Pogo/Latigo leads the pack in 06

the newsletter of the Panhandle Producers & Royalty Owners Association • Vol. LXXVIII • No. 1
Pogo/Latigo leads the
pack in 06
Latigo Petroleum, acquired by Pogo Producing Co. in April, completed the most wells in RRC
Dist. 10 in 2006 . Working primarily in Ochiltree County south of Perryton (see map, right),
the Houston-based company brought in 15
producing wells, according to DrillinInfo.com.
Pogo/Latigo put 16 wells on
line in an intensive infield
drilling program south of
Perryton.
Gas price manipulation investigation in
the wind
This map compiled by DrillingInfo.com shows completion
activity in the Panhandle in 2006
IN THE PIPELINE
Pogo/Latigo leads the pack ............. 1
Gas price manipulation .................... 1
From the wellhead ........................... 2
PDB eye in the sky ......................... 2
Socks n’ hugs ................................. 3
Markets ........................................... 4
Monthly stats .................................. 4
Casenote ........................................ 5
Quote .............................................. 6
Walker named VP of Cambridge ..... 7
Gas prices ...................................... 8
Locations ...................................... 10
District 10 production data ............ 12
Prior to acquiring Latigo, Pogo
completed one well in the same
operating area.
OKC-based EOG put 14
wells on line in 2006. Chase
Production completed 14 locations.
All told, there were 146
successful gas wells, the majority in the highly-productive
Granite Wash and Buffalo Wallow plays in the eastern Panhandle. In 06, the Railroad
Commission issued 250 drilling
permits, only 125 in 2005.
Energy Transfer Partners
will pay up to $30 million to
settle an ongoing investigation by the Federal Energy
Regulatory Commission
into natural gas marketing
practices. ETP admits the
move is intended to call off
the FERC dogs, but more
negative news could be in
the wind. A wind called
Katrina.
ETP’s subsidiary, Energy
Transfer Company, allegedly drove down monthly
physical gas prices at the
Houston Ship Channel to
cont’d on page 7
2
FROM THE WELLHEAD
Our premier event of the year is just around the
corner. The annual convention this year is April 2426 at the Civic Center. Plans for the convention are
well under way. Given that it is a month earlier this
year, we need to have most arrangements tied down in
the next 30 days. So, if you have a suggestion for a
speaker or topic let us hear from you soon.
Scott Noble, president of Noble Royalties, has
already committed to speak during Day Two at our
breakfast or luncheon.
PPROA President
Brady Brown
The 110th Congress is now in session. Given the change in party
leadership from Republican to Democrat our industry is definitely in
the line of their fire. The Democrats have vowed to pass an energy
policy. This comes from a party that has been detrimental to our
industry for many years. Remember the Natural Gas Policy Act and the
Power Plant and Industrial Fuel Use Act in 1978? How about the
Windfall Profits Tax in 1980?
Hopefully the House and Senate will study the negative results of
these acts and not repeat history. Instead look at the dynamics of
our industry and realize a profit allows us to explore for new oil
and gas reserves which increases supply and eventually lowers prices.
Any sensible energy policy should not discourage or restrict
exploration. We need access offshore and on public lands. And our
country needs the jobs and tax dollars instead of sending our dollars
to unfriendly countries, only to have them returned with barbaric
acts of violence.
The PPROA is committed to working with other industry organizations
to make our voices heard at local, state, and federal levels in order
to protect our way of life and national
security.
PDB eye in the sky
The sky’s the limit for one
company prospecting in the
Palo Duro Basin. Columbus
Resources has contracted with
Yorba Linda, CA-based eField
Exploration to run a High
Resolution Electromagnetic
January 2007
Airborne EMT oil and gas survey over its properties in Motley County. Columbus Resources is headquartered in
Flower Mound, TX.
eFields’ system is “ElectroMagnetelluric” technology
mounted in an airplane. Resulting color graphics show geophysical structures deeper than
commonly used technologies at
much lower expense, according
to an eField news release.
The system allegedly detects
the presence of hydrocarbons
cont’d on page 3
Eye, cont’d from page 2
January 2007
socks and hugs
by reading patterns associated with natural
electric currents known scientifically as Telluric currents which are induced by solar flares
and lightning which penetrate deep to the
planet’s core. The charge effects occur at the
interface of water and dissolved hydrocarbons
- an effect called the Natural Field Induced
Polarization (NFIP), identifying oil and gas
anomalies from surface to 20,000 ft. down.
The accumulation of the charges and their
migration to the surface in seep columns is
mapped by the eField Airborne ET System.
Computer analysis of the system computes
apparent resistivity and the NFIP.
eField announced that data from the Palo
Duro survey in Motley and adjacent Floyd
County and surrounding areas is available for
license. Typically, the company charges a
survey fee and gross overriding royalty from
production in licensed prospect areas.
3
PPROA President Brady Brown surprised Carolyn Miller
with several checks donated to Socks for Soldiers in
December. Sidwell Companies, Travelers Oil Co. and
PPROA donated $500 each. Several dozen pair of socks
and miscellaneous toiletries were donated by PPROA
members at the annual Christmas Open House. Miller
and her husband Doug created the campaign in
Amarillo last year.
In the last publication of
Pipeline, we commented on a
multitude of bearish factors that
by October 20th had combined to
retrace over 25% of the crude
contract’s mid-July price peak.
On that day, the November
January 2007
contract expired at $56.82, the
lowest closing of 2006. The
graph below shows the price
movement of the nearest crude
contract between the first
trading day of July and the
November contract expiration.
One of the
prominent
portions of that
discussion
involved the
uncertainty
surrounding
OPEC action.
The producer
group remained
on the sidelines
as prices ran up
4
to over $78/bbl, primarily
because their lack of excess
capacity limited their ability to
lower prices. Though they
cannot keep prices from rising,
the cartel does have the ability
to keep them from falling by
withdrawing supply from the
market. When prices precipitously fell in the three months
following the peak, the market
speculated about what OPEC
action may come.
We had previously asserted
that without Saudi Arabian
cooperation, the price targets
and “voluntary” production cuts
of other members were virtually
meaningless. We assumed that
because of a multitude of geopolitical reasons, it would be in the
Saudi’s best interest to let prices
continue to fall, protecting a
cont’d on page 5
MARKETS, cont’d from page 4
price floor in the $40’s.
On October 19th, OPEC met
in Doha, Qatar and announced a
production cut of 1.2 mbpd.
More recently, in December,
they decided to make additional
cuts at their Abuja, Nigeria
meeting. From the emergency
meeting in Doha, Saudi Arabia
even indicated that another 0.5
mbpd production cut was on the
table for its scheduled December meeting in Nigeria. The
move signaled that OPEC was
effectively endorsing a $55 price
floor for their basket, over twice
its old range of $22-28. This
event was unexpected and so it
makes sense to analyze why the
situation may have taken the
turn it did.
First, we think that Saudi
Arabia decided to make the
production cuts to protect its de
facto leadership role within the
cartel. Reports of Saudi Arabia
wanting prices to fall to “reasonable levels” after setting a sixmonth low, the Saudi ambassador to the U.S. stating that
crude prices were too high for
poor countries, and apparent
Saudi frustration in voluntary
Venezuelan and Nigerian cuts
combined with evidence of Saudi
Arabia not cutting contracted
November volumes to refiners
in Asia, Europe, and the U.S., led
us to believe that Riyadh would
support lower prices and did not
want a cut. Instead, Saudi
Arabia decided to lead a cut
following the actions of hawks,
Venezuela and Nigeria, and as
the generally dovish Kuwait
seemingly tried to take a leadership role.
The following is not a legal
opinion. You should
consult your attorney if this
may be of some
significance to you.
Garcia v. Garcia, ___ S.W.3d
____, 2006 WL 1684742 (Tex.
App.—San Antonio 2006, pet.
denied), holds that a deed conveys
the interest as broadly described in
the deed, and the interest conveyed in the deed is not limited by
the more specific description
included in the deed. The grantor
under the deed owned 18 surface
acres and an undivided
60.2395 oil, gas, and other mineral acres. The deed conveyed the
following:
All that certain lot, tract or
parcel of land, situated in
the County of Zapata, State
of Texas, more particularly
described as follows, to-wit:
January 2007
Eighteen (18) acres of land,
more or less, undivided,
being all out right, title and
interest in and to
891.30 acres of land, more
or less, in Porclones Nos. 34
and 35, Zapata County,
Texas
* * *
. . . in this connection it is
the intention of the Grantors herein to sell and convey to the Grantee herein
all interest of every kind
and character, and from
whatever source acquired,
in and to said entire
891.3 acre tract.
The court held that the deed
was unambiguous and conveyed
Additionally, our analysis 5
suggested that Saudi Arabia
should favor lower prices as a
means to weaken Iran. Realizing that Iran and Saudi Arabia
have historically had tense
relations and that the historic
counterbalance to Iran, Iraq, is
in turmoil, we assumed Saudi
Arabia would be willing to stomach less revenue both because of
its high reserves per person
ratio and to limit Iranian funds.
Those funds are used to spread
Iran’s influence amongst the
Shiite population which could
threaten Saudi Arabia’s northeastern oil fields.
One thing that this cut does
accomplish is that it utilizes a
production cut instead of a
quota cut which nations such as
Iran, Venezuela, Indonesia, and
cont’d on page 8
all of grantor’s interest. The court
relied on existing authority for the
principle that a broad, general
granting clause that is a conveyance of “all” of grantor’s interest
will broaden a more specific,
limited description. The court
found that the final clause of the
description was conclusive, and
that the rule of construction that
the specific controls over the
general only applies when there is
a conflict or repugnance between
the descriptions used. In this
deed, there was no conflict, and
“situations in which general
grants cannot be given effect have
not arisen frequently” and “it only
rarely happens that general grants
cannot be given literal effect.”
Richard Brown can be contacted
at (806) 345-6300 or
rbrown @bf-law.com
6
One woman described how she decided not
to continue in a relationship with a Hollywood
producer when he ordered meat and used
artificial sweetener in his drink, much to her
amazed revulsion. Clearly, she wasn't from
Texas. Maybe Austin.
First, it validates Michael Crichton's statement given to the Commonwealth Club that
"Environmentalism is the new religion of the
Urban Atheist". Remember when dating or
marrying out of your religion was taboo? As
Judeo-Christian ethics have come under
attack in the later part of the 20th century,
you know, archaic things that belong to a
different, more superstitious time like, say,
the 10 Commandments, to be replaced by
this thing called "moral relativism", we have
apparently lost our ability as a species in our
society to reason.
Open Choke
anonymously at drillinginfo.com
“We in the House know and understand
that Oklahoma’s high rate of
marginal taxation is a deterrent,” Cargill
said. “Many states across the country,
including our major economic competitor
to the south, don’t even have income taxes.
And we have one of the highest. That’s a
real inhibitor to growth and investment in
Oklahoma.”
Lance Cargill
Oklahoma Speaker of the House designate
OIPA Wellhead, Dec. 2006
January 2007
Walker named Cambridge
Production V.P.
P. David Walker, president
of the PPROA Board of Directors, 2004 - 06, has been
named Vice President of Cambridge Production, Inc.
“We are extremely pleased
to have David Walker associated
with the Company,” Cambridge
Production president Tom
Cambridge said. “We will be
able to benefit from his skills
and knowledge in oil and gas
exploration, and he will still be
very involved in consulting for
the industry.”
Walker is a consulting petroleum geophysicist with 26 years’
experience specializing in the
acquisition and interpretation of
3-D seismic data. He will continue his consulting work for a
variety of private and public
companies.
Cambridge’s latest ventures
include a gas
gas prices, cont’d from page 1
discovery near
Wheeler and an oil
increase profits on large financial positions
prospect in
taken in the financial basis swap market.
norther Nevada.
Documents provided to the FERC show that
the creative bookkeeping happened in the six Tom Cambridge
also serves as
months following 9/1/05. Following hurricanes Katrina and Rita, shut in of gulf gas
production drove Henry Hub futures past $15/
mmbtu.
ETP’s disclosure that it may have to pay
millions to settle with regulators investigating
post-hurricane trading activity comes as
producers and the Texas Railroad Commission muse about which agency is responsible
for policing intrastate gas trading in Texas.
In November, the Commission’s Executive
Director Richard Varela said that “clearly, such
alleged market manipulations would be illegal,” but stressed that the transactions were
“completely outside this agency’s jurisdictions.”
The TRC’s position that it has no jurisdiction
over gas trading has prompted several producer and royalty owner groups to ask the
Texas Attorney General to investigate the
mechanism behind depression of physical
prices in the Ship Channel. The inquiries
have prompted the FERC to ask for or additional information.
January 2007
7
chairman of the board of directors of Midland-based Parallel
Petroleum Co.
P. David Walker
Markets cont’d from page 5
Nigeria had endorsed. A production cut would hurt each
OPEC nation if prices don’t rise
enough to offset the volume of
each members’ reduction.
Thus, though not dealing Iran a
paralyzing blow, the cut still has
the potential to weaken Tehran.
A volume reduction also
builds in a safety net for the
Saudis if the situation in Iraq
worsens and the U.S. prematurely withdraws. Without the
U.S. in Iraq, Iran’s regional
power may increase exponentially. For Saudi Arabia, not
upsetting Iran may be a proactive self-defense, whereas
allowing prices to fall into the
$40’s may have been asking for
unwanted trouble.
That’s why we think the
announcement came. What it
means for the market is another
issue. We think rather than
trying to boost prices, OPEC
was attempting only to stop the
skid and set a price floor. They
probably achieved their objective in this regard as the downward momentum of prices has
slowed and the price chart
January 2007
continues to show signs of bottoming. Additionally, it reestablishes OPEC’s credibility in the
market which many were discounting in the days leading up
to the October 19th meeting.
What the market will continue to watch for now is compliance with the cuts. Those
nations that were producing
below their quotas (Iran, Venezuela, Indonesia, and Nigeria)
did not want to shoulder any of
the cuts, and some in the market are apparently discounting a
less-than-announced cut in
actual volumes. In the past,
when Saudi Arabia postures and
leads a cut, the follow-through
improves.
All told, we look at OPEC’s
action as a stabilizing force for
prices in the near-term. We’d
anticipate that their target price
between $55 and $60 is not low
enough to discourage demand
destruction and stunt both
conventional and
nonconventional non-OPEC
energy production.
For producing hedgers, we
feel the market is trading in a
range-bound, sideways pattern.
Thus, there is little need to
hedge.
8
For more information, contact
A.G. Edwards & Sons,
(806) 372-5351.
Courtesy of Rex Martin
Along The Trail
9
January 2007
10
Active Drilling Locations
Texas/OK Panhandles, SW KS - 1/9/07 - RigData, Inc.
Beaver
Zenith
Cimarron
Bronco
Clark
VAL Energy
VAL Energy
Harper
Pioneer
Pioneer
Hartley
Spradling
Hemphill
Bronco
Goober
Leonard Hudson
Leonard Hudson
Leonard Hudson
Nabors
Patterson-UTI
Patterson-UTI
Patterson-UTI
Patterson-UTI
Patterson-UTI
Patterson-UTI
Patterson-UTI
Patterson-UTI
Pioneer
Unit
Unit
Unit
Unit
Unit
Unit
Hutchinson
Patterson-UTI
Spradling
Lipscomb
Beredco
Cactus Drilling
Cheyenne
Forrest Drilling
Nabors
Patterson-UTI
Unit
Moore
Leonard Hudson
Preset
Moton
Murfin
Blue Dolphin
Dave Holt Consulting
Falcon Exploration
VAL Energy
Brittany Energy
Chesapeake
Fortay
B&B
Dominion Oklahoma Texas
Forest
Mewbourne
Samson Lone Star
Samson Lone Star
Dominion Oklahoma Texas
Dominion Oklahoma Texas
Grayhawk
Mewbourne
Noble Energy
Noble Energy
Noble Energy
Samson Lone Star
Cimarex
Cordillera
Dominion Oklahoma Texas
Forest
Forest
Samson Lone Star
Unit
Latigo
WO Operating
Texas American Resources
EOG
W. R. Williams
EOG
Texakoma
EOG
Apache
Stallion
BP
Wheeler Energy
Ochiltree
Leonard Hudson
Pioneer
Unit
Zenith Drilling
Potter
Leonard Hudson
Roberts
Abercrombie
Beredco
Cactus
Nomac
Unit
Unit
Seward
Abercrombie
Murfin
Stevens
Abercrombie
Texas
Bronco
Bronco
Bronco
Zenith
Wheeler
Cactus
Cactus
Cactus
Cactus
Goober
Goober
Goober
Grey Wolf
Helmerich & Payne
Helmerich & Payne
Leonard Hudson
Leonard Hudson
Nabors
Nabors
Nomac
Nomac
Patterson-UTI
Patterson-UTI
Patterson-UTI
Preset
Unit
Unit
Unit
Unit
Unit
Crest
Texas American Resources
Latigo
Courson Oil & Gas
Pioneer
Merit
Range
Cimarex
Chesapeake
Cimarex
Cimarex Energy Company
EOG
Dunne Equities
EOG
Whiting
Whiting
Whiting
ConocoPhillips
Apache
Newfield
Newfield
Newfield
Dominion Oklahoma Texas
Dominion Oklahoma Texas
Newfield
Forest
Newfield
Newfield
Questar
Rio Petroleum
Brigham
Devon
Chesapeake
Chesapeake
Noble
Pogo
Protege
Viking
Apache
Apache
Chesapeake
Chesapeake
Dominion Oklahoma Texas
Data provided by RigData.com
January 2007
11
11
January 2007
OFFICERS
EXECUTIVE
COMMITTEE
President
Brady H. Brown
Ashtola Exploration
Co.
Jack Miller
Masterson
Management Corp.
Past President
P. David Walker
Independent
Geophysicist
Vice Presidents
Cap Gillman
Travelers Oil Co.
Jason Herrick
Pantera Energy Co.
William P. Harris
Harris Oil & Gas
Properties
Leslie Weaver
Amarillo National Bank
Gary Bagwell
Philcon Development
Co.
Doug Fisk
Tri-Ex Petroleum, L.P.
Secretary
Gary Tubb
Tubb Resources Co. Paul A. Clark
PAC Production. Co.
Treasurer
Gib Brown
Richard Brown
H & L Operating Co.
Brown &
Fortunato, P.C.
Ed Podzemny
Merex Resources, Inc.
Staff
H. Wayne Hughes
Executive V.P.
Sherri Elkins
Office Manager
RRC District 10 Production Data
12
January - October 2006
County
Oil (BBL)
CH (MCF)
GW (MCF)
Cond (BBL)
BRISCOE
0
CARSON
246,520
CHILDRESS
25,725
COLLINGSWORTH
1,406
DONLEY
0
GRAY
1,016,752
HANSFORD
104,540
HARDEMAN
256
HARTLEY
146,999
HEMPHILL
123,922
HUTCHINSON
654,623
LIPSCOMB
653,646
MOORE
234,998
OCHILTREE
723,004
OLDHAM
46,298
POTTER
147,363
ROBERTS
562,419
SHERMAN
77,217
WHEELER
286,424
0
1,781,202
180
28,999
0
2,814,822
499,914
0
0
1,702,151
4,354,556
4,039,241
2,078,982
3,086,418
578
316,193
5,040,069
148,037
944,001
0
13,671,549
0
1,058,267
13,525
8,330,723
20,996,632
0
2,139,539
85,197,828
9,064,892
40,402,877
33,642,080
19,249,022
162,940
14,891,358
31,256,012
18,271,782
72,544,389
0
238
0
0
186
3,840
20,901
0
0
811,565
7,610
358,924
257
89,717
0
247
334,573
3,094
1,115,858
26,835,343 370,893,415
2,747,010
Total
5,052,112
source: http://webapps.rrc.state.tx.us/PDQ
The
Energy
Report
news from the
oil and gas
industry
PPROA PIPELINE
3131 Bell St., Suite 209
Amarillo, TX 79106
(806) 352-5637 or
(800) 658-6169
[email protected]
Monday
thru
Friday
5:45 & 7:45 A.M.
High Plains Public
Radio - 94.9/105.7 MHz
Monday - Friday
8:30 A.M. & 6:30 P.M.
PPROA underwrites “Car Talk,” Saturday, 9:00 A.M.
and “This American Life,” Sunday, 3:00 P.M.
PRSRT STD
U.S. POSTAGE
PAID
Permit No. 573
Published ten times a year by the Panhandle Producers & Royalty Owners Association
January 2007