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Permit Activity last week.

  1. PA – 13 permits; Anadarko in Lycoming County; Chesapeake in Bradford
  2. OH –17 permits; Hilcorp in Columbiana; Eclipse in Guernsey and Hess in Harrison

Expo/Industry events for the next few months:

Midstream PA 2014, November 18TH, Penn State

PA’s first midstream conference.  Speakers from MarkWest, Williams, UGI and Sunoco Logistics.  You will learn what’s coming in midstream in 2015. Limited sponsorships and seating.  It will be a great networking opportunity.

Presentations from Cabot Oil and Gas and Range Resources.

Register now to reserve your seat http://midstreampa2014.com/wordpress/

OOGA Oilfield Expo and Technology Conference, Dec 3-4, Cleveland

Look for an exciting program that will provide information for both conventional operators and shale producers.

Chesapeake, Enervest and Ergon have become platinum sponsors.  The Expo is certainly gaining momentum.  

http://ooga.org/expo/

http://www.shaledirectories.com/site/oil-and-gas-expo-information.html

Latest facts and a rumor from the Marcellus and Utica Shale

Thoughts for the week  

1. The politics of fracking

The recent election has some interesting results.

  • In Ohio, every town that had a fracking ban on the ballot voted it down.
  • The voters in Denton, Texas voted to ban fracking in the city limits.  The lawsuits have already been filed to fight the ban.
  • PA elected a governor who wants to have a severance tax on the oil and gas companies, but they also elected more republicans into the state assembly and senate.  We’ll have to see if the severance tax is passed and how high it is.  If it’s high, will rigs start moving to OH and WV?

The Republican victories should bode well for the oil and gas industry.  Here are some of the questions that may get answered

  • Will the Keystone Pipeline get approved?  
  • Will the EPA’s attack on coal be blunted?  
  • Will there be drilling on federal land?
  • Will there be more offshore drilling?  
  • Will U.S. oil companies be able to sell oil overseas?
  • Will the government expedite the approval to ship LNG overseas?
  • And lastly, will the U.S. have an energy policy?

2. Latest comments about oil price war with the Saudis

  • U.S. companies in shale fields from North Dakota to Texas are talking tough in the face of Saudi Arabia's price war, believing they have more staying power than many of the OPEC partners.
  • “Saudi Arabia is really taking a big gamble. If they take the price down to $60-$70, you will see a slowdown in the U.S. but you’re not going to see it stop. The consequences for other OPEC countries are far more dire," says Chesapeake Energy chairman Archie Dunham.
  • Execs at several large U.S. shale producers, including CHK, EOG Resources, and Whiting Petroleum said as they reported earnings that they plan to maintain and even raise production.
  • Shale producers cite success in reducing costs as proof they can still be profitable at prices below $70/bbl; CHK says well costs at its two largest production areas - Pennsylvania’s Marcellus Shale and Texas' Eagle Ford - fell 11% and 13% respectively Y/Y during the first seven months of this year.
  • But not all shale is alike: Bakken and Permian producers need prices at ~$67 and $65, respectively, to make drilling worthwhile, according to ITG Investment Research, while producers at the Cana Woodford shale in Oklahoma need $100 to make a profit, and $79 is the threshold at the Anadarko formation on the Texas-Oklahoma border.
     
  • Shell purchases the land for the cracker plant in Monaca, PA.  Shell has told the current owner of the site, Horsehead Corporation, that it is exercising their option to buy the property.  Shell will still need to decide to build the $2 - $3 billion dollar plant.  However, with each move that Shell makes, the odds are better for it building the cracker plant.
     
  • Shell has two more cracker meetings planned.  Shell Chemicals is holding two public meetings on Nov. 13 on the proposed cracker plant in Pennsylvania's Beaver County. The meetings will be at at 11 a.m. and 5:30 p.m. Both will be held at the Lincoln Park Performing Arts Center in Midland, Pa. Shell announced its interest in early 2012 to build the proposed cracker plant to turn ethane from the Utica and Marcellus shales into polyethylene for plastics.
     
  • MarkWest on its way to becoming #1 in the U.S.  MarkWest Energy Partners has added a customer to its Keystone processing facility in Butler County.

    In its third-quarter earnings release, the company announced that it will be providing processing, fractionation and natural gas liquids marketing services to PennEnergy Resources, an independent producer operating in Butler, Beaver and Armstrong counties.

    MarkWest is in a growth mode and in the Marcellus Shale basin alone, it intends to add 16 processing and fractionation facilities, MarkWest CEO Frank Semple said during the company's conference call to discuss earnings.

    He said the company expects to process 5 billion cubic feet of natural gas per day next year. He also said the company is on pace to become the largest natural gas producer in the U.S. sometime over the next few years.
     
  • Mariner East 2 gets $2.5 billion dollar investment.  Sunoco Logistics Partners announced a successful open season for Sunoco Pipeline L.P.’s Mariner East 2 project, the second phase of the Company’s broader plan to provide critical pipeline transportation from the Marcellus and Utica Shales. Mariner East 2 will expand the Mariner East service to deliver natural gas liquids (NGLs) from the liquid-rich shale areas in Western Pennsylvania, West Virginia and Eastern Ohio to Sunoco Logistics’ Marcus Hook Industrial Complex on the Delaware River in Pennsylvania, where it will be stored and distributed to various local, domestic and international markets. Sufficient binding commitments have been received from shippers, enabling the project to move forward.

    “This vital energy project will provide a comprehensive solution in the region to transport, store and process NGLs from the Marcellus and Utica Shales, and will provide the foundation for the continuing rebirth of the local manufacturing sector”

    Sunoco Logistics plans to invest approximately $2.5 billion for Mariner East 2.

    Mariner East 2 is anticipated to provide an initial capacity of 275,000 barrels per day of NGLs such as propane, butane and ethane. Combined with Mariner East 1 capacity of 70,000 barrels per day, the Mariner East project will provide 345,000 barrels per day of total NGL takeaway capacity from the shale regions. Mariner East 1 is expected to begin propane service by the end of 2014.

    For Mariner East 2, Sunoco Logistics plans to construct a pipeline from processing and fractionation complexes in Western Pennsylvania, West Virginia and Eastern Ohio for transport to the Marcus Hook Industrial Complex. Sunoco Logistics plans to construct new facilities at the Marcus Hook Industrial Complex to store, chill, process and distribute propane, butane and ethane for distribution to local, domestic and international markets. Sunoco Logistics plans to offer intrastate and interstate movements to meet the demands of various markets. Mariner East 2 is expected to be operational by the end of 2016, subject to regulatory and permit approvals.
     
  • Fracking in the Marcellus turns 10.  Range Resources fracked its first well, the Renz well, in Washington County in 2004.  As the saying goes, “You’ve come a long way baby.”  Congratulates to Range Resources for leading the way in the Marcellus and Utica Shale plays.
     
  • Tenaska Resources contacts.  Tenaska Resources, LLC, one of the largest private, independent energy companies in the United States has rented a portion of the Weaver Building located on West Main Street in Galeton, PA and is in the process of leasing gas rights in the eastern half of Potter County. Personnel from Tenaska are Dan Ferrell, land agent; Caroline Griebel, abstractor; Andy Epple, crew chief; and Ashlei Caldera, abstractor. Tenaska’s natural gas exploration and production unit has been focused over the past few years on the Marcellus shale and has wells in Potter and Tioga counties. The company pursues a strategy of acquiring promising acreage, drilling wells to prove the reserve potential, installing gathering systems, establishing production and setting the stage for long-term development.
     
  • Travis Peak Resources, a new player coming into the Utica in PA.  Jim Addison, president and CEO of Travis Peak Resources, said the Utica is one of the most prolific plays going right now. His company, which is based in Austin, Texas, is expecting to lease 25,000 to 50,000 acres in Potter and Tioga counties.

    Addison said Travis Peak, whose leadership is made up of five men who have spent their careers in the gas industry, differentiates itself by how it treats people. “We approach this business and the people with whom we work with honesty and integrity,” he said.

    Founded in 2013 by Addison, Clint Calhoun, Jerry Ilseng and George Grunau and joined in January by Ben Ellis, Travis Peak Resources received equity funding from Encap Investments to the tune of $250 million.

    Most private equity-financed exploration and production companies expect to liquidate in three to seven years, usually by selling to a larger company or going public. Addison said his company expects to be around for “a long time.”

    Kittanning-based MDS Energy Development has begun drilling its first horizontal Marcellus Shale wells, the company has announced.  – IS THIS IN RIGHT PLACE??
     
  • MDS Energy drills its first horizontal well.  MDS already has drilled the vertical bores for the three wells on its Ambrose pad in East Franklin Township, Armstrong County, PA. Now it is awaiting arrival of a horizontal rig to drill the laterals. The rig is to arrive next week, and the wells are expected to be brought into production sometime next year, the company said.
     
  • EQT fewer wells, longer laterals.  EQT plans to decrease the number of wells it drills in the Marcellus and Upper Devonian plays but make up for it by using longer laterals.

    The result, company executives said in a conference call following EQT's third-quarter earnings release, will be the same amount of production at a lower cost.

    During the conference call with investment analysts, Steven T. Schlotterbeck, executive vice president and president of exploration and production, said the average length of Marcellus laterals this year will be about 5,820 feet, compared with 5,000 feet last year. EQT expects its wells to have even longer laterals next year, he said.

    Also, EQT will have more wells per pad, he said. Last year, the company averaged 7.6 wells per pad. This year it expects to average 11 wells per pad.

    EQT CEO David L. Porges said this approach requires more time to drill and complete wells.

    “However, from our perspective, the more important point is that this move to longer laterals results in a 6 percent reduction in cost per foot of pay and is consistent with that clear strategic driver to further reduce overall unit cost structure,” he said.

    Schlotterbeck also said EQT also expects to drill wells in the Utica Shale next year. If those wells are successful and if they are more economic than Marcellus wells, EQT will shift capital away from the Marcellus and into the Utica, he said.

    Rex increasing output.  The State College, Pennsylvania-based driller released results from some of its Utica wells ahead of a conference call with analysts on Wednesday.

    The six-well Grunder (OH) pad averaged a 30-day sales rate per well of 900 barrels of oil equivalent per day. That daily rate included 1.6 million cubic feet of natural gas, 288 barrels of condensate and 331 barrels of natural gas liquids, assuming ethane recovery

    Another Carroll well, the three-well Jenkins pad, had a 30-day sales rate per well of 1,300 barrels of oil equivalent per day. That daily rate comprised 2.3 million cubic feet of natural gas, 484 barrels of condensate and 463 barrels of natural gas liquids, assuming ethane recovery

    In Guernsey County, Rex has finished drilling its six-well J. Hall pad. The wells were drilled with an average lateral length of 5,400 feet with 650-foot spacing between the laterals. The wells are expected to begin producing near the end of the year.

    In total, Rex Energy’s capital spending paid to drill 16 gross wells, frack 13 gross wells and place 20 gross wells into sales in the Marcellus and Utica shales.

    During the quarter Rex also closed on its $120 million deal to buy the drilling rights to 208,000 gross acres in Pennsylvania and Ohio from SWEPI, a Royal Dutch Shell affiliate.
     
  • More money flowing into Midstream – Antero Midstream IPO.  A week after the largest master limited partnership initial public offering on record, another energy MLP is set to test its luck in the public market, and seems on track to find eager buyers.

    Antero Midstream Partners LP is expected to price its IPO Tuesday night. It hopes to sell 37.5 million shares at between $19 and $21, according to regulatory filings. At the midpoint, the deal will raise $750 million, making it the second-largest MLP IPO in 2014.

    Antero Midstream, a partnership formed by Antero Resources Corp.AR -2.01%, owns pipelines and compressor stations in the core of the Marcellus Shale in northwest Virginia and Utica Shale in southern Ohio. The MLP provides midstream services to Antero Resources under a long-term, fixed-fee contract.

    Antero Midstream’s IPO comes just a week after the highly-sought-after debut of Shell Midstream Partners, which priced above its expected range and sold more shares than planned. At $23 a share, Shell Midstream raised $1.058 billion making it the largest MLP IPO on record, according to Dealogic.
     
  • Antero adds more acreage.  Added 32,000 net acres in the core of the Marcellus and Utica Shale plays resulting in 520,000 total net acres in the Appalachian Basin
     
  • Talisman selling Marcellus assets by the end of the year.  Talisman Energy Inc, the Canadian oil producer whose shares have fallen more than half in the past year, said on Tuesday it expects to meet its goal of selling $2 billion in assets by mid-2015 despite tumbling oil prices.

    The company, which reported a bigger-than-expected third-quarter profit on Tuesday, said buyers remained interested even as oil prices drop to three-year lows.

    Chief Executive Hal Kvisle said Talisman expects to make one or two sale announcement by year end and the largest of those potential deals, the sale of some of its fee-based pipeline and processing assets in the Marcellus shale gas field in the U.S. northeast, is not affected by low oil prices.

    Talisman is still acquiring permits in the Marcellus in PA.  We’ll monitor to see if Talisman is successful.
     
  • Chesapeake keeps drilling due to lower production costs.  Chesapeake Energy Corp. raised its full-year oil and natural gas production target and said drilling wells is getting cheaper in every field where it operates.

    Chesapeake expects to pump the equivalent of 700,000 barrels of crude a day this year, based on the midpoint of the range the Oklahoma City-based company reported on its website today. That’s 5,000 barrels, or 0.7 percent, higher than the previous target released in August.

    The worst oil bear market in more than half a decade hasn’t deterred Chesapeake Executive Officer Doug Lawler from increasing output because the costs to drill new wells are plunging.

    In Chesapeake’s two largest production areas -- Pennsylvania’s Marcellus Shale and the Eagle Ford formation in Texas -- well costs dropped 11 percent and 13 percent, respectively, during the first seven months of this year compared with 2013, the company said in a statement today. Those two shale regions accounted for 34 percent of Chesapeake’s third-quarter output.
     
  • Bullish comments from Halliburton CEO (thanks, FuelFix).  “Despite what people are thinking, demand is creeping up, albeit at a lower rate than it has been,” he said. The downward pressure on prices is mostly due to an oversupply, and Lesar said that will quickly prove self-correcting, especially when it comes to U.S. shale production.

    Unlike with conventional oil, shale wells peter out quickly and companies depend on constant new drilling to maintain production levels. This also makes shale more responsive to price movements. Lower prices will discourage new drilling, quickly removing the glut in crude supplies, Lesar said.

    As the world’s biggest supplier of fracking services, Halliburton has perhaps the best perspective on what’s driving the U.S. shale boom.

    In an interview at the company’s Houston headquarters, Lesar also said the supply-demand imbalance is temporary, and that prices are likely to remain between $80 and $100 a barrel.

    The breakneck pace of shale drilling in recent years has pushed oil output to 31-year highs just as forecasts for global demand were cut. U.S. crude prices plunged more than 25 percent since June to hover around $80 a barrel, and the industry is poised for them to drop even more.
     
  • Another cracker plant in LA.  Sasol Ltd., a South Africa-based company, and France-based Technip have signed a contract to work on Sasol’s proposed complex in Westlake, Louisiana, according to the Oil & Gas Journal.

    The proposed complex would be an integrated ethane cracker and downstream derivatives plant. Under the contract, Technip will be responsible for furnace engineering and procurement. The complex requires eight proprietary Ultra Selective Conversion furnaces.

    The value of the contract was not disclosed, but Sasol did announce that the complex could be commissioned come 2018. The company already owns and has operations on the neighboring land in Westlake.
     
  • Pipeline for Range begins construction.  NiSource Midstream Services has started building its Washington County gathering system, according to Pittsburgh Business Times.

    The $120 million project, funded in part by Range Resources Corp., includes gathering lines and compressor stations that will carry gas to a Columbia Gas transmission line. The system is projected to go into operation by late 2015 and will be expanded as production increases.

    The system is one of several different pipelines from the Columbia Pipeline Group, which will soon be a unit spun off by NiSource Inc. One such project is the $65 million expansion of the Big Pine gathering system located in western Pennsylvania, which has been in service for 16 months. Columbia Pipeline spokeswoman Sarah Barczyk says the company didn’t plan to begin the expansion this soon, but producers are requesting expanded capacity.
     
  • Exports increasing because of Shale.  Exports of manufactured products have risen 6% since the beginning of America’s shale gas production boom, according to  the International Monetary Fund (IMF), signaling, some experts say, a sign plentiful, affordable natural gas, a strong catalyst for chemical industry export growth, is benefiting US manufacturing.

    For the US chemical industry, the shale gas revolution has lowered input costs; spurred demand for goods derived from chemicals in international markets, and created what’s considered a tremendous competitive advantage.

    As one of the lowest-cost producers of petrochemicals and resins today, the industry has gone from a trade deficit to a $3.4 billion surplus. By 2018, the trade surplus could reach $30 billion, according to Kevin Swift, Economist, American Chemistry Council (ACC).

    Our Utica Summit II conference identified the significant price advantage in the chemical industry for feedstock and energy would lead to a surge in exports.  The best news is that it’s just beginning.
     
  • Stone Energy 3rd. Qtr. Update.
    • Utica Shale Test (Appalachian Basin).  During the second and third quarters of 2014, Stone drilled a horizontal test well through the Utica shale formation with a true vertical depth of 11,350 feet, including a horizontal lateral which extends through the Point Pleasant shale formation to a length of 3,600 feet.  Completion operations and production will commence in the fourth quarter of 2014.   
    • Marcellus Shale Drilling Program Update (Appalachian Basin).  Stone drilled nine horizontal Marcellus shale wells and performed completion operations on 14 wells during the third quarter of 2014.  Due to increased drilling efficiencies, Stone has made an upward revision to the previously forecasted range of over 32 wells to a current forecast of over 35 wells drilled in 2014.
    • Marcellus Shale Production Update (Appalachian Basin).   During the third quarter of 2014, Stone averaged approximately 106 MMcfe per day (73 MMcf per day of gas and 5,500 barrels per day of liquids) from Stone's Marcellus shale position, which includes initial production from the 10-well Howell pad in the Mary field.  In addition, Stone plans to bring online the 8-well Stone pad, and the 5-well Pribble pad (includes Utica test well) during the fourth quarter of 2014, and the 8-well ZMBG pad in January 2015.  
       
  • Blue Racer processing complex to open in Monroe County, OH.  The Berne processing complex in Monroe County, Ohio, which has the capacity to hold three plants, each capable of processing 200 million cubic feet per day of natural gas, is almost ready to open.

    The first 200 million cubic feet per day capacity plant will open in November of this year, said Casey Nikoloric, a spokeswoman for Blue Racer Midstream LLC, the company that runs the Monroe County project.

    The second plant is already under construction and it has been suggested that it will be operational in April 2015.
     
  • Reliance selling Eagle Ford assets.  Reliance Industries is looking to sell its 49.9 percent stake in a US joint venture that owns a 460 miles pipeline network for transportation of shale oil and gas.

    RIL, as well as its partner Pioneer Natural Resources Co, are seeking a buyer for their stakes in Eagle Ford Midstream venture as they focus on shale oil production.

    "Pioneer Natural Resources today announced that the company is pursuing the divestment of its 50.1 percent share of the Eagle Ford Shale Midstream business.

    "Reliance Holding USA, Inc owns the remaining 49.9 percent of the EFS Midstream business and also plans to pursue the divestment of its share in a joint process with Pioneer," the Dallas-based independent oil and gas producer said in a statement.
     
  • Funding for new technologies for the Shale industry.  Ben Franklin's Shale Gas Innovation & Commercialization Center (www.sgicc.org) is currently seeking companies, entrepreneurs, or university researchers located in the State of PA (or companies that have a significant presence in the state) interested in applying for grant funds to help advance their new shale energy related technology. Of highest interest are technologies ready for testing or demonstration, or efforts geared towards advancing the commercialization of an existing product or service seeking to enter the shale energy industry. Projects focused on improving a company's marketing and sales efforts, supply chain improvements, or production improvement are also of interest.

Rig Count

  • Baker Hughes Rigs count for the October 31st reporting week.  Again we believe Baker Hughes count is on the light side
    • PA
      • Marcellus 51 rigs – up 4
      • Utica 4 rigs – down 1    
    • Ohio
      • Utica 42 – down 2
    • WV
      • Marcellus 33 down 1
    • TX
      • Eagle Ford – 218 up 2
      • Permian Basin – 466 down 6
    • NM
      • Permian Basin – 96 unchanged
    • ND
      • Williston – 180 unchanged
    • MT
      • Williston – 11 unchanged
    • CO
      • Niobrara – 57 unchanged
  • TOTAL U.S. Rig Count 1929 up 2

PA Permits for October 30 to November 6, 2014

       County            Township             E&P Companies

1.    Beaver              Industry Boro        Chesapeake
2.    Bradford            Albany                 Chesapeake
3.    Bradford            Leroy                   Chesapeake
4.    Bradford            Standing Stone     Chesapeake
5.    Bradford            Tuscarora             Chesapeake
6.    Lycoming          Cogan House        Anadarko
7.    Lycoming          McHenry              Anadarko
8.    Lycoming          McHenry              Anadarko
9.    Lycoming          McHenry              Anadarko
10.    Lycoming         McHenry             Anadarko
11.    Lycoming         McHenry             Anadarko
12.    Susquehanna   Auburn                Chesapeake
13.    Susquehanna   New Milford          Southwestern

OH Permits – week ending November 1, 2014

       County            Township              E&P Companies

1.    Belmont             Somerset             Gulfport
2.    Carroll                Fox                     Chesapeake
3.    Columbiana        Salem                  Hilcorp
4.    Columbiana        Salem                  Hilcorp
5.    Columbiana        Salem                  Hilcorp
6.    Guernsey           Wills                    Eclipse Resources
7.    Guernsey           Wills                    Eclipse Resources
8.    Guernsey           Wills                    Eclipse Resources
9.    Guernsey           Wills                    Eclipse Resources
10.    Harrison           Franklin                Amer. Ener. Utica
11.    Harrison            Athens                Hess
12.    Harrison            Athens                Hess
13.    Harrison            Athens                Hess
14.    Harrison            Athens                Hess
15.    Harrison            Athens                Hess
16.    Jefferson           Wayne                Chesapeake
17.    Tuscarawas       Perry                  Chesapeake

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

 

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