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Permit Activity last week. 

  1. PA – 68 permits; 15 E&P Companies in 13 counties; drilling is spreading throughout the PA
  2. OH –31; Gulfport in Belmont; Chesapeake in Harrison and Carroll; Eclipse Resources in Monroe and Noble

Expo/Industry events for the next few months:

Marcellus-Utica Midstream
Jan. 27-29, 2015
David Lawrence Convention Center
Pittsburgh, PA

Billions are going to spent in Midstream the next couple of years. Get the latest information to prepare your company for this multi-year opportunity.

To ATTEND, SPONSOR or EXHIBIT, visit www.MarcellusMidstream.com

Save the date for Upstream Seminar

Utica Upstream 2015 – April 8, 2015, Canton, OH

Latest facts and a rumor from the Marcellus and Utica Shale

  • Thoughts on 2015.  Many of you may be aware of the Chinese proverb, “May you live in interesting times.”  2015 could be interesting times.  The falling oil prices and the stable Nat Gas prices in spite of frigid weather means upstream and midstream businesses could experience considerable swings in 2015.  

    In looking at the rig counts since our last newsletter in late December, the counts in the Marcellus and Utica are somewhat constant.  Rig counts have fallen some in the Texas and North Dakota, and Colorado is the same.   

    Permitting in OH and PA is also consistent.  

    The challenge for all businesses in the oil and gas industry in 2015 will be operating in a “cost cutting environment.”  To be successful in 2015, you will have to stay current on the happenings in the upstream and midstream markets.  I encourage you to attend as many industry conferences and seminars as possible where E&P and Midstream Companies will be speaking.  Ideally, these events will provide you information which will help you operate successfully in 2015.

    We, at Shale Directories, will do all we can to keep you updated on what is happening in the industry so you can make good business decisions.
     
  • Southwest bullish in 2015.  Unlike many of its peers/competitors, Houston-based independent oil and gas producer Southwestern Energy is increasing its capital budget for 2015, with plans to also produce more products in the next 12 months, the company revealed Monday, Dec 29.

    Based on production expectations from the assets acquired in three transactions since mid-October which cost the company well over $5.5 billion, Southwestern's total capital investment program in 2015 is roughly $2.6 billion, compared to a projected $2.4 billion capital program in 2014, excluding the acquisition capital for the transaction trio.

    Southwestern is targeting total net gas and oil production of 970 to 980 billion cubic feet-equivalent (Bcfe) in 2015, up roughly 28% over the company's current production projection of 758 to 764 Bcfe for 2014 (using midpoints).

    Since mid-October, Southwestern has made three acquisitions across Appalachia to increase its exposure to different prolific areas. The largest deal was the $4.975 billion acquisition from Chesapeake Energy in West Virginia and Pennsylvania to initiate a position in the stacked pay potential of the Utica and Marcellus Shale plays.

    Associated with the deal was the acquisition of additional 6% working interest from Chesapeake’s joint-venture partner in the play, Statoil for $365 million.

    Also announced in early December was a bolt-on acquisition in north central Susquehanna County Pennsylvania, from WPX Energy of producing acreage that also includes 260 million cubic feet per day (MMcf/d) of firm pipeline transportation capacity. This acreage is immediately west of Southwestern’s northeast Susquehanna County position.

    In its Southwestern Marcellus Shale holdings, the company plans to sink 65 to 73 gross wells, with six of those to be located in Washington County. And it plans to spend about $625 million to do so. It said it intends to start the year running one rig and increase to four by year's end.

    Southwestern entered the southern Marcellus Shale fields this year by way of a land acquisition from Chesapeake Energy. The deal, which closed Dec. 22, gave Southwestern 413,000 net acres in Washington County and northern West Virginia.

    It is also expanding its presence in northeastern Pennsylvania, where it already has been operating, through two additional deals with WPX Energy and Norway's Statoil.

    Statoil was a joint venture partner with Chesapeake and had to give its consent to the Chesapeake deal before it could be finalized.

    In northeast Pennsylvania, Southwest said it plans to drill between 101 and 108 gross wells, up from 83 this year.

    With natural gas futures hovering just above $3 per million British thermal units, now wouldn't seem to be the time to expand a drilling program. But on a call with analysts on Tuesday, Southwestern Chairman and CEO Steve Mueller said he doesn't believe futures prices accurately reflect the market.
     
  • Aubrey mergers Utica and Marcellus affiliates.  American Energy Partners, led by Aubrey McClendon, reported that its Utica and Marcellus affiliates will merge in an all-stock transaction to create one of the largest pure-play Appalachian exploration-and-production companies in the country.

    After the merger, shareholders will own all of the common equity of the new company, called American Energy Appalachia Holdings LLC. The two companies will remain wholly-owned units of American Energy Appalachia.

    American Energy Appalachia will operate over 300,000 acres in the Utica and Marcellus Shale plays in eastern Ohio and northern West Virginia, respectively. American Energy Appalachia had reserves of 1.5 trillion cubic feet and estimated daily production of 167 million cubic feet for the most recently ended quarter.

    American Energy Partners was created by Mr. McClendon in 2013 after he was ousted as chief executive of Chesapeake Energy Corp. Ohio’s Utica Shale has been a key point for the company. Last year, it purchased Utica shale fields from Hess Corp., in its first acquisition, for $924 million.

    The move Monday by American Energy Partners comes as oil prices hit multiyear lows amid a glut in supply, prompted in part by big bets on shale-rock formation in the U.S., a resource that became economically feasible to tap with the advent of new drilling technology.
     
  • U.S. looking to allow exporting of condensate.  On the tail end of 2014, the Obama Administration hinted at a major breakthrough for U.S. petroleum exports when the Commerce Department’s Bureau of Industry and Security (BIS) told oil companies that they should consider exporting a lightly processed form of crude oil called condensate without formal permission, according to a recent Reuters report.

    The impact of America becoming a major oil exporter is still heavily speculative. However, in a report from News Radio 1200 WOAI, economist and professor at UTSA Tom Tunstall is predicting this will open a whole new market for petroleum flowing from Eagle Ford country.

    “We are maximizing the refining capacity along the Gulf Coast, and if they can’t refine it and they can’t export it, then they are stuck with having to build the storage containers to store it,” Tunstall said.
     
  • Nat Gas production up.  US gross natural gas production rose to a record high in October as operators restored production from shuttered wells in Texas and continued to bring new wells on line in the Marcellus shale.

    Gross gas output from the 48 contiguous US states, which includes gas that does not reach market, rose in October to 80.95 Bcf/d (2.3bn m³/d), up by 520mn cf/d, or 0.6pc from the previous month, according to the US Energy Information Administration's (EIA) monthly natural gas production report. Production in October was up 9.3pc from a year earlier.

    US gas production has surged during the past year as producers continue to tap the Marcellus shale, a mammoth gas-bearing formation in Pennsylvania and West Virginia, and drill in oil rich-areas of south Texas' Eagle Ford shale and the Permian basin in west Texas and southeastern New Mexico, where wells often produce large amounts of gas.

    October output from the EIA's "other states" category, which includes wells in the Marcellus shale and in the oil- and gas-rich Bakken formation, rose by the largest margin. Gross output from other states increased to 32.34 Bcf/d, up by 1.2pc from September and by a fifth from a year earlier.

    Production from Texas, the largest gas-producing state by volume, rose to 24.11 Bcf/d, an increase of 0.7pc from the previous month and up by 5pc from October 2013.

    But production declined by less than 1pc from the key gas-producing states such as Louisiana, New Mexico and Wyoming, the EIA said. Gulf of Mexico gas output in October was unchanged from the previous month at 3.5 Bcf/d.
     
  • Antero to focus on drilling.  Antero Resources plans to lay off more than 250 contract land brokers and focus on drilling.

    Regional vice president Al Schopp told the Exponent Telegram that the layoffs won’t affect Antero’s employees.

    He says prices for natural gas liquids have been affected by a drop in crude oil prices. The price decline prompted Antero to reevaluate how much capital it commits to land acquisition.

    Schopp says the company wants to focus its capital on drilling.

    Antero Resources is one of the biggest players in Ohio's Utica Shale.
     
  • Gulfport’s 2014 report.  On December 31, 2014, Gulfport recorded daily net production of approximately 68,000 barrels of oil equivalent per day ("BOEPD"), consisting of approximately 73% natural gas and 27% oil and natural gas liquids. During the month of December 2014, Gulfport estimates that net production averaged approximately 66,000 BOEPD. For the fourth quarter 2014, Gulfport currently estimates that net production was approximately 5.5 million barrels of oil equivalent.

    Michael G. Moore, Gulfport's Chief Executive Officer and President, commented, "We are pleased with the significant amount of production growth Gulfport experienced during 2014. Gulfport achieved total production of approximately 5.5 million BOE during the fourth quarter of 2014, which exceeds our total production for full-year 2013 and is an increase of 41% over the third quarter of 2014. Throughout 2014, Gulfport's drilling and operations teams have focused on consistency and efficiency leading to significant process improvements. We continue to be pleased with the results of our managed pressure program in the Utica Shale and believe our fourth quarter production provides strong support for the program to which we remain strongly committed."

    "With regard to 2015 activities, we continue to thoughtfully plan our 2015 capital spending and anticipate providing 2015 guidance prior to or in conjunction with our fourth quarter and full-year 2014 earnings release scheduled after the market closes on Wednesday, February 25, 2015."

    Utica Shale

    In the Utica Shale, Gulfport brought online twenty-two gross wells during the fourth quarter of 2014. Of these twenty-two wells, six wells were located within the condensate window of the play, twelve wells were located within the wet gas window and four wells were located within the dry gas window of the play. At present, Gulfport has six horizontal rigs drilling in the play.
     
  • Eclipse forecast for 2015.  Independent oil and gas producer Eclipse Resources on Monday, Dec 29, announced the company sold 62.5 million shares of common stock via private placement for $440 million.

    Eclipse expects to net roughly $434 million from the offering, Shale Energy Business Briefing (SEBB) understands.

    Shares were sold to investors for $7.04 a piece, the average closing price of the company’s common for the five-day period including Dec 26.

    Eclipse also announced its board approved a 2015 capital budget totaling $640 million, down 20% from its 2014 CAPEX budget.

    As a result of the company’s improvement in capital and drilling efficiencies, Eclipse said it expects to deliver year-over-year production growth of 240 – 290% next year. Net production is expected to consist of roughly 60% natural gas, 20% condensate and oil, and 20% natural gas liquids.

    The 2015 capital budget is allocated 94% to Utica Shale drilling and completions and 6% to land-related activities and other general corporate purposes.

    Additionally, Eclipse announced it has entered into a 10-year firm transportation and marketing agreement with Blue Racer Midstream to market a substantial portion of its operated production of propane and butane through Blue Racer’s firm capacity on Sunoco’s Mariner East II pipeline project.

    Mariner East II will connect the natural gas liquids in the Marcellus and Utica Shales to Sunoco's existing infrastructure and international port at its Marcus Hook facility near Philadelphia. Mariner East II is expected to be operational in late 2016.

    Under the agreement, Eclipse will have firm transportation, which grows from roughly 7,500 barrels per day (BPD), to 14,000 BPD during the agreement (67% propane and 33% butane).
     
  • Sharp decline curves in Utica wells in OH.  In the world of shale gas in Ohio, the top-producing wells aren’t king of the hill for long.

    Take the Tippens 6HS well, for example.

    Located in Monroe County in southeastern Ohio, it produced more natural gas in the first quarter of 2014 than any other Utica Shale well in the state — some 1.117 billion cubic feet of the resource in 80 days, according to Ohio Department of Natural Resources records. That’s enough natural gas to fuel 12,000 houses for a year.

    But the well that gushed 13,972 thousand cubic feet of natural gas per day in the first three months of 2014 saw daily production drop 41 percent in the second quarter to 8,180 thousand cubic feet per day and another 26 percent in the third quarter to 6,015 thousand cubic feet per day.

    By autumn, the Tippens well was producing less than half the natural gas that it had during its peak output and slipped from No. 1 to No. 72. It went from being a stellar Ohio well to a good-producing well.

    Similar drops are showing up in nearly all of Ohio’s horizontally drilled natural gas wells.

    Such numbers are evidence of what drillers call “production decline curves” — drop-offs over time. It’s a common (and expected) occurrence for shale wells, even in wells expected to produce for 30 years or more.

    The bottom line: Shale wells produce the most in the first few years or, as evidenced in the sharply declining production rates in Ohio, their first few months.

    Analysis of Ohio’s decline curves is more complex.

    It won’t be possible to gauge fully how the Utica Shale in eastern Ohio compares with other shale formation in the United States until more time has passed and the Ohio Department of Natural Resources collects more data. Only five quarterly reports are now available.

    An analysis of Utica wells tapped in each of the first four quarters — from July 2013 through June 2014 — shows natural gas production had dropped 65 percent, said Dr. Jeffrey C. Dick, a professor and chair of the department of geology and environmental sciences at Youngstown State University and an expert on Utica Shale.

    He estimated that Utica Shale production will drop 33 percent in the second year of a well’s life and another 22 percent in the third year. Decline is projected at another 17 percent in the fourth year, followed by 13 percent and 11 percent in the next two years, he said in a review that has circulated widely.

    Production drops of 80 percent have been found in the Haynesville Shale in Arkansas, Louisiana and Texas; parts of the Eagle Ford Shale in Texas; the Bakken Shale in North Dakota; and the Marcellus Shale in Pennsylvania, Dick said.

    Determining decline rates is not easy, he said, because drilling companies have different approaches to production. Some want to draw down wells quickly, while others might restrict production to extend the lives of the wells or to wait until low prices rebound.

    Dick said that often the key for drillers who want to keep production totals high is for them to drill additional wells when production starts to decline significantly.

    Drilling a Utica Shale well can cost from $6 million to $10 million, however, and an important question becomes: Can companies afford to keep drilling such wells?

    Wells also can be hydraulically fractured, or fracked, multiple times to boost production.

    Even with the sharp decline curves, Ohio is not experiencing drops in total oil or natural gas production because additional wells are going online each quarter.

    To date, Ohio has approved 1,735 Utica wells, of which 1,277 have been drilled. A total of 707 Utica wells are producing, according to ODNR figures.

    The most recent report, from third quarter 2014, for 717 wells showed total oil production of 3.013 million barrels and 132 billion cubic feet of natural gas. Both totals were significant jumps from the second quarter, when 504 wells were listed.
     
  • Transco Pipeline in NE PA gets expansion approval.  The Federal Energy Regulatory Commission (FERC) has approved Transcontinental Pipeline Co.'s plans to expand its Leidy Line — an existing line running about 200 miles from the Marcellus Shale region, through Monroe County, to Hunterdon County, New Jersey.

    The project will increase the line's total capacity by adding loops — parallel pipelines connected to the existing one on each end, increasing the amount of gas the line can hold.

    One of the loops will be along the section running through Tobyhanna and Tunkhannock Townships.

    The full expansion is expected to cost Transco upwards of $600 million, according to testimony before FERC. The pipeline company says it will allow them to serve an additional 2 million homes each day.
     
  • SM Energy focusing on Eagle Ford and Bakken.  Denver-based independent producer SM Energy said Tuesday, Jan 6, it plans to sell gas-producing assets in areas of the Mid-Continent region of Oklahoma, Texas, and Louisiana, and close its regional office in Tulsa, OK.

    The oil and gas company said it will instead focus on its core assets in the Eagle Ford in South Texas and Bakken/Three Forks areas of North Dakota.

    The assets to be offered by SM are in the Arkoma Basin of Oklahoma and in the Arklatex area of East Texas/northern Louisiana. The assets produced 3.4 million barrels of oil equivalent (MMBOE) in 2014, 98% of its gas, SM said.
     
  • Cheniere selling Nat Gas to Portugal.  Cheniere Energy landed a 20-year contract to supply natural gas in Portugal.

    The natural gas boom in the U.S. has led to a rush by major producers to put into place the infrastructure to ship overseas.

    Companies such as Exxon Mobil and Sempra Energy are seeking federal permits for more than 20 export projects that could handle as much as 29 billion cubic feet of natural gas a day.

    Only one license has been issued in the U.S. to build a liquid natural gas export terminal, however, and Cheniere owns it.

    The contract announced Thursday, through Cheniere subsidiary Corpus Christi Liquefaction, will be sold to the utility company EDP Energias de Portugal S.A.

    EDP agreed to buy 770,000 tons of liquefied natural gas per year once operations begin at the third train of the LNG export facility being developed by Cheniere near Corpus Christi, Texas. A train refers to a company’s liquefaction and purification facility. The Corpus Christi liquefaction project is being designed and permitted for up to three trains. Deliveries from the third train are expected to occur as early as 2019.

    The deal has an extension option of up to 10 years.
     
  • More gas going to India.  Reliance Industries (RIL) and Mitsui OSK Lines of Japan on 25 December 2014 signed a long-term agreement for transportation of liquefied ethane from North America to India.

    According to the agreement, Mitsui will manage six Very Large Ethane Carriers (VLECs), built by Samsung Heavy Industries. It will also supervise the construction of 87000 cubic meter VLECs. These VLECs are expected to be delivered in the last quarter of 2016.

    RIL plans to ship 1.5 million tons a year of ethane from its US shale joint ventures to its chemical complex in Gujarat through the VLECs.

    RIL has two Joint Ventures (JV) namely Marcellus Shale in Pennsylvania with an investment of 1.7 billion US dollars and Houston-based Carrizo Oil & Gas with an investment of 392 million US dollars.

    It also has another JV named Eagle Ford Shale with Dallas-based Pioneer Natural Resources in Texas worth 1.5 billion US dollars.

Rig Count

  • Baker Hughes Rigs count for the week ending Jan 2.  Please note that up or down rig count show the difference since our last newsletter on December 20th.  As you can see, the Permian rigs in Texas have seen the largest decline of 18 rigs followed by the Bakken with 10.  Most counts are unchanged or down one or two.
     
    • PA
      • Marcellus 50 rigs – down 1
      • Utica 3 rigs – unchanged
    • Ohio
      • Utica 46 down 1
    • WV
      • Marcellus 27 down 5
    • TX
      • Eagle Ford – 199 down 5
      • Permian Basin – 436 down 18
    • NM
      • Permian Basin – 94 unchanged
    • ND
      • Williston – 169 down 10
    • MT
      • Williston – 10 up 1
    • CO
      • Niobrara – 53 down 1
         
  • TOTAL U.S. Rig Count 1809 down 84

PA Permits for December 18, 2014 to January 8, 2015

       County                    Township           E&P Companies

1.    Bradford                   Burlington Boro    Chesapeake
2.    Bradford                   Pike                    Talisman
3.    Bradford                   Pike                    Talisman
4.    Bradford                   Pike                    Talisman
5.    Bradford                   Smithfield             Chesapeake
6.    Bradford                   Terry                    Chesapeake
7.    Bradford                   Wilmot                 Chesapeake
8.    Butler                       Center                  Rex
9.    Butler                       Penn                    Rex
10.    Butler                     Penn                    Rex
11.    Butler                     Summit                XTO
12.    Cameron                Shippen                Seneca
13.    Cameron                Shippen                Seneca
14.    Cameron                Shippen                Seneca
15.    Cameron                Shippen                Seneca
16.    Cameron                Shippen                Seneca
17.    Clearfield                Pine                     Exco
18.    Greene                   Gray                    Vantage
19.    Greene                   Richhill                Noble
20.    Greene                   Richhill                Noble
21.    Greene                   Richhill                Noble
22.    Greene                   Richhill                Noble
23.    Greene                   Richhill                Noble
24.    Greene                   Richhill                Noble
25.    Greene                   Richhill                Noble
26.    Greene                   Richhill                Noble
27.    Greene                   Washington         Vantage
28.    Greene                   Washington         Vantage
29.    Jefferson                 Washington         Exco
30.    Lycoming                McHenry             Anadarko
31.    Lycoming                McHenry             Anadarko
32.    Lycoming                McHenry             Anadarko
33.    Lycoming                McHenry             Anadarko
34.    Lycoming                McHenry             PA Gen. Ener.
35.    Lycoming                McHenry             PA Gen. Ener.
36.    Lycoming                McHenry             PA Gen. Ener.
37.    Lycoming                McHenry             PA Gen. Ener.
38.    Lycoming                McHenry             PA Gen. Ener.
39.    Sullivan                   Cherry                Chesapeake
40.    Sullivan                   Forks                 Chesapeake
41.    Susquehanna          Auburn               Chesapeake
42.    Susquehanna          Franklin              Southwestern
43.    Susquehanna          Franklin              WPX
44.    Susquehanna          Gibson               Cabot
45.    Susquehanna          Great Bend         Southwestern
46.    Susquehanna          Jackson              Southwestern
47.    Tioga                      Chatham             Shell
48.    Tioga                      Jackson              Shell
49.    Tioga                      Rutland               Shell
50.    Washington             Jefferson             Range
51.    Washington             Robinson            Range
52.    Washington             Robinson            Range
53.    Westmoreland         Bell                    Consol
54.    Westmoreland         Bell                    Consol
55.    Westmoreland         Bell                    Consol
56.    Westmoreland         Bell                    Consol
57.    Westmoreland         Bell                    Consol
58.    Westmoreland         Bell                    Consol
59.    Westmoreland         Bell                    Consol
60.    Westmoreland         Bell                    Consol
61.    Westmoreland         Bell                    Consol
62.    Westmoreland         Bell                    Consol
63.    Westmoreland         Bell                    Consol
64.    Westmoreland         Derry                  WPX
65.    Wyoming                Forkston             Southwestern
66.    Wyoming                Meshoppen         Chesapeake
67.    Wyoming                Washington         Chesapeake
68.    Wyoming                Windham            Chesapeake

OH Permits – weeks ending December 20, December 27, and January 3, 2015

       County               Township            E&P Companies

1.    Belmont               Washington         Gulfport
2.    Belmont               Washington        Gulfport
3.    Belmont               Washington        Gulfport
4.    Belmont               Washington        Gulfport
5.    Carroll                  Lee                   Chesapeake
6.    Carroll                  Loudon              Chesapeake
7.    Guernsey             Millwood            Chesapeake
8.    Guernsey             Wills                 Eclipse
9.    Guernsey             Richland            Carrizo
10.    Guernsey           Richland            Carrizo
11.    Guernsey           Richland            Carrizo
12.    Harrison             North                 Chesapeake
13.    Harrison             North                 Chesapeake
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.    Monroe              Adams               Eclipse
25.    Monroe              Adams               Eclipse
26.    Noble                Marion                Eclipse
27.    Noble                Marion                Eclipse
28.    Noble                Marion                Eclipse
29.    Noble                Marion                Eclipse
30.    Noble                Marion                Eclipse
31.    Noble                Marion                Eclipse

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