Source: OK Policy Note: Gross production tax revenues are from production months, two months prior to date of tax remittance

This article appeared in the April 2012 edition of the Oklahoma Economic Report, a publication of the Office of State Treasurer Ken Miller. It is reprinted here in its entirety with permission.

It seems that each day brings another story of record low natural gas prices and record high supplies. A warmer-than-normal winter in the United States drove down natural gas demand this year at a time when prices usually rise and supplies are reduced.

As a result, natural gas in storage is at or near record levels while prices are at their lowest in more than a decade. The U.S. Energy Information Administration (EIA) estimated natural gas in storage at the end of March at 2.48 trillion cubic feet, about 57 percent higher than at the same time last year.

According to Bloomberg, the average spot price in April at the Henry Hub in Louisiana was $1.99 per thousand cubic feet (mcf) as of April 27. Read the rest of this entry »

Last March, we ran a blog post we titled “Kill the drill” commenting on a front-page  New York Times story on the  steep drop in drilling activity that accompanied plunging oil prices and gas prices in early 2009. The Times declared that, “The great American drilling boom is over,” and concluded that with prices plummeting, “the result for companies is that it is becoming unprofitable to drill.” The Times quoted Oklahoma’s Devon Energy as Exhibit A of the drilling hangover era:

“The big bonanza is over,” said Jay Ewing, the completion and construction manager for Devon Energy in the Barnett Shale field here, where so far this year his company has brought its rig count from 35 to 8. “Everyone is really shocked how fast everything has turned.”

Energy experts and company executives warn that oil and gas companies now cutting back on investments will be unable to respond quickly to a future economic recovery. John Richels, Devon’s president, said that if the slump lasted two years, it could then take 18 to 24 months for companies to reassemble rig crews.

We reproduced the Times’ chart showing “a precipitous decline in oil and gas drilling”: Read the rest of this entry »

This month’s announcement of December General Revenue collections didn’t seem to provide much in the way of good news. Revenues for the month again came in around 30 percent below levels of one year ago (graph) and 30 percent below the certified estimate upon which this year’s initial budget was developed (see our Budget Hilites for an overview of the state’s budget situation).

Read the rest of this entry »

The continued weakness of natural gas prices and production is the most important factor accounting for Oklahoma’s disappointing revenue collections.  July collections from natural gas production to the General Revenue Fund (GRF) totaled just $22.2 million in July -  a 75 percent decline from revenues for the same month a year ago, and $42.1 million less than the estimate certified in February by the State Board of Equalization. More than half of the total revenue shortfall in the GRF can be attributed directly to falling revenues from the gross production tax on gas. Read the rest of this entry »

Sunday’s edition of the New York Times had a front-page report on the steep drop in drilling activity that has followed plunging oil prices in recent months. Since last summer, the number of oil and gas rigs deployed to tap new energy supplies across the country has fallen by half, and the drop is accelerating, especially for natural gas production. The Times quotes Oklahoma’s Devon Energy as Exhibit A of the drilling hangover era:

“The big bonanza is over,” said Jay Ewing, the completion and construction manager for Devon Energy in the Barnett Shale field here, where so far this year his company has brought its rig count from 35 to 8. “Everyone is really shocked how fast everything has turned.”

Energy experts and company executives warn that oil and gas companies now cutting back on investments will be unable to respond quickly to a future economic recovery. John Richels, Devon’s president, said that if the slump lasted two years, it could then take 18 to 24 months for companies to reassemble rig crews.

Read the rest of this entry »