Head West for Best Look at U.S. Oil Drillers’ Pain
By Lynn Doan and Zain Shauk Jan 23, 2015 11:33 AM ET
Little is going right for California’s oil industry.
Turns out the state’s shale formation holds less promise than producers expected. Aging conventional wells are drying up. And a rebound in output that cost drillers as much as $3 billion annually to create has been overshadowed by shale oil gushing from wells in North Dakota and Texas.
Then, of course, came the collapse in oil prices -- a seven-month, 57 percent drop that was exacerbated by OPEC’s refusal to cut output in order to squeeze the U.S. shale drillers. No state is feeling that pressure more than California. Drillers there have idled more rigs -- on a proportional basis -- than those in any other part of the country.
“We spent a lot of money to go out and drill and use new technologies just to stop production from depleting in our mature fields,” Rock Zierman, chief executive officer of trade group California Independent Petroleum Association, said by phone. “It took us a lot of capital to basically run in place and now we’re looking at crude prices under $40 a barrel.”
While U.S. benchmark West Texas Intermediate oil has fallen by more than half since June, California’s heavy Kern River crude has lost 65 percent of its value. The spot price of that oil slid to $34.87 a barrel on Jan. 22, below Gulf Coast crudes, below Bakken in North Dakota and under Alaska North Slope oil.
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http://www.bloomberg.com/news/2015-01-23/head-west-for-best-look-at-u-s-oil-drillers-pain.html
