American Oil and Gas Reporter - April 2017 - 96

ConventionSection: Kansas Independent Oil & Gas Association

Kansas Industry 'Sustaining'
At A Mid-$50s Oil Price
By Bill Campbell
GARDEN CITY, KS.-The Kansas Independent Oil & Gas Association approaches its midyear meeting, April 19-21
in Garden City, with the industry in much
better shape than at the same time last
year, assesses Chairman Nick Powell.
A year ago, recalls the president of
Colt Energy Inc. in Mission, Ks., he was
hopeful the Organization of Petroleum Exporting Countries would rein in production.
Today, that agreement is in place, and
compliance among OPEC members is reported around 80 percent, Powell observes.
"It was a six-month deal and everything
I read says they are going to extend it for
a full year," he adds. "So I am cautiously
optimistic OPEC is enjoying the benefits

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of $50 oil compared with $30, and will
maintain its cuts throughout the year."
A mid-$50 oil price, Powell estimates,
is good enough to sustain, but not grow,
Kansas production. "People will drill
their better prospects and bring some
wells back on," he reasons. "But you
need higher prices to get back into a
growth industry in Kansas."
Whether that happens depends largely
on OPEC and the U.S. shale industry,
Powell suggests. Looking at the longterm oil futures price, he says there seems
to be a ceiling around $55-$56 a barrel.
"I am guessing a lot of shale companies
are hedging their production at that price,"
Powell says.
There isn't a lot of geologic risk in
shale plays, Powell figures. "Their risk
is the price they get for it and the cost to
bring oil to the surface," he says.
One unknown is how much costs will
go up from the 30-40 percent Powell estimates service companies had to slash their
prices to maintain some level of business
during the downturn. "That isn't sustainable," he allows. "Service costs have to
increase, and that has to be refactored into
the break-even price for shale companies."
Demand growth also will play a part
in determining whether oil can get back
to a $60-$65 range. Powell calls estimates
of worldwide demand increasing 1.5 million-1.8 million barrels a day this year
"pretty strong. That could eat up some of
the additional barrels brought on by U.S.
shale production, as long as OPEC maintains its cuts."
Midyear Meeting
The Garden City host committee for
KIOGA's midyear meeting is hopeful the
improved business outlook results in a
strong turnout for a convention that promises to highlight what co-Chairman H.J.
Swender, chief of staff at American
Warrior Inc., calls "a thriving, progressive
community out west."
Convention activities get under way,
Swender says, on Wednesday evening,
April 19, at one of Garden City's newest
attractions, the Parrot Cove water park,
which features water slides, splash zone,

wading pool, log crossing, plunge area,
and rock climbing. Swender says the facility, which opened in December, "is
the only indoor water park between Kansas
City and Denver."
He notes that a number of lawmakers,
including First District Kansas Congressman Roger Marshall, are expected to attend, "so that will be a good time to
interact with area legislators."
Following Wednesday's opening cocktail party, Swender mentions, shuttles
will be available to transport those interested to the Boot Hill Casino in Dodge
City, Ks.
A highlight for Thursday, Swender
continues, is two tours of the $235 million
Dairy Farmers of America milk processing
plant slated for completion in May. "It
will be the largest dry powder milk facility
in the United States, right here in Garden
City," he boasts.
On a more oil industry note, Swender
says Thursday's agenda includes concurrent
morning seminars on advances in 3-D seismic technology and confined space entry
at the Garden City Clarion Inn. In the afternoon, Oil & Gas Conservation Division
Director Ryan Hoffman will provide an
update on Kansas Corporation Commission
regulatory changes, including the commission's abandoned well plugging policy,
and KIOGA Electric Committee Chairman
Adam Beren will discuss electric rates.
After KIOGA's board and general
membership meeting, Thursday's activities
conclude with a cocktail party, followed
by a dinner that features a talk by Continental Resources Senior Vice President
Gary E. Gould, and entertainment by comedian Russ Rivas.
KIOGA's midyear meeting concludes
on Friday, April 21, with a golf tournament
at the Golf Club at Southwind and sporting
clays at the Garden City Trap & Skeet
Club.
❒

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American Oil and Gas Reporter - April 2017

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