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NewsLetters

Expo/Industry events for the next few months

Utica Midstream
June 8, 2016
Pro Football Hall of Fame
Canton, OH

http://www.uticasummit.com/

DUG East
June 21 – 23, 2016
David L. Lawrence Convention Center
Pittsburgh, PA

http://www.dugeast.com/

Latest facts and a rumor from the Marcellus and Utica Shale

  • Is the Long-term Outlook for Oil Bullish?  Oil discoveries worldwide in 2015; fell to a 60-year low as explorers cut billions of dollars of spending to help them get through the ongoing price plunge in oil and gas.

    Roughly 12.1 billion barrels (BBbls) of oil reserves were found in 2015, the fifth consecutive year of decline and the smallest volume since 1952, Oslo, Norway-based consultant Rystad Energy said Monday.

    Supermajor oil companies like BP Plc and Royal Dutch Shell Plc have cut budgets and staff as they focus on keeping existing fields going and maintaining shareholder dividends.

    Many industry experts believe the lack of new discoveries could affect long-term supply as it takes five to 10 years to bring new discoveries to production, depending on location, prices and demand, Bloomberg reported.

    “Short term, there is no shortage of oil,” Martijn Rats, an analyst at Morgan Stanley in London, wrote in a May 20 report that estimated exploration spending at about $95 billion last year–down 45% from 2013. “Any impact of the recent poor exploration results will have to play out over the long term.”

    The pace of oil discoveries will probably remain unchanged through to 2018, Rystad Energy said.

    Global climate targets are likely to curb oil consumption, meaning existing resources could be sufficient to meet demand for the next two decades, according to Morgan Stanley, Bloomberg reported.
     
  • Parsley Energy Expands in the Permian.  Independent producer Parsley Energy said it’s acquiring mineral rights under approximately 30,000 acres consisting of Parsley leasehold and other adjacent properties in Texas’ Pecos and Reeves counties for $280.5 million in cash.

    The proposed transaction is scheduled to close by July 14, 2016, subject to customary closing conditions. Parsley intends to finance this acquisition through debt and equity issuances announced concurrently with the announcement of the acquisition.

    Parsley also announced the purchase of additional working interests in the company’s leasehold in Pecos and Reeves Counties totaling 885 net acres for $9.0 million in cash. This transaction closed on May 10, 2016.

    Acquired mineral rights under 29,813 acres come with an average royalty interest of 17.5%, Kallanish Energy understands.

    Estimated net current production associated with acquired mineral rights is roughly 280 barrels of oil equivalent per day (BOE/d), according to Parsley. A total of 82% of mineral acreage represents Parsley leasehold, with the balance leased and operated by other operators.

    Parsley also acquired surface rights on approximately 80% of mineral acreage, eliminating compensation for surface damages and water procurement, among other costs, and also facilitating optimal well and facility placement.

    The transaction is scheduled to close on July 14.

    In other news involving Parsley, the company said Monday it upsized its 8-million-share offering of Class A common shares by 250,000, and expects gross proceeds from the offering of roughly $203 million.

    The offering’s underwriters have a 30-day option to purchase up to an additional 1.24 million shares of Class A common from Parsley.

    The equity offering is expected to close on May 27.
     
  • Very High Demand for NGL Storage in the Appalachian Basin.   Mountaineer NGL Storage said the non-binding open season for its natural gas storage project near Clarington, in eastern Ohio, received requests for more than three times the amount of initial planned capacity.

    The Mountaineer NGL project plans to offer up to 2 million barrels of initial storage capacity, with more than 40,000 barrels per day (BPD) of load-in and load-out capacity.

    The project will store ethane, propane, butane and y-grade products for gas processors, producers, markets and commodity traders interested in exploiting wet gas production from the Marcellus/Utica Shale plays.

    "We'll begin the permitting process for LPG [liquefied petroleum gas] storage, initiating a 3-D seismic shoot over the property, drilling a test well, and coring the salt to confirm its suitability for LPG storage," said David Hooker, managing director of Denver, Colorado-based Mountaineer.

    The project should break ground in early 2017, with a planned in-service date of early 2018, Kallanish Energy understands.

    "We're pleased to see that the support of this project in the heart of the Marcellus/Utica wet gas shale play is as strong as it is," Hooker said. "The Mountaineer NGL Storage Project is strategically placed to provide service to the expanding network of pipelines, rail, truck, and barge infrastructure that is currently being built to transport Marcellus and Utica natural gas liquids throughout the Northeast and Mid-Atlantic.”
     
  • Where there’s white pickup trucks could there be drilling?  In the past six to eight weeks we’ve been asked by residents in Lycoming County “you noticing more white trucks driving around?”  Were they reading our minds? We were thinking the exact same thing for weeks.

    So we actively started looking for the “white trucks” we all became too familiar with starting in 2009 until about 2015 when there were fewer and less frequent sighting.   But, within the past three weeks there was a Weatherford van with a crew in Clinton County, a Universal truck at a Sheetz gas station and then a Halliburton truck driving through Lycoming County.   AND, a rig move in the northern tier (PA) this past weekend and knowledge of a mid-size company reaching out to a local trucking company for assistance. In WV sightings of the president of an upstream company from OK having lunch with pipeline operations manager- several times (all of which were done confidentially and under the radar- that’s why we are not disclosing names).  

    At the OH Valley Expo in April Edgemarc and Rice Energy both alluded to their concern of having sufficient experienced trained workforce readily available when drilling activity does resume.   So is it just a coincidence that in addition to the sightings, PIOGA’s is offering Safeland USA which is almost filled.

    Is this the beginning signs to drill again or all a mere coincident?  Stay tuned, attend the Utica Midstream June 8, Canton, OH and Midstream PA 2016 -we’ll keep you updated.
     
  • Chinese Looking for Deals in the Permian.  Chinese investment holding company Yantai Xinchao Industry is seeking U.S. oil buys valued up to $1 billion in the Permian Basin, and it wants to run the show, the head of the company’s U.S. subsidiary tells Bloomberg.

    Unlike Asian companies that bought stakes in U.S. energy assets in recent years, Xinchao is seeking operating positions which will give it primary authority over all aspects of the drilling process, Curtis Newstrom, CEO of Blue Whale Energy North America, the U.S. arm of Shanghai-listed Xinchao, told Bloomberg.

    Houston, Texas-based Blue Whale in 2015 made its first two deals for Xinchao, including a $315 million acquisition of drilling rights across 7,100 acres from Juno Energy II, and a $1.1 billion deal in November with Tall City Exploration and Plymouth Petroleum. The company is now seeking assets valued at between $500 million and $1 billion, Newstrom said.

    “We’re going to continue looking for opportunities,’’ Newstrom told Bloomberg, in an interview on the sidelines of Hart Energy’s DUG Permian Basin conference in Fort Worth, Texas, Tuesday.

    Blue Whale is at a disadvantage to domestic investors as it tries to acquire more U.S. oil assets because it’s owned by a Beijing-based company, meaning every deal must be examined by the Treasury Department’s Committee of Foreign Investment in the U.S., known as CFIUS, Newstrom said.

    The vetting process usually takes from 45 to 90 days, a time lag that makes some American sellers balk, he said.
     
  • June is the Month for the Williams – ETE Deal.  Pipeline companies Williams and Energy Transfer Equity (ETE) said Tuesday a trial over tax issues that threaten their $14 billion merger is scheduled to begin on June 20, in Delaware.

    The companies also set a shareholder vote on the deal for June 27, according to a filing with the Securities and Exchange Commission, Kallanish Energy finds.

    Williams has accused ETE of trying to get out of the deal and filed a lawsuit in the Delaware Court of Chancery to prevent the Dallas, Texas-based company from terminating its takeover over a tax issue, or if the deal isn’t closed by a June 28 deadline.

    ETE has filed a counterclaim to Williams’ lawsuit.

    Kelcy Warren, the billionaire CEO of Energy Transfer, pursued Williams last year to substantially add to his already considerable pipeline network. He launched an unsolicited bid in June and reached a deal in late September that at the time was worth $33 billion.

    But oil and gas prices crumbled after the deal was announced, the companies’ shares dropped sharply and investors started to worry the $6 billion cash portion of the deal would saddle ETE with too much debt.
     
  • Halliburton Shedding Real Estate.  Thirty-eight real estate assets owned by oilfield services giant Halliburton, including maintenance facilities, warehouses and land, will be sold to the highest bidder during three days in June.

    The properties are located in Texas, Pennsylvania, Louisiana, West Virginia, Montana, Wyoming, New Mexico and Kansas, as well as Nova Scotia, Canada, Kallanish Energy reports.

    “The assets are mostly vacant field offices Halliburton identified as surplus after consolidating some of their operations,” said Fontana Fitzwilson, executive vice president of real estate auction house Williams & Williams.

    “Halliburton directed us to sell these properties absolute, without reserve prices, because they want the market to bid with confidence at these auctions,” Fitzwilson added.

    Among the properties up for auction are trucking terminals, warehouses, development land, plus a barite mine in Nova Scotia.

    The auctions will be open to the public and bids may be placed in person for most properties, or online for all properties. Online bids can be placed at AuctionNetwork.com, a sister company to Williams & Williams.

    Fitzwilson said the high bidders will be required to make a non-refundable 10% down payment immediately after the auctions, and close in 30 days.

    Halliburton’s proposed $32 billion merger with smaller rival Baker Hughes recently was called off by both parties due to antitrust issues both in the U.S. and Europe.

    As part of the merger not being consummated, Halliburton must pay Baker Hughes $3.2 billion.
     
  • Baker Hughes Making Changes with Collapse of Halliburton Deal.  Baker Hughes, still getting over the collapse of its $28 billion merger with Halliburton, but consoled by the $3.5 billion breakup fee it’s banked, has announced organizational and management changes.

    The changes follow the company’s announcement on May 2 (the day after the deal was flushed) of plans to “capitalize on its leadership position as a product innovator by simplifying its business structure, reducing costs and enhancing its commercial strategy.”

    “These changes to our organizational design and leadership team demonstrate that we are moving quickly and decisively to execute on the strategy we outlined earlier this month,” said Martin Craighead, CEO of Baker Hughes.

    Baker Hughes, effective May 24, consolidated its previous regional oilfield services operations structure into one global organization with responsibility for driving operational performance, service and sales, as well as delivering operating profit.

    Belgacem Chariag, who was most recently the company’s vice president and chief integration officer, will serve as president, Global Operations.

    The Houston, Texas-based company has combined its Technology and Global Products and Services (GPS) organizations to create one global organization responsible for strengthening the company’s technology commercialization and investment strategy.

    Art Soucy, previously president, Europe, Africa and Russia Caspian (EARC) region, will now serve as president, Products and Technology. He also will be responsible for optimizing the company’s supply chain and procurement capabilities.

    Derek Mathieson will serve as chief commercial officer of the newly formed Commercial Strategy organization. In this role, Mathieson will lead the commercial growth strategy for the company with the responsibility of developing sales channels for its products and technology.

    Mathieson, who previously served as vice president, Chief Technology and Marketing Officer, also will lead future business incubation efforts as well as corporate development planning and implementation.

    Richard Williams, formerly president of the company’s North America region, will serve as senior advisor to the company’s executive leadership team.
     
  • ETE Seeks to Break the Williams Deal.  In the latest move in the deal/non-deal between pipeline giants Energy Transfer Equity (ETE) and Williams, ETE is seeking the right to exit its-now roughly $17 billion deal to buy Williams – and collect a $1.48 billion breakup fee because its quarry breached the merger terms.

    Williams broke the pact between the two pipeline giants by, among other things, refusing to cooperate with Energy Transfer’s efforts to finance the deal and failing to make “reasonable best efforts” to complete it, Dallas, Texas-based ETE said Thursday, in a statement.

    The company is asking the Delaware Court of Chancery to rule it can “immediately terminate” the agreement due to the alleged breaches and said it would be entitled to the breakup fee if it did.

    “ETE seeks a declaratory judgment that, in the event Latham & Watkins LLP [Latham], its outside tax counsel, is not able to deliver a 721(a) tax opinion prior to the outside date of June 28, 2016, set forth in the merger agreement, ETE will be entitled to terminate the merger agreement without penalty due to the failure of a closing condition,” ETE said.

    A termination would mark the end of a nearly nine-month ordeal that has seen ETE and Williams fight each other in and out of court over a deal that’s gone downhill since it was announced last September.

    At that time, the merger was valued at $32.9 billion. (Williams actually had rejected a $48 billion ETE offer last June.)

    The ensuing plunge in oil prices dragged down both companies’ stocks, throwing into question the economics of the transaction – particularly since ETE remained on the hook for the $6 billion cash portion of the offer.

    Energy Transfer said Thursday Williams further breached the terms of their agreement by making public statements “implying that the Williams Board supports enforcing the merger agreement as opposed to completing the merger.”

    Its court filing is in response to a lawsuit Williams filed earlier this month in an attempt to keep Energy Transfer from using a June 28 closing deadline or a failed tax opinion to pull out of the deal.

    Williams said that Energy Transfer’s latest claims “are entirely without merit and are yet another transparent attempt” by the company to avoid fulfilling its obligations.

    The Tulsa, Oklahoma-based company said it’ll prove at trial ETE was the one to breach the merger agreement “through a pattern of obstruction.”

    The companies are scheduled to go to trial this month.

    ETE also announced the U.S. District Court of Dallas County, Texas, granted a motion to dismiss the lawsuit brought by Williams against ETE Chief Executive Kelcy Warren.

    Warren had filed the motion to dismiss on the basis that Williams’ lawsuit against him in Dallas County was a breach of the mandatory forum selection provisions of the merger agreement, among other things.

    Williams had accused Warren of “maliciously orchestrating” a unit offering that would guarantee him more than $200 million a year in payments at the expense of other investors.
     
  • Thank You, PIOGA for PA DEP Info.  PA DEP continues to change and/or implement new procedures for drilling in PA.   Thank you PIOGA for making us aware of the new information on DEP updates on online submissions, residual waste codes and liners.  Here's the link.

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

http://www.shaledirectories.com/blog/

Rig Count

  • Baker Hughes Rig Count the week of May 27, 2016
     
  • PA
    • Marcellus 16 unchanged
  • Ohio
    • Utica 11 up 1
  • WV
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford –29 down 2
  • TX & NM
    • Permian Basin – 137 unchanged
  • ND
    • Williston – 22 down 1
  • CO
    • Niobrara – 16 unchanged
       
  • TOTAL U.S. Land Rig Count 374 down 1

PA Permits for May 19, to May 26, 2016

       County    Township    E&P Companies

1.    Sullivan    Elkland        Chief

OH Permits for weeks ending May 21, 2016

        County       Township    E&P Companies

1.    No Permits this past week

Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149

DUG Technology