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Expo/Industry events for the next few months

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

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

Midstream PA 2015
October 1, 2015
Penn State

Utica Summit III
October 13, 2015
Canton, OH

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

Latest facts and a rumor from the Marcellus and Utica Shale

  • What to keep on your radar screens.  There have been a few developments that I keep hearing or reading about which I want to make you aware of.  Depending on your business, you may choose to follow these more closely
    • Tioga and Bradford counties, PA.  Almost everyone I speak with whom has been to these two counties recently talked about all the land men there trying to resign expiring leases.  The drive behind this activity appears to be the fact that Shell and Seneca have hit oil in the Utica in Tioga County.  
    • Shell in Northern PA.  I have heard from different sources that Shell is bringing more rigs in order to drill deeper into the Utica.  It is also refurbishing rigs to be able to drill deeper.
    • The Rogersville Shale in Kentucky.  There seems to be interest in the Rogersville Shale in Lawrence and Johnson Counties in Kentucky.  Here’s what we found about the Rogersville Shale.
      • The Marcellus is about a mile down. The Rogersville is between 9,000-14,000 feet down, or 2-3 times the depth of the Marcellus. Until now we’ve heard about potential Rogersville activity in Kentucky (see Fracking on the Way in the Bluegrass State? Quite Possibly and Kentucky Fracking One Step Closer: Commission Considers 1st Permit). Two exploratory wells have already been drilled in the Rogersville in Kentucky. But the new news, the thing that interests us, is that Cabot Oil & Gas has now drilled a test well in the Rogersville in West Virginia.  
      • Cabot’s interest in the Rogersville is interesting and important. Cabot has owned and drilled and operated thousands of conventional wells in southern WV for decades. They already own leases and have the rights to drill in some 600 locations where they have existing conventional wells. Is the Rogersville the next big thing for Cabot and others?
  • Fracking give U.S. manufacturing advantage.  The average cost to manufacture goods in the U.S. is now only 5% higher than in China and is actually 10% to 20% lower than in major European economies, a new Boston Consulting Group (BCG) study estimates.

    Further, BCG projects that by 2018, it will be 2% to 3% cheaper to manufacture in America than in China. BCG believes part of the reason for the narrowing gap is that wages have been rising in China, while American companies have been boosting productivity faster than many of their international competitors.

    But BCG states that perhaps the single largest factor in narrowing the wage gap is hydraulic fracturing, fracking, which has helped dramatically drive down the price of oil and gas that’s being used in energy intensive industries such as steel, aluminum, paper and petrochemicals.

    BCG calculates U.S. industrial electricity prices are now 30% to 50% lower than those of other major exporters. “America’s new energy abundance can not only help restore U.S. competitiveness, but can also create geopolitical advantages for America,” BCG states in “America’s Unconventional Energy Opportunity.” “These benefits can be achieved while substantially mitigating local environmental impact and speeding up the transition to a cleaner-energy future that is both practical and affordable.”

    America’s abundant and low-cost unconventional gas and oil resources are a once-in-a-generation opportunity to change the nation’s economic and energy trajectory, according to BCG.

    “The U.S. now has a global energy advantage, with wholesale natural gas prices averaging about one-third of those in most other industrial countries, and industrial electricity prices 30–50% lower than in other major export nations,” the consultants state. “That means major benefits for industry, households, governments, and communities, while reducing America’s trade deficit and geopolitical risks.”

    America has had a 10- to 15-year head start in commercializing unconventional resources vs. other countries, BCG believes.

    Harvard Business School Professor Michael Porter, a co-author of the BCG report, says America has about a 15-year lead on other nations when it comes to fracking. Here's the most telling number to make that point. The U.S. has 101,117 fracked wells, followed by Canada’s 16,990. By contrast China has 258.
  • 17 Pipelines planned for the Marcellus.  The supply glut that depressed natural gas prices in Pennsylvania may be eased in the coming years when as many as 17 pipeline projects meant to ship about 17.3 billion cubic feet per day of natural gas out of Pennsylvania, West Virginia, and Ohio come online – the portal Power Source reports.

    The shale gas revolution changed dramatically the pipeline landscape of the U.S. Traditionally pipelines flowed from conventional gas and oil production areas in the south to the end users in the north. The development of the Marcellus and Utica shales changed that with large amounts of natural gas needing to be transported from the wells in the Appalachian Basin.

    This initially led to small-scale projects aiming to improve access to interstate pipelines as well as adding compression to allow more gas to flow through the steel or modifying existing pipelines. Project then came to reverse the flow of pipelines as Pennsylvania natural gas drilling outpaced that of other parts of the country.

    What differs the current situation from these early initiatives is that now the drive is towards building huge, multi-million dollar projects that – unlike their predecessors – are not modifying existing infrastructure, but creating brand new pipeline networks where there were none before.

    “This is an once-in-a-lifetime construction cycle,” Mihoko Manabe, senior vice president at Moody’s Investor Services, told Power Source. “Once the infrastructure is built, the activity will die down. That’s why there is so much frenetic activity in pipeline development.”

    “If you don’t seize the moment now, a competing pipeline will build the way out.”

    “The scale is significant in terms of the country’s natural gas infrastructure,” she added.

    “The Marcellus is re-plumbing the gas flows of the eastern half of the U.S. in a big way,” Ms. Manabe said.
  • The mental giants of NY ban fracking permanently.  A statewide ban on high-volume hydraulic fracturing, or fracking, was made official across New York State on Monday, nearly a year after communities won the right to ban oil and gas development locally.

    This action concluded New York Department of Environmental Conservation’s comprehensive, seven-year review and officially prohibits fracking anywhere in the state.
  • OPEC is losing.  Thanks to U.S. shale oil output, the Organization of Petroleum Exporting Countries’ share of the global crude market has hit a low not seen for over a decade, reports Bloomberg News.

    The organization’s global oil market share in 2014 dropped to 41.8 percent, down from 43.3 percent seen the year prior, according to OPEC’s Annual Statistical Bulletin. The downward slide is the lowest crude market share OPEC has seen since 2003. Of the total output reduction, Libya was responsible for over half.

    Production growth in U.S. shale oil fields resulted in OPEC ditching its long-held position of balancing world market prices last November. Rather, following Saudi Arabia’s lead, the group opted to maintain output levels, placing pressure on companies with high operating costs to cut production levels as the global supply glut grew. Last year the group’s 12 member countries combined produced 30.68 million barrels per day. Saxo Bank A/S analyst Ole Sloth Hansen told Bloomberg, “The OPEC policy is probably the only option they have. U.S. shale is now the swing producer.”
  • Halliburton consolidating in Zanesville, OH.  Oilfield services giant Halliburton is closing its Indiana County office as gas drilling customers, pressured by low prices, focus more of their activity in the southwest corner of Pennsylvania and in eastern Ohio.

    The Houston Company on Tuesday notified the 430 workers in the Homer City office that it would close by the end of the year and move operations there to an office in Zanesville, Ohio.

    The move will result in the loss of 90 jobs. The rest of the workers will get offers to move to Zanesville or other company locations, spokeswoman Susie McMichael said.

    “Halliburton continues to make adjustments to its workforce based on current business conditions,” she said. “We value every employee we have, but unfortunately we are faced with the difficult reality that reductions are necessary to work through this challenging market environment.”
  • Gastar Exploration happy with dry gas in the Utica in WV.  The company reported initial and 30-day average production on its second Utica Point/Pleasant well.  The Blake U-7H well located in Marshall County, West Virginia produced at a peak 48-hour gross sales rate of 36.8 MMcf/d of natural gas on a 32/64ths choke with approximately 6,235 psi of flowing casing pressure.  On a restricted flow basis, the well's post peak rate 30-day production averaged 20.2 MMcf/d on a 26/64ths choke with approximately 5,312 psi of flowing casing pressure.  The most recent 5-day average rate is 14.8 MMcf/d at approximately 5,008 psi of flowing casing pressure.  The Blake U-7H well was drilled with a lateral length of 6,617 feet and was completed with 34 hydraulic fracturing stages that used approximately 14.8 million pounds of proppant.  Gastar has a 50% working interest in the Blake U-7H well and 41.1% net revenue interest in the well.

    J. Russell Porter, Gastar's President and Chief Executive Officer, commented, "We are very pleased with the results of our second dry gas Utica well as it demonstrates the consistency of the prolific production from the Utica/Point Pleasant play across our leasehold.  Currently, we have no plans to drill another Utica/Point Pleasant well on our acreage until regional natural gas prices improve and returns on investment become competitive relative to our other internal investment opportunities."
  • Natural gas rig count.  In the US, there were 228 natural gas rigs operating in the week ending June 26—five more than in the previous week. This marks the second straight weekly natural rig count addition.

    In the “other basins” rig category, the natural rig count rose by four last week. The rigs in “other basins” are those in smaller basins or rigs that don’t fall within a specific geographic basin. Read the following section to know what happened to the crude oil and natural gas rigs in the key shales.

    Since the beginning of this year, the number of natural gas rigs in operation fell by 100.  However, natural gas rigs seem to have stabilized in the past two months.  On average, one natural gas rig was added in the four weeks ending June 26.

    A higher number of natural gas rigs in operation suggests that natural gas producers like CONSOL Energy, Southwestern Energy, Linn Energy, WPX Energy, and Pioneer Natural Resources might be rising or on the verge of increasing their drilling activities. This could mean a rise in production. In contrast, a fall in the number of rigs in operation indicates a slowdown in production growth or even a fall in production. This would be negative for these companies. WPX Energy accounts for 0.16% of the iShares U.S. Energy ETF.

    MLPs (master limited partnerships) specializing in natural gas storage and transport activities like AmeriGas Partners, DCP Midstream Partners, and ONEOK Partners  could benefit if production rises.

    Natural gas rigs have been on a downward trend for about four years. The number of active natural gas rigs also fell over the last 12 months. A year ago, there were 314 natural gas rigs in operation. Currently, there are 228 rigs. That’s a fall of 86 rigs, or ~27%.
  • You may want to learn about Burket-Geneseo.  Located above the Marcellus Shale in the Appalachian Basin, the Burket-Geneseo Shale “could be the next super giant field,” but the play is still well in its infancy and the current Marcellus development could jeopardize the ability of operators going back in down the road to pull those additional reserves, according to Gregory Wrightstone of Wrightstone Energy Consulting.

    Speaking before a crowd at DUG East in Pittsburgh, PA, on Thursday, Wrightstone said the Burket-Geneseo, which could be classified as a super-giant field — 30 Tcf or greater — is often overlooked and overshadowed by the Marcellus.

    The Burket refers to most of Pennsylvania and the West Virginia portions, while the Geneseo is considered to cover northeast Pennsylvania and southern New York. It lies just above the Marcellus, from less than 100 feet of separation in West Virginia to more than 800 feet in northeastern Pennsylvania. It is the black organic rich shale that lies immediately on top of the Tully Limestone, and is an Upper Devonian formation.

    Stats on the play are a bit hard to come by as there are less than 30 wells on record with public production data.
  • Virginia coal miner to start drilling in Greene County, PA.   Alpha Natural Resources bought out its partner in a joint shale gas venture in Greene County and expects to start drilling soon, the company said Wednesday.

    Alpha subsidiary Pennsylvania Services Corp. paid $126 million for the stake held by a subsidiary of EDF Group, a European utility that is exiting the Marcellus shale. The venture had not developed the 25,000 acres it controls, but plans to complete at least four shale wells by the first part of next year.

    Alpha, based in Bristol, owns the Emerald and Cumberland coal mines in Greene County and has announced hundreds of layoffs in West Virginia as it grapples with low prices and demand. It has another joint venture in the Marcellus with Cecil-based Rice Energy. Its 29 active wells rank 17th in shale gas production in Pennsylvania.
  • MarkWest opens Utica HQ.  MarkWest Energy Partners LP has opened its new 20,000-square-foot building in Cadiz, Ohio that will house the company’s headquarters for its operations in the Utica Shale play. Some 70 to 80 people will work there, but the building has room for up to 110 employees, according to the New Philadelphia Times-Reporter. The building is in the Cadiz Industrial Park, across the road from a MarkWest natural gas processing facility.

    The headquarters is in the Cadiz Industrial Park, across the road from its Cadiz processing facility.

    American Energy Partners LP, led by Aubrey McClendon, continues to bulk up in Ohio's Utica Shale, purchasing natural-gas fields from Hess Corp. for $924 million, according to people familiar with the matter.
  • Aubrey buys Hess acreage in the Utica.  Hess said it struck an agreement to sell 74,000 acres in the Utica to an undisclosed buyer. The company has sold more than $7.8 billion in assets over the past year to raise cash and narrow its focus on growing oil output in the U.S.
  • Hess does midstream JV in the Bakken.  Independent oil and gas producer Hess said it had completed the $2.68 billion all-cash sale of a 50% interest in its Bakken midstream assets to Global Infrastructure Partners.

    Hess and Global Infrastructure Partners have created a midstream joint venture, known as Hess Infrastructure Partners.

    The Hess midstream assets included in the JV include a natural gas processing plant in Tioga, North Dakota, a rail loading terminal in Tioga and associated rail cars, a crude oil truck and pipeline terminal in Williams County, North Dakota, a Mentor, Minnesota, propane storage cavern and rail and truck transloading facility, and North Dakota crude oil and natural gas gathering systems.

Visit our Blog for daily updates on what’s happening in the oil & gas industry

Rig Count

  • Baker Hughes Rigs count for the week July 3, 2015
  • PA
    • Marcellus 45 up 1
    • Utica 2 unchanged
  • Ohio
    • Utica 18 up 1
  • WV
    • Marcellus 19 down 1
  • TX
    • Eagle Ford – 106 up 3
      • Permian Basin  189 unchanged
  • NM
    • Permian Basin – 43 up 1
  • ND
    • Williston – 76 up 2
  • MT
    • Williston – 1 up 1
  • CO
    • Niobrara –26 down 1


  • TOTAL U.S. Rig Count 862 up 3

PA Permits for June 25, to July 2, 2015

       County            Township            E&P Companies

1.    Beaver              South Beaver        Chesapeake
2.    Greene              Morris                 EQT
3.    Jefferson            Henderson          Exco Resources
4.    Potter                Sweden              JKLM Energy
5.    Potter                Sweden              JKLM Energy
6.    Potter                Sweden              JKLM Energy
7.    Sullivan              Fox                    Chesapeake
8.    Washington        Carroll                EQT
9.    Washington        Fallowfield          EQT
10.    Washington      Jefferson             Range

OH Permits – week ending June 27, 2015

       County            Township              E&P Companies

1.    Carroll                Orange                Chesapeake
2.    Carroll                Orange                Chesapeake
3.    Harrison             Nottingham           Amer. Ener. Utica
4.    Harrison             Cadiz                    Hess
5.    Harrison             Cadiz                    Hess
6.    Harrison             Cadiz                    Hess
7.    Harrison             Cadiz                    Hess

Joe Barone 610.764.1232
Vera Anderson 570.337.7149


Northeast Supply Enhancement