American Oil and Gas Reporter - April 2018 - 151

ConventionSection: Tennessee Oil & Gas Association

Tennessee Operators Poised
For Market Turnaround
By Dan Larson
Special Correspondent
KNOXVILLE, TN.-While the state
has seen a modest increase in drilling
activity this year, most oil and natural
gas companies operating in Tennessee
remain on the sidelines while keeping
an eye on the market, according to industry leaders.
"Our members tell us they are waiting
for $70 a barrel before they can start
drilling and returning shut-in wells to
service," says Chuck Laine, president of
the Tennessee Oil & Gas Association.
"We had a cold winter in New England,
which should be good for natural gas
prices, but there is such a massive amount
of gas coming from the Marcellus that
prices for Tennessee gas did not budge
all winter," reports TOGA Chairman Gary
Bible, president of Cougar Dome LLC, a
geological and GIS consulting firm in
Helenwood, Tn.
As TOGA prepares for its annual convention faced with the "new reality" of
an oil market priced just below an economic level and a gas market that rebuffs
Tennessee exports, association leaders
say they continue to act on important
issues in the state capitol and to serve the
interests of members.
TOGA's 47th annual meeting is scheduled for May 7-8 at the Park Vista Hotel
in Gatlinburg, Tn., Laine notes.
Among topics for discussion is an
effort to reallocate severance tax distribution, re-energize the state's orphan well
program, and continue guiding revisions
to well bonding rules for landowners
through the rule-making process.
Laine says the impact of a prolonged
depressed commodity market on Tennessee's oil and gas industry will be felt
for months to come.
But Bible, who is wrapping up his
third year as TOGA chairman, says he
remains optimistic. "We have weathered
the worst of the downturn. Oil markets
have firmed this year and Tennessee
has plenty of oil, if we can get the
prices needed to justify drilling wells,"
he observes.

TOGA Annual Meeting
Gatlinburg, Tn.
Monday, May 7
3 p.m. Registration Opens, Upper Level,
Park Vista Hotel
3:30-4 p.m. TOGA Board of Directors &
Membership Meeting
Hosted Bar
6-9 p.m. Loco Burro Hosted Dinner

Tuesday, May 8
8 a.m. Registration Opens
9-10 a.m. Technical Session
Welcome Message, Chuck Laine, TOGA
President
Tennessee Legislative Update, State Representative John Ragan (Invited), ROak Ridge
10-10:15 a.m. Coffee Break
10:15-11:45 a.m. Technical Session
Regulatory Update, Mike Burton, Tennessee Oil & Gas Program
"Improving Structure Contour Maps: Regional Structural Elements of the
Nashville and Jessamine Domes using
Automated GIS Tools," Kenneth Boling,
University of Tennessee Knoxville
Noon-1 p.m. Awards Luncheon
Presentation of TOGA Godfather Award
1:15-2:45 p.m. Technical Session
Tax Law Update, Kevin McCollum, Coulter & Justus PC
Topic to be Announced
3 p.m. Dismiss

Annual Report
In its annual report on the industry
last year, the Tennessee Oil & Gas Program,
an agency within the state's Department
of Environment and Conservation, notes
that permitting activity in 2016 continued
its five-year decline and showed a decrease
of nearly half from 2015.
Laine says the annual Tennessee Oil
and Gas Activity Report is released each
year during TOGA's annual meeting, and
the 2017 report will be presented at the
TOGA convention in May.
Clearly reflecting the nationwide decline, last year's report stated, "Tennessee
had its third worst year in permitting
wells, fourth worst year in oil production,
and the least gas production since 2006."

"Operators were faced with the lowest
price of oil since 2004 and lowest natural
gas price since 1999," observes Elaine
Foust, a geologist within the Oil & Gas
Program.
Permits were issued in only five counties-Overton, Scott, Pickett, Fentress and
Morgan-continuing a seven-year trend
away from the Cumberland Plateau and
toward the Eastern Highland Rim in
north-central Tennessee, Foust notes.
In its completion report, the program
recorded an overall success rate of 31 percent for all wells tested during 2016, down
from the 38-year average of 56 percent.
Oil production in 2016 totaled 256,664
barrels, a decline from 299,650 barrels
produced in 2015, Foust reports. The average price in 2016 was $41.20 a barrel,
generating $10.5 million in sales and
$317,000 in state severance taxes.
Natural gas production in 2016 was
likewise depressed, she adds. The 3.6
billion cubic feet produced marked a 25
percent decline from the previous year.
The average price was $2.53 an Mcf,
down $0.21 from 2015. Gas production
generated $9 million in sales-down from
$13 million in 2015-and $270,000 in
severance taxes.
State records show ENREMA LLC of
Knoxville was the state's leading oil producer in 2016 and Knox Energy of Oak
Ridge, Tn., was its leading gas producer.
Foust says the state oil and gas database
continued to be expanded through 2016
and into 2017, and at the time the report
was published held information on almost
16,100 wells. The slowdown in oil field
activity allowed the Oil & Gas Program
to increase field investigations and catch
up on well classifications, she adds.
Foust says permitting activity showed
an increase during the first half of 2017,
with the state issuing 29 permits compared
with 15 during the same period in 2016.
Good Operators
Both Laine and Bible acknowledge
that there continues to be little new oil
and gas development in Tennessee.
"We have to become good operators
to make money in a low-price environment," asserts Bible.
APRIL 2018 151



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