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Expo/Industry events for the next few months

Utica Upstream
April 6, 2016
Pro Football Hall of Fame
Canton, OH

Upstream PA 2016
April 19, 2016
Penn Stater Inn
State College, PA

Ohio Valley Regional Oil & Gas Expo
April 26-27, 2016
Belmont County Carnes Center
St. Clairsville, OH

PIOGA’s 2016 Spring Meeting
April 7, 2016
Rivers Casino

Latest facts and a rumor from the Marcellus and Utica Shale

  • Antero’s CAPEX Cuts Are Much Less.  A big player in the Marcellus and Utica shale is planning to spend $1.4 billion for natural gas drilling in 2016, although that number is about 23 percent less than it spent in 2015.

    Antero Resources said low natural gas prices were the reason for the reduction but said it is flexible enough to change its drilling plans if prices go up or down.

    “For example, we have the ability to reduce our current $1.4 billion development plan as six of our rig contracts expire over the course of the year,” said Antero Chairman/CEO Paul Rady in a statement. “Conversely, to the extent commodity prices improve from current levels, we are well positioned to accelerate activity as a result of our sizable inventory of drilled but uncompleted wells.”

    Antero said 75 percent of its capital budget will go to the Marcellus, while 25 percent is for the Utica Shale in Ohio. There were 10 rigs operating at the beginning of the year, but it has been cut to seven for the year. Five of the rigs will work in northern West Virginia, while the other two will be in Ohio.

    While American drillers have idled more than two-thirds of their oil and gas rigs since October 2014, production has been resilient thanks to techniques that allow them to pump more from each well.
  • Pipeline along PA Turnpike.  Routing gas transmission pipelines along the Pennsylvania Turnpike would be good for the state’s environment and balance sheet, a House lawmaker told a committee hearing last week.

    Rep. Scott Petri, R-Richboro, has just introduced legislation to give the turnpike commission authority to allow use of its right of way for commercial transmission pipelines and charge a fee for it.

    “There’s no reason to destroy environmentally sensitive areas when you have the turnpike,” Petri said during a meeting of the House Environmental Resources and Energy Committee. He represents a district in Bucks County where constituents are concerned about the intrusion of gas pipelines near residences and environmental areas.

    Petri has also sponsored legislation to levy a state severance tax on gas production. But he thinks a transmission fee could generate far more revenue for state coffers and cover turnpike costs than a severance tax would. Petri’s bill doesn’t specify a fee amount, but it would require a pipeline operator to have a valid fee arrangement with the turnpike commission.

    The turnpike commission is studying the matter of whether pipelines, fiber optic cables and other utility infrastructure can run along its right of way.

    “We understand parts of our 550-mile system may be suitable to carry parallel pipelines — but that hasn’t been fully determined just yet,” said agency spokesman Carl Defebo Jr.

    Interstates 80 and 79 could also be candidates for pipelines if federal approval was obtained, Petri said.

    I have heard rumors about pipeline along the PA Turnpike, but now it looks like formal consideration is moving forward.  Knowing how government works, this could take years to get approval.  The gas needs to move now, not 10 years from now.
  • Utopian Pipeline Meeting Little Resistance.  (Thanks Akron Beason Journal)

    Utopian Pipeline Meeting Little Resistance. Akron Beason Journal

    Land acquisition for a new liquids-only pipeline across northern Ohio is proceeding with little uproar from neighbors.

    The $500 million Utopia East Pipeline has generated little community opposition, unlike two bigger natural gas pipelines that will also cross northern Ohio.

    The Utopia pipeline would run 210 to 215 miles through 14 counties from Harrison County in Ohio’s Utica Shale area west to Fulton County near Toledo, where it would connect with an existing pipeline. It would pass through parts of southern Stark and Wayne counties.

    The pipeline, 12 inches in diameter, will ship about 50,000 barrels of liquids per day, said Allen Fore, vice president for public affairs with Texas-based Kinder Morgan, the pipeline giant behind the new project.

    The capacity could be boosted to 75,000 barrels per day with the addition of two more pump stations. Two pump stations are planned.

    Construction would likely take place in 2017 and the line could begin services in late 2017 or early 2018, he said.

    The name Utopia stands for Utica To Ontario Pipeline Access.

    The liquids, including ethane and propane from the Utica Shale, would be shipped to NOVA Chemicals Corp. for use as feedstock for producing plastics at its plant in Corunna, Ontario.

    There is capacity for additional customers, Fore said on a recent visit to Akron.

    The new pipeline will require easements from more than 900 landowners in Ohio, and about one third of those deals have been completed, he said.

    Kinder Morgan was provided survey access from 98 percent of the landowners along the route, Fore said.

    The survey work is largely complete, he said.

    His company also has hired an Ohio firm, Land Stewards LLC in Marion, to work with landowners to resolve concerns, including farm drain tile issues. Land Stewards is also working on the Rover natural gas pipeline along a similar route across Ohio.

    Utopia East will create about 1,000 union construction jobs, he said. The pipeline will create five full-time jobs.

    The new pipeline is being developed by Kinder Morgan Cochin LLC and Kinder Morgan Cochin ULC subsidiaries.

    The pipeline must be approved by several federal and state agencies but it does not require approval of the Federal Energy Regulatory Commission, as is required for the Nexus and Rover pipelines across northern Ohio. That is because the Utopia East Pipeline does not cross state lines and it is not transporting natural gas.

    Initial paperwork for the pipeline has been filed and applications will be filed this spring with government agencies.

    Approval is needed from the U.S. Army Corps of Engineers, U.S. Fish and Wildlife Service, the U.S. Department of Transportation’s Pipeline and Hazardous Safety Administration and several state agencies, including the Ohio Department of Natural Resources and the Ohio Environmental Protection Agency.

    Utopia East was first announced in late 2013.

    Fore said that Kinder Morgan has scrapped plans for a second 12-inch pipeline for natural gasoline originally planned along the same Ohio route. The Utopia West Pipeline would have connected with the existing Cochin Pipeline in northwest Ohio to transport that liquid to Kankakee, Ill., and on to Alberta in western Canada. It is used by Canadian tar sand producers. Much of the route would have been in a pipeline that previously carried Canadian propane to the United States.
  • Deloitte:  One-Third of Oil Producers Could Go Bankrupt.  Roughly 33% of oil producers could seek bankruptcy protection from creditors in 2016, as low commodity prices hurt access to cash and the ability to cut debt, according to a new Deloitte study.

    The report is based on a review of more than 500 publicly-traded oil and natural gas exploration and production companies worldwide, Kallanish Energy learns.

    The roughly 175 companies at risk of bankruptcy have more than $150 billion in debt, with the slipping value of secondary stock offerings and asset sales further hindering their ability to generate cash, Deloitte said in the report, released Tuesday.

    “These companies have kicked the can down the road as long as they can and now they’re in danger of kicking the bucket,” William Snyder, head of corporate restructuring at Deloitte, told Reuters. “It’s all about liquidity.”

    While Deloitte said 95% of oil producers can produce crude for less than $15 per barrel – illustrating ongoing efficiencies and technological improvements in the industry since mid-2014, when only 65% of producers could produce near that level — that may not be enough for some, Deloitte found.

    “2016 is the year of hard decisions, where it will all come to a head,” John England, vice chairman of Deloitte, told Reuters.

    The Deloitte study found that oilfield services providers are filing for fewer bankruptcies than producers, likely due to the larger capital costs — and therefore debt — for producers, Deloitte found.

    “Services providers tend to be more of a people business with less capital deployed, so it’s easier for them to financially flex,” Snyder said. “Eventually, though, they’ve got to run out of gas, too.”
  • Re-Routing Atlantic Coast Pipeline.  Developers of the Atlantic Coast Pipeline plan to re-route more than 10 miles of the proposed 42-inch natural gas line away from environmentally sensitive areas of the Monongahela and George Washington National Forests, Kallanish Energy finds.

    But the planned re-route carries its own drawbacks. The new route adds 30 miles – perhaps as much as $60 million to the 564-mile, $5.1 billion project cost – while also impacting 249 landowners in West Virginia’s Pocahontas and Randolph counties, as well as others in Virginia’s Highland, Bath, and Augusta counties.

    In December, the Federal Energy Regulatory Commission (FERC) asked the developers to select a new route through the national forests that would avoid environmentally sensitive areas that provide habitat for such protected species as the Cheat Mountain salamander.

    Pipeline planners have “worked with the U.S. Forest Service over the last several months to find an alternative route that avoids sensitive areas” in the two national forests, according to a statement from Atlantic Coast Pipeline LLC.

    “We are contacting landowners along the alternative route to request permission to survey their properties so the route can be thoroughly evaluated,” according to Atlantic Coast Pipeline.

    The proposed pipeline would stretch from northwest West Virginia, split Virginia in two, and continue to southeastern North Carolina, flowing natural gas from wells drilled in the Marcellus Shale play in north central West Virginia, Kallanish Energy reports.

    While the proposed route change “avoids impacts to certain species that are emblematic of this wild landscape, it will nonetheless do great damage,” Rick Webb, coordinator of the Dominion Pipeline Monitoring Coalition, told the Charleston (West Virginia) Gazette-Mail.

    Webb said pipeline planners are now proposing to build the pipeline along a path they initially rejected for being too challenging and potential hazardous.

    Atlantic Coast Pipeline LLC is owned by Dominion (45%), Duke Energy (40%), Piedmont Natural Gas (10%), and AGL Resources (5%).
  • Utica Production Continues to Grow.  According to the EIA (U.S. Energy Information Administration), the Utica Shale in eastern Ohio has become one of the fastest-growing natural gas–producing regions in the United States. In its Drilling Productivity Report released on February 8, 2016, the EIA estimated that Utica Shale natural gas production reached ~3.2 Bcf (billion cubic feet) per day in January 2016. That’s ~2.2% more than production in December 2015 and 54% more than production in January 2015. In the past eight years, natural gas production at the Utica Shale has increased more than 19-fold.

    According to Baker Hughes (BHI), the Utica Shale currently has 14 active rigs, down from 16 in December 2015. In comparison, 45 rigs were in operation in the shale in January 2015.

    From January 2008 to January 2016, additional natural gas production per rig at the Utica Shale rose from ~0.20 MMcf (million cubic feet) per day to 6.5 MMcf per day, or by 32x. In the 12 months to December 2015, the natural gas production addition per rig rose 53%.
  • Chesapeake to Make Debt Payment.  Chesapeake Energy will pay the $500 million of debt maturing in March, using a combination of cash on hand and other liquidity that may include its credit line, an unnamed person with knowledge of the situation told Bloomberg.

    The U.S.’s second-largest natural gas producer (behind ExxonMobil) is also considering selling assets to strengthen its capital so it can handle more than $1 billion of debt due in 2017, said the person.

    Investors in Chesapeake were skittish last week as its securities dropped after a report that restructuring lawyers at Kirkland & Ellis were advising the independent producer, Kallanish Energy reports.

    Chesapeake’s $500 million of 3.25% senior unsecured notes scheduled to be repaid on March 15, dropped as much as 22% on the news.

    Creditors are gearing up for negotiations over how to reorganize the energy producer’s debt load of roughly $10 billion. At least one group of unsecured bondholders has hired advisers to help evaluate the company’s assets in the U.S., another person with knowledge of the situation told matter told Bloomberg.

    Last week’s issue had a story about “Chesapeake Dancing with Bankruptcy.”  Much of that article was based on the unknown fact regarding Chesapeake making this payment.  It appears Chesapeake  has some breathing room for a while
  • Shame on the University of Cincinnati.  (Thank you, Jackie Stewart, Energy-in-Depth-Ohio) After news broke that an ongoing University of Cincinnati (UC) study, which included baseline samples, has found no water contamination from hydraulic fracturing, the Times Reporter reported that the funders were “disappointed” in the results.

    This news comes after environmental groups originally praised the ongoing study, even giving the UC lead researcher Dr. Amy Townsend-Small an award for her work on the project. But as Dr. Townsend-Small said at a recent public meeting hosted by the anti-fracking Carroll County Concerned Citizens (CCCC),

    “I’m really sad to say this but some of our funders, the groups that had given us funding in the past, were a little disappointed in our results. They feel that fracking is scary and so they were hoping our data could point to a reason to ban it.” (emphasis added)

    Although UC claimed it did not take funding from groups opposed to fracking, it turns out that’s not exactly the case. The study received over 18 percent of its funding from the Deer Creek Foundation. As the Chamber of Commerce uncovered this week, Deer Creek Foundation gave $25,000 to the Media Alliance in Oakland, Calif. for a documentary on the “rise of ‘extreme’ oil and gas extraction – fracking, tar sands development, and oil drilling in the Arctic” as well as $20,000 to the Northern Plains Resource Council, a Montana activist group that states on its website, “Fracking damages water, land and wildlife.” EID has also uncovered that Deer Creek Foundation donated at least $20,000 to WildEarth Guardians, which is a key player in the “Keep-it-in-the-Ground” anti-fossil fuel movement that has been especially active in Ohio lately.

    EID has been following this ongoing study for three years and was on hand to capture the announcement of the results on film. Here are five key statements made by Dr. Townsend-Small about the UC findings during her presentation – and here’s a link to the full video:

    “All the samples fell within the clean water range and they did not find any changes over time either in any of our homes during the time series of fracking.”

    “We never saw a significant increase in methane concentration after fracking well was drilled.”

    Samples that were collected that were high in methane “clearly did not have a natural gas source.”

    “Some of our highest observed methane concentrations were not near a fracking well at all.”

    “There was no significant change in methane concentration over time, even as more and more natural gas wells were drilled in the area.”

    Dr. Townsend-Small said in her presentation that UC teamed up with CCCC to attract participants for the water analysis. The researchers examined water samples taken three to four-times per year from five Ohio shale counties. The primary focus area was actually in the most active Utica county, Carrol County, where sampling was conducted on 23 water wells from 2012 to 2015, for a total of 191 samples. Here’s a page from Dr. Townsend-Small’s presentation, which can be found here:

    Importantly, sampling was conducted before any oil and natural gas development occurred, which made this test unique. According to a UC press release:

    “The UC study is unique in comparison with studies on water wells in other shale-rich areas of the U.S. where fracking is taking place – such as the Marcellus Shale region of Pennsylvania. Townsend-Small says water samples finding natural gas-derived methane in wells near Pennsylvania fracking sites were taken only after fracking had occurred, so methane levels in those wells were not documented prior to or during fracking in Pennsylvania. The only way people with private groundwater will know whether or not their water is affected by fracking is through regular monitoring.”

    The voluntary water samples from private water wells were analyzed for concentrations of methane as well as hydrocarbons and salt.

    UC has no immediate plans to publish this first-of-its kind, multi-year groundwater study, but as was mentioned above, the full results were announced at a recent anti-fracking public meeting hosted by Carroll County Concerned Citizens (CCCC), which is a member of the Frackfree America National Coalition.

    With such great results the big question is: why aren’t the researchers making their findings available to the public? To explain that, a little more background is needed on the study itself, including how it was originally embraced by environmental groups, who called the study “novel” and a “ groundbreaking approach ” to monitoring groundwater resources near fracking sites in Ohio.

    Environmental groups originally praised the study

    Over the course of the past few years, environmental groups praised this unique groundwater analysis again and again. To highlight this point, UC’s Dr. Townsend-Small was awarded the first-Ever Science and Community Award from Ohio Environmental Council (OEC), a state-wide honor for her innovative work testing groundwater in Eastern Ohio. According to their website The OEC is Ohio’s “most comprehensive and respected environmental advocate for a healthier, greener, and more prosperous Ohio.” In a press release, the OEC announced the 2014 award recipient this way:

    “This innovative research study is examining the potential effects of hydraulic fracturing, or fracking, on groundwater in Ohio’s Utica shale. Led by UC geologist Amy Townsend Small, this first-of-a-kind project is testing for the presence of methane (the primary component of natural gas) and its origins in groundwater and drinking water wells before, during, and after the onset of fracking. Other studies have focused on water contamination only after fracking is complete. The project involves the gathering and analysis of water samples in eastern Ohio by UC graduate and undergraduate students.

    The OEC is honored to recognize these four champions of environmental conservation. Each has demonstrated outstanding ingenuity and perseverance to help make Ohio a cleaner, more vibrant place to live, work, and play. Congratulations to them for helping to secure healthier air, land, and water for all who call Ohio home.” (Emphasis Added)

    These studies never analyzed groundwater before the onset of fracking. Because fracking has only just begun in Ohio, we have an opportunity to make baseline measurements of methane in water wells.”

    In 2013, CCCC put out a press release on the ongoing study with the headline, “Carroll County group to learn about methane, water on Nov. 14.” But the preliminary results were described at the meeting this way:

    “We haven’t seen anything to show that wells have been contaminated by fracking.”

    Fast forward to 2016, when, just days before the results were made public, the CCCC put out a press release with the headline, “Groundwater methane in Carroll County,” which would lead readers to believe that methane found in groundwater was from fracking. But at that meeting, Dr. Townsend-Small stated,

    “Some of our highest observed methane concentrations were not near a fracking well at all” (emphasis added)

    The response from the anti-fracking groups? Silence. In fact, after learning the results of the three year study, the leader of CCCC, Mr. Paul Feezel said, “You all are very quiet tonight.”

    A local reporter who attended the February 4th meeting reported that,

    “An audience member asked if the university was going to publicize the results of the study, noting that had the findings been unfavorable to drilling, that would have been national news.”

    It’s interesting to note that before this good news, and clean bill of health, there was no shortage of efforts to get the word out about the “Groundwater methane in Carroll County at Feb. 4th Meeting” and many outlets covered that story.


    As is evident by the legitimate water contamination findings in Flint, Michigan, and most recently in Sebring, Ohio, it’s clear that efforts to tackle water pollution should be directed at ageing infrastructure issues and pre-existing water quality conditions from naturally occurring methane.

    If these Ohio activists were truly concerned about water quality, they would focus their funding, campaigns, and public relations efforts on these real concerns, as opposed to trying to find “a reason to ban” fracking.

    To echo Dr. Townsend’s point, it is “really sad” that anti-fracking activists found this news to be disappointing. It’s a further sign that they are not truly fighting and funding to defend and promote health and safety issues. They are instead driven by a political campaign to ban the oil and natural gas development that’s bringing so many benefits to Ohio..

  • Wells Fargo’s Significant Exposure to E&P Companies.  U.S. banking giant Wells Fargo in January disclosed it had $17 billion of exposure to the oil and gas industry.

    Last week, the financial institution revealed the $17 billion was a bit low, like more than 140% — $25 billion – low, Kallanish Energy learns.

    Wells Fargo Chief Financial Officer John Shrewsberry said last week the financial institution’s potential exposure is actually $42 billion, a number that includes $25 billion worth of unfunded commitments, lines of credit, Wells Fargo made available to oil and gas companies, but haven’t yet been tapped.

    The lines of credit, LOCs, are unfunded, but they are legal documents Wells Fargo is obligated to back. And, LOCs during extremely distressful times, like now, often are quickly drawn down as highly leveraged companies grab any and all funds available to keep from going Chapter 11.

    Of the $42 billion in both funded and unfunded liabilities, 25% is tied to oilfield services companies, 30% to midstream operators, and the remaining 45% is labeled for exploration and production companies.

    Keep in mind, Wells Fargo’s total commercial loan portfolio at Dec. 31, totaled $456.58 billion, meaning the O&G-related loans comprise 9.2% of the total commercial loan portfolio, and just 4.6% of the $916. 56 billion total loan portfolio.  
  • What Does Warren Know that We Don’t.  Warren Buffett’s Berkshire Hathaway investment vehicle bought 26.5 million shares of Kinder Morgan in the fourth quarter, adding to his recent energy industry purchases, according to an U.S. Securities and Exchange Commission filing.

    The Kinder Morgan buy represents an estimated 1.2% stake in the pipeline giant, valued at $395.9 million at the end of 2015, Kallanish Energy calculates.

    The total value of Berkshire’s equity holdings rose 3.5%, to $131.86 billion at Dec. 31.

    Berkshire has for months been buying shares in refiner/midstreamer Phillips 66, fueling speculation Buffett may be considering buying the company.

    Buffett’s total stake in Phillips is close to 74 million shares, worth $5.9 billion. Since Jan. 4, Berkshire has spent $964 million to add 12.5 million shares to its Phillips 66 stake.

    The $18 billion Appaloosa Management hedge fund, headed by David Tepper, also has bought into Kinder Morgan.

    At Dec. 31, Appaloosa had acquired 9.4 million shares of the company, valued at $140.9 million, according to an SEC filing.

    The hedge fund also bought 5.1 million shares of natural gas gathering, processing, storage and transfer company Energy Transfer Partners worth $173.5 million at the end of the year.

    Warren has made big investments in ConocoPhillips in the last six months.  He seems to be focusing on energy.  Obviously, he feels the market will recover.

Visit our Blog for daily updates on what’s happening in the oil & gas industry

Rig Count

  • Baker Hughes Rig Count the week of February 19, 2016
  • PA
    • Marcellus 17 unchanged
    • Utica 0  
  • Ohio
    • Utica 13 unchanged
  • WV
    • Marcellus 12 unchanged
  • TX
    • Eagle Ford – 54 down 4
    • Permian Basin  145 down 6
  • NM
    • Permian Basin – 20 down 1
  • ND
    • Williston – 36 down 3
  • CO
    • Niobrara – 15 down 1
  • TOTAL U.S. Land Rig Count 489 down 27

PA Permits for February 11, To February 18, 2016

       County        Township       E&P Companies

1.    Armstrong    West Franklin    PennEnergy
2.    Elk              Jones                Seneca
3.    Greene        Perry                 Vantage
4.    Greene        Perry                 Vantage
5.    Greene        Perry                 Vantage
6.    Greene        Perry                 Vantage
7.    Greene        Perry                 Vantage
8.    Lycoming    Jackson             SWN
9.    Tioga        Delmar                 Shell
10.    Tioga        Delmar               Shell
11.    Tioga        Delmar               Shell
12.    Tioga        Liberty               SWN
13.    Washington    Amwell         EQT
14.    Washington    Amwell         EQT
15.    Washington    Amwell         EQT
16.    Washington    Amwell         EQT
17.    Washington    Amwell         EQT
18.    Washington    Amwell         EQT
19.    Washington    Amwell         EQT
20.    Washington    Amwell         EQT
21.    Washington    Amwell         EQT
22.    Washington    Amwell         EQT
23.    Washington    Amwell         EQT
24.    Washington    Carroll          EQT
25.    Washington    Somerset     Range
26.    Washington    Somerset     Range
27.    Washington     Somerset    Range
28.    Westmoreland    Derry        WPX
29.    Westmoreland    Donegal    WPX

OH Permits for week ending February 13, 2016

        County    Township  E&P Companies

1.    Monroe      Perry        EM Energy
2.    Monroe      Perry        EM Energy

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019