American Oil and Gas Reporter - August 2016 - 79

ConventionSection: Kansas Independent Oil & Gas Association

Market Predictions Fuel
Optimism In Kansas
By Dan Holder
MISSION, KS.-Two out of three remains a winning projection, and Nick
Powell, chairman of the Kansas Independent
Oil & Gas Association, says that percentage
of oil predictions he received this summer
is giving him reasons for optimism.
In a June presentation at the Independent Petroleum Association of America's midyear meeting, three industry analysts offered predictions for near-term
oil prices, recalls Powell, president of
Colt Energy in Mission. Two called for
oil to hit $60 a barrel by year's end and
climb into the $70 range in 2017, while
the third projected flat prices through
2016 and oil not topping $60 a barrel
until next year, he says.
Looking ahead to KIOGA's 79th annual
convention and exposition, to be held
Aug. 14-16 at the Century II Convention
Hall in Wichita, Ks., Powell predicts market news will be one cause for optimism
among KIOGA members.
"The recent price pullback from $50
a barrel probably has shaken a few KIOGA
members, but I don't think anyone expected this to be a V-shaped recovery,
Powell reflected in mid-July. "Most expect
a U-shaped recovery, and one with a very
long bottom. A lot of this also is because
the dollar is rising in value against other
currencies. Even if the supply and demand
situation continues to improve, a dollar
that continues to rise will hurt the price."
KIOGA President Edward Cross
added that he had heard one wireline
service employee report his Kansas company was seeing increased activity, and
a producer state that he was tired of
sitting around, and was itching to go
back to work.
"Nobody is thinking oil prices will go
to $100 a barrel anytime soon, but companies only need to know that prices are
stable and are not likely to drop back to
$20 or less," he commented last month.
"If companies could get some certainty,
they could start making plans to move
forward. Right now, the industry is showing some cautious optimism. I hope that
will continue the rest of this year."

Price Recovery
KIOGA's member companies are ready
to react to a sustained rebound in oil
prices, but Powell cautions that past negative experiences probably will prevent
any such response from developing quickly. People got more interested in drilling
last spring when oil prices climbed to
$60 a barrel, he notes, but that enthusiasm
flickered as prices fell again. Interest
grew again when the markets pushed
prices back to $50, but a mid-July retreat
to $46 again dampened any excitement.
The oil community needs higher prices
for a longer time to get more rigs drilling
and additional service crews back in the
field, he assesses. Before any of that activity happens, Powell notes, operators
will have to spend money to overhaul
idled equipment. "Then, you need the
people who have the expertise to run this
equipment. Many of them have found
jobs in other industries. They probably
are not looking to come back because of
the risks with this industry. And so, it
will be a slow recovery. It certainly will
take a higher oil price on a longer-term

basis to incentivize people to go out, take
the risks and incur the costs to get the industry back to drilling," he states.
Cross says the state's geological makeup is such that many of the horizontal
drilling advances seen in other resource
plays are unlikely to show up in Kansas
soon, although some technological improvements designed for developing conventional wells are being employed. Last
year's temporary oil price uptick fanned
excitement about drilling in South-Central
Kansas, with operators targeting the Mississippian Lime using vertical wells.
Cross notes that there have been reports
of several good wells in the play. He adds
the Mississippian Lime activity is helping
Harper County surpass Ellis County as
the largest oil-producing county in Kansas.
"But, the Mississippian Lime geology
in Kansas is much different than it is in
Oklahoma," he acknowledges. "As far as
extending the Mississippian Lime north
into Kansas, I don't think that is going to
happen, at least with horizontal drilling
technology."
According to Powell, the dip in oil

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AUGUST 2016 79

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American Oil and Gas Reporter - August 2016

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