66,000 undocumented immigrants in Kern County, whose population is majority Latino. More than 22 percent of its people live below the poverty line, 69 percent of them within one mile of an oil well.
The barren place is a bit like Mississippi in the ’60s, powerful enough to defy progressive norms or laws on the national level. The federal government in 1982 transferred its power to California to monitor and regulate the 42,000 injection wells that dump toxic waste fluids into groundwater. That monitoring didn’t happen, a lapse that the feds say is shocking. The human carcinogen benzene has been detected in fracking wastewater at levels 700 times over federal safety standards. Health impact studies are inadequate, but Kern community hospital managers say the county has one of the highest cancer rates in the country, which is expected to double in 10 years.
How did it happen that the Obama Environmental Protection Agency is pushing the Jerry Brown EPA to comply with modern environmental law? The same Gov. Jerry Brown signed that 1982 agreement, giving Big Oil an opportunity to oversee itself. Those were the days when President Ronald Reagan’s Anne Gorsuch ran the federal EPA, perhaps convincing California that it could do a better job.
As a result of the 1982 transfer, the feds say California has failed at oversight and record-keeping. With the feds watching, the state has two years to implement a meaningful monitoring plan.
Brown has tried to fix the problem, which undercuts his claim that drilling and controversial fracking can be addressed by beefed up regulations instead of a moratorium on fracking that most environmentalists want. He has added more professional staff to DOGGR and installed a new director, Steve Bohlen, who promises to clean up the place. Since last summer, the agency has shut down 23 injection wells out of 2,500.
The preference of one experienced state official is to peel back DOGGR, move it to Cal EPA and turning it into a real regulatory agency instead of a lapdog for the oil industry. But Brown officials prefer the uphill task of reforming DOGGR from within, and have signaled they will veto any bill that brings the agency under state EPA jurisdiction. The Legislature is going along with his incremental approach, so far.
The task will be daunting. The DOGGR mandate has been to drill, baby, drill, says state Sen. Hannah-Beth Jackson, D-Santa Barbara. DOGGR’s legal mandate calls for “increasing the ultimate recovery of underground hydrocarbons,” not determining whether drilling or fracking are sustainable and safe for aquifers or human health. Her SB545 is still a work in progress, however. It stops the archaic custom of drilling permits being obtained and accepted without any written approvals or findings, which upsets the feds and shuts out the public. Until recently, an oil company simply gave notice of its intent to drill and was entitled to proceed unless the agency said no in writing within 10 days. Under Jackson’s bill, an application to drill will require written approval, and the paperwork will be posted on the DOGGR website. In addition, the bill will limit the Kern custom of keeping records about chemicals and water impacts confidential, even when a well has gone into production.
However, the bill’s language makes oversight optional by saying that DOGGR “may” require an operator to implement a monitoring plan. Decision-making power is devolved to the division district deputy in Kern, which is like expecting a Mississippi sheriff to carry out federal law in 1964 — or the present Kern sheriff to enforce immigration law today. Nor does the bill give the state EPA or health experts any shared authority in the permitting process.
Well derricks crowd the Kern River oil field in Bakersfield in 1912. Photo: Chevron, SFC
At the heart of the scandal is the historic power of Big Oil against the emergence of California’s clean-energy economy with its priorities of renewable resources and efficiency. The Democratic majority in Sacramento is hobbled by a pro-drilling contingent, led by Republicans with a number of Central Valley Democrats. The oil lobby spent $9 million in 2014 in a failed attempt to exempt themselves from the state’s cap-and-trade law. The effort was led by Assemblyman Henry Perea, D-Fresno, along with 16 Democratic legislators. In a more striking example, state Sen. Michael Rubio, D-Bakersfield, left his seat in 2013 to begin lobbying for Chevron, one of the major firms along with Occidental Petroleum operating in Kern’s oil fields. The oil lobby is spending large sums to cultivate friendly Democratic candidates and underwrite advertising campaigns warning of a “hidden gas tax” if their privileges are threatened.
Many Sacramento insiders believe that Brown has made concessions to Big Oil in order to protect his considerable progress toward clean-energy goals while not confronting the industry the way he took on the nuclear lobby in the ’70s. That’s understandable, if it works. Now, however, his regulatory reputation needs rebuilding. What if his DOGGR won’t hunt? What if it’s beyond reform? What will the governor and Legislature do if facing open defiance from the powers that be in Kern on a range of issues from clean air and water to the protection of children’s health to environmental justice? With the drought on everyone’s mind, can he allow the state’s aquifers to be threatened by the carcinogenic wastewater of oil production?
The DOGGR scandal drills deeply into the foundations on which state politics are built.
Tom Hayden writes, speaks and consults on climate politics and serves on the editorial board of the Nation. His latest book is “Listen Yankee!: Why Cuba Matters.” (Seven Stories Press, 2015).
Chevron Posts Lowest Quarterly Profit in Five Years
Oil Major to Pare Capital Budget by 13%, End Buybacks to Offset Low Crude-Oil Prices
By Daniel Gilbert and Chelsey Dulaney, Jan. 30, 2015
Gas prices are displayed at a Chevron fueling station in Richmond, Calif. in April Photo: Bloomberg News
Chevron Corp. said it would trim ambitious spending plans and stop buying back its shares as the collapse in oil prices erased billions of dollars from the company’s cash flow.
The San Ramon, Calif., company on Friday reported $3.5 billion in profit for the last three months of 2014, down 30% from a year ago and its lowest since the 2009 recession.
It also outlined plans to spend $35 billion this year to find and tap oil and gas, a 13% cut from last year’s budget, in response to oil prices that have slumped more than 60% since the summer to under $50 a barrel.
With less cash coming in, the company is suspending its share buyback program for 2015, which had cost $5 billion a year since 2012. Repurchasing shares shrinks the number available to the public and tends to increase their value. Its shares were down 67 cents at $102.33 in recent trading.
John Watson , Chevron’s chief executive, said the company remains on track to pump the equivalent of about 3.1 million barrels a day by 2017—20% more than its current levels—despite spending less. Oil prices must rise, he said, because companies won’t invest enough to make up for the natural declines of existing oil and gas wells, eventually reducing supplies.
“The projects that are going to meet demand going forward are more complex than 20 or 30 years ago, and so the costs of the projects will be higher, and will require a higher price than we’re seeing today,” Mr. Watson said.
Chevron’s spending plans remain ambitious relative to its rivals and its shrinking cash flow. On Thursday, Occidental Petroleum Corp. said it would spend a third less on producing oil and gas this year; ConocoPhillips said it would chop 15% off its capital budget, on top of a 20% cut in December; Royal Dutch Shell PLC said it would spent $15 billion less than planned over three years. Exxon Mobil Corp. , the biggest U.S. energy company, reports results on Monday.
Chevron generated $6.5 billion from its operations in the fourth quarter of 2014, down 38% from a year ago, but still better than analysts’ expectations. Unless oil prices rebound significantly, that rate of cash generation isn’t likely to cover the company’s spending on exploration and production, plus dividend payments that totaled $7.9 billion last year.
Even before oil prices fell, Chevron had been spending at a deficit, dipping into its pile of cash and borrowing more money. The company’s debt rose to $27.8 billion by the end of 2015, doubling in two years and marking the highest it has been in at least 20 years, according to data compiled by S&P Capital IQ.
The company still has $12.8 billion in cash, but that is about $3.5 billion less than at the beginning of 2014. Patricia Yarrington, Chevron’s finance chief, said it could borrow “tens of billions of dollars” more. And Mr. Watson, the CEO, said that while acquisitions aren’t a priority, “We are actively screening opportunities that are out there and we’ll take advantage of opportunities that we see.”
Overall, Chevron reported earnings of $3.47 billion, or $1.85 a share, down from $4.93 billion, or $2.57 a share, a year earlier. Results included a net $570 million gain on asset sales. Revenue fell 18% to $46.1 billion.
Analysts polled by Thomson Reuters had forecast earnings of $1.63 a share and revenue of $30.65 billion.
Chevron’s bottom line was helped by foreign-currency effects, which have been a drag on many U.S. companies’ results recently. Chevron said foreign currency helped its earnings by $432 million in the quarter, up from $202 million a year earlier.
The pain from lower oil prices was cushioned by Chevron’s business of refining crude into fuels like gasoline and diesel. The refining business, which in recent years has accounted for less than 15% of its profits, provided $1.5 billion in earnings–44% of the company’s total. Refining profits nearly quadrupled from a year ago, due to a combination of better margins and asset sales.
The fall in oil prices masked the company’s success at pumping more oil, as it began reaping petroleum from two major projects in the Gulf of Mexico’s deep waters in the last months of 2014. But overall, Chevron’s oil and gas output slipped about 1% from a year ago. On Friday, the company said production could increase up to 3% this year.
As crude oil prices hang low, about $43 per barrel Monday, some North Dakota operators are trying to divest interests in the Bakken.
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