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Permit Activity last week.  

  • PA – 3; Cabot in Susquehanna County
  • OH –5; Rex in Carroll County; Chesapeake in Harrison


Expo/Industry events for the next few months

“Get Ready for Summer Safety Seminar”
May 27, 2015
Undo’s
St. Clairsville, OH

Summertime is the height of the drilling season in the oil and gas industry.  It is a time when workers have to be especially aware of the safety issues and how it relates to work practices, clothing and general health.
The “Get Ready for Summer Safety Seminar” will the first safety seminar of its type held in the Marcellus and Utica Shale regions of OH, WV and PA.  

The topics to be covered in the seminar are:

  • Summer means: It’s storage tank vapor hazard season
  • Bulwark – Flame Resistant Clothing
  • Timberland PRO – Foot protection
  • HexArmor – Hand protection
  • Sqwincher – Hydration
  • Strata Products Worldwide – OSHA training and gas meters

Register here:  www.safetyseminar.net

Utica Midstream
June 10, 2015
Walsh University
North Canton, OH

The midstream business is very active in Ohio. There are 13 pipelines that are being built or in the early start up phases in Ohio. If you want to get the latest information from the major midstream companies, plan on attending Utica Midstream seminar. It will feature speakers from Williams, Marathon Petroleum, EnLink, Spectra Energy and Blue Diamond.

Register now! https://www.cantonchamber.org/utica-midstream

DUG East
June 23-25, 2015
Pittsburgh, PA

The DUG East conference and exhibition is the world’s leading event focused on unconventional resource development in the vast Marcellus and Utica shale plays, as well as emerging plays throughout the Appalachian region. Each year, thousands of oil and gas industry professionals gather for two days of world-class presentations and exclusive networking opportunities. Conference sessions are impactful and informative, covering a wide range of timely topics around exploration, drilling, completions and production.  

www.DUGEast.com

Latest facts and a rumor from the Marcellus and Utica Shale

  • Thoughts from DUG Permian.  I attended my first DUG Permian event and hats off to Hart Energy for another exceptional event.  As usual a superb list of speakers that gave insight into the challenges and opportunities in the Permian.  
    • Two phrases that resonated with me:
      • $60 is the new $90
      • $60 a barrel looks much better on the way up than on the way down.
    • Many E&P Companies have taken the significant steps to reduce costs and can be profitable at the $60 level.  Steps taken:
      • High grading
      • Stacked pay
      • Larger laterals
      • Bigger fracs
    • Rigs may start to be redeployed at $60
       
  • Texas takes control of drilling.  Texas Gov. Greg Abbott announced this morning that he will sign into law a bill that reasserts the state’s control over oil and gas drilling and prohibits cities from banning hydraulic fracturing, giving them only limited control over the oil and gas process within their city limits.

    Abbott will sign the bill two days after he appeared at commencement services in Denton at the University of North Texas. Denton was the first — and likely the last — city in Texas to ban fracking.

    Abbott’s stamp of approval on the bill comes as no surprise. At the beginning of the legislative session, the governor bemoaned the growing patchwork of local ordinances in Texas on issues from drilling practices to plastic shopping bags, saying that Texas was being “Californiaized.”

    Because HB40 passed by such wide margins in the Texas House and Senate, the law goes into effect immediately.

    After suspending its oil and gas drilling operations in December of last year, PDC Energy Inc. announced it may resume work sooner than planned.
     
  • PDC may be drilling in the Utica again.  PDC suspended its oil and gas operations in Ohio’s Utica Shale formation due to better economics in the shale field located near its “home” in Denver.  However, now that the company has received positive feedback from the wells it had already drilled in the Utica, it’s considering bringing back operations to the region sooner rather than later.

    According to the Columbus Business First, while speaking with analysts, PDC explained “its Dynamite well pad in southeastern Guernsey County is outperforming cost and production projections.”  PDC’s Senior Vice President of Operations Scott Reasoner said the well continues to surprise the company.  PDC also has “high hopes” for a well that is just north of the Dynamite pad which is ready to begin production.

    As reported by the Columbus Business First, “PDC today focuses on the Wattenberg field in central Colorado. It has said that oil prices would need to hit between $70 and $80 a barrel to consider moving rigs to the Utica again. They’re in the high $50s now.”  While speaking with analysts, PDC was asked if the company’s Utica wells were producing better at lower oil prices, would it consider moving its target price closer to $70.  CEO Bart Brookman answered analysts with the following:
     
  • Here comes the fertilizer industry.  The glut of cheap natural gas that is hindering profits and prompting job cuts among Marcellus shale drillers has been a blessing for companies that use the gas to make fertilizer for farmers.

    The domestic fertilizer industry is experiencing its largest growth in 25 years, thanks to gas pulled from shale in record volumes across Appalachia.

    “Ever since you started seeing the (price) declines in natural gas, you've seen the profitability of this industry just skyrocket,” said Glen Buckley, a fertilizer industry consultant who spent 30 years working at CF Industries, based in Deerfield, Ill., the largest public homegrown fertilizer producer.

    Low-cost gas selling for $2.76 per million British thermal units — down 40 percent from last year's prices and well below the $9 it cost in 2003 — has invigorated the fertilizer manufacturing industry across the Midwest and Southeast, with more than 35 fertilizer plants proposed or recently brought online, according to The Fertilizer Institute, a Washington-based industry advocacy group.

    Natural gas makes up 90 percent of nitrogen fertilizer, the variety most commonly used by farmers. Its ingredients and manufacturing process depend on huge amounts of natural gas, so when gas is cheaper, so is fertilizer production.
     
  • Japanese investments in U.S. Shale.  Tokyo Gas Co Ltd, Japan’s biggest gas utility, is looking to invest in more U.S. shale gas production as a hedge to liquefied natural gas (LNG) imports from the United States to start next year, a company executive said on Monday.

    The company has inked contracts to buy 1.9 million tons per year (tpy) of LNG from U.S. producers and aims to invest in an equal volume in the upstream sector, said Shigeru Muraki, a board member and executive adviser at Tokyo Gas.

    “We try to expand our investment in the shale gas production in the United States. That can be the natural hedge for LNG,” he told reporters on the sidelines of an industry conference.

    The company has contracted to buy 1.4 million tpy of U.S. LNG from the Cove Point project, which will start shipments in the second or third quarter next year, and 0.5 million tpy from Mitsui & Co’s Cameron project, he said.

    In 2013, Tokyo Gas bought a stake in a shale gas field in Texas’ Barnett Basin from Quicksilver Resources that would give it 0.35 million to 0.5 million tpy of gas output.

    Companies seeking to attract investments in U.S. shale projects are offering terms that could work even after oil prices fell, he said, citing a project proposed last month in Houston that would yield fixed revenue of $11 per million British thermal units (mmBtu) for deliveries by ship to Asia.

    Muraki said U.S. gas delivered to Asian destinations is competitive to oil-indexed supplies when oil is at $70 a barrel, but loses its cost competitiveness at $50 a barrel.

    LNG is expected to remain in oversupply through 2020, Muraki said, citing slower growth in China and a possible demand drop of 20 million tpy in Japan once it restarts 24 nuclear reactors.
     
  • Eagle Ford oil could be $10 to $15 cheaper next year.  By next year, production in the Eagle Ford shale could be $10 to $15 cheaper per barrel, according to new estimates from Wood Mackenzie analysts.

    Fuel fix reported on the analysts’ findings, which were stated to a meeting with journalists last week. Thanks to more efficient drilling of horizontal wells, speeding up pressure pumping systems and embracing better technology, initial rates of production for wells could increase by roughly a third. In addition, service companies are slashing costs of drilling tools, fracturing proppants and rigs by an average 16 percent this year.

    This is what Wood Mackenzie analysts believe could reduce a breakeven barrel value from $56 to as low as $41 by summer 2016. Similar trends could be imagined for America’s other large shale operations, such as the Bakken in North Dakota and the Permian Basin of West Texas.

    Wood Mackenzie analyst Ben Shattuck stated that although oil companies have cut their U.S. shale spending from $96 billion in 2014 to $60 billion this year, a dollar will do much more this time around if service companies keep costs low.

    “The death of the unconventional business has been greatly exaggerated,” Wood Mackenzie analyst Cody Rice said. “Operators can still make money in the best portions of the best plays in the lower 48.”
     
  • Ohio cracker ready to go in 2020.  If it decides to make the investment and build an ethane cracker in Belmont County, OH, Thailand's PTT Global Chemical (PTTGC) pcl said earlier this week that it plans to begin commercial production at the facility by 2020.

    The petrochemical subsidiary of Thailand's state-owned oil and gas company, PTT pcl, announced in April plans to partner with Japan's Marubeni Corp. to construct the ethane cracker in southeast Ohio at the heart of the Utica Shale and near the Marcellus Shale (see Shale Daily, April 23). At the time, the companies said no final investment decision would be made until 2016. Although the company said it had been searching for a location in the Appalachian Basin for nearly two years, it has not yet disclosed the site.

    But in its first quarter earnings report the company said it is planning for a one million ton facility that would cost nearly $6 billion to complete. PTTGC said it is also seeking a third partner for the venture with Marubeni Corp. to help finance the project. Company officials added that Marubeni Corp., a global services company with business in various sectors including food, textiles, chemicals and energy, would help PTTGC "penetrate the North American market."

    Management said the company's board of directors has already approved the project. It expects to sign an agreement to pursue the facility with Marubeni Corp. and a third partner later this year. The cracker would convert locally sourced ethane from the Marcellus and Utica shales into ethylene and polyethylene, which are key building blocks for plastics.

Rig Count

Baker Hughes Rigs count for the week May 22, 2015
     

  • PA
    • Marcellus 48 up 3
    • Utica 1 unchanged
  • Ohio
    • Utica 24 unchanged
  • WV
    • Marcellus 18 down 3
  • TX
    • Eagle Ford – 107 down 1
    • Permian Basin  188 down 3
  • NM
    • Permian Basin – 45 up 3
  • ND
    • Williston – 78 down 1
  • MT
    • Williston – 0 unchanged
  • CO
    • Niobrara –28 unchanged
       
  • TOTAL U.S. Rig Count 885 down 3

PA Permits for May 14, to May 21 201

       County                    Township            E&P Companies

1.    Susquehanna            Gibson                Cabot
2.    Susquehanna            Gibson                Cabot
3.    Susquehanna            Gibson                Cabot

OH Permits – week ending May 16, 2015

       County             Township             E&P Companies

1.    Belmont             Mead                    XTO
2.    Carroll                Harrison                Rex
3.    Carroll                Harrison                Rex
4.    Harrison             German                Chesapeake
5.    Harrison             German                Chesapeake


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