Michigan Oil & Gas Production Report January – December 2015

2015 Michigan petroleum production numbers are approximately 98% reported as of today. RMP has always focused on the numbers as they are often greater than adjectives.   Opinions are overrated.  People want to hear the numbers and then decide for themselves.   This is RMP’s fifth year studying, parsing, organizing, compiling, and reporting numbers related to Michigan petroleum production. The information RMP publishes will always be free access to the public. RMP has always followed three fundamental tenets as a research and reporting philosophy:

  • It’s all about the rock. Always respect the geology.
  • Follow the money. Money talks.
  • Follow the wastewater. Waste means inefficiency and problems. Inefficiency and problems mean additional costs. With regard to costs, see point #2.

Following the money has proven to be difficult because of the voluminous and heterogeneous data sets related to hydrocarbon production.  RMP devised a method that can process thousands of rows of data from hundreds of operators to make revenue calculations.   After  tweaking for 5 years on MDEQ & MPSC datasets, RMP is now ready to report ballpark revenue calculations of how much revenue was generated by each operator according to the hydrocarbons they produced.

Merit Energy’s February 2016 Check Remittance Advice to the State of Michigan as a Barometer

In order to do some reasonableness testing on revenue calculations, RMP analyzed a recent check remittance Merit Energy paid to the State of Michigan. In February 2016, Merit Energy remitted a check to the State of Michigan detailing hydrocarbons valued at $2,790,888 that were sold to market. The remittance report from the MDNR system was 28 pages long.   Each line on the check is for a different type of hydrocarbon, for a different rate, and has different deductions taken from it.   The “State Decimal Interest” on the check determines how much Michigan taxpayers get because we are the rightful owners of those hydrocarbons. If you add up all lines showing Michigan’s revenue cut, you get $254,443.   If you add up all the deduction fees Michigan is responsible for, you get $11,582. In the end, Merit Energy, a Dallas Texas company, keeps $2,779,305 of that revenue and the Michigan taxpayer’s cut is $242,861.

Most of the oil pricing in Merit’s February check remittance was from December 2015 and January 2016 sales with a price per barrel of crude oil between $27 and $28.   This price is reasonable with the 2015 average WTI benchmark price RMP used of $48.67/bbl given that oil was priced higher in the first part of 2015 and dropped to its lowest price toward the end of the year. Most of the condensate pricing on Merit’s check was very close to oil pricing which is why RMP used oil pricing equal to condensate for simplicity. Michigan producers do not produce much condensate relative to other hydrocarbons so this estimate seems solid for our first iteration of calculating aggregate revenues. According to RMP calculations, Merit Energy (Dallas, TX) was the top moneymaker in Michigan in 2015 bringing in approximately $90 million with West Bay (Traverse City, MI) coming in second place with about $70 million.

If oil prices were $75/bbl and natural gas prices were $4/mcf, the same 2015 production would have netted Merit Energy $132 million and West Bay about $106 million according to RMP calculation estimates. It is interesting to run these numbers in revenue variability considering cost structures remain unchanged even though revenue numbers are very volatile as they are hinged to a product with very volatile pricing. What would you do with an extra $42 million dollars if your daily costs did not change? Understanding these numbers is important to RMP and we think it’s important to educate the public about the revenue associated with these natural resources where we as taxpayers are the rightful owners of the hydrocarbons.

merit_energy_check_remittance
This is the last page of Merit Energy’s February 2016 check remittance advice report from the MDNR computer system. It shows the total amount of Michigan owned hydrocarbons sold by Merit Energy in the month of February 2016 which is $2.8mm and Michigan’s cut of that $2.8mm which is $242k.  Click to enlarge the image so it’s easier to read on your screen.

Estimating the costs or profitability related to the revenue for each operator is next to impossible, but estimating the revenue itself is something we can do within reason. These revenue calculations are our estimates and if applied consistently they give a very good barometer of the total revenue earned in 2015 for each operator regardless of that operator’s “main” hydrocarbon produced (i.e. oil, gas, NGL, or condensate). For example, Merit Energy produces all hydrocarbons, while Linn Energy produces mostly only dry natural gas in the Michigan Basin. West Bay, on the other hand, produces primarily crude oil. This revenue estimating technique makes an apples-to-apples comparison of how much money a “dry producer” makes as compared to a “crude oil producer” in the Michigan Basin.   This is the first iteration of RMP’s revenue calculator using our data tables built from MPSC and MDEQ public source data.

2015 Top 25 Operators By Revenue in Michigan Basin Petroleum Production

In this first iteration of calculating gross revenues the following rate drivers for calculations will be used: crude oil revenues will be calculated using the 2015 average rate of West Texas Intermediate Crude (WTI) at $48.67/bbl (source). Condensate will be calculated as the same value of crude oil for simplicity as mentioned above. NGLs will be calculated at $17.50/bbl (source). Dry gas (i.e. natural gas per 1000 cubic feet [mcf]) will be calculated at the average price published as $2.62/mcf (source).

In case you’re up at night wondering which operator came in dead last (i.e. 143rd place) when it comes to making petroleum money in Michigan, it was San Lor Oil Company (Elida, OH) who only managed to generate $243 of revenue in 2015 from Michigan produced hydrocarbons. Another operator worth mentioning is Marathon (Houston, TX) who is conspicuously absent from the top 25 list.   Marathon just missed the cut at 26th place in 2015.

Without further ado, here are top 25 operators by revenue dollars in the Michigan Basin for 2015 petroleum production data, which RMP estimates is 98% reported as of today:

Please note: all the tables and graphs in this post can be difficult to read in normal reading mode, but if you click the image it should enlarge in your browser making it easier to read.

Top 25 hydrocarbon producers in Michigan in 2015 by money ranking only. Click image to enlarge.
Top 25 hydrocarbon producers in Michigan in 2015 by money ranking only. Click image to enlarge.

2015 Top 25 Crude Oil Production Units in the Michigan Basin

The old oil well units in Beaver Creek continue to be the top producing units in Michigan.  The Beaver Creek units are just west of Houghton and Higgins Lake.  Even though the Beaver Creek and Norwich units in this area have produced the most oil in Michigan over the past couple years,  the production of each individual well on its own is very weak.  The wells west of Houghton Lake & Higgins Lake are called “stripper wells” and are on secondary recovery.  Notice the “# of Wells in Unit” column and divide the production by that number of wells to understand the average production per well.  RMP has been demonstrating that we should be responsibly migrating away from oil as an energy source.  Producing oil is not the best use of Michigan’s natural resources like water & land for energy production and we go through the exercise of learning the numbers so we can say such things with strong supporting documentation.

Note Core Energy’s CO2 injection unit in the far north of Michigan’s lower peninsula in Charlton Township of Otsego county made the list of the Top 25.  RMP supports CO2 injection as a tertiary oil production technique because RMP supports #CCS.   Two other wells on the list are worth noting:  the State Horicon 7-15 and the State Springdale 1-21 demonstrate how a producer like Merit can take wells that were someone else’s junk and turn them into Top 25 producers.  These wells are very old but Merit found a way to get top production out of them.  There’s an old adage in oil production that says if you’re looking to find oil, go where it’s already been found.

Below are the 2015 Top 25 oil producing units in the Michigan Basin.  Coming soon, RMP will be showing off a mapping feature that shows all 25 of these units with rankings on a single map.

top25_oil_units
This table shows the Top 25 Oil Producing Units in the Michigan Basin in 2015.  Click to enlarge.

2015 Top 25 NGL Production Units in the Michigan Basin

The top 25 NGL units again demonstrate Merit’s savvy in production in the Michigan Basin.  Marathon, who purchased EnCana’s HVHF wells that cost about $20mm per well to drill and complete, doesn’t make the top 25 money maker list in 2015 even though they show the #1 NGL producing well & #7, and #11.  Merit Energy on the other hand, has multiple wells in the top 25 they probably purchased for a bargain and Merit produces more than 2x as much NGL as Marathon.  This further demonstrates why High Volume Hydraulic Fracturing (HVHF) and especially HVHF where large volume water withdrawals take place is not a threat to come back in the Michigan Basin.

Notice also on this list is the Wood 5-11 well which is the featured image of this post.  RMP studies groundwater contamination related to oil & gas production at wells like the Wood 5-11 to raise awareness that producing oil is not economically beneficial for Michigan even though there are revenues and jobs associated with it.  RMP does not want to see any Michigander out of work, even those in the oil & gas industry.  However, the costs associated with groundwater contamination from oil & gas far outweigh the economic benefits of using oil as an energy source even if the remediation costs are paid through oil & gas taxes rather than through Michigan’s General Fund.  This is particularly true not where the oil is produced, but rather where petroleum based products are stored in underground or above ground storage tanks.

This recent article in talks about how Michigan spends on average $30 million each year and puts some numbers to what RMP has been talking about in recent posts about storage tanks truly being the groundwater problem, not hydraulic fracturing.  RMP will continue to demonstrate the literally millions of tax dollars that go towards environmental remediation because of oil as an energy source.   Crude oil is obsolete.   This recent article in NPR also demonstrates that for the first time ever, the Levelized Cost of Energy (LCE) for solar and wind is below that of coal & natural gas.  This marks a very important milestone in energy production because solar and wind do not come with $30mm/year cleanup costs for groundwater contamination that are not even factored into the very important LCE statistic.  The LCE is everything in energy.  The evidence is mounting & proving out that crude oil as an energy source is bad for America’s economy and national security.

top 25 NGL producers in Michigan
The Wood 5-11 well comes in 19th place on the Top 25 NGL producers. RMP chose this well as the cover photo for this post because it is allowed to continue to produce even though it continues to contaminate Michigan’s ground water resources. This is the ultimate paradox of using oil as an energy source.  Click image to enlarge.

2015 Top 25 Natural Gas Production Units in the Michigan Basin

The top 25 natural gas units will are listed by PRU number.   Again, this table will soon be supplemented with new mapping technology that will allow RMP to put all top 25 units on a regular Google Map so you can see exactly where they are.   Linn Energy (Houston, TX), Chevron Michigan LLC (San Ramon, CA), Terra Energy (Calgary, CAN), and Ward Lake Energy (Gaylord, MI) continue to dominate Michigan natural gas production.   The Top 25 production units of natural gas in Michigan are shown below.

top 25 natural gas producion units michigan
Listing of the Top 25 natural gas production units in the Michigan basin.  Click image to enlarge.

Top 25 Crude Oil Producers in Michigan Basin in 2015

West Bay (Traverse City, MI) continues to be the #1 producer of crude oil in Michigan.  Below are the Top 25 crude oil producers in Michigan and their corresponding production from last year.

top 25 crude oil producers
Top 25 crude oil producers in the Michigan Basin in 2015. Click image to enlarge.

Top 21 NGL Producers in Michigan Basin in 2015

Only 21 operators produced NGLs in the Michigan Basin in 2015 so they all make the Top 21 list.  Merit Energy leads the way and most producers saw decreases in NGL production year over year with a couple reporting small upticks.   All 21 NGL producers are shown below.

All 21 NGL producers in Michigan in 2015 sorted by barrels produced. Click image to enlarge.
All 21 NGL producers in Michigan in 2015 sorted by barrels produced. Click image to enlarge.

Top 25 Natural Gas Producers in Michigan Basin in 2015

The top 5 producers on the list continue to dominate natural gas production in Michigan.   None of the companies in the top 5 are Michigan based companies.  The 2015 numbers shown in the table below could tick slightly upward if certain wells/units are reporting late.  RMP estimates that reporting is 98% complete.

Top 25 natural gas producers in Michigan in 2015.
Top 25 natural gas producers in Michigan in 2015.  Click image to enlarge.

Rolling Aggregate Crude Oil Production in Michigan Basin 2010 to 2015 by Quarter

Rolling crude oil production by quarter over the last six years. Juxtapose this with the permitting activity and trend should continue downward.
Rolling crude oil production by quarter over the last six years. Juxtapose this with the permitting activity and trend should continue downward.  Click image to enlarge.

Rolling Aggregate NGL Production in Michigan Basin 2010 to 2015 by Quarter

NGL production rolling by quarter over the past six years. Click image to enlarge.
NGL production rolling by quarter over the past six years. Click image to enlarge.

Rolling Aggregate NatGas Production in Michigan Basin 2010 to 2015 by Quarter

Natural gas production in Michigan over the past six years by quarter. Click image to enlarge.
Natural gas production in Michigan over the past six years by quarter. Click image to enlarge.

Rolling Aggregate Waste Water Production in Michigan Basin 2010 to 2015 by Quarter

Rolling waste water production trend over last six years. Click image to enlarge.
Rolling waste water production trend over last six years. Click image to enlarge.

Final Thoughts on Michigan 2015 Petroleum Production

In the cover photo of this post is Merit Energy’s Wood 5-11 well.  I remembered this well as a groundwater polluter from RMP’s research done in 2014.  It sprang into memory when Merit Energy (Dallas, TX) ended up being the top moneymaker in 2015 and this particular well made the top 25 producer list of Natural Gas Liquids (NGLs) in Michigan.  You can see fluid leaking from the top of the wellhead where the pollshed rod enters the top of the wellhead.  Every time the pumpjack’s horse head, carrier bar, and pollshed rod assembly move up and down, fluid spills out of the top of the wellhead where the groundwater is already under remediation for contamination.  The fluids can be seen in the cover photo of this post.   You can watch this short video of the wellhead leaking fluid or this short video of the wellhead leaking fluid.  You can also see, in both videos, the soil venting equipment (PVC poles sticking out of the ground) where the groundwater is contaminated.

A helpful and volunteer research assistant wrote this research report about the Wood 5-11 in 2014 and I would love to pay for her hard work but we are and have always been an unfunded 501(c)3 organization.  The cover photo and the videos are credited to Neo.  You can find RMP’s homepage of the Merit Energy’s Wood 5-11 well here.  On RMP’s homepage for this well, you can find photos, videos, the research report written above, and the supporting MDEQ documents that support the research report.  RMP conducts and reports this research without funding.  If you think we are doing a good job for Michigan’s economy as a public service and you would like to see our organization continue to do actual top-notch funded research, consider making a tax-deductible donation to our Michigan 501(c)3 non-profit organization by clicking here.  Thank you.

Thanks for reading the 2015 Michigan Basin Annual Petroleum Production Summary.  RMP’s production reporting is getting better each month, each quarter, and each year.  Please like us on facebook, share this post on your facebook by clicking the button below, and follow us on Twitter by clicking here.  Subscribe to our YouTube channel by clicking here.  Thanks!

 

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