Energy In-depth: Energy Companies With Arkansas Ties Get Lean As Commodity Prices Dip

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ENERGY COMPANIES WITH ARKANSAS TIES GET LEAN AS COMMODITY PRICES DIP
Two energy companies with deep roots in Arkansas are getting leaner as declining commodity prices continue to inflict pain on oil and gas companies who make their living at the wellhead.

Last week, Murphy Oil Corp. quietly sold off its 130,000-barrel per day crude oil refinery in the United Kingdom, closing the book on the company’s midstream and downstream operations and completing the El Dorado oil giant’s goal of being a “pure play” oil and gas explorer and producer.

Despite the sole focus on E&P operations, Murphy and the entire oil and gas industry has been caught in the downdraft of declining oil and gas prices. According to the company’s own internal statistics, the price for a barrel of West Texas Intermediate (WTI) crude oil averaged $93.00 in 2014, $98.05 in 2013 and $94.15 in 2012.

During that same period, the NYMEX natural gas price per million British thermal units (MMBtu) averaged $4.33 in 2014, $3.73 in 2013 and $2.83 in 2012. At the close of business last Friday, crude oil prices settled at $45.72, up $1.76 and April natural gas futures fell 2.7 cents to $2.786 per MMBtu.

In January, Murphy announced that capital expenditures for 2015 are expected to be nearly $2.3 billion, 33% lower than the 2014 capital program at $3.76 billion. Murphy’s spending budget came in at $3.97 billion and peaked in 2014 at $4.19 billion.

Fayetteville Shale leader Southwestern Energy Corp. is also facing similar problems. Last week, the Houston-based driller sold off its midstream gathering assets in northeastern Pennsylvania that included 100 miles of natural gas gathering pipeline for $500 million. A day later, the oil and gas producer said it found a private buyer for its conventional oil and gas assets located in East Texas and the Arkoma Basin for nearly $218 million.

Southwestern said proceeds from both deals will be used to pay down debt and repay capital as part of a loan that matures at the end of 2016.

But Southwestern and Murphy Oil are not the only companies in the U.S. oil and gas sector who are mothballing their 2015 drilling and exploration plans. Many Wall Street analysts are revising their near- and long-term forecasts for any publicly-traded company with ties to the oil and gas industry.

Morningstar analyst Steve Simko recently wrote in a research note concerning Murphy Oil that “we are placing our energy sector coverage under review as we prepare to update our long-term global oil and U.S. natural gas pricing outlooks.”

GRID OPERATOR MISO CHRISTENS $22 MILLION LR COMMAND CENTER
Gov. Asa Hutchinson called the christening of the Midcontinent Independent System Operator’s new $22 million state-of-the art command center in West Little Rock a “window to reliable energy” in Arkansas and across the U.S.

Hutchinson made his remarks on Tuesday morning as MISO officials and dignitaries from across the state cut the ribbon on the 50,000-square-foot facility, which is expected to employ 42 workers at an average annual salary of $85,000.

HUTCHINSON: STATE MAY NEED PLAN IF EPA ADOPTS ‘DIRTY AIR’ RULES IN JUNE
While Gov. Asa Hutchinson has made it clear that he opposes President Obama’s new carbon emission rules that would shelve much of the state’s coal-fired power generation, he said Tuesday his administration may have to change its strategy if federal regulators go ahead and put the new rules in place later this summer. Read more on his plans going forward at this link.