Several U.S. independent producers plan to hike 1990 capital outlays mainly because the Middle East crisis has improved the outlook for oil and gas production.
But action by another independent reflects the summer doldrums in spot wellhead gas prices.
- Questar Corp., Salt Lake City, will spend 15% more this year than it earlier planned because of what it foresees as increased U.S. gas usage due to environmental and national security concerns.
- Mitchell Energy & Development Corp., Woodlands, Tex., decided to hike its capital budget by about 9.1 % due partly to higher prices for natural gas liquids.
- American International Petroleum Corp., New York, will resume production from about 45 shut-in oil wells in Warren County, Ky., because crude prices have surged about $10/bbl.
- Plains Resources Inc., Houston, put gas buyers on notice it will refuse to sell spot gas at less than replacement cost. Plains Pres. Patrick Collins said, "If natural gas is to be an available fuel alternative for petroleum products, U.S. natural gas producers must be able to sell at prices that will enable them to continue to explore and produce."
QUESTAR BUDGET
Questar jumped its projected capital outlays for 1990 to $160 million from an original estimate of $140 million. It expects to spend $63 million of that on exploration and production by yearend, 31% more than the $45 million it spent in 1989.
Questar said the higher spending level fits its strategy to add reserves, especially gas, and to increase its interstate gas pipeline system to meet the growing transportation market. Two of its affiliates added 28 bcf equivalent of reserves in first half 1990.
Much of Questar's higher spending is earmarked for development drilling, acquisitions, and other projects. Its Questar Pipeline Co. unit also plans to spend $47 million this year, up from $11 million in 1989.
GAS LIQUIDS MARKET
Mitchell increased its 1990 budget by $19 million to a total of $227 million. In 1989 it spent $195 million.
Among the beneficiaries of the revised budget is Mitchell's gas transmission and processing division, which was given another $12 million mainly to build underground gas storage.
The budget hike also reflects higher prices for ethane, propane, and other liquids products, which bode well for its NGL business. Mitchell said Mont Belvieu spot prices for ethane rose to 21/gal Aug. 21 from 18/gal Aug. 1 and 15/gal July 3, while Mont Belvieu propane spot prices leveled off at 40/gal Aug. 21 after jumping from 31/gal Aug. 1 and 26/gal July 3.
The $7 million of Mitchell's remaining capital spending increase will be used to boost its 1990 real estate division budget to $98 million.
Budgets of its exploration and production division and its drilling partnership, MEC Development Ltd., will remain at $94 million and $40 million, respectively.
With oil prices rising, however, and gas prices still depressed, Mitchell said it is gearing its drilling program more toward oil. But it expects gas prices to rise substantially this winter.
Mitchell's corporate and venture capital spending forecast remains $4 million.
SHUT-INS REOPENED
American International expects all 45 of the Kentucky wells to be producing again by mid-September.
It said production was suspended because the wells were not profitable at $15/bbl.
When prices rose to more than $25/bbl, however, production again became feasible.
The company said oil price increases also enabled it to sell almost all of its crude and products inventories at its Lake Charles, La., refinery for about $600,000.
PLAINS PRICES
Plains will begin posting fixed monthly prices for all spot gas sales, rather than submit bids.
It will post the wellhead price by the 20th of each month prior to the month in which the price is effective. The new policy does not cover long term contract prices.
The company's posted September prices are $1.65/MMBTU in the Midcontinent and $1.75/MMBTU on the Gulf Coast, both pegged to a BTU equivalency of about $10/bbl of oil.
By comparison, Natural Gas Clearinghouse Inc.'s latest report on spot prices showed a range of $1.20-1.25/MMBTU in the Midcontinent and $1.30-1.40/MMBTU on the Gulf Coast (OGJ, Aug. 13, p. 65).
Plains received an average $1.76/Mcf in second quarter 1990, a decline of 37% from the $2.79/Mcf average in second quarter 1989.
The 1989 price included the effects of a settlement of gas contract litigation.
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