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Expo/Industry events for the next few months

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

Midstream PA 2015
October 1, 2015
Penn State

WV Oil and Gas Expo
October 7, 2015
Morgantown, WV.

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

  • Another $1 billon MarkWest project.  MarkWest, EMG expanding Utica gas-gathering capabilities via new $1 billion project

    MarkWest Energy Partners and The Energy & Minerals Group (EMG) late Wednesday announced development of a new $1 billion dry gas gathering system in the Utica Shale, Kallanish reports.

    The system will be underpinned by a long-term, fee-based contract with Ascent Resources–Utica, a subsidiary of former Chesapeake Energy CEO And co-founder Aubrey McClendon’s Ascent Resources. The producer has dedicated roughly 100,000 acres in northern Belmont and Jefferson counties, Ohio, to the system.

    Dry-gas production from Ascent’s acreage is expected to support the system’s initial growth; however, the new system will also gather dry gas from other producers, according to the partners.

    “Our system will be a critical new gathering option, and we anticipate total investment could exceed $1 billion over the next three years,” said Frank Semple, MarkWest CEO.

    The system will be designed to gather more than 2 billion cubic feet per day (Bcf/d) of gas from the Utica’s dry-gas window, and could ultimately consist of more than 250 miles of pipeline and more than 200,000 compression horsepower.

    Initial operation is expected to begin by the end of 2015 and the system will provide numerous takeaway options, including connections to the Ohio River System, a gathering trunkline project capable of delivering gas to Rockies Express Pipeline (REX), Texas Eastern Transmission through its new OPEN project, Energy Transfer’s Rover Pipeline, and other interstate lines.

    Development of the system will occur under a new joint venture between MarkWest and EMG, which will be owned two-thirds by the Denver-based midstreamer and one-third by long-time partner EMG.

    Currently, MarkWest and EMG, with Summit Midstream Partners, operate one of the largest gathering systems in the Utica Shale through the Ohio Gathering Co. joint venture.
  • Anadarko bringing rigs to PA.  Anadarko is bringing a rig to PA for resume drilling activity early 2016 with another rig following for drilling 1st quarter 2016.  (RUMOR)
  • Natural Gas boom to total $147 billion.  The market for natural gas-fueled generator sets is expected to total $147 billion between 2015 and 2024, according to a new Navigant Research study.

    A source of emergency standby, prime, peaking, or continuous power generation, natural gas gensets are used worldwide for distributed power production. The market for the technology is expected to show steady growth over the next 10 years despite a short-term slowdown due to volatility in the oil and gas market.

    “The reciprocating engines used in natural gas gensets are used for many different types of distributed power generation, from small portable purposes to large, multi-megawatt installations,” said Taylor Embury, a research analyst with Navigant Research. “NG gensets are also gaining ground in backup and standby application due to their reliable performance.”

    Dual-fuel gensets are becoming increasingly popular, as they offer a middle ground between the high reliability of diesel fuel and the lower cost and emissions of natural gas, according to the report. One of the biggest hurdles for natural gas gensets to navigate is the current lack of infrastructure in emerging economies, Kallanish learns.

    Dual-fuel gensets can serve as a bridge into these markets and lay the framework for more NG infrastructure to follow, according to Navigant.

    The report, “Natural Gas Generator Sets,” analyzes the global market for NG gensets from less than 15 kilowatts to 20 megawatts for residential, commercial, industrial, and utility applications.

    Navigant Research is the research arm of independent consulting firm Navigant.
  • Crude oil exports.  U.S. House legislation that would end the 40-year ban on domestic crude oil exports will receive a floor vote this fall, Representative Joe Barton (Republican-Texas), the bill’s sponsor, said last week.

    The legislation (H.R. 702), which has 113 co-sponsors, including 13 Democrats, has been gaining momentum as booming domestic oil production and low gas prices have led lawmakers to question the need for the policy enacted in the wake of the Arab oil embargo.

    The trade prohibition, which applies to most U.S. oil exports but not refined products like gasoline and jet fuel, is opposed by oil producers such as ConocoPhillips and Marathon Oil, Kallanish finds.

    Opponents of changing the law include Consumers and Refiners United for Domestic Energy (CRUDE), a coalition of independent refiners comprising Alon USA, PBF Energy, Philadelphia Energy Solutions and Delta Air Lines Inc.'s Monroe Energy, which argue lifting the ban will increase domestic oil prices.

    In addition to repealing the section of the 1975 Energy Policy and Conservation Act that created the crude export ban, the legislation bars the federal government from imposing or enforcing any similar restrictions and requires an Energy Department report on the appropriate size and makeup of the Strategic Petroleum Reserve.

    Barton's legislation is likely to gain enough support in the House to pass but not garner enough votes to override a veto threat, ClearView Energy Partners said in a recent research note.

    Still, the challenge is likely to be more profound in the Senate, where 60 votes are effectively needed for passage.
  • Crude oil, natural gas production projected to fall.  All the job cuts, all the rig laydowns, all the cuts in capital expenditures by producers continue to negatively impact America’s oil and natural gas industry.

    Overall crude oil production is projected to drop 93,000 barrels per day (BPD), from 5.36 million barrels per day (MMBPD) in August, to 5.27 MMBPD in September, Kallanish finds.

    Total production in June reached 5.58 MMBPD, according to the U.S. Energy Information Administration’s Drilling Productivity Report for August. The monthly report examines production in the country’s seven most prolific plays, including the Bakken, Eagle Ford, Haynesville, Marcellus, Niobrara, Permian and Utica.

    New well production is expected to rise from an estimated 433,000 BPD this month, to 434,000 BPD in September. Production from new wells was pegged at 404,000 BPD in June.

    Since June, total production has dropped 31,000 BPD and new production has risen by 30,000 BPD.  The productivity report shows natural gas production from August to September is projected to fall by 261 million cubic feet per day (MMcf/d), to 44.90 billion cubic feet per day (Bcf/d), from a projected 45.16 Bcf/d.

    Each of the seven major production areas will see its gas production fall from August to September, according to EIA. The largest month-to-month drop will be in the Eagle Ford Shale, where natural gas production will drop by 112 MMcf/d, to 6.86 Bcf/d, from 6.98 Bcf/d.

    Even the mighty Marcellus will see its August-to-September gas production fall by 60 MMcf/d, to 16.37 Bcf/d, from 16.43 Bcf/d. The Marcellus continues to produce more than one-third of the U.S.’s natural gas, according to EIA data.

    New well natural gas production will drop 13,000 cubic feet per day (Mcf/d), to 2.43 MMcf/d, from 2.44 MMcf/d, EIA projects.
  • EIA bullish on the Marcellus.  Marketed natural gas production will increase by 4.0 billion cubic feet per day (Bcf/d, 5.4%) and by 1.8 Bcf/d (2.3%) in 2015 and 2016, respectively, according to the U.S. Energy Information Administration.

    Despite data showing month-over-month production declines in May and June, natural gas production remains higher than year-ago levels. EIA expects moderate growth through 2016, with increases in the Lower 48 States expected to more than offset long-term production declines in the Gulf of Mexico.

    “Increases in drilling efficiency will continue to support growing natural gas production in the forecast despite relatively low natural gas prices,” EIA said in the August Short-Term Energy Outlook (STEO).

    “Most of the growth is expected to come from the Marcellus Shale, as the backlog of uncompleted wells is reduced and as new pipelines come online to deliver Marcellus natural gas to markets in the Northeast.”

    Increases in domestic natural gas production are expected to reduce demand for natural gas imports from Canada and are expected to support growth in exports to Mexico, EIA projects.

    The statistical arm of the Department of Energy expects natural gas exports to Mexico, particularly from the Eagle Ford Shale in South Texas, to increase because of growing demand from Mexico's electric power sector, coupled with flat Mexican natural gas production, Kallanish understands.

    EIA projects liquefied natural gas (LNG) exports will increase to average 0.79 Bcf/d in 2016, with the startup of a major LNG liquefaction plant (Cheniere Energy’s Sabine Pass complex in Louisiana) in the Lower 48 States.
  • Former American Energy affiliates, investors sue attorneys over Aubrey McClendon data dispute (from NewsOK).  In a lawsuit filed Monday, several energy companies formed by Aubrey McClendon and their investors are suing a law firm for $150 million, claiming the firm's attorneys hid a legal demand from Chesapeake Energy Corp. regarding a dispute with McClendon over data in Ohio's Utica Shale.

    Several energy companies formed by Aubrey McClendon and their investors are suing a law firm for $150 million, claiming the firm's attorneys hid a legal demand from Chesapeake Energy Corp. regarding a dispute with McClendon over data in Ohio's Utica Shale.

    The lawsuit, filed Monday in state district court in Houston, claims attorneys for the Duane Morris law firm engaged in settlement talks with Chesapeake without the knowledge or consent of several American Energy affiliates and their investors.

    McClendon formed the American Energy companies following his ouster from Chesapeake in 2013. McClendon in December was replaced as CEO of American Energy-Utica LLC, American Energy-Appalachia Holdings LLC and American Energy-Ohio Holdings LLC.

    In the lawsuit, the American Energy affiliates — which were renamed Ascent Resources earlier this year — joined several investors, including Energy and Minerals Group Fund III LP and EMG Fund III Offshore Holdings LP.

    “We have reviewed the claims filed by these business entities and believe the law firm acted appropriately and ethically in all respects," said David Beck of Beck Redden LLP, which is representing Duane Morris in the case. "In short, the case is without merit and the firm will aggressively defend the case.”

    McClendon isn't named as a defendant, although his name features prominently in the lawsuit. He is no longer an officer or director of any of the Ascent companies.

    The plaintiffs said neither the Duane Morris law firm nor McClendon had authority to speak on their behalf following October 2013 debt and equity financing transactions that involved American Energy Utica. After that point, McClendon no longer controlled American Energy Utica, although he remained chairman of the board.

    The lawsuit said attorneys for Duane Morris and McClendon told Chesapeake they represented the American Energy affiliates and investors in a dispute over data the Chesapeake co-founder took with him when he left the company in spring 2013.

    The data dispute festered behind the scenes until a court filing in February where Chesapeake accused McClendon of taking company secrets and using them to help start his American Energy ventures. McClendon denied the allegations, saying he was entitled to the information under the terms of an old Chesapeake executive perk called the Founders Well Participation Program.

    The lawsuit against the law firm said McClendon asked the board of American Energy-Utica to approve a loan and a capital call at the end of January.

    “As of that time, neither McClendon, nor Duane Morris, disclosed to the plaintiffs that Chesapeake had made those serious allegations, or that a settlement demand had been made, or that litigation with Chesapeake was imminent,” the lawsuit said.

    In April, American Energy-Utica agreed to give Chesapeake about 6,000 acres in northern Harrison County, Ohio, and up to $25 million. That was to settle part of the legal dispute over acreage data between Chesapeake and McClendon. In return, American Energy-Utica, now Ascent, was dropped from the lawsuit.

    A judge has since ordered American Energy Partners and Chesapeake to resume arbitration over their data dispute.
  • Eclipse Resources 2nd Qtr. update.  Eclipse Resources Corp announced its quarterly earnings data on Wednesday. The company reported ($0.15) EPS for the quarter.

    Eclipse Resources Corporation is an independent exploration and production company. The Company is engaged in the acquisition and development of oil and natural gas properties in the Appalachian Basin. It has assembled an acreage position approximating 221,700 net acres in Eastern Ohio. Approximately 100,700 of its net acres are located in the Utica Shale fairway, which it refers to as the Utica Core Area, and approximately 27,250 of these net acres are also prospective for the area of the Marcellus Shale in Eastern Ohio within what it refers to as its Marcellus Project Area. The Company is the operator of approximately 85% of its net acreage within the Utica Core Area and its Marcellus Project Area. Eclipse has identified approximately 3,112 gross (810 net) remaining horizontal drilling locations across its acreage, which comprises 605 locations within the Utica Core Area and 205 locations within its Marcellus Project Area.
  • Magnum Hunter could be drilling soon.  Magnum Hunter Resources Corp. has entered into a $430 million letter of intent for a Utica shale joint venture, continuing an eventful week for the Utica shale driller.

    The company's agreement with an unnamed private equity fund involves 28,500 undeveloped acres in eastern Ohio's Monroe and Washington counties, the company (NYSE:MHR) said Tuesday in a federal filing.

    A letter of intent is different from an agreement – Magnum Hunter says it expects a definitive agreement within 30 to 45 days, and a closing 15 to 30 days after that. And the terms could change.

    Nonetheless, the announcement marks another notable event for the Appalachia-focused Texas shale driller that has spent 2015 finding ways to raise cash. Executives on Friday said two deals totaling around $1 billion– including the joint venture – were close to fruition. On Monday, the company's depressed stock closed up 71 percent to $1.33 after cratering to as low as 70 cents this year.

    A bigger deal still looms for the company's Eureka Hunter pipeline system, which the company estimates could rise up to $600 million.

    The joint venture would initially target 9,500 acres, but the filing did not disclose a specific location in the two-county area. Magnum Hunter has 200,000 acres under lease in the Marcellus and Utica shale region, but since January hasn't drilled a well to preserve capital.

    "I think that was a wise decision," CEO Gary Evans said Friday. "You're seeing more and more companies in our sector continuing to cut budgets because prices have not done what everybody expected."

    The company plans to restart some drilling after it gets its cash infusion.
  • LNG going to France.  French Energy Company EDF secured a deal for liquefied natural gas drawn from reserves in the United States, Cheniere Energy announced.

    Cheniere and EDF signed a sales agreement for up to 26 cargoes of LNG from its Sabine Pass export terminal through 2019.

    "Volumes will be sourced from Cheniere Marketing's LNG supply portfolio, which includes rights under a sale and purchase agreement with Sabine Pass Liquefaction, LLC to purchase any LNG produced from Sabine Pass in excess of that required for other customers," Cheniere said in a statement.

    Cheniere has designated several dozen cargoes for sale to date, with delivery expected to begin next year.

    A special permit is needed to send natural gas to companies without a U.S. free trade agreement. Though France has no such agreement, Cheniere secured the necessary permits, weighed against the public's interest, from Washington in 2011.

    The U.S. Energy Information Administration in a November report said the increase in U.S. natural gas production should support as much as 80 percent of the potential increase in demand resulting from the steady gains in LNG exports from the Lower 48 states.

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Rig Count

  • Baker Hughes Rigs count for the week August 14, 2015
  • PA
    • Marcellus 35 down 1
    • Utica 3 unchanged
  • Ohio
    • Utica 19 down 1
  • WV
    • Marcellus 18 down 1
  • TX
    • Eagle Ford – 103 up 3
    • Permian Basin  206 up 3
  • NM
    • Permian Basin – 49 down 2
  • ND
    • Williston – 69 down 2
  • MT
  • Williston – 1 unchanged
  • CO
    • Niobrara –30 up 1
  • TOTAL U.S. Rig Count 884 unchanged

PA Permits for August 6, to August 13, 2015

       County                Township              E&P Companies

1.    Lawrence              North Beaver          Hilcorp
2.    Lawrence              North Beaver          Hilcorp
3.    Lawrence              North Beaver          Hilcorp
4.    Lawrence              North Beaver          Hilcorp
5.    McKean                Sergeant               Seneca
6.    McKean                Sergeant               Seneca
7.    McKean                Sergeant               Seneca
8.    McKean                Sergeant               Seneca
9.    McKean                Sergeant               Seneca
10.    McKean               Sergeant              Seneca
11.    McKean               Sergeant              Seneca
12.    Tioga                  Osceola                Shell
13.    Tioga                  Osceola                Shell

OH Permits – week ending August 13, 2015

       County                Township             E&P Companies

1.    Belmont                Pultney                XTO
2.    Jefferson               Ross                    Chesapeake
3.    Jefferson               Salem                  Amer. Ener. Utica

Joe Barone 610.764.1232
Vera Anderson 570.337.7149


Midstream PA