American Oil and Gas Reporter - April 2016 - 89

ConventionSection: Kansas Independent Oil & Gas Association

KIOGA's Midyear Meeting
Sees Optimistic Signs
By Dan Holder

adds.

MISSION, KS.-The global oil situation
seems to be brightening for producers,
and Nick Powell, chairman of the Kansas
Independent Oil & Gas Association, says
he is starting to see hints that there will
be better news for association members
when they gather for their midyear meeting, April 20-22 at the Expo Complex in
Great Bend, Ks.
"Hopefully, between now and the
meeting, prices will continue to strengthen
as things will start looking better. I think
it will be a little more upbeat," offers
Powell, president of Colt Energy in Mission. "We saw (oil prices) bottom at $26
a barrel and then come up. Then we hit
the low again, so from a technical standpoint, that is a nice double bottom. There
is more talk about Iran's production coming on at only 500,000 barrels a day.
Going to 1 million barrels a day seems
unrealistic, considering Iran only did
220,000 bbl/d in February."
Another encouraging signal Powell
cites is reports the Organization of Petroleum Exporting Countries is weighing
the possibility of a production freeze.
However, Powell allows there will be
some somber sentiment at the midyear
meeting, with activity for too many companies-from the drilling, production and
development side as well as the service
and supply segment-still far below 2014
levels.
KIOGA President Edward Cross says
the midyear meeting is a great opportunity
to hear about industry issues, as well as
receive updates on state politics and view
exhibitors' offerings.
Public concerns about seismic events
in Kansas continue, and Cross says Rex
Buchanan, interim director of the Kansas
Geologic Survey, will report on how the
state and industry are responding.
"Buchanan also will talk about the States
First Initiative, which is a group he leads,
organized by the Interstate Oil & Gas
Compact Commission, that helps regulatory agencies evaluate and develop strategies to handle the response to seismic
events and other industry issues," Cross

Industry Recovery
Powell suggests reality is returning to
the domestic oil market, with declining
rig counts and shut-in wells finally cutting
into production. He notes that the U.S.
rig count had fallen well below 500 in
mid-March, and was expected to continue
declining. The U.S. Energy Information
Administration earlier projected oil production would drop as much as 500,000

KIOGA Midyear Meeting
Great Bend, Ks.
Wednesday, April 20
5 p.m. Vendor Setup, Great Bend Expo
Complex
6-9 p.m. Cocktail Party, Wolf Hotel Underground Saloon
Bus from Best Western Hotel

Thursday, April 21
8 a.m. Registration, Great Bend Expo
Complex
9 a.m.-4 p.m. Trade Show, Great Bend
Expo Complex
9-11 a.m. "Seismic Events in Kansas: An
Update," Armory Building
Rex Buchanan, Kansas Geological Survey
10-11:30 a.m. Tour, Haz-Mat Response
and Kansas Oil and Gas Museum
Bus from Expo Complex
11:30 a.m.-1:30 p.m. Lunch by Wheatfield
Café, Expo Complex
2-4 p.m. "Electric Rate Concerns," Armory
Building
Adam Beren, Berexco LLC
2-4 p.m. Tour, Rosewood Winery
Bus from Expo Complex
4-5:30 p.m. Board and General Membership Meeting, The Page
5-7 p.m. Cocktail Party, The Page
7-10 p.m. Dinner, Best Western Angus Inn

Friday, April 22
9 a.m. Golf Tournament, Stone Ridge
Country Club, Great Bend
Lunch to Follow
9 a.m. Sporting Clays Tournament, LaSada,
Russell, Ks.
Lunch to Follow

bbl/d, Powell says, but since has begun
forecasting a 750,000 bbl/d decline.
The real question for producers, particularly those hedging their output, is
the price at which companies will stimulate
and connect their drilled but uncompleted
wells, Powell considers, noting that the
inventory of those wells offers one source
of crude in a position to respond rapidly
to any upward price movement. That
price uncertainty also figures in producers'
calculations on when to resume drilling,
he notes, adding, "The old $60 a barrel
might be the new $40."
Powell adds that despite technological
improvements in the drilling and production sectors, many operators will find
$40 an insufficient trigger to resume field
work, in large part because Kansas crude
oil sells for a price significantly below
New York Mercantile Exchange futures
contracts.
When operators feel prices have
reached the trigger point, Powell says
there is plenty of oil ready to be produced,
both waiting behind pipe and in undeveloped fields. The concern then, he notes,
will be how quickly service companies
can return to the needed level of operations.
Another complication he raises is the
possibility that producers are basing their
drilling plans according to current service
costs.
"Those costs probably are below the
long-range requirements, particularly for
service companies that have to replace
equipment," Powell reasons. "To be competitive, service companies have slashed
their prices for fracturing, cement jobs
and other services. Those are not sustainable, so they will have to bring those
prices back up. That will raise the oil
prices producers need for their desired
rates of return."
Unless OPEC surprises the world and
imposes a production cut, oil prices are
not likely to climb above the $60-$65 a
barrel range until 2018, Powell predicts.
"I think a cut would be the only thing
that could get us there sooner, but OPEC
members will be taking a strong look at
the level of response by shale oil producers
to increase production," he says.
APRIL 2016 89



American Oil and Gas Reporter - April 2016

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Contents
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American Oil and Gas Reporter - April 2016 - Contents
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