QEP Resources (QEP +3.2%) is upgraded to Outperform from Market Perform with a $24 price target, raised from $20, at FBR, which expects the stock to return to outperformance in the new year.
QEP lagged its benchmark index during H2 2016, which FBR attributes to investors penalizing the stock following a premium-priced Permian acquisition, but the firm believes the acreage is situated in one of the most prospective areas of the play.
QEP also could get a lift from a new play in the Permian, as well as its underappreciated exposure to natural gas, which quietly hit a two-year high last week.
Continental Resources (CLR -1.6%) is downgraded to Hold from Buy with a $64 price target at Deutsche Bank as the company continues to shift exposure to Permian Basin.
Although more STACK well results are still ahead, the firm thinks 2016 likely was more rich in catalysts for CLR, and while visibility in the forward outlook has significantly improved post OPEC, it sees the shares largely reflecting this view.
Deutsche Bank says investors should have some exposure outside the Permian and sees better value in other diversified producers with similar or better balance sheet profiles, including Newfield Exploration (NFX +1.4%), Oasis Petroleum (OAS +0.9%), QEP Resources (QEP +0.8%), Encana (ECA +3.3%) and WPX Energy (WPX -0.3%).
CLR also has been downgraded at J.P. Morgan and KLR Group in recent days.
Production fell 1.1% for the month to 971K bbl/day in September, the most recent month for which data is available, 10K bbl/day less than August and the lowest level since February 2014, when output was 952K bbl/day.
Natural gas production in North Dakota fell 1.7% in September to 1.61B cf/day, the state also reports.
North Dakota oil production dropped below 1M bbl/day in August for the first time in more than two years, as the state's higher-cost production continues to struggle relative to other parts of the U.S.
Production from North Dakota’s portion of the Williston Basin fell to 981K bbl/day in August, down 4.7% from July and the lowest since March 2014; the state's peak production, in December 2014, was more than 1.23M bbl/day.
Lynn Helms, director of the state’s Department of Mineral Resources, expects oil production to decline to a low of ~900K bbl/day by mid-2017 before recovering.
The state's Department of Minerals Resources says production may already have dropped below 1M bbl/day and could take at least a year to recover if the level is breached.
But in a positive sign for the industry, the state says the breakeven price for oil production at its existing wells has slipped to $26/bbl, showing that existing production remains profitable for companies that have aggressively cut costs.
SM Energy’s (SM +7.2%) $980M purchase of drilling rights in the Permian Basin shows that producers are willing to pay a premium for access to one of the few spots where oil exploration still turns a profit, Bloomberg reports.
SM will pay the equivalent of $39.5K/acre for drilling rights across 24,783 acres in the Permian Basin, will ahead of the $25K-$35K that acreage in the Permian’s Midland Basin section had been fetching as recently as May and almost doubling SM's holdings in the region.
The North Dakota Department of Mineral Resources cites low crude oil prices but also windy weather throughout much of the month, which delays the fracking of wells, adding that it expects the slide to accelerate through May and into the summer.
There are 28 drilling rigs currently active in the state, up from 27 in May which was the fewest since July 2005; at its peak, North Dakota had 218 rigs drilling in May 2012.
QEP Resources (QEP -0.1%) is upgraded to Overweight from Neutral with a $24 price target, raised from $20, at Piper Jaffray, which believes the company is undervalued and will deliver oil production growth of 8% above peers.
Jaffray says the main catalysts driving QEP will include incremental well results in the Permian Basin, downspacing in Williston and cost reductions across the company's portfolio.
The firm also notes increases in location count in South Antelope to 400 from 278 and increased Spraberry EUR's to 900M boe from 650M boe.
The rules, which will affect only new oil and natural gas wells, will require companies to install technologies to monitor and limit inadvertent emitting of methane during the production and transmission process of natural gas, and require new practices such as regular inspections for leaks.
Meanwhile, a new study says the Bakken oil-producing region of North Dakota and Montana leaks 275K tons/year of methane, a sizeable amount but less than previously believed.
A new study finds that fracking of U.S. shale fields is causing a global surge in ethane emissions. Ethane is known to contribute to global warming and dangerous air pollution.
Global ethane levels had been falling since the 1980s, but in 2010 a sensor in Europe picked up a surprise increase. U.S. shale fracking was thought to be the culprit. More recently, a single field in the North Dakota and Montana Bakken Formation has been found to be emitting 2% of the worldwide total.
"Two percent might not sound like a lot, but the emissions we observed in this single region are 10 to 100 times larger than reported in inventories. They directly impact air quality across North America. And they're sufficient to explain much of the global shift in ethane concentrations," said Eric Kort, the first author of the new study published in Geophysical Research Letters.
Ethane emissions from other U.S. fields, especially the Texas Eagle Ford, likely contributed as well, the research team says. The findings illustrate the key role of shale oil and gas production in rising ethane levels.