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Permit Activity last week.  

  • PA – 24; Southwestern in Bradford County; Rice in Washington; and Chesapeake in Wyoming
  • OH –7; Chesapeake in Harrison County

Expo/Industry events for the next few months

South Texas Oilfield Expo
July 29-30, 2015
San Antonio, TX

http://www.southtexasoilfieldexpo.com/

Shale Insight 2015
September 16-17, 2015
Philadelphia, PA

http://shaleinsight.com/

Midstream PA 2015
October 1, 2015
Penn State

http://midstreampa2015.com/

Utica Summit III
October 13, 2015
Canton, OH

http://www.uticasummit.com/

DUG Eagle Ford + MIDSTREAM Texas
October 25-27
San Antonio, TX

http://www.dugeagleford.com/

Latest facts and a rumor from the Marcellus and Utica Shale

  • Shell has finally done it!  Shell Oil Co., a division of the Dutch petrochemical giant, finally closed its much anticipated purchase of the former Horsehead zinc smelter in Potter. The price on the deed was $13.5 million, although the company is not commenting on the actual amount of money that changed hands.

    Shell also has bought 12 other properties in the area totaling $13.8 million. Those purchases ranged from a high of $5 million for a 100-acre site on Frankfort Road to $10 each for two parcels bought from the Beaver County Economic Development Authority.

    The two county properties, with about 60 acres between them, had a combined fair market value of more than $1 million, according to the deeds.

    Although work at the site progresses, Shell has not yet made a final decision about building the ethane cracker — a multibillion complex to turn Marcellus Shale natural gas liquids into feedstock for chemical production.

    The company said it will not make a decision until it has certain environmental permits in hand, most notably the air quality permit it has sought from the Pennsylvania Department of Environmental Protection. A public hearing on the permit was held last month.

    Shell has estimated the cracker plant would create “thousands of construction jobs” in addition to 400 to 500 operational positions.
     
  • Shell takes huge step forward.  Royal Dutch Shell has leaped a very important hurdle in determining whether or not the oil major will construct a multi-billion-dollar ethane cracker/petrochemical complex in southwest Pennsylvania, with the Pennsylvania Department of Environmental Protection approving the project’s air permit.

    Shell first announced its proposal to build an ethane cracker in Beaver County in March 2012. Since that time, the company has spent millions of dollars in property acquisitions, funded the demolition of the former Horsehead Holdings zinc smelter complex onsite, and held numerous public meetings to explain its project. Still, Shell has yet to make its final decision whether or not to build.

    Throughout the slow-moving process, Shell has continuously stressed how important it was to receive the necessary air permit before making a decision – the permit it now has in hand.
     
  • Rumors from DUG East.  
    • Shell is making changes at its Wexford office and is bringing in more senior personnel.  Could it be related to the building of the cracker plant or could it be the ramping up of production in Tioga County, PA since it hit oil in the Utica? Or could it be both? (RUMOR)
    • PGE will be bringing 4 or 5 rigs by November/December 2015. (RUMOR)  
       
  • The talk at DUG East.  In my many conversations with exhibitors and attendees,  there were a couple of consistent theme:
     
    • More bidding – almost everyone commented that they are seeing more bids which many hope will lead to pick up in business in the fall and 2016.
    • “Pretty busy” – while no company stated they are “slammed” with work, most said that they are busy.
       
  • Thoughts from DUG East.  Building more pipelines out of the Marcellus shale won't bring enough relief to natural gas companies struggling with low prices, an analyst told industry leaders gathered in Pittsburgh on Wednesday.

    Demand from power plants and other big customers won't keep pace with all the new supply coming out of the region over the next few years until exports of liquefied natural gas ramp up, said Kathryn Downey Miller of Denver-based BTU Analytics.

    “Don't expect demand to increase greatly until LNG shows up in 2019 to 2020,” she told the seventh annual Hart Energy Developing Unconventionals DUG East conference.

    Until then, the producers with the best locations for drilling and lowest costs have the upper hand, Miller and others said.

    “Can you control your costs ... and have a sufficiently sized balance sheet to offset the bad with the good?” Paul Morgan of Stratus Advisors said.

    Leaders of several companies made their case for why they are in the best position. Despite the large size of the Marcellus and Utica shales, Derek Rice, executive vice president of Cecil-based Rice Energy, estimated “about 20 percent of the fairway is economic.”

    Range Resources Corp. and Consol Energy Inc. touted well-placed lease locations that allow them to hit multiple layers of rock — Upper Devonian, Marcellus and Utica — from a single well pad.

    “There's a lot of efficiencies to having them stack up like that,” said Jeff Ventura, CEO of Fort Worth-based Range.

    State College-based Eclipse Resources Corp., a relative newcomer to the shale, is focused on the Utica in Ohio. It found success by extending the horizontal length of its wells by more than 1,000 feet during the past year and using more sand in fracking while cutting costs by 23 percent, said CEO Benjamin Hulburt.

    “We think we're far from over in optimizing this,” he said.

    Ryan Horvat, an analyst with New York-based ITG Investment Research, said analysis of wells shows per-foot production drops very slightly as those horizontal “laterals” are extended, so “it makes sense to drill out as far as you can.”
     
  • Halliburton – Baker Hughes deal may be in jeopardy.  Baker Hughes stock is trading at its widest discount to the Halliburton offer value since January, and the discount has been rising since Mid-April. A widening in this spread is a sign investors see growing risk that the transaction will not be closed. Increased regulatory scrutiny, a lack of updates on required divestitures, more US deal challenges, and a recent hiccup in European regulatory approval may all be contributing to the concern.
     
  • Another pipeline from Northeast to Texas.  Kinder Morgan said Wednesday it is soliciting contracts for shipping liquids on a proposed 1,100 mile pipeline running to the Texas Gulf Coast from the Marcellus and Utica shales in the Northeast.
     
  • MarkWest keeps growing.  MarkWest Energy Partners LP has 18 projects under construction in the three-state Appalachian region that makes up the Utica and Marcellus shale plays.

    While oil and gas drillers are reining in activity in Ohio, West Virginia and Pennsylvania, the Denver-based natural gas midstream company (NYSE:MWE) is ramping up activity.

    Drillers have taken a step back since late 2014 as commodity prices have tumbled. But companies like MarkWest, which operates pipelines, fractionation plants and other equipment related to the delivery and processing of gas, still are building.

    That’s in part because its pipelines and associated facilities have long-term agreements with oil and gas producers who already have drilled more than existing pipelines can take away.

    MarkWest has spent billions in Ohio and the surrounding states, and has plans to spend more. It’s finalizing three major Ohio plant expansions: a 60,000 barrel-a-day expansion of its Hopedale fractionation plant; adding a third plant with 200 million cubic feet a day of capacity to its cryogenic facility in Cadiz; and a fourth plant with 200 million cubic feet of extra capacity will be added to its Seneca processing complex in Noble County.

    “Given the market conditions currently, this will give us plenty of capacity to meet all the immediate needs,” David Ledonne, MarkWest’s VP of Utica and Appalachia operations, told me.
     
  • Blue Racer adds another processing plant.  After its fourth plant came online last month, Blue Racer Midstream LLC has plans for one more cryogenic processing plant in the Utica shale while drillers prepare themselves for increased drilling activity.

    According to Jack Lafield, chairman of Blue Racer, the company’s fifth plant was put on hold for about six months due to commodity prices being so low.  Lafield explained how a lot of Blue Racer’s customers were forced to slow down.  Therefore, the company was forced to delay its plans for the cryogenic processing plant. Latfield did say that by spring the plant will be necessary due to increasing well production.

    As reported by the Dallas Business Journal, “The cryogenic plant freezes natural gas, separating the methane from the ethane and other products. Blue Racer will have capacity to handle 1 billion cubic feet per day of natural gas once the fifth plant comes online in the first half of 2016. No location has been chosen yet.”

    While natural gas prices remain low, Lafield said drillers have become resourceful and have discovered ways to drive down the costs of drilling in the Utica.  He expressed how he continues to be amazed by the innovations companies have come up with to reduce costs per well by 30 to 40 percent.

    The main goal now for pipeline companies is to stay ahead of producers that rely on them to deliver their oil and natural gas to markets, explained Lafield.  This will be good for Blue Racer since it is a smaller company and will be able to act faster when drilling does increase or decrease.

    Currently, Blue Racer has customer contracts that stretch across 200,000 acres and the ability to produce 380 million cubic feet of natural gas per day.  According to the Dallas Business Journal, “Volumes into Blue Racer processing facilities have tripled in the last year. Pipeline volumes have doubled.” Stephen Arata, CEO of Blue Racer, commented on the company’s transportation abilities:
     
  • Vantage is up “For Sale”  Vantage Energy, a driller with operations in the Marcellus (in southwestern Pennsylvania) and in the Texas Barnett Shale, has had a bumpy ride over the past year or so. In 2014 Vantage planned to launch an initial public offering (IPO), hoping to raise $600 million–but later scraped that plan (see Vantage Energy Postpones IPO Citing Unfavorable Market Conditions). In December, the company was assessed a hefty fine by the PA Dept. of Environmental Protection (see Vantage Energy Fined $1M for Multiple Errors at Greene County Site). And in February of this year, Vantage had the dubious distinction of being one of the companies on David Fessler’s oil & gas company “death list” of companies with debts four times or higher than earnings (see 19 Oil/Gas Companies on “Death List” – 8 are in Marcellus/Utica). So it was no surprise for MDN to read that Vantage has put itself up for sale. The company has hired Barclays to help find a suitor to buy them. Among the potential suitors are several Marcellus drillers.
     
  • Magnum Hunter raising funds to avoid default.  Independent producer Magnum Hunter must raise $9.4 million to avoid defaulting on loan covenants, Kallanish understands.

    The Irving, Texas-based company already has raised $55.6 million, including $33.6 million in a sale of 5,200 acres of undeveloped leasehold in Tyler County, West Virginia.

    But Magnum Hunter needs to have raised $65 million by July 10, a new deadline its lenders pushed back from June 19.
     
  • Magnum Hunter selling assets.  Magnum Hunter Resources, which has been selling assets to increase liquidity demanded by its lenders, said Thursday it will sell its 45.53% interest in Eureka Hunter Holdings, owner of Eureka Hunter Pipeline and TransTex Hunter.

    “Based upon current market conditions, the company believes that a sale of all of its equity ownership interest in Eureka Hunter Holdings could generate up to approximately $600 to $700 million in gross cash proceeds to Magnum Hunter,” the company said in a U.S. Securities and Exchange Commission filing dated today.
     
  • Carnival switching to LNG.  Carnival Corporation has signed a multi-billion dollar contract with Meyer Werft for four LNG-powered cruise ships, which will also have the largest guest capacity in the world.

    The four new ships will be the first in the cruise industry to use LNG in dual-powered hybrid engines to power the ship both in port and on the open sea. LNG will be stored onboard and used to generate 100 percent power at sea. Using LNG to power the ships in port and at sea will eliminate emissions of soot particles and sulfur oxides.

    Each of the four next-generation ships will be able to accommodate 6,600 guests. They will additionally have over 5,000 lower berths and will exceed 180,000 gross tons. A major component of the next-generation design involves making much more efficient use of the ship's spaces, creating an enhanced onboard experience for guests.

    Carnival Corporation CEO Arnold Donald said the contract is consistent with the company’s measured capacity growth strategy to replace ships with less efficient capacity with newer, larger and more fuel efficient vessels over time.
     
  • Williams could become part of Energy Transfer Equity.  Energy infrastructure giant Energy Transfer Equity has made a $51 billion unsolicited bid for natural gas pipeline company Williams, a deal Williams rejected as “undervalued.”

    Energy Transfer Equity (ETE) said its all-stock offer of 0.9358 shares for each Williams' share, or $64 per share, represented a 32% premium to the stock's closing price of $48.34 on June 19.

    “Generally, I have not been supportive of transactions that involve the issuance of ETE units given my belief that ETE units remain significantly undervalued,” said Kelcy Warren, chairman of Dallas, Texas-based ETE.
     
  • Growing support for Shale.  Pennsylvanians and Americans “overwhelmingly support” the safe and proven use of hydraulic fracturing to produce clean-burning natural gas, according to a national survey by Robert Morris University’s Polling Institute.
     
  • Support for fracing has also increased significantly – moving from 42.3% in 2013 to 55.9% majority today.
     
  • Additionally, support for fracing in Americans’ own hometowns has also seen increased support.  Today, 49.2% would support (strongly or somewhat) fracing in their own hometowns – up from 40.0% in late 2013.
     
  • Other important findings include:
    • Fracing can help the U.S. economy – 73.3% agree
    • Fracing will help the U.S. move to energy independence – 68.9% agree
    • The U.S. should begin exporting some of the resulting natural gas – 51.6% agree

 

A poll by The Robert Morris University Polling Institute shows 57.1% of Pennsylvanians in support of hydraulic fracturing. … Nationally, the figures showed 55.9% of Americans hold the same view. … Among those surveyed in Pa., 74.3% said fracking has the potential to help the U.S. economy. … Among Pennsylvanians polled, 69.9% said new drilling technologies that allow fracking “will help move the U.S. to energy independence. … The poll was conducted before the release of a recent report by the EPA that found fracking has not had much impact on drinking water. Once again mirroring national results, more Pennsylvanians said they would favor fracking in their own hometowns than the percentage opposed — 48.2% to 43.3%.

Rig Count

  • Baker Hughes Rigs count for the week June 26, 2015
     
  • PA
    • Marcellus 44 unchanged
    • Utica 2 unchanged
  • Ohio
    • Utica 17 down 3
  • WV
    • Marcellus 20 up 1
  • TX
    • Eagle Ford – 103 down 1
    • Permian Basin  189 down 3
  • NM
    • Permian Basin – 42 up 1
  • ND
    • Williston – 74 down 3
  • MT
    • Williston – 0 unchanged
  • CO
    • Niobrara –27 unchanged
       
  • TOTAL U.S. Rig Count 859 up 2

PA Permits for June 11, to June 25 2015

       County              Township             E&P Companies

1.    Beaver                South Beaver        Chesapeake
2.    Bradford              Albany                 Chesapeake
3.    Bradford              North Towanda      Chesapeake
4.    Bradford              Stevens                Southwestern
5.    Bradford              Stevens                Southwestern
6.    Bradford              Terry                    Chesapeake
7.    Bradford              Wilmot                Chesapeake
8.    Butler                  Buffalo                Range
9.    Butler                  Butler                 XTO
10.    Butler                Donegal              XTO
11.    Butler                Donegal              XTO
12.    Butler                Lancaster           Rex
13.    Butler                Penn                  XTO
14.    Butler                Summit              XTO
15.    Butler                Summit              XTO
16.    Cameron            Shippen             Seneca
17.    Elk                    Highland            Shell
18.    Elk                    Jones                Seneca
19.    Elk                    Jones                Seneca
20.    Elk                    Jones                Seneca
21.    Elk                    Jones                Seneca
22.    Elk                    Jones                Seneca
23.    Elk                    Jones                Seneca
24.    Lycoming           Cogan House     Range
25.    Lycoming           Cogan House     Range
26.    Lycoming           Cogan House     Range
27.    Lycoming           Gamble             Atlas
28.    Lycoming           Gamble             Atlas
29.    Lycoming           Gamble             Atlas
30.    Lycoming           Gamble             Atlas
31.    Lycoming           Gamble             Atlas
32.    Lycoming           Gamble             Atlas
33.    Lycoming           Hepburn            Inflection Energy
34.    Sullivan              Elkland             Chief
35.    Susquehanna     Bridgewater       Cabot
36.    Susquehanna     Bridgewater       Cabot
37.    Susquehanna     Bridgewater       Cabot
38.    Susquehanna     Bridgewater       Cabot
39.    Susquehanna     Harford              Cabot
40.    Susquehanna     Harford              Cabot
41.    Susquehanna     Harford              Cabot
42.    Susquehanna     Harford              Cabot
43.    Susquehanna     Harford              Cabot
44.    Susquehanna     Harford              Cabot
45.    Susquehanna     New Milford       Southwestern
46.    Susquehanna     New Milford       Southwestern
47.    Susquehanna     New Milford       Southwestern
48.    Susquehanna     New Milford       Southwestern
49.    Susquehanna     Oakland            Southwestern
50.    Susquehanna     Oakland            Southwestern
51.    Susquehanna     Oakland            Southwestern
52.    Susquehanna     Oakland            Southwestern
53.    Susquehanna     Oakland            Southwestern
54.    Tioga                Chatham            Shell
55.    Tioga                Duncan               EQT
56.    Tioga                Liberty                Southwestern
57.    Tioga                Liberty                Southwestern
58.    Washington       North Strabene    Rice
59.    Washington       North Strabene    Rice
60.    Washington       North Strabene    Rice
61.    Washington       North Strabene    Rice

OH Permits – weeks ending June 18th and 25th  2015

       County            Township             E&P Companies

1.    Carroll                Orange                Chesapeake
2.    Carroll                Orange                Chesapeake
3.    Carroll                Washington           Rex
4.    Harrison              Monroe                Chesapeake
5.    Harrison              Monroe                Chesapeake
6.    Harrison              Monroe                Chesapeake
7.    Harrison              Monroe                Chesapeake
8.    Harrison              Nottingham           Chesapeake

 

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

 

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