American Oil and Gas Reporter - August 2017 - 98

ConventionSection: Kansas Independent Oil & Gas Association
"Every time prices go to $55, people are
hedging going out two years or more.
Once operators get their production
hedged, it becomes more a manufacturing
process than an exploration and development process."
He points out that hedging markets
that used to require a minimum 1,000
barrels a month now require only 500
barrels. "That is something that people
should take a look at," Powell suggests.
"You have to be set up before the price
gets up there again, so you are not scrambling around trying to get your documentation in place when the price hits

the trigger."
Cross says J.C. Watts, president and
chief executive officer of Watts Partners,
will be the luncheon keynote speaker.
The annual meeting also will offer presentations on national energy policy, insurance issues, oil and gas tax policies
and geophysical tools used in seismic activities, as well as a congressional panel.
"Hopefully, everyone will be excited
about the meeting," Cross says. "I won't
say they are excited about oil prices, but
hopefully KIOGA members are more
pleased with the way some of the federal
issues are going, both legislative and reg-

ulatory."
Powell notes that his term as KIOGA
chairman ends with the annual meeting's
adjournment.
"I have enjoyed my two years," he reflects. "I always have thought that serving
the industry that you are in is important,
and that everyone has to help make things
work for everybody. I was honored to be
chosen chairman. But, two years is long
enough, and I will be happy to turn the
reins over. I will still be around, and will
try to help the next chairman as much as
I was helped by the past chairman when
I came in."
r

Kansas Sees Boost In Drilling Permits
TOPEKA, KS-The nation's regulatory
and market impacts on oil and gas operations continue to move in inverse directions,
observes Edward Cross, president of the
Kansas Independent Oil & Gas Association.
For example, producers now typically see
positive regulatory signs at the same time
commodity prices are declining.
"The mood in the industry all this
year has been optimistic, from the standpoint that operators like the way the 2016
elections played out and they see something is going better, but they are somewhat cautious because of where prices
are," he said in July.
Through April, the state of Kansas
had issued 500 drilling permits, which
projects to around 1,500 for the year,
Cross calculates. He compares that with
the 2016 total of just over 1,100 permits.
"There was a little increase in activity,
but nothing like the 7,000 permits Kansas
issued in 2014," he assesses. "Operators

still are very conservative. I would guess
Kansas producers would be that cautious,
as are smaller producers in other states.
They are happy with the way the regulatory
environment is going today, but the pricing
situation certainly has muted their responses."
KIOGA Chairman Nicholas K. Powell
observes that Kansas operators are drilling
only where they think they can get payback
at current prices. There are areas in the
state where operators can get an economic
rate of return on new-well investments,
but he notes that a significant part of that
equation is because service costs have
fallen.
"You had a big turn down from $100
barrel oil, and all the service and supply
companies dropped prices by 30-50 percent," says Powell, president of Colt
Energy in Mission, Ks. "My company
has wells it was drilling and putting on
production in the $100-a-barrel era, and it

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An Exploration, Production & Acquisition Company
PHONE

316-264-6366
FAX

316-264-6440

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Kansas Oil & Natural Gas Industry
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98 THE AMERICAN OIL & GAS REPORTER

now is doing that at 30-35 percent less
cost. The problem is as activity picks up,
which it is starting to according to the rig
count, the demand for services and supplies
will go up. Therefore, those service prices
will go up."
Powell relates that his company had
not seen any increases in service costs as
of July, although when oil prices climbed
to $55 a barrel earlier in the year, it saw
some hints those costs might increase.
He points out that many service companies
are not including depreciation costs in
their price schedules.
"Their equipment is going to have to
be fixed or replaced, and companies
cannot do that at what they are charging
now," he says. "I believe a lot of them
are taking equipment that has been idled
to keep the equipment they use going.
Eventually, if they bring that idled equipment back on, they will have to pay for
the parts to get it running again."
Operating In Kansas
State legislators considered several
proposals dealing with electric rates
during their 2017 session, but none of
them advanced, Cross says. After several
years of rate increases, KIOGA has been
seeking concessions from the state's rural
electric cooperatives, and re-formed its
Electric Committee under Adam Beren
to support those efforts, he notes. After
last year's annual convention, Cross says,
Beren met with members of the Kansas
Electrical Cooperatives Association, but
nothing happened since (AOGR, June
2017, pg. 118).
"During this legislative session, the
chairmen of the House and Senate utilities



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Contents
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