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  • Permit Activity last two weeks.  
    • PA –92 permits; Bradford, Butler, Greene, Lycoming, Mercer and Washington lead the way; 14 different E&P companies received permits
    • OH –27 permits: Harrison and Belmont dominated
  • Expo/Industry events for the next few months:
    • PA Energy Games September 6, 2014
    • DUG Eagle Ford September 15 – 17
    • Shale Insights September 24 - 25
    • The Fourth Annual West Virginia Oil & Gas Expo October 1, 2014
    • Flash-Fire-Workshop October 8th Pro Football Hall of Fame, Canton, OH
    • Shale Gas Symposium, October 8th Agri-Plex Expo Center, Allentown, PA
    • Midstream PA 2014, November 18TH, Penn State

Latest facts and a rumor from the Marcellus and Utica Shale

  • MarkWest Marcellus and Utica update.  MarkWest Energy announced an operational update regarding the continued development of midstream infrastructure projects in the liquids-rich areas of the Marcellus and Utica Shales.

    In the Marcellus Shale, the Partnership has safely resumed operations of Plant III at the Houston processing and fractionation complex ("Houston complex") in Washington County, PA. The Houston complex consists of three processing plants totaling 355 million cubic feet per day (MMcf/d) and 98,000 barrels per day (Bbl/d) of ethane and heavier fractionation capacity. Plant III is a 200 MMcf/d cryogenic facility that has been offline since May 28, 2014 after the facility's heat exchanger was damaged.  During the period required to complete all necessary repairs to Houston's Plant III, MarkWest was able to minimize disruption to its producer customers by utilizing its large, high-pressure, rich-gas header system to route gas to the Majorsville complex in Marshall County, West Virginia for processing.

    In the Utica Shale, MarkWest Utica EMG a joint venture between MarkWest and The Energy and Minerals Group ("EMG"), is in startup mode for its third cryogenic processing plant at the Seneca complex in Noble County, Ohio. The 200 MMcf/d Seneca III plant will increase total processing capacity at the complex to 600 MMcf/d. The Seneca complex is supported by long-term, fee-based contracts with Antero Resources Corporation Gulfport Energy Corporation, Rex Energy Corporation, PDC Energy Inc., and other producers. MarkWest Utica EMG continues to expand capacity at the Seneca complex and will complete a fourth 200 MMcf/d plant in the second quarter of 2015.

    In addition to the Seneca complex, MarkWest Utica EMG's Cadiz complex in Harrison County, Ohio, also continues to grow rapidly. MarkWest Utica EMG recently completed a 40,000 barrel per day de-ethanization facility at the Cadiz complex. This new facility will provide MarkWest Utica EMG's producer customers' with the ability to meet residue gas quality specifications and downstream ethane pipeline commitments. Ethane produced at the new Cadiz facility will be delivered to the ATEX pipeline. In addition, during the third quarter of 2014, the Cadiz II plant will become operational and increase total cryogenic processing capacity at the Cadiz complex to 325 MMcf/d.

    MarkWest has completed 25 major infrastructure projects in the last two years, totaling over 3 billion cubic feet per day of processing capacity and nearly 200,000 Bbl/d of fractionation capacity to support producers' midstream requirements primarily in the Marcellus and Utica Shales. In the remaining six months of 2014, the Partnership will complete five additional projects in the Northeast and is constructing eight additional projects, which are scheduled to begin operations in 2015 and beyond.
  • Major purchase in the Bakken.  Whiting Acquiring Kodiak for $6 Billion, Becomes Bakken’s Largest Producer.  Whiting Petroleum Corp is acquiring Kodiak Oil & Gas for $6 billion in stock and assumed debt, to become the largest producer in North Dakota’s Bakken Shale, passing Continental Resources.

    CONSOL’s 2nd production is up.  Consol Energy’s E&P Division produced 51.9 Bcfe during the second quarter, up 34% from the 38.6 Bcfe produced in the year-earlier quarter, and in line with previous second-quarter guidance of 50 – 52 Bcfe net to Consol.

    Consol expects third-quarter gas production, net to the company, to range between 59 – 61 Bcfe which, using the midpoint, would be a 30% increase compared with 46.1 Bcfe produced in the year-ago quarter.

    Total gas production this year is projected to range between 225 – 235 Bcfe, with the low end of the range increased by 10 Bcfe over earlier guidance. The 2014 production guidance assumes liquids content between 5% – 8% of the total.

    Marcellus Shale operations remain the growth driver of the E&P division, according to Consol, with volumes increasing 129% from the year-earlier quarter.
  • It’s looking better at Chesapeake.  Chesapeake has raised its production growth target, driven primarily by better natural gas liquids volumes.

    The company expects NGL production to grow by 63%-68% during 2014.  With the newly built ATEX pipeline in the Utica shale, the company is positioned to transport much-needed capacity from the shale.

    The increased capital spending signifies that the company is on-track to meet its long-term production targets.

    The spin-off and divestment of assets resulted in a decreased burden of debt for the company.

    Chesapeake Energy (CHK) raised its 2014 total production growth outlook to 9%-12%, up from the previous estimate of 8%-10%, driven by better natural gas liquids volumes. In addition, since the company has shifted its focus on the liquid-rich plays, its liquid production is expected to increase by approximately 29%-33% in 2014. The company also expects capital expenditure in the range of $5.0 billion-$5.4 billion, as it is planning to drill more than 260 wells over the next two years.

    With the divestment of less profitable properties, Chesapeake has enjoyed a decline in production costs. The company has also accumulated considerable cash resources by divesting of these assets. The company is also determined to sell its non-core assets in Southwestern Oklahoma, as well as in Eastern and Southern Texas. These sales will further lower production costs, which will result in improved margins in the long term.

    Chesapeake is putting efforts into developing the Utica and Marcellus shales to meet the long-term objective of 1 million barrels of oil equivalent production per day. To do so, it has allocated $5 billion of capital expenditure, which will help the company to drill more than 260 wells in the next couple of years.

    The company is making the right moves by expanding its NGL production, as the NGL production will be contributing 13% of the total production in 2014. With the premium prices of NGL over natural gas prices, the company is well-positioned to improve its profitability in the years to come.
  • Hilcorp in Lawrence County, PA.  Those who dismiss the prospects of oil and natural gas in the northern tier of the Utica shale need only travel along High Hill Road in Pulaski Township in Lawrence County, Pa.

    Within this area, three well pads owned by Houston-based Hilcorp Energy Co. are either in production, being drilled, or under construction – concrete evidence that not all energy companies have abandoned this section of the play.

    “We’ve seen extensive development in the northwest corner of the county,” observes Lawrence County Commissioner Dan Vogler. “It’s mostly in Pulaski and Mahoning townships right now.”

    The plan in Lawrence County is to connect Hilcorp wells and feed them into a larger header line, which will transport the gas to Pennant Midstream LLC’s Hickory Bend cryogenic plant in Springfield Township in eastern Mahoning County.

    Pennant Midstream, a joint venture between Hilcorp and NiSource Midstream, has finished construction on the first phase of the plant, NiSource confirms. The plant separates dry gas, such as methane, and natural gas liquids that can be processed into products such as butane, ethane and propane. Dry gas is pumped into existing natural gas lines while the wet gas would be transported from Hickory Bend to Utica East Ohio’s Kensington plant in Columbiana County via a natural gas liquids line now under construction.

    Spokeswoman Sarah Barczyk says the plant is ready to process, and anchor producer Hilcorp should be shipping gas to the plant sometime this month “when the plant will be placed into full operation.”
  • Antero 2nd Qtr. Update. Antero Resources second quarter 2014 operational highlights and an increase in its firm transportation position.
    • Second quarter 2014 average net daily gas equivalent production was 891 MMcfe/d, a 94% increase over the prior year quarter and a 13% increase sequentially
    • Second quarter 2014 average net daily liquids production was 20,200 Bbl/d, a 387% increase over the prior year quarter and a 25% increase sequentially; representing 14% of net gas equivalent production for the quarter
    • Recently achieved milestone of 1 Bcfe/d of net daily gas equivalent production
    • Executed LNG supply agreement with Cheniere Energy to sell 200,000 MMBtu/d of gas for the Sabine Pass LNG facility at NYMEX-based pricing upon commencement of operations at the facility
    • Mid-year 2014 proved reserves increased 19% from year-end 2013 to 9.1 Tcfe (13% liquids) and 3P reserves increased 7% to 37.5 Tcfe (15% liquids) with a pre-tax PV10 of $26.4 billion including the value of hedges
  • Gulf to build LNG facility in NE PA.  Gulf Oil Limited Partnership, which distributes motor fuels to stations across the country, is moving forward with plans to construct a liquefied natural gas (LNG) production facility in northeast Pennsylvania, where Marcellus Shale dry gas production continues to rise, according to FERC filings.

    Instead, Gulf plans to distribute the LNG regionally to Marcellus gas producers, truck fleet operators and natural gas utilities in New England.

    According to its filings with FERC, Gulf Oil's plan calls for the construction and operation of a liquefaction facility in Great Bend, PA, in Susquehanna County, which is one of the leading counties for natural gas production in the state. Producers there have also endured midstream constraints that are more severe than those of their counterparts in the southern cores of the Appalachian Basin.

    Gulf Oil said the facility would utilize electric compression to produce 100,000-300,000 g/d of LNG. That would require between 8,333 and 25,000 Dth/d of natural gas. Depending on the markets being served, Gulf Oil would also store up to three million gallons of LNG on site.  The company currently estimates that the project will cost $45 million.
  • Aubrey is far from done.  Aubrey McClendon, the shale wildcatter who’s raised $1 million an hour since getting fired from Chesapeake Energy Corp. last year, is seeking another $2 billion for oil drilling.

    Energy 11 LP plans to offer 95 million common units for $20 each and 5.26 million units for $19, according to a prospectus the Fort Worth, Texas-based partnership filed today. The units will not trade on any public exchange. A subsidiary of McClendon’s American Energy Partners LP will manage all aspects of Energy 11’s business, the filing said.

    Energy 11 plans to acquire interests in U.S. oil and natural gas fields, according to the filing. The entity is a so-called blind pool investment, a speculative vehicle with no assets or profits that gives investors a chance to help bankroll oil and gas wells.
  • New Utica Marcellus Texas Pipeline Project.  Plans for a pipeline to carry natural-gas liquids from Ohio to the Gulf Coast are progressing.

    Dubbed the Utica Marcellus Texas Pipeline Project, the pipeline is being developed by Kinder Morgan Energy Partners LP and its partner, MarkWest Utica EMG LLC. It is designed to serve the Utica and Marcellus shale regions in Ohio and surrounding states.

    New details for the project, first announced in August, have emerged on a fact sheet posted on Kinder Morgan’s website.

    The pipeline would run from a proposed natural-gas processing plant in Uhrichsville in southern Tuscarawas County to Mont Belvieu, Texas.

    The project calls for converting 1,005 miles of Kinder Morgan’s 24-inch and 26-inch Tennessee Gas Pipeline system, switching it from carrying natural gas to transporting related liquids such as ethane, butane and propane.

    The existing pipeline runs from Mercer County in western Pennsylvania to Natchitoches, La. A new line, stretching about 200 miles, would be built from Natchitoches to Mont Belvieu.

    The project also includes about 160 miles of new laterals and interconnects in Ohio, Pennsylvania, West Virginia, Kentucky, Tennessee and Mississippi.

    The pipeline would have an initial capacity of 150,000 barrels per day. That would be expanded to 400,000 barrels per day with the addition of pump stations.

    The new pipeline is scheduled to be in full service by the second quarter of 2017.

    Houston-based Kinder Morgan would own 75 percent of the liquids pipeline and Denver-based MarkWest Utica EMG would have the option to invest in the remaining 25 percent.

    Kinder Morgan would operate the new pipeline.  That company also formed a partnership with Houston-based Targa Resources Partners LP to build a fractionation facility to separate liquids at Mont Belvieu.

    In related news, TransCanada Corp.’s ANR Pipeline Co. is conducting an open sign-up season through July 28 for its proposed ANR East Pipeline across northern Ohio.

    The pipeline would run from gas-processing facilities in Columbiana and Carroll counties in eastern Ohio to near Defiance in northwest Ohio, where it would connect with existing and proposed pipelines to the Gulf Coast and to Detroit, Ontario and the Midwest.

    The pipeline, scheduled to be operational in the third quarter of 2017, would improve access to Utica gas to 35 Midwest utilities that generate electricity and either burn natural gas or could switch to natural gas in the future.
  • Dominion’s exporting LNG facility getting closer to reality. Officials with Dominion Cove Point LNG, a subsidiary of Richmond, Va.-based Dominion Resources, expect FERC to issue an order — a response to public comments that followed an environmental assessment of the project — as soon as the end of this month, said Mike Frederick, vice president of Dominion Resources Inc.’s LNG Operations.

    “We’re very close to wrapping up the regulatory process and starting construction,” Mr. Frederick said.

    If approved, Cove Point would become the closest LNG export terminal to the Marcellus Shale that covers much of Pennsylvania. The $3.8 billion project will convert an existing natural gas import site — largely unused because of domestic production — into an export facility where locally produced natural gas can be shipped overseas.
  • The reason for Permian Basin’s oil production increase.  Six formations within the Permian Basin have provided most of the basin’s 60% increase in oil output since 2007 – allowing the Permian to become America’s most prolific oil.

    Crude oil production from Permian Basin counties in Texas and New Mexico has exceeded production from the federal offshore Gulf of Mexico region since March 2013, making the Permian the largest crude oil producing region in the United States.

    Last year, the Permian accounted for 18% of total US crude production.

    The recent increase in Permian crude oil production is largely concentrated in the Spraberry, Wolfcamp, Bone Spring, Glorieta, Yeso and Delaware formations.
  • “Wildcatters” in Columbiana County, OH.  With many majors pulling out of NE OH, land men from smaller drillers are moving into Columbiana County (RUMOR)

I expect that smaller drillers will be moving into Trumbull County.  I’m sure the folks at BP knew what they were doing when it purchased all those leases.  BP just has different priorities which caused them to move.

Rig Count

  • Baker Hughes Rigs count for the July 18th reporting week.
    • PA
      • Marcellus 53 rigs – down 1
      • Utica 2 rigs – unchanged    
    • Ohio
      • Utica 44 – up 2
    • WV
      • Marcellus 26 unchanged
    • TX
      • Eagle Ford – 212 down 1
      • Permian Basin – 472 down 5
    • NM
      • Permian Basin – 84 down 2
    • ND
      • Williston – 178 up 6
    • MT
      • Williston – 6 down 1
    • CO
      • Niobrara – 55 unchanged

TOTAL U.S. Rig Count 1871 down 4

PA Permits for July 10 to July 24, 2014

       County            Township                E&P Company
1.    Beaver              Darlington                 Chesapeake
2.    Beaver              South Beaver             Chesapeake
3.    Bradford             Asylum                    Chesapeake
4.    Bradford             Herrick                     Southwestern
5.    Bradford             Smithfield                 Chesapeake
6.    Bradford             Standing Stone          Chesapeake
7.    Bradford             Troy                          Chesapeake
8.    Bradford             Tuscarora                  Chesapeake
9.    Bradford             Tuscarora                  Chesapeake
10.    Bradford            Tuscarora                  Chesapeake
11.    Bradford            Tuscarora                  Chesapeake
12.    Bradford            Wilmot                      Chesapeake    
13.    Bradford            Wilmot                      Chesapeake
14.    Bradford            Wysox                      Chesapeake
15.    Butler                Connoquenessing      XTO
16.    Butler                Connoquenessing      XTO
17.    Butler                Connoquenessing      XTO
18.    Butler                Jefferson                   PennEnergy
19.    Butler                Jefferson                   PennEnergy
20.    Butler                Lancaster                 Rex
21.    Butler                Lancaster                 Rex
22.    Butler                Oakland                    EM Energy
23.    Butler                Oakland                    EM Energy
24.    Butler                Penn                        Rex
25.    Butler                Penn                        Rex
26.    Butler                Penn                        Rex
27.    Clinton                East Keating           Enerplus Res
28.    Elk                     Jay                         EQT
29.    Elk                     Jay                         EQT
30.    Elk                     Jay                         EQT
31.    Elk                     Jay                         EQT
32.    Elk                     Jay                         EQT
33.    Forest                 Kingsley                Shell
34.    Greene                Center                   CONSOL
35.    Greene                Center                   CONSOL
36.    Greene                Center                   CONSOL
37.    Greene                Jefferson                Energy Corp of Am.
38.    Greene                Morris                    EQT
39.    Greene                Morris                    EQT
40.    Greene                Morris                    EQT
41.    Greene                Morris                    EQT
42.    Greene                Morris                    EQT
43.    Greene                Washington            EQT
44.    Greene                Washington            EQT
45.    Greene                Washington            EQT
46.    Greene                Washington            EQT
47.    Greene                Washington            EQT
48.    Greene                Washington            EQT
49.    Greene                Washington            EQT
50.    Greene                Washington            EQT
51.    Greene                Whitely                  Energy Corp of Am.
52.    Greene                Whitely                  Energy Corp of Am.
53.    Greene                Whitely                  Energy Corp of Am.
54.    Greene                Whitely                  Energy Corp of Am.
55.    Greene                Whitely                  Energy Corp of Am.
56.    Greene                Whitely                  Energy Corp of Am.
57.    Greene                Whitely                  Energy Corp of Am.
58.    Indiana                Center                   CONSOL
59.    Lycoming            Cogan House          Range
60.    Lycoming            Lewis                     Range
61.    Lycoming            Lewis                     Range
62.    Lycoming            Lewis                     Range
63.    Lycoming            Lewis                     Range
64.    Lycoming            McNett                   Chief
65.    Lycoming            McNett                   Chief
66.    Lycoming            McNett                   Chief
67.    Mercer                Shenango               Hilcorp
68.    Mercer                Shenango               Hilcorp
69.    Mercer                Shenango               Hilcorp
70.    Mercer                Shenango               Hilcorp
71.    Mercer                Shenango               Hilcorp
72.    Mercer                Shenango               Hilcorp
73.    Mercer                Shenango               Hilcorp
74.    Potter                  West Branch          Ultra
75.    Susquehanna       Forest Lake            WPX
76.    Susquehanna       Franklin                  WPX
77.    Susquehanna       Franklin                  WPX
78.    Tioga                   Gaines                    Ultra
79.    Washington         East Finley              CONSOL
80.    Washington         East Finley              CONSOL
81.    Washington         Jefferson                  Range
82.    Washington         North Strabene          Range
83.    Washington         Robinson                  Range
84.    Washington         Robinson                  Range
85.    Washington         Somerset                 Range
86.    Washington         Somerset                 Range
87.    Washington         Somerset                 Range
88.    Washington         Somerset                 Range
89.    Washington         Somerset                 Range
90.    Washington         Somerset                 Range
91.    Washington         Somerset                 Range
92.    Wyoming            North Branch             Chesapeake

OH Permits – weeks ending July 12th and 19th, 2014

       County             Township        E&P Companies

1.    Belmont             Mead                XTO
2.    Belmont             Mead                XTO
3.    Belmont             Mead                XTO
4.    Belmont             Smith                Amer. Energy Utica
5.    Belmont             Smith                Amer. Energy Utica
6.    Carroll                East                  Chesapeake
7.    Carroll                East                  Chesapeake
8.    Guernsey           Oxford                Eclipse
9.    Guernsey           Oxford                Eclipse
10.    Guernsey         Oxford                 Eclipse
11.    Guernsey         Oxford                 Eclipse
12.    Guernsey         Oxford                 Eclipse
13.    Guernsey         Londonderry          Amer. Energy Utica
14.    Harrison           North                    Chesapeake
15.    Harrison           North                    Chesapeake
16.    Harrison           North                    Chesapeake
17.    Harrison           North                    Chesapeake
18.    Harrison           North                    Chesapeake
19.    Harrison           North                    Chesapeake
20.    Harrison           North                    Chesapeake
21.    Harrison           North                    Chesapeake
22.    Harrison           North                    Chesapeake
23.    Harrison           North                    Chesapeake
24.    Jefferson           Salem                    Chesapeake
25.    Jefferson           Salem                    Chesapeake
26.    Monroe             Switzerland                CONSOL
27.    Monroe             Washington                H G Energy

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