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Permit Activity last week. 

  • PA – 20; Southwestern and Chief in Susquehanna County; Range in Washington County
  • OH –17; Chesapeake in Carroll and Harrison Counties; Consol in Monroe County

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.

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.

Upstream PA 2015 – April 16, 2015 Penn State

David Spigelmyer, Marcellus Shale Coalition President, will be the featured speaker.  Spigelmyer along with some E&P Companies 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.

Latest facts and a rumor from the Marcellus and Utica Shale

  • Chesapeake sues Aubrey.  Chesapeake Energy Corp filed suit Tuesday alleging that its founder and former chief executive, Aubrey K. McClendon, stole confidential company data during his last months on the job in order to launch his new oil and gas empire.

    McClendon, 55, "misappropriated highly sensitive trade secrets from Chesapeake" and "subsequently used these trade secrets for the benefit of" a company he founded in 2013, American Energy Partners LP, according to the civil complaint filed by Chesapeake in Oklahoma County District Court.

    In the suit, Chesapeake claims McClendon asked his assistant to print maps and data about unleased acreage and that McClendon also sent himself blind copies of the same documents at a personal email address during his last months at the company. The company says it discovered McClendon's actions through a forensic analysis of his Chesapeake email account.

    Chesapeake alleges that the information was used by McClendon and American Energy Partners to acquire drilling rights on land in the Utica Shale formation in four separate transactions.

    In a statement, McClendon characterized the lawsuit as "baseless" and said his severance agreement with the company included "the right to own and use this information." He said he intends to contest the lawsuit "vigorously."

    The suit represents the latest drama in the very public falling out between McClendon and Chesapeake, the company he co-founded in 1989 and built into the second largest natural gas producer in the United States. During his tenure at Chesapeake, McClendon was hailed as a visionary who helped pioneer the drilling technique known as hydraulic fracturing, or fracking.

    In 2012, a series of Reuters investigations found that McClendon had taken but not publicly disclosed $1.55 billion in personal loans from a major financier of the company. He helped run a hedge fund to personally trade oil and gas. And emails reviewed by the news agency showed McClendon collaborated with a rival firm in a bid to suppress land prices in a prospective oil and gas play in Michigan.

    Although an internal investigation of his activities found no "intentional" wrongdoing, McClendon agreed to step down as CEO on Jan. 29, 2013.

    "Approximately thirty-six hours after the announcement of his departure," Chesapeake alleges in its complaint, McClendon began to take confidential company information.

    Among the documents were "open acreage reports" about the Utica Shale formation, an oil and gas play in Ohio, Chesapeake alleges. The reports, which Chesapeake claims were confidential and expensive to compile, contain information about unleased land that the company was "pursuing and seeking to acquire," the suit contends.

    As part of his employment agreement, McClendon was allowed to invest in each of Chesapeake's wells. When he left the company, McClendon retained those stakes, which were characterized as "jointly owned interests," and his separation agreement spells out information to which he is entitled.

    Chesapeake alleges that McClendon strayed far beyond the bounds of the agreement. "Open acreage which has not even been acquired is, by definition, not 'jointly owned'," according to Chesapeake's complaint. The company contends McClendon had no right to take that information

    "We believe that pursuing these legacy claims is in the best interest of the company and its shareholders," Chesapeake spokesman Gordon Pennoyer said in a statement.

    According to the suit, McClendon "used and disclosed Chesapeake's trade secret and confidential information" to solicit investors for his new endeavor even as he served as a Chesapeake director and CEO in February and March 2013. "These investors knew or should have known that McClendon owed a duty to Chesapeake to maintain the secrecy of the information," the lawsuit claims.

    Seven months after McClendon left Chesapeake, a Utica-focused affiliate of his American Energy Partners issued an announcement: the unit had raised $1.7 billion in equity and debt commitments from investment firms. The money would be used to acquire 110,000 acres in the Utica and launch drilling operations, according to a company news release.

    McClendon's backers include Energy & Minerals Group, a Houston-based investment firm run by John Raymond, which has invested more than $3 billion. EMG and other investors could now become entangled in the litigation. Raymond could not immediately be reached for comment Tuesday.

    In addition to American Energy Partners, three affiliates and McClendon Energy Operating, Chesapeake's complaint names "John Doe Investors 1-20" as defendants. McClendon is not named as a defendant in the complaint because resolution of disputes between him and Chesapeake requires arbitration, according to his separation agreement.

    Chesapeake is seeking an unspecified amount of damages for alleged violations of the Oklahoma Uniform Trade Secrets Act and other state statutes. Chesapeake also is asking the Oklahoma County court to force McClendon's company to place "all income earned from their Utica Shale play acquisitions" in a trust. Chesapeake contends that any income earned by American Energy Partners resulted from "the use of Chesapeake property and the usurpation of Chesapeake's corporate opportunities."
  • Cracker plant in SE PA.  Exploratory work is being done to determine the viability of cracker plant in the greater Philadelphia area.  (RUMOR)
  • Another pipeline in Northern PA.  UGI Corp. of Reading, one of the lead partners in the PennEast Pipeline Partners, which is planning a $1 billion, more than 100-mile pipeline through Pennsylvania and New Jersey, has announced plans for a second, smaller pipeline.

    UGI Energy Services LLC says it plans to build an approximately 35-mile pipeline to bring natural gas from the Marcellus Shale region in Pennsylvania to a planned 1,000-megawatt power generation facility near Shamokin Dam in Snyder County.

    UGI Sunbury LLC, a wholly owned subsidiary of UGI Energy Services LLC, said it will file this year for approval to build and operate the pipeline, seeking the OK from the Federal Energy Regulatory Commission, the agency that regulates transportation of natural gas. The company had issued a pre-filing request with the Federal Energy Regulatory Commission in December with regard to this project.

    The 20-inch diameter, steel pipeline will be designed to transport 200,000 dekatherms per day of natural gas. It is expected to cost about $160 million and to be in service in early 2017.

    UGI said that later this year Panda Power Funds of Dallas, Texas, and Sunbury LLC, a wholly owned subsidiary of UGI Energy Services LLC, will file for approval to build and operate the pipeline. They will seek the OK from the Federal Energy Regulatory Commission, the agency that regulates transportation of natural gas. The company had issued a pre-filing request with the FERC in December with regards to this project. Sunbury Generation LP plan to build a new natural gas “Hummel Station” power plant on the site of an existing coal-fired plant near Shamokin Dam that has been retired.
  • PA’s top producers in 2014.  Pennsylvania’s unconventional gas wells continued to blast production records out of the water last year, pumping out nearly 4 trillion cubic feet of gas.

    According to data the state Department of Environmental Protection released Tuesday, operators working in the Marcellus Shale industry reported producing nearly 1 trillion cubic feet more gas in 2014 than in 2013, increasing overall production by more than 30 percent.

    “Economic growth from natural gas production has translated to increased disposable income for families and more profitable businesses,” Frank Macchiarola, an executive vice president for the trade group America’s Natural Gas Alliance, said in a prepared statement. “Pennsylvania also is supplying the rest of the country with abundant natural gas and helping to power America.”

    Cabot Oil & Gas Corp. claimed the industry’s 16 top-producing wells in last year’s second half. Those wells produced a combined 55.7 billion cubic feet of natural gas — enough to heat roughly 780,000 homes — between July and December.

    At the head of the pack, Chesapeake Appalachia LLC, with the bulk of its 650 active wells in Bradford County, produced more than 788 billion cubic feet in 2014, a 16 percent increase from the year before.

    Production in drilling counties surrounding Lackawanna County rose considerably with 48 percent more gas coming out of Wyoming County, a 33 percent increase from Susquehanna County and 14 percent more from Bradford.

    Latest numbers from the federal Energy Information Administration show the gas fields in Pennsylvania and West Virginia make up the lion’s share, about 37 percent, of the nation’s daily production.

    All major gas developers that use hydraulic fracturing or fracking to retrieve gas from Pennsylvania saw gains in 2014 over the previous year.

    Talisman Energy USA Inc., a company that actually suffered shrinking production in 2013, bounced back with a 6 percent increase over last year.

    The data, which is released twice a year, gives operators a rare chance to rate their production against the competition, Cabot Oil & Gas external affairs director George Stark said.

    Just about all of Cabot’s 340 active wells are in Susquehanna County, dubbed the “sweet spot of the Marcellus.”

    “We don’t have that many (wells), and yet we’re producing this strong,” Mr. Stark said.

    Cabot hopes to see the growth continue, Mr. Stark said, but the gas needs a delivery system, and pipeline construction has chronically trailed production.

    Mr. Stark said two interstate pipelines now in pre-construction phases would carry Marcellus gas from wells in Susquehanna County to customers in New England all the way to Georgia and could supercharge the entire industry.

    “We’ve demonstrated the production, and it’s going to be here,” Mr. Stark said. “Once we get the lines, like Constitution and Atlantic Sunrise, we have evidence that we’ll be able to deliver the gas.”
  • Magnum Hunter’s CAPEX Budget for 2015.  Magnum Hunter Resources (NYSE:MHR) said that it would spend $100 million this year after saying last month that it would cut capital spending as oil prices plunge.

    The independent exploration and production company has allocated $70 million towards its Utica Shale and Marcellus Shale drilling program, $10 million to the Williston Basin in North Dakota and $20 million for leasehold acreage acquisitions in the Utica and Marcellus Shale plays.

    Magnum Hunter said that it expects “capital expenditure program to further drive its production volumes and enable it to maintain its projected 2015 average daily production volumes of approximately 29,000 barrels to 33,000 barrels of oil equivalent per day.”
  • Rice cuts CAPEX budget 19%.  Rice Energy Inc. announced it will be joining the long list of companies that are cutting back on 2015 drilling operations.

    The company said it will be reducing its capital budget by 19 percent compared million will go toward developments in the company’s Marcellus and Utica assets.  The remaining funds will be invested in the company’s Ohio gas gathering system and its freshwater distribution center.  Even with the reduction in spending, Rice Energy says its production will increase by anywhere between 64 percent and 72 percent, equivalent to between 450 and 470 million cubic feet per day.

    The company’s number of rigs will drop from four to three this year.  Rice Energy plans on letting one Ohio rig go once the contract reaches its expiration date, which is sometime in mid-2015.  They stated the following regarding its exploration and production plans in its press release:

    In Pennsylvania, Rice expects to spud 43 gross (39 net) horizontal Marcellus wells (100% operated) and turn to sales 31 gross (26 net) horizontal Marcellus wells with an average lateral length of 7,100 feet. In addition, we are currently drilling our first Pennsylvania Utica well, which we expect to complete and turn to sales in the second half of 2015. In Ohio, we expect to spud 19 gross (12 net) horizontal Utica wells and turn to sales 12 gross (7 net) horizontal Utica wells with an average lateral length of 9,500 feet. On our non-operated properties in Ohio, we expect to spud 38 gross (9 net) horizontal Utica wells and turn to sales 15 gross (2 net) horizontal Utica wells with an average lateral length of 7,200 feet. We are currently operating two horizontal rigs in Pennsylvania and two horizontal rigs in Ohio. We plan to release one Ohio horizontal rig at the end of its contract in mid-2015 and operate three horizontal rigs for the remainder of 2015.
  • Eclipse Resources proved reserves increase 353%.  Eclipse Resources reported proved reserves at Dec 31, 2014, totaled 355.8 billion cubic feet-equivalent (Bcfe), a 353% increase from one year earlier.

    Year-end 2014 proved reserves were 72% operated by Eclipse, 39% proved developed producing and 72% natural gas.
  • Shell cracker plant continues to move forward.  Center Township Water Authority is negotiating with Royal Dutch Shell about relocating four aquifer wells located on the site of a proposed petrochemical plant in Potter, Beaver County, the authority's vice chairman said Thursday.
    • Shell is meeting with electrical companies to get bids for lighting for the first unit.  (Rumor)
  • WPX focuses on the Bakken.  WPX Energy has announced a 2015 capital investment plan of $725 million—roughly half the amount of its capital plan last year—with up to $225 million planned for the company’s Williston Basin activity.

    “Our capital plan is prudent, disciplined and consistent with our long-term focus,” said Rick Muncrief, WPX president and CEO. “At the same time, we have financial and operational flexibility because of how well we executed over the past year, completing asset sales, increasing oil volumes and heavily hedging our 2015 production at very favorable prices.”

    WPX recently sold its international interests and part of its operations in the Marcellus Shale, generating nearly $600 million. The company states that it plans to focus on its core assets in the Williston, San Juan and Piceance Basins.

    WPX started 2015 with five rigs in the Williston Basin and plans to scale back to one rig by late spring for the remainder of the year.
    “Head winds bring challenges and opportunities,” said Muncrief. “We’re ready for both. It’s why we have a long-term plan to reshape WPX and grow our margins and cash flow. Margin expansion comes from diversifying our production and right-sizing our cost structure.”
    WPX hedged approximately three-fourths of its anticipated 2015 natural gas production and roughly two-thirds of expected oil production this year at an average price of $94.88 per barrel.
    “We’ll stay prudent, disciplined and consistent with our long-term focus,” Muncrief added.

    In the fourth-quarter of 2014, WPX reported an increase in oil volumes from 6,500 barrels of oil per day (bopd) to roughly 32,300 bopd, a 25 percent increase over third-quarter 2014, which produced 25,800 bopd.
  • Hess continues transformation.  The company expects its capital expenditure at $4.7 billion, roughly 16% less than $5.6 billion spent in 2014. Recently, it divested the retail business and is in the process of shedding its upstream assets in Thailand as well as selling its trading business. The amount raised through asset sale is expected to help fund E&P investments. However, the company will consider all opportunities to enhance long-term shareholder value.

    We expect unconventional oil (including sources like oil shales, coal-based liquid supplies) and gas extraction (using non-traditional techniques) to play important roles in the world energy mix in the long run. After strengthening its position in the North American Bakken oil field for unconventional oil, Hess is now pursuing unconventional gas in the Marcellus Shale play. Hess’ exposures to the Eagle Ford and Utica shales as well as several global development projects (such as Ghana, Brunei, North Sea, Gulf of Mexico, Southeast Asia and Kurdistan) are likely to be the growth drivers for 2015 and beyond.

    Hess remains on track with its multi-year transformation program. However, to support its capital expenditures through 2015, the company continues to be highly dependent on major asset sales. Hence, the company’s growth and returns picture will likely be hindered by the asset sale programs in the near term.
  • U.S. becomes energy self-sufficient in 2015.  The US will maintain its position as the world’s largest liquids and natural gas producer, according to energy giant BP’s just-released “Energy Outlook 2035.”

    Worldwide, demand for energy is expected to rise by 37% from 2013 to 2035, or an average of 1.4% annually, due in large part to ongoing economic expansion in Asia, particularly in China and India, according to the BP outlook.

    Other points BP makes in the 2035 outlook include:

    US energy production rises by 32% to 2035, while consumption expands by only 1%. Natural gas replaces oil as the leading fuel in US energy consumption around 2028 – increasing from 30% today to nearly 38% in 2035. As a result, oil’s share of the fuel mix falls from 35% to 31%, the lowest on record, according to BP.

    Fossil fuels account for 79% of US energy demand in 2035, down from 85% currently, driven by more renewables in power generation, growing from 3% today, to 9% in 2035.

    Energy consumed in power generation increases by 4% and, by 2030, gas overtakes coal as the dominant fuel source in power generation, with its share increasing from 22% to 32%.
    Energy consumed by vehicle transportation falls by 13%. Oil remains the dominant fuel source, but its share falls from 95% today, to 84% in 2035 as biofuels and natural gas capture 9% and 6%, respectively, of the share.
    Rising US production of oil (43%) and natural gas (66%) outpace declines in coal (down 30%). Oil output surpasses its previous high (1970) in 2015, while natural gas continues to rise from today’s record levels.
  • OH Supreme Court rules in favor of the industry.  Towns and cities in Ohio cannot regulate hydraulic fracturing on their own, the state’s Supreme Court ruled Tuesday, Feb 17.

    The court ruled 4-3 Ohio’s legislature gave state agencies exclusive authority over all aspects of oil and natural gas drilling, including hydraulic fracturing, in a 2004 law, and any local ordinances would violate that exclusivity.

    Ryder going to NGV’s Commercial fleet management company Ryder System, a leader in converting/utilizing natural gas-powered vehicles, said Wednesday, Feb 18, it has launched a new online natural gas vehicle (NGV) maintenance training program for its entire North American maintenance network.

    More than 6,000 maintenance and service employees across Ryder’s 800 maintenance facilities will be trained on the new technology. The program will provide the company’s technicians with knowledge of all NGV platforms and configurations.
  • Noble Energy 2015 plans.  In the Marcellus Shale, two operated rigs are running, with activity planned for 2015 primarily focused in the Majorsville development area. In addition, four non-operated rigs are running in the dry gas areas. Noble Energy and its partner continue to work together to find an optimal investment plan for 2015. Approximately 15 percent of the Company's Marcellus investment is allocated to midstream.
  • Halliburton – Baker Hughes deal moving forward.  Halliburton and Baker Hughes said Tuesday, Feb 17; each company will hold a special meeting of stockholders on March 27, 2015, in connection with Halliburton’s pending $35 billion acquisition of Baker Hughes.

    Halliburton stockholders will vote on whether to approve the issuance of shares of Halliburton common stock in connection with the acquisition, and Baker Hughes stockholders will vote on whether to approve the merger and the agreement and plan of merger, dated Nov 16, 2014.
  • Another natural gas-fired generation plant coming to PA.  Panda Power Funds of Dallas, Texas, announced this week it was joining Sunbury Generation to develop, finance and operate a 1,000 megawatt plant known as Hummel Station on the site of a former coal-fired plant in Shamokin Dam.

    No cost figures were revealed but the Energy Information Administration estimates the expenditure to build power plants like Hummel Station to be approximately $1 million per megawatt.

    UGI Energy Services plans to invest more than $150 million to build a pipeline to transport Marcellus Shale gas from Lycoming County to the plant.

    Hummel Station is expected to be one of the largest coal to natural gas conversion projects in the United States, according to Panda.

    The plant is expected to supply electricity to locations such as Harrisburg, New York and Philadelphia when it goes on line in the second half of 2017, it says.

    "We have found a great partner in Panda," said Dave Meehan, president of Sunbury Generation. "They currently have more generating capacity under construction in the United States than any other company."

    The company has two 829 megawatt plants under construction near Towanda and Montgomery that are scheduled to be completed in 2016.

    Hummel Station will serve as the anchor tenant in the Keystone Opportunity Zone on the site of the retired coal-burning plan, Meehan said.

    An estimated 800 jobs will be created during the construction of the power plant and the pipeline, he said.

    Hummel Station will supply 260 percent more power than its predecessor but key air emissions will be reduced by 97 percent, Panda says.

    The plant, along the west bank of the Susquehanna River, will use 97 percent less water for cooling purposes than the coal-fired facility, it says.
  • PA DEP splitting board.  The Pennsylvania Department of Environmental Protection is replacing all of the members of its oil and gas advisory board to give it a greater focus on shale drilling, while creating a second board to advise the agency about regulations affecting the traditional drilling industry.
  • Halcon’s 2015 plans.  Halcon also reported it’s reducing its 2015 drilling and completion budget by an additional $25 million to account for lower service costs.

    The energy company has five wells in production in Trumbull County – two in Lordstown Township, two in Hartford Township and one in Vienna Township. Halcon has two producing horizontal wells in Mahoning County, both of them in Jackson Township. The wells target the Utica/Point Pleasant shale formation.

    Halcon announced last year that it would suspend drilling operations in the Utica shale and has not drilled new wells in the region since 2014.

    Instead, Halcon is focused on tapping into rich oil reserves such as the Bakken/Three Forks shale play in North Dakota and the Eagle Ford shale in East Texas.

    The company operates 172 producing Bakken wells and 53 Three Forks wells. Halcon currently has 14 Bakken wells and 4 Three Forks wells being completed or waiting on completion on its operated acreage.

    Halcon currently has 89 East Texas Eagle Ford wells in production and five wells being completed or waiting on completion.
  • Cabot delivering impressive numbers.  Cabot Oil & Gas Corporation reported year-end proved reserves of 7.4 trillion cubic feet equivalent (Tcfe), an increase of 36 percent over year-end 2013.  Specific highlights from the Company's year-end reserve report include:
    • Total company all-sources finding and development cost of $0.71 per thousand cubic feet equivalent (Mcfe)
    • Total company finding and development cost excluding purchases of reserves in place of $0.65 per Mcfe
    • Marcellus-only all-sources finding and development cost of $0.43 per thousand cubic feet (Mcf)
    • Total company all-sources reserve replacement of 466 percent, representing the third consecutive year over 400 percent
    • Increase in proved developed reserves by 39 percent to 4.5 Tcfe, resulting in a year-over-year increase in the Company's proved developed percentage from 59 percent to 61 percent Increase in liquids proved reserves (crude oil/condensate/natural gas liquids) by 100 percent year-over-year
    • Increase in before-tax PV-10 by 38 percent year-over-year to $8.6 billion

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 12, 2015 to February 19, 2015

       County            Township            E&P Companies

1.    Bradford            Asylum               Chesapeake
2.    Bradford            Leroy                  Chesapeake
3.    Bradford            Litchfield             Chesapeake
4.    Bradford            Litchfield             Chesapeake
5.    Bradford            Overton               Chesapeake
6.    Bradford            Stevens              Talisman
7.    Butler                Center                Rex
8.    Butler                Center                Rex
9.    Butler                Clinton                Range
10.    Fayette            Redstone            Chevron
11.    Fayette            Redstone            Chevron
12.    Fayette            Redstone            Chevron
13.    McKean           Norwich              Seneca
14.    McKean           Norwich              Seneca
15.    McKean           Norwich              Seneca
16.    Susquehanna   Jessup                Cabot
17.    Susquehanna   New Milford          Southwestern
18.    Susquehanna   New Milford          Southwestern
19.    Susquehanna   New Milford          Southwestern
20.    Susquehanna   New Milford           Southwestern

OH Permits – weeks ending February 14, 2015

       County              Township            E&P Companies

1.    Belmont             Washington           Gulfport
2.    Belmont             Washington           Gulfport
3.    Carroll                Lee                       Chesapeake
4.    Carroll                Lee                       Chesapeake
5.    Carroll                Washington           Chesapeake
6.    Carroll                Washington           Chesapeake
7.    Carroll                Lee                       Chesapeake
8.    Columbiana        Fairfield                 Hilcorp
9.    Harrison             North                     Chesapeake
10.    Harrison           North                     Chesapeake
11.    Harrison           North                     Chesapeake
12.    Harrison           North                     Chesapeake
13.    Harrison           North                     Chesapeake
14.    Monroe            Switzerland             Consol
15.    Monroe            Switzerland             Consol
16.    Monroe            Switzerland             Consol
17.    Monroe            Switzerland             Consol
18.    Belmont           Kirkwood                Antero

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