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Expo/Industry events for the next few months

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

Great Fallfest
Wyoming County PA
September 24, 2015

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

  • Where are we?  As you know, I’m relatively new to the oil and gas industry.  We started Shale Directories in November 2009.  This sharp price decline in oil is the first one I experienced since we started Shale Directories.  

    We saw a deep price decline in natural gas in 2012 when it went under $2.00.  It has recovered somewhat, but seems to be locked in a trading range from $2.65 to $3.00.  In fact, natural gas has weathered the current declines pretty well.  

    In looking at the current state of the oil and gas industry, here are some of my thoughts:
    • The price of oil. It dipped below $40 this week, but seems to be rebounding.   The question is where is the new “norm.”  I’ve heard $60 a barrel is the new $100 a barrel.  How long can the Saudis continue to keep pumping to keep prices depressed?  It may not be too much longer.  Here are some observations:
      • The Saudis have issued bonds recently for the first time in since 2007 and more bond issues could be in the future. (Shale Directories, 8/15/15)
      • Saudis will be cutting its national budget.  (See below)
      • OPEC members are pushing for a summit to discuss production.  Saudis are resisting.
      • Iran will start exporting soon.
      • U.S. companies are keeping production consistent in spite of rig count declines.  
      • Congress will vote to allow U.S. companies to export oil in the fall session.  Permission was just given to export oil to Mexico. (Shale Directories 8/22/15)
    • The price of natural gas.  Natural gas has not seen the gyrations in pricing like oil.  Natural gas pricing is driven by Marcellus and Utica production.  Here are some observations:
      • EIA has just reported that it expects natural gas production to decline in the Marcellus and Utica.  There are not enough new wells being drilled to replace the declined curves of the existing wells.  None of the other shale plays can increase production to replace these declines.
      • The midstream efforts to move Marcellus and Utica natural gas is moving forward as quickly as possible.  As natural gas moves to new markets, many think the price of natural gas will pick up.
      • The rig counts in PA, OH and WV have slowly declined over the summer.
    • Conclusions.  
      • Who knows what will happen to the price of oil.  Those companies that can operate profitably with oil in the $40 price range will probably come out of this as winners.  Companies that cannot will either be purchased or go into bankruptcy which we are seeing.
      • The natural gas price could edge if new wells do not replace the declines from existing wells.  I think drilling will probably pick up in 2016
      • For those companies committed to the oil and gas, it’s imperative to keep informed.  Seminars, expos and conferences are more important than ever for business planning purposes.
      • Companies should maintain its sales and marketing efforts as best they can.
  • Schlumberger buys Cameron.  Schlumberger, the world’s largest oilfield services company, and fellow services firm Cameron, originator of the oilfield blowout preventer, said they’re merging in a $14.8 billion cash and stock deal.

    Under the terms of the agreement, Cameron shareholders will receive 0.716 shares of Schlumberger common stock and a cash payment of $14.44 in exchange for each Cameron share. Based on the closing stock prices of both companies on Aug. 25, the deal values Cameron at $66.36 per share – a 37% premium to Cameron's 20-day volume weighted average price of $48.45/share, and a 56.3% premium to Cameron's most recent closing stock price of $42.47/share.

    Upon closing, Cameron shareholders will own roughly 10% of Schlumberger's outstanding common shares, Kallanish calculates.

    "We believe that the next industry technical breakthrough will be achieved through integration of Schlumberger's reservoir and well technologies with Cameron's leadership in surface, drilling, processing and flow control technologies,” said Paal Kibsgaard, CEO of Paris-based Schlumberger. “Deep reservoir knowledge further enabled by instrumentation, software and automation, will launch a new era of complete drilling and production system performance.”

    Schlumberger projects pretax synergies of roughly $300 million and $600 million in the first and second year, respectively, initially related to reducing operating costs, streamlining supply chains, and improving manufacturing processes.

    On a pro forma basis, the combined company had 2014 revenue of $59 billion.

    "By bringing together Cameron and Schlumberger, we will be uniting two great companies with successful track records, performance and value creation,” said Jack Moore, CEO OF Houston-based Cameron.

    The transaction is expected to close in the first quarter of 2016.
  • Natural Gas Production Declines.  The Energy Information Administration (EIA) expects to see near-term declines in the amount of natural gas produced in the seven major shale regions for the first time in September. The number of new wells being brought on in every region will not be able to produce enough to offset the declines seen in legacy wells, according to the EIA.

    Natural gas production peaked in May of this year, with the seven major shale regions in the U.S. accounting for 45.6 billion cubic feet per day (Bcf/d) of production. The numbers were the highest on record since the EIA began tracking the information in 2001. Despite the overall increase in the production of natural gas, consumption decreased in residential commercial and industrial sectors for the third consecutive month.

    The EIA’s Drilling Productivity Report (DPR) anticipates that next month will be the first month in which production in all seven shale regions show declines, as increased well efficiencies are unable to offset the low number of running rigs and typical well decline curves.

Marcellus and Utica

The Marcellus and Utica shale plays have been responsible for 85% of shale gas growth in the U.S. since 2012, but even they are expected to produce less natural gas in September than in August. New well production in both regions has increased substantially, with wells in the Marcellus producing 160% more in in July 2015 than in January 2012. New wells in the Utica saw an even more substantial increase, producing 6.9 MMcf/d in July 2015, compared to just 0.31 MMcf/d in January 2012, or a 2230% increase natural gas

Despite this tremendous increase in productivity, the EIA anticipates declines from legacy wells in the Utica will total 55.6 MMcf/d in September, which will only be partially offset by new well production of 52.2 MMcf/d. With just seven rigs drilling in the Utica in July, even new-well production of 7 MMcf/d will not be able to fully compensate for legacy declines.

The EIA’s estimates could potentially be affected by factors like bad weather, shut-ins, variations in the quality and frequency of state production data, and infrastructure restraints, the Administration said. For example, the Rockies Express Pipeline started to deliver 1.8 Bcf/d of Appalachian natural gas production west on its existing mainline, which could encourage increased production from regions such as the Marcellus and Utica.

  • Rex to start drilling in Lawrence County, PA.  Perry Township, which has had more Marcellus shale drilling activity than any other municipality in the Ellwood City area, could be getting three new gas well pads.

    Lawrence County has received notification from Rex Energy of the company's intention to apply with the state Department of Environmental Protection for three well pads along Bates Road in the township, on what is being called the Wolf Unit.
  • Burket/Geneseo seeing activity. Energy news from the Appalachian Basin hasbeen dominated for the last decade by the natural gas behemoth that is the Marcellus Shale. Singlehandedly, this super-giant natural gas reservoir has transformed the North American energy markets with its vast reserve potential and production rates. Recently, the deeper Utica Shale has been getting a lot of notice with its consistent high production rates in the wet gas window of Ohio and some attention-grabbing high IP rates in the dry gas windows in eastern Ohio, extending into Pennsylvania and West Virginia.

    A third resource shale play, the Burket/Geneseo Shale, is being developed in much of the same geographic areas as the current Marcellus Shale development in Pennsylvania and West Virginia. This reservoir has not produced the same eye-popping production numbers as the other “Big 2” shales to date, but the play is still in its early field development stage, and it is certainly likely that operators will improve and fine-tune their completion and drilling techniques as the play moves into the full development stage. This reservoir will never challenge the Marcellus or Utica in its productivity or size of resource potential, although total reserves may be significant.

    It is likely that the play will benefit from several advantages, including its stacked pay potential, liquids-rich production in some areas and possible flat decline rates.

    As of mid-April 2015, a total of 85 Burket/Geneseo horizontal wells have been completed as productive, with an additional 99 wells either in the drilling phase or awaiting completion. Nineteen companies have drilled Burket tests in the two identified core areas; however, most are concentrated in the southwest part of the play (Figure 1). EQT Production has been the leader in development of this resource with more than 60 wells either completed or in the process of drilling/completion, with an additional 40 Burket wells planned for 2015.
  • Saudi’s budget cutting.  What does that mean to the price of oil? Saudi Arabia is showing more signs that it is committed to a "lower-for-longer" oil price scenario, with Bloomberg reporting Tuesday that the Royal Kingdom is seeking counsel on how to reduce billions of dollars from its 2016 budget due to the fall in oil prices.

    Sources told Bloomberg that the Saudi government is collaborating with advisers on an evaluation of capital spending plans and may postpone or scale back some infrastructure projects to save money.

    The sources said the government is in the early stages of the evaluation and could consider reducing investment spending, which is estimated to be roughly $102 billion this year, by approximately 10% more.

    Current spending on areas such as public sector salaries would not be impacted by the cuts, the sources also said.

    The International Monetary Fund (IMF) said last week that Saudi Arabia's economic growth will slow this year and next as the government is forced to cut spending to address falling oil prices.

    In an emailed statement to Bloomberg following its regular country consultation, the IMF said the Royal Kingdom's GDP will grow by 2.8% in 2015 and 2.4% next year. This contrasts to 3.5% growth in 2014. In the "medium term," the IMF said, growth may expand to 3%.

    For the first time since 2007, Saudi turned to the bond market earlier this year following the collapse of oil prices by over 50%. The consequent budget deficit, which the IMF forecasts at 19.5% of GDP, may prompt Saudi's leaders to forego its aggressive spending plans.
  • Bakken and Eagle Ford oil production up.  Oil production from shale plays in North Dakota and Texas increased by double digit percentages in July compared to July 2014, according to Bentek Energy, an analytics/forecasting unit of Platts.

    The average oil production from the Eagle Ford Basin last month was 1.6 million barrels per day (MMBPD), up a little less than 250,000 barrels per day (BPD), or about 17% higher than July 2014, according to Sami Yahya, Bentek energy analyst.

    The average crude oil production from the North Dakota section of the Bakken formation in July was 1.2 MMBPD, or roughly 90,000 BPD from year-ago levels, Kallanish reports.

    "It is the flight to quality and higher returns that is keeping crude production going in those two key shale basins," Yahya said. "Initial production [IP] rates have been improving, especially in the oily window of the Eagle Ford. Producers in the Eagle Ford are currently drilling 2.5 wells per rig per month, which is higher than the national average of 1.5 wells. Drill times have been improved from an average 15 days per well in 2014, to roughly 11 days per well in 2015."

    The Bakken follows closely behind the Eagle Ford in terms of efficiency gains and internal rates of return, noted Yahya. Drill times in this basin have dropped from about 15 days per well in late 2014, to roughly 13 days per well during the second quarter of this year, he said.
  • Buckeye Partners announced midstream project.  Buckeye Partners’ Buckeye Pipe Line Transportation unit has executed transportation services agreements with committed customers to its Michigan/Ohio Pipeline expansion project.

    Executed commitments will allow Buckeye Transportation to move forward with project engineering and construction.  Once completed in the second half of 2016, the project will allow Buckeye to offer expanded transportation service of refined petroleum products from origin points in Michigan and Ohio, to destination points in Ohio and Western Pennsylvania, according to the company.

    Buckeye did not release which companies secured capacity on the pipeline expansion, Kallanish reports.
  • Building your rankings in search engines. In the world of search engine optimization (SEO) there seems to be no shortage of trends that come—and go—promising to help businesses everywhere to improve search result rankings. Some such trends are flighty and short-lived while others are far much more than trends and actually do produce results.

    Barnacle SEO was a seemingly short-lived trend back in 2007 or 2008 but is re-emerging today and has the potential to become a truly valuable SEO practice. Whether or not you have yet heard about barnacle SEO, it is well worth your time to get immersed in it and know how you can make it work for your business.

    The term “barnacle SEO” was coined by Will Smith (no, not the actor) several years ago. Smith used this term to describe the action of creating an identity or content on another high-ranking site as a means of improving your site’s own search engine ratings profile (SERP’s).

    A barnacle is basically something of a parasite that, instead of relying completely upon itself for sustenance, leverages the power of another entity. Marine references aside, an example of barnacle SEO would be creating a thorough profile of your company on a listing site like Shale Directories and then linking that profile to your website. This can also be done via social media sites. The power ranking of these sites rankings can pull your own site up in the SERPs.

    Companies that can benefit the most from barnacle SEO are those whose keywords when entered into a search engine return many listing sites on the first page. Local businesses tend to experience this quite heavily and often are the best candidates for this practice.

    Please contact us if you want help with you search engine rankings.  

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

Rig Count

  • Baker Hughes Rigs count for the week August 28, 2015
  • PA
    • Marcellus 34 down 1
    • Utica 1 unchanged
  • Ohio
    • Utica 19 unchanged
  • WV
    • Marcellus 17 unchanged
  • TX
    • Eagle Ford – 97 down 2
    • Permian Basin  208 up 4
  • NM
    • Permian Basin – 47 down 2
  • ND
    • Williston – 72 unchanged
  • MT
    • Williston – 1 unchanged
  • CO
    • Niobrara –28 down 1
  • TOTAL U.S. Rig Count 877 down 8

PA Permits for August 20 to August 27 2015

       County            Township             E&P Companies

1.    Armstrong          Sugarcreek           Apex
2.    Butler                Donegal                XTO
3.    Butler                Jefferson               XTO
4.    Butler                Summit                 XTO
5.    Butler                Summit                 XTO
6.    Elk                    Jones                    Seneca
7.    Elk                    Jones                    Seneca
8.    Elk                    Jones                    Seneca
9.    Elk                    Jones                    Seneca
10.    Elk                  Jones                    Seneca
11.    Jefferson          Falls Creek             EQT
12.    Tioga               Morris                    Southwestern
13.    Washington      North Bethlehem     Rice
14.    Washington      North Bethlehem     Rice
15.    Washington      North Bethlehem     Rice
16.    Washington      North Bethlehem     Rice
17.    Washington      North Bethlehem     Rice
18.    Washington      North Bethlehem     Rice

OH Permits – week ending August 22, 2015

       County            Township             E&P Companies

1.    Belmont            Goshen                Rice
2.    Belmont            Smith                   Rice
3.    Harrison            Rumley                Chesapeake
4.    Noble                Wayne                Antero
5.    Noble                Wayne                Antero
6.    Noble                Wayne                Antero

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

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