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NewsLetters

Permit Activity last week. 

  • 1PA – 27; Southwestern and Chief in Susquehanna County; Range in Washington County
  • 2OH –7; Antero and XTO in Belmont and Monroe Counties

Expo/Industry events for the next few months:

OOGA Winter Meeting – March 11-13, 2015, Columbus, OH

OOGA’s featured speaker will be Dr. Philip K. Verleger, Jr. is Owner and President of PKVerleger LLC, an independent consulting firm. Dr. Verleger’s research focuses primarily on the function and structure of energy commodity markets. His studies also encompass the changing relationship between the energy and economic sectors.

http://oogawintermeeting.com/

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

If you are a business that serves the oil and gas economy in the Utica Shale, you will need the best information going forward in 2015. These experts and more will give you what you need.

https://www.cantonchamber.org/utica-upstream

Upstream PA 2015 – April 16, 2015 Penn State

David Spigelmyer, Marcellus Shale Coalition President, will be the featured speaker.  Spigelmyer along with the some E&P Companies will be providing an overview for upstream activity in 2015.  Additionally, industry experts will comment on oil and gas pricing and government actions impacting the oil and gas industry.  

If you’re doing business in the upstream market in PA, this is a must attend seminar.

http://upstreampa2015.com/

    
Latest facts and a rumor from the Marcellus and Utica Shale

  • Drastic cut in Gulf imports.  The increase in US shale and tight crude oil production has resulted in a decrease of crude oil imports to America’s Gulf Coast area, particularly for light-sweet and light-sour crude oils, according to the Energy Information Administration (EIA).

    Historically, Gulf Coast refineries have imported as much as 1.3 million barrels per day (MMBPD) of light-sweet crude oil, more than any other region of the country. Beginning in 2010, improvements to the crude distribution system and sustained increases in production in the region (in the Permian and Eagle Ford basins) have significantly reduced light crude imports.

    Since September 2012, imports of light-sweet crude oil to the Gulf Coast have regularly been less than 200,000 BPD. Similarly, Gulf Coast imports of light crude with higher sulfur content (known as “light-sour”) have declined and have been less than 200,000 BPD since July 2013.

    Along the Gulf Coast (defined as the Petroleum Administration for Defense District 3, or PADD 3), crude oil is imported from several countries, mainly in the Americas (Mexico, Venezuela, Colombia, and Canada) and in the Middle East (Saudi Arabia, Kuwait, and Iraq), according to the EIA.

    Imports from other countries to PADD 3 have declined significantly in recent years, from an average of 1.7 MMBPD in 2009, to just 0.26 MMBPD through October 2014. Imports from Africa in particular have fallen, as those were primarily light-sweet in quality.

    Since the Midwest region (PADD 2) is landlocked, imports show a much less diverse range of countries of origin. In 2014, almost all imports of crude oil to the Midwest came from Canada.

    Comparing Canadian imports to the Midwest, which now surpass 2 MMBPD, imports from other countries had been historically low (125,000 BPD in 2009), and are now even lower (34,000 BPD in 2014 through October).

    Natural gas productivity, thy name is Marcellus Shale, according to the just-released Energy Information Administration’s (EIA) monthly Drilling Productivity Report.
     
  • EIA’s February and March Nat Gas forecast.  The February report utilizes data from January to project production of gas and crude oil during February and March from the seven largest unconventional plays in the US. The plays account for 95% of all crude production and 100% of natural gas production, according to the EIA.

    It’s interesting to note that despite the off-the-table-drop in crude prices, and the carryover effect the plunge has had on natural gas prices/production, the EIA sees March production in all seven plays besting February production.

    For natural gas, the clear and overwhelming winner in terms of production was the Marcellus, projected to produce 16.55 billion cubic feet per day (Bcf/d) this month and 16.72 Bcf/d in March.

    The closest play-producer to the Marcellus is the Eagle Ford, but the play is still expected to produce less than half the volume of its larger sibling.
     
  • PennEast Pipeline to generate $1.6 billion.  Construction of the PennEast Pipeline will generate roughly $1.6 billion in additional wages, revenue, and investments to regional and state economies of Pennsylvania and New Jersey, according to a new Drexel University study released this week.

    "PennEast Pipeline Project Economic Impact Analysis," co-authored by Econsult Solutions, finds the proposed pipeline would have a major, positive impact on the economies of the two states in which it would be built and operated.

    According to researchers, design and construction of the PennEast Pipeline would support approximately 12,160 jobs and an associated $740 million in wages. Additionally, the ongoing operation of the pipeline would generate approximately $23 million in annual economic impact, supporting 98 jobs with $8.3 million in wages. Even greater economic impact from ongoing operations would be realized from the new supply of natural gas to PennEast customers in Pennsylvania and New Jersey.

    "Drexel's analysis illustrates the substantial economic benefit of the PennEast Pipeline," said Peter Terranova, Chairman of the PennEast Pipeline board of managers. "As a large infrastructure improvement project, it will support thousands of jobs and generate more than a billion and a half dollars of economic activity in Pennsylvania and New Jersey. The sustained long-term value of PennEast also would be realized in the form of lower energy bills to consumers."

    "This project will deliver what our region is most sorely in need of: jobs," said Fred Potter, president of Teamsters Local Union 469 in New Jersey. "This project will put several hundred New Jersey tradesmen to work at a time when our economy is dependent on getting people back to work."
     
  • Universal closes office.  Universal Well Services Inc. has closed its Meadville district well service facility, the company confirmed in a brief statement Sunday night. Universal, however, did not indicate how many employees lost their jobs locally.

    The statement also didn’t indicate if the company’s Meadville-area corporate offices were affected or if any of its other well service facilities — in Bradford, Mt. Braddock, Punxsutawney and Williamsport; Allen, Ky.; Wooster, Ohio; or Buckhannon, W.Va. — were affected.

    Universal provides pressure pumping and reservoir enhancement services to the oil and gas industries, according to its website. Those enhancement services include hydraulic fracturing, cementing, nitrogen and acidizing services, the website said.
     
  • CNBC reports Shale oil and gas wells’ rapid decline rates will reduce production sooner.  In recent weeks, the market has shifted its attention from cratering crude prices to the falling number of rigs operating in American oilfields. But in the coming months, the very life cycle of many of those wells may have many market watchers concerned about output and price stability, experts told CNBC.

    Oil wells—whether conventional or unconventional—reach peak production soon after they yield the first drop of crude. The difference is how quickly they enter decline.

    Conventional wells go through a long period of steady, flat production between peak and decline. In contrast, production falls rapidly in the first three years of unconventional wells—those in shale, sandstone and carbonates. They then enter a long phase of very low production.

    In order to even keep production steady across an unconventional oilfield, producers must constantly drill new, high-producing wells. Now they're cutting back on exploration, and many investors and energy companies do not fully appreciate how many new wells producers will have to drill in order to get production back to where they were, said Michael Rowe, vice president of exploration and production research at Tudor Pickering Holt.

    On Tuesday, the International Energy Agency projected that oil supplies will continue to increase throughout this year. But in fact, oil supplies and prices may be much more volatile over the coming couple years, said Murray Olson, a former geological engineer and co-founder of Calgary-based Northern Blizzard Resources.

    "These rapid changes in the price of oil will be a feast-and-famine set of economic consequences for the next few years, with much instability," Olson said.

    For the last nine years, American oil production has only climbed, growing steadily from 5 million barrels per day in 2005 to 8.6 million last year.

    Drillers in the top seven U.S. shale plays get 43 to 64 percent of the oil out of their wells in the first three years of pumping, according to research by David Hughes, a fellow at the Post Carbon Institute. In reports published in 2013 and 2014, Hughes has said that the U.S. Energy Information Administration's long-term oil output projections are overly optimistic.

    The problem at present is that so-called "tight oil" drillers are cutting capital expenditure budgets, and creating new wells is a front-loaded investment. Nearly all of the costs come in the first two phases: drilling for exploration and hydrofracking, the process of pumping a mixture of water and chemicals into the ground to break up rock formations and release oil and gas.
     
  • CAPEX cuts depend on size.  North American Exploration and Production (E&P) companies continued to announce reductions to 2015 capital spending (CAPEX) in Q4 earnings due to plunging crude oil prices, according to Fitch Ratings.

    The CAPEX cuts were smaller among larger E&P companies and onshore shale play operators bore the brunt of slashed CAPEX budgets according to the ratings service.

    Fitch said on Feb 6, the size of cuts has generally been inversely related to the size and credit quality of companies. The largest, best capitalized E&P companies with headroom to continue investing through the down cycle had the smallest budget cuts (i.e. Chevron, BP at just 13%), while high yield North American E&P companies with higher financial and operational leverage had the most severe cuts (i.e. Linn Energy at 53%, Laredo Petroleum at 60%, and Halcon Resources at 74%) Fitch found.
     
  • Go-Frac leaving the Utica.  GoFrac LLC, a Texas-based fracking business operating in the Utica shale play, is shutting down operations and closing its doors.

    GoFrac arrived in Ohio a few years ago when it purchased 90 acres in Guernsey County and started an operation in Cambridge.  The company had serious investments in rail spurs and silos, explained Executive Director Norm Blanchard to the Columbus Business First.  He also mentioned that the operation could hire up to 250 people.

    However, the Utica shale, like the rest of the energy industry, is struggling due to low oil prices.  According to Blanchard, because of the downturn, GoFrac told the local Ohio Means Job office that it will be shutting down this week.  Blanchard expressed how leaving the Utica is upsetting.  The company saw itself as a solid company, and wouldn’t lose its operations due to all of the investments the company had made.

  • GoFrac’s corporate office was unavailable for questioning.  It is unsure how many employees will be affected by the closing, but government officials have plans to offer help to those in need.

    GoFrac was formed in 2011 out of Fort Worth, Texas.  As of November 2014, the company employed over 600 people in Texas and Ohio.  GoFrac services oil and gas companies by using hydraulic fracturing consisting of water, gel and acid.  Recently, the company appointed Kevin McGlinch as CFO and Buddy Peterson as the company’s new COO.
     
  • PA Governor Wolf’s tax plan.  Wolf's proposal mirrors West Virginia's gas levy: a 5 percent tax on the value of natural gas produced from a well and a 4.7-cent fee for every 1,000 cubic feet of gas extracted.

    It’s really not a 5% percent tax.  When you add the fees it’s 8.4% in Northeastern PA and a 7% in Southwestern PA.  The tax rate is being distorted.

    Marcellus Shale Coalition statement following Governor Wolf’s tax proposal.  

    Marcellus Shale Coalition president David Spigelmyer issued the following statement on Governor Wolf’s new energy tax proposal unveiled today in Thorndale, Pennsylvania:

    “Governor Wolf fails to acknowledge that the natural gas industry already pays significant taxes in Pennsylvania. Natural gas operators pay the same taxes that every other business in Pennsylvania pays, which have helped generate more than $2.1 billion through 2013.  Pennsylvania is the only state that imposes a special impact tax that will have generated nearly $830 million by April of this year, directly benefitting all 67 counties throughout the Commonwealth.  Pennsylvanians have realized more than $700 million in royalties from energy-development on public lands. By any measure, these are significant revenues that are boosting local communities, as well as important environmental programs.  More importantly, revenue estimates fail to account for the more than 200,000 hard-working Pennsylvanians who are employed by or support this industry and generate substantial revenue for the Commonwealth by paying their taxes.”

    “While we look forward to evaluating the policy details outlined by the Governor today, it’s clear that new energy taxes will discourage capital investment into the commonwealth and make Pennsylvania less competitive. Make no mistake, adding a five percent tax to any business sector – including the energy industry – is going to reduce capital spending and hit the supply chain, especially Pennsylvania-based small and mid-sized businesses, as well as our region’s labor and building trades.”

    “Pennsylvanians are looking to their elected officials to help create new jobs, not new taxes, especially during these difficult and challenging times within an industry that has reduced energy costs for every consumer and been a bright spot for the Commonwealth’s economy.”
     
  • Talisman acquirer looking to export Marcellus Nat Gas.  Repsol SA is accelerating efforts to build a natural gas export terminal on Canada’s East Coast, as the company awaits shareholder and regulatory approval of its $8.3-billion (U.S.) takeover deal for Talisman Energy Inc.

    In new filings with the National Energy Board, the Spanish energy firm said it plans to export as much as five million tons of super-chilled gas per year for 25 years from an existing site at Saint John.

    The move shows the Madrid-based company expects few hurdles as Talisman shareholders prepare to vote on its $8-per-share offer next week.

    Repsol is proposing to build an export facility at the site of its existing Canaport LNG plant, which it owns jointly with Irving Oil Ltd.

    The export plant would make use of gas from the U.S. northeast as well as from deposits in Western Canada, for a total of 785 million cubic feet a day, according to the filings. Repsol is also seeking permission to import U.S. gas.
     
  • Will the Keystone pipeline get vetoed?  The US House gave final congressional approval Wednesday, Feb 11, to legislation to complete the Keystone XL oil pipeline -- setting up the first veto showdown between President Obama and the new, Republican-controlled Congress.

Rig Count

Baker Hughes Rigs count for the week Feb. 13th.
     

  • PA
    • Marcellus 52 rigs – unchanged
    • Utica 2 unchanged
  • Ohio
    • Utica 37 down 2
  • WV
    • Marcellus 17 down 2
  • TX
    • Eagle Ford – 164 down 4
    • Permian Basin – 305 down 38
  • NM
    • Permian Basin – 63 down 11
  • ND
    • Williston – 123 down 9
  • MT
    • Williston – 5 unchanged
  • CO
    • Niobrara – 39 down 6
       
  • TOTAL U.S. Rig Count 1358 down 98

PA Permits for February 5, 20 to February 12, 15

       County                   Township            E&P Companies

1.    Bradford                   Terry                    Chesapeake
2.    Bradford                   Towanda               Chesapeake
3.    Greene                     Dunkirk                Chevron
4.    Lycoming                 Cogan House        Range
5.    Lycoming                 Cogan House        Range
6.    Susquehanna            Jackson              Southwestern
7.    Susquehanna            Jackson              Southwestern
8.    Susquehanna            Jackson              Southwestern
9.    Susquehanna            New Milford          Southwestern
10.    Susquehanna          New Milford          Southwestern
11.    Susquehanna          New Milford           Southwestern
12.    Susquehanna          New Milford           Southwestern
13.    Susquehanna          Springville             Chief
14.    Susquehanna          Springville             Chief
15.    Susquehanna          Springville             Chief
16.    Washington            Carroll                    EQT
17.    Washington            Chartiers                Range
18.    Washington            Chartiers                Range
19.    Washington            Chartiers                Range
20.    Washington            Chartiers                Range
21.    Washington            Cross Creek           Range
22.    Washington            Cross Creek           Range
23.    Washington            Cross Creek           Range
24.    Washington            Cross Creek           Range
25.    Washington            Cross Creek           Range
26.    Wyoming                Windham               Chesapeake

OH Permits – weeks ending February 7, 2015

       County               Township           E&P Companies

1.    Belmont              Somerset            Gulfport
2.    Belmont              Kirkwood             Antero
3.    Belmont              York                    XTO
4.    Columbiana          Fairfield              Hilcorp
5.    Monroe                Franklin              Antero
6.    Monroe                Franklin              Antero
7.    Monroe                Switzerland         XTO


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

 

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