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Permit Activity last week.  

  • PA –18 permits; EQT is going to active in Jefferson County.
  • OH –17 permits; Chesapeake in Harrison and Carroll Counties;

Expo/Industry events for the next few months:

PA Energy Games September 6, 2014, Hughesville, PA

  • The #1 event in Northern PA; well attended by E&P companies drilling in the five county area.

DUG Eagle Ford September 15 – 17, San Antonio, TX

Shale Insights September 24 – 25, Pittsburgh, PA

  • PA’s only Expo where all the E&P companies will be in attendance from Access Midstream to XTO Energy.  Come visit us at booth 535.  We’ll make introductions wherever we can.
  • For a limited time, is sharing a $100 Registration Discount code AERNM4 for those wanting to  attend SHALE INSIGHT™ 2014.  The code will give registrants a $100 discount on conference registration ($875 instead of $975).
  • Register now  and visit booth #535.  This code is valid until September 15 and is valid for MSC non-members only.

The Fourth Annual West Virginia Oil & Gas Expo October 1, 2014

Flash-Fire-Workshop October 8th Pro Football Hall of Fame, Canton, OH

  • Bill Radford, Safety Basin Coordinator, Eclipse Resources will be the featured speaker. It will be a good networking event for everyone in safety compliance and you’ll learn latest about FR clothing and handling.

Shale Gas Symposium, October 8th Agri-Plex Expo Center, Allentown, PA

Utica Summit II, October 14th, Canton, OH

  • Learn about the downstream opportunities coming to OH and western PA as the result of the cracker plants and more.  National and local speakers will give you real insight into what’s coming.  
  • See what will be happening with the new Ohio cracker plant
  • Register now

Midstream PA 2014, November 18TH, Penn State

  • PA’s first midstream conference.  Speakers from MarkWest, Williams, UGI and more.  You will learn what’s coming in midstream in 2015. Limited sponsorships and seating.  
  • Register now to reserve your seat

Latest facts and a rumor from the Marcellus and Utica Shale

  • Shell still committed to U.S. Shale.  Shell’s chief executive Ben van Beurden, speaking at Columbia University’s Center on Global Energy Policy in New York, has said that the company is still very much interested in US oil and gas shales, despite the $2 billion write-down and decision to sell a significant part of its acreage. This is because it was slow to understand the potential of the shale book.

    Initially, it had spent $4.7 billion buying acreage in the Marcellus shale and $1 billion in the Eagle Ford before the write-down which was due to additional and perhaps unexpected costs of drilling and development.

    Speaking about China, he said it was not likely that it would experience a shale boom like the US: “There are much less advanced systems, less advanced supply chains, market mechanisms.”

    Countries like Russia, Algeria and Argentina have much more potential, he said.

    He also believes that although European countries are anxious to use exports from the US to lessen their dependence on Russia, this may not happen for another 5-10 years.
  • Shell’s two big hits in the Utica.  Shell announced it made natural gas discoveries at two wells in the Utica shale reserve area in Pennsylvania.

    "Last year, we refocused our resources plays strategy to select fewer plays with specific scale and economic characteristics to best suit our portfolio," Marvin Odum, Shell's upstream America director, said in a statement. "The

    Appalachian basin is one of those areas, and these two high-pressure wells both exhibit exceptional reservoir quality."

    Shell said it made the discoveries in its Neal and Gee wells in the Utica shale. The company said the discoveries "extend the sweet spot" of Utica shale beyond southeast Ohio and western Pennsylvania into an area where it holds 430,000 acres.

    Gee had an initial flow rate of 11.2 million cubic feet of gas per day and Neal has already yielded 26.5 million cubic feet of gas per day, the company said.

    In August, the Energy Information Administration, the statistical arm of the Energy Department, said total production from Utica shale should increase from 155 million cubic feet per day reported in January 2012 to an expected 1.3 billion cubic feet per day by September.

    Shell recently sold its entire stake in the Pinedale reserve area in Wyoming to Ultra Petroleum in exchange for $925 million and 155,000 net acres in the Marcellus and Utica basins in Pennsylvania.

    We have alluded to these wells in previous newsletters.  These big hits combined with Shell’s deal with Ultra will make Shell a major player in Northern PA.  Look for Shell to bring in more rigs and be more aggressive in 2015.
  • Aubrey making news.  Aubrey McClendon, the U.S. shale gas pioneer fired from Chesapeake Energy Corp. (CHK) last year, plans to take public the exploration companies he has formed since. McClendon, who has raised about $10 billion to acquire gas fields in the past 16 months, told a conference in Dallas yesterday that he intends to start a collection of companies that each specialize in a single U.S. shale region.

    McClendon’s American Energy Partners LP already has created subsidiaries focused on shale formations and pipeline networks from Appalachia to the Great Plains. He’s also the guiding hand behind two so-called blind pool investment vehicles that plan to gather drilling rights across the U.S. “They’ll go public,” McClendon said during a presentation during Hart Energy’s A&D Strategies and Opportunities event. “They’ll have their own management” and he will “stand behind them.” In an about-face from the transcontinental strategy he pursued during quarter-century tenure at Chesapeake, McClendon is now sticking to an approach known as pure play, where each entity zeroes in on a single shale region. McClendon said his private equity backers prefer that focused approach to companies that are active in multiple formations.

    McClendon, 55, was in the vanguard of the shale revolution that upended U.S. gas markets and paved the way for the renaissance in American crude oil production. At Chesapeake, he amassed a shale empire that rivaled Exxon Mobil Corp. (XOM)’s before he was dismissed last year amid conflict-of-interest probes and a shareholder revolt led by billionaire Carl Icahn. Financial backers of his American Energy creations include First Reserve Corp. and John Raymond, son of retired Exxon CEO Lee Raymond.
  • Marcellus Nat Gas to Southeastern Markets.  Two joint ventures involving six major energy companies are pushing plans for multibillion-dollar pipelines to move natural gas from the abundant wells in the Marcellus and Utica shale to growing markets in Virginia and North Carolina.

    A group led by Dominion and Duke Energy on Tuesday announced a partnership they formed to build the 550-mile Atlantic Coast Pipeline from near Clarksburg, W.Va., through Virginia to Robeson County, N.C. Downtown-based EQT Corp. also updated regulators on its venture with Florida-based NextEra Energy to build the 330-mile Mountain Valley Pipeline from Smithfield, W.Va. to Chatham, Va.

    The companies expect both pipelines to begin operation in 2018, pending approval from the Federal Energy Regulatory Commission.
  • Consol commits to WV.  While its corporate focus is squarely on Western Pennsylvania's natural gas reserves for now, Consol Energy President and CEO Nick Deluliis says the company expects to spend billions in the Mountain State over the next decade.

    Though he didn't discuss specifics, Deluliis said the company looks to invest about $28 billion in West Virginia, Pennsylvania and Ohio over the next 10 years, about half of that in the Mountain State.

    “West Virginia is a big part of our plans,” he said during an Aug. 25 ceremony marking the official kickoff for a massive drilling operation at Pittsburgh International Airport, a 9,000-acre parcel leased from the Allegheny County (Pennsylvania) Airport Authority.

    Plans for the airport property call for a total of 45 wells on six well pads, with a total capital investment in the $500 million range. Up-front bonuses and royalty payments over the life of the project should top $500 million, officials said.
  • EOG to drill 520 wells in the Eagle Ford.  EOG Resources chairman and CEO Bill Thomas announced that the company plans to drill and complete 520 wells in the Eagle Ford shale this year. So far, in the first half of 2014, EOG has brought 260 wells online.

    Jennifer Hiller on notes from the call:

    EOG’s completed wells in the Eagle Ford cost around $5.7 million, up slightly because it’s drilling longer lateral reaches.

    It’s developing the Eagle Ford on 40-acre spacing. “That’s about 300 feet between wells on average. There are some wells where the well spacing is greater than 300 feet and we are doing a bit of infill field work…,” Thomas said.

    EOG Resources is currently the largest owner of Eagle Ford acreage and has been active in the play since 2010. EOG played a big role in sparking interest in the Bakken shale by drilling the discovery well in the Parshall formation.

    EOG is based in Houston Texas.
  • Mexico importing U.S. crude.  Jose Manuel Carrera, a representative for Mexico’s state-owned Pemex, has announced that the company will begin importing U.S. crude this year in a bid to increase refinery output. David Alire Garcia and Ana Isabel Martinez from Reuters report.

    Carrera said light crude imports could range between 35,000 bpd and 70,000 bpd, or around 5 to 10 percent of the crude oil each of Mexico’s six domestic refineries process.

    “That’s a reasonable (volume) to begin with,” he added, emphasizing that the amount could vary depending on which Pemex refineries add light crude to their mix.

    Mexico, the world’s 10th-largest crude oil producer, has very rarely imported the commodity. Still, it must import about half of its gasoline due to ailing refinery output at home.

    Carrera said the light crude imports could arrive via a crude swap or a direct import agreement with the United States, depending on specific approval from the U.S. Commerce Department.

    About 73 percent of Mexico’s oil exports are shipped to the U.S. to be refined. The shale boom has made oil refineries less dependent on Mexico’s crude, and over the past decade Mexican crude imports have fallen 44 percent.

    Carrerra said that Mexico may import either shale oil or conventional oil, but will  not take ultralight shale condensate. “Condensate is not necessarily what Mexico needs. It needs crude,” he said.
  • EnerVest drilling in the Clinton in Stark County, OH.  EnerVest Ltd., based in Houston, has quietly drilled seven miniaturized horizontal wells in the sandstone that has been heavily drilled in the past.

    Clinton sandstone is found under 25 counties in eastern Ohio including those in the Akron-Canton-Cleveland area.

    EnerVest has drilled three wells in Nimishillen Township. Two are in Washington Township and one each is in Bethlehem and Marlboro townships, according to state records.

    An eighth well, south of Canton in Pike Township, has been approved by the Ohio Department of Natural Resources’ Division of Oil & Gas Resource Management. It has not yet been drilled, according to state records.}|

    The company on Aug. 5 filed to drill a ninth horizontal well. It will be in Nimishillen Township.

    Two of the EnerVest wells had deeper wells that were plugged back to permit the shallower horizontal drilling, said ODNR spokesman Mark Bruce.

    It will be at least 90 days before EnerVest can determine how successful the new horizontal wells might be, said company spokesman Ron Whitmire.

    The results from the new wells will determine whether EnerVest expands the Clinton drilling, Whitmire said.

    The goal is to see if "today’s technology will work in this play," he said.

    The Clinton wells would go down about 4,600 feet to reach the sandstone. The wells’ laterals or horizontal legs would be about 1,500 feet in length, according to experts.

    The new wells would be far cheaper: perhaps $1 million to $3 million per well, compared to $6 million to $11 million per well in the Utica shale.

    That will create a new financial opportunity for Ohio’s smaller drilling companies and landowners, said Shawn Bennett of Energy in Depth-Ohio, a pro-drilling trade group.
  • Running out of sand.  A new Morgan Stanley research note reports American oil and gas exploration-production companies are running out of sand.

    In the note, Ole Slorer, Benjamin Swomley and Connor Lynagh state exploration and production (E&P) companies have found using more sand to prop open shale, equals more fossil fuel brought from the ground.

    Morgan Stanley projects sand demand growth between 2013 and 2016 will skyrocket 96% — while sand production will climb by “just” 76%, Shale Media Group learns.

    “We expect sand demand to nearly double – up 96% — in 2016, vs 2013, driven by 59% sand-to-well growth, vs capacity growth of only 76%,” Morgan Stanley’s note states.

    The Morgan Stanley study suggests the median sand-to-well ratio is up 33% year-over-year as of March; many E&Ps still use an average of more than two times sand-to-well ratio used by “typical” E&Ps, “and their leading-edge wells use roughly four times the industry average,” according to Morgan Stanley.

Rig Count

  • Baker Hughes Rigs count for the August 29th reporting week.  
    • PA
      • Marcellus 53 rigs – up 5
      • Utica 2 rigs – unchanged    
    • Ohio
      • Utica 41 – down 1
    • WV
      • Marcellus 27 down 1
    • TX
      • Eagle Ford – 203 up 3
      • Permian Basin – 468 up 2
    • NM
      • Permian Basin – 89 unchanged
    • ND
      • Williston – 183 unchanged            
    • MT
      • Williston – 8 unchanged
    • CO
      • Niobrara – 58 up 1

TOTAL U.S. Rig Count 1914 up 18

PA Permits for August 21, to August 28, 2014

       County            Township               E&P Company
1.    Bradford            Monroe                Chesapeake
2.    Bradford            Wilmot                Chesapeake
3.    Bradford            Wyalusing            Chesapeake
4.    Greene              Center                  EQT
5.    Greene              Cumberland          Ener. Corp. of Am.
6.    Greene              Washington          EQT
7.    Jefferson            Washington          EQT
8.    Jefferson            Washington          EQT
9.    Jefferson            Washington          EQT
10.    Jefferson          Washington          EQT
11.    Jefferson          Washington           EQT
12.    Jefferson          Washington           EQT
13.    Lycoming         McHenry               PA. Gen. Ener.
14.    Sullivan            Colley                   Chesapeake
15.    Susquehanna   Auburn                  Chesapeake
16.    Susquehanna   Auburn                  Chesapeake
17.    Tioga               Sullivan                 Shell
18.    Wyoming         Windham              Chesapeake

OH Permits – week ending August 30th, 2014

       County            Township                E&P Companies

1.    Belmont             Wheeling             Amer. Ener. Utica
2.    Belmont             York                    XTO
3.    Belmont             York                    XTO
4.    Belmont             York                    XTO
5.    Carroll                Loudon                Chesapeake
6.    Carroll                Loudon                Chesapeake
7.    Carroll                Loudon                Chesapeake
8.    Harrison             Rumley                Chesapeake
9.    Harrison             Rumley                Chesapeake
10.    Harrison           Rumley                Chesapeake
11.    Harrison           Archer                  Chesapeake
12.    Harrison           Archer                  Chesapeake
13.    Harrison           Archer                  Chesapeake
14.    Harrison           Archer                  Chesapeake
15.    Harrison           Moorefield             Gulfport
16.    Harrison           Moorefield             Gulfport
17.    Harrison           Moorefield             Gulfport

Take advantage of the bullish outlook and become a member in

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