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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

  • Inflection Energy in the Utica and Upper Devonian.  We have heard that Inflection Energy could be one of the latest E&P Companies to be drilling in the Upper Devonian and Utica.  It will be drilling in Lycoming County, PA.  (RUMOR)
  • Will the Upper Devonian and Utica be the PA news of 2016?  Based on Inflection Energy rumor and the news about companies like EQT and Shell drilling in the both of those shales, it looks like this could be the beginning of  increased activity in the Upper Devonian and Shale and it could be the hot news in PA in 2016.

    Unfortunately, I do not know if it is less expensive to drill in those shales, but there must be some financial advantage to drilling in the Upper Devonian and Utica.

    I have heard number of comments/rumors about land men in Tioga County, PA this last year.  Some people say it was like 2008 and 2009.  I’m sure some of this is driven by Shell’s success in the Utica in Tioga County.  Other rumors I’ve heard that Shell is very busy and is looking to bring another rig into Tioga County.  

    Additionally, Seneca, which has leases bordering Shell’s in Tioga, has also had success in the Utica in that county.

    We’ll closely monitor the drilling activity in Upper Devonian and Utica in PA and keep you informed about where, when and who.
  • Gulfport closes deal.  When will it start drilling?  Gulfport completed the acquisition of Paloma for about $301.9 million in total purchase price including certain closing adjustments.

    Paloma holds about 24,000 net nonproducing acres in the core of the dry gas window of the Utica Shale in Belmont and Jefferson counties, Ohio. The acreage overlaps with several of Gulfport's currently planned units and is located in the vicinity of existing interstate pipelines with gathering and compression infrastructure already under development.

    Gulfport plans to move one rig onto this acreage in 2015’s fourth quarter. The acquisition with a portion of the net proceeds from its previously completed securities offerings, the company said.

    Also, Gulfport said that the Bank of Nova Scotia, as sole lead arranger and administrative agent of the credit facility, will recommend that lenders increase the borrowing base of the facility to $700 million in the fall bank redetermination. It is at $575 million now, the company said.
  • Two new pipelines.  Energy Transfer has two new pipelines in their plans for 2016 in the Northeastern U.S.  (RUMOR)
  • PTT makes another announcement about cracker plant.  PTT GC America has selected a consortium of Bechtel, JPG America, and Samsung Engineering America to provide front end engineering and design a petrochemical complex in Belmont County, Ohio, US.

    The plant will produce ethylene, high-density polyethylene, high-purity ethylene oxide, and mono-ethylene, using ethane from the Marcellus and Utica Shale formations.

    Jack Futcher, President of Bechtel’s Oil, Gas, and Chemicals Business Unit, commented: “This is an exciting project that will bring jobs and economic development to the region. Our team is looking forward to working with PTT GC to deliver the most efficient design for a world class facility applying our extensive project delivery experience.”
  • Chesapeake does deal with Williams.  Chesapeake Energy Corporation has taken another big step forward to reduce its costs so that it can increase the margin it's earning on its natural gas production in a low price environment. That step is in the form of a new gas gathering agreement with its midstream partner Williams Companies (NYSE:WMB) and its MLP affiliate Williams Partners in the Haynesville and dry gas Utica shale. The new deal will lower Chesapeake Energy's costs so that it can drive volume growth in both of those plays.

    Doing what it said it would do

    On its second-quarter conference call, Chesapeake Energy CEO Doug Lawler said that the company was having "positive discussions with Williams, our primary gas gathering provider," on a new gas gathering agreement and that he was "confident in finding mutually agreeable solutions that will benefit both companies." Today, that confidence has been rewarded as the company has finalized two very important agreements with Williams.

    There are three primary attributes to this deal:
    • Chesapeake will see a significant improvement in its per unit gathering rates in these two areas beginning in 2016.-- This will lead to enhanced volume growth for Chesapeake, which also benefits Williams
    • The combination of the gathering system agreements allows Chesapeake to satisfy minimum volume commitment (MVC) obligations in the Haynesville Shale. -- This will lead to an increase in the realized pricing per mcf of gas.
    • The aligned strategic interests improve drilling economics, operational efficiency, and midstream asset utilization.

It's a win-win solution for both companies as Chesapeake Energy will enjoy the benefit of lower gathering fees, which will improve margins. This will provide it with more cash flow so that it can grow faster. Meanwhile, Williams and Williams Partners benefit because they'll earn a fixed fee across a larger volume of gas that will run through the system as Chesapeake increases production.

  • Chesapeake looking at Asian deals.  Chesapeake Energy Corp., the U.S. natural-gas producer that’s been selling assets to cut debt by more than $3.8 billion, said Asian utilities have begun kicking the tires at fields it might divest.

    Utilities seeking a hedge to gas they’ve contracted to import in liquefied form have shown “significant interest” in “the things we are going to potentially sell,” Chief Executive Officer Doug Lawler said today in a web cast from the Barclays CEO Energy/Power Conference in New York. To raise cash, Chesapeake has been selling assets including gas fields, pipelines and buildings, and has said it will consider partners for joint ventures.

    Lawler’s predecessor, Aubrey McClendon, had an affinity for Asian deals. Under McClendon, Chesapeake sold stakes in fields to CNOOC Ltd. in 2010 and to China Petroleum & Chemical Co. in 2013. In December, U.S. utility Florida Power & Light, a unit of NextEra Energy Inc., won regulatory approval to partner with a gas producer to develop an Oklahoma gas field. FP&L persuaded officials that owning gas can provide cheaper price protection than a financial hedge.

    The U.S. gas market diverges from the global market for liquefied natural gas, which must be super-cooled into a liquid for transport in tankers overseas. The price of LNG, as it is abbreviated, is often linked to crude oil prices. In North America, the gas price is tied more directly to regional supply and demand. In July, Japan paid $7.90 per million British thermal units for LNG, compared with $2.72 for the U.S. benchmark, according to data compiled by Bloomberg.

    Lawler didn’t name any of the utilities interested in the Chesapeake properties. He said other Asian buyers and domestic producers also are looking at Chesapeake assets. The company operates in some of the nation’s most prolific gas-producing regions including the Marcellus Shale, the Utica Shale and the Eagle Ford Shale of Texas.
  • CONSOL selling Oil & Gas business.  Marcellus Drilling News is reporting that Noble Energy is lining up to “taking over” the joint venture acreage which the two companies held as 50/50 deal.  

    Some people say that CONSOL may sell all of its oil and gas business to Noble Energy.  Again, this is another situation which we’ll monitor.
  • Rex Energy and Gulfport reaffirm borrowing bases which should keep drilling going.  Many industry watchers expected fireworks when producer lenders re-determined borrowing bases after examining company reserves and tried discerning future oil and gas prices.

    Not so with State College, Pennsylvania-based producer Rex Energy. Its bank group, led by Royal Bank of Canada, on Wednesday reaffirmed the existing $350 million borrowing base under the company’s senior secured credit facility.

    So confident was the consortium in Rex and how it’s handling lousy oil and gas prices that it approved an amendment to the credit agreement which, among other things, allows the company to repurchase up to $25 million of Rex common stock or senior unsecured notes.

    “We appreciate the support of our bank group as we continue to navigate through the challenging price environment,” said Tom Stabley, Rex Energy’s CEO. “Preserving our liquidity and flexibility is a key component of our strategy.”

    Gulfport Energy asked its lender consortium to increase by 21.7% the company’s borrowing base. The Bank of Nova Scotia, sole lead arranger of Gulfport’s credit facility, will recommend to the lending syndicate the borrowing base be raised to $700 million, from $575 million.
  • U.S. Oil production at one-year low.  The EIA on Wednesday said US oil production dropped to an almost one-year low and that low oil prices will likely keep US output declining through 2016.

    In its monthly short-term energy outlook, the agency said that production dropped by 140,000 bpd in August from the previous month. At its peak in April, oil production averaged 9.6 M/bpd, the highest rate since 1971. Since then, output has steadily declined to 9.1 million per the EIA, the lowest since last September.

    The EIA also pushed back its projections for a US production recovery by approximately six months. The agency now says monthly production will continue dropping until it hits 8.6 million barrels per month until August 2016. In the Wednesday report, it lowered its production expectations for both this year and next by approximately 1.5%- to 9.2 M/bpd and 8.8 M/bpd, respectively. Crude oil production is projected to continue falling through mid-2016 before growth resumes in late 2016.

    Production is expected to begin rising in late 2016, returning to an average of 9.0 M/bpd in 4Q15. A total of 12 projects are scheduled to come online in the Gulf of Mexico in 2015 and 2016, pushing up production from an average of 1.4 M/bpd in 4Q14 to more than 1.6 M/bpd in the same period of 2016.

    “Current low oil prices are making some US oil production less profitable,” EIA Administrator Adam Sieminski said in a statement.

    Oil prices, especially in 2Q15, remained adequately high to support continued development drilling in the core areas of the Bakken, Eagle Ford, Niobrara, and Permian basins, with July showing the first month-to-month increase in the oil-directed rig count since October 2014.

    However, WTI prices below $60/bbl through the EIA's forecast period are expected to slow the rate of recovery in onshore drilling and well completion totals, despite continued increases in rig and well productivity and declining drilling and completion costs. "The forecast remains sensitive to actual wellhead prices and rapidly changing drilling economics that vary across regions and operators," the EIA said.

    It also reduced its price forecast for both WTI and Brent through next year. The EIA said WTI would average $53.57/bbl in 2016, down 1.6% from the previous STEO report. WTI averaged $93.17/bbl last year.

    Meanwhile, the EIA said Brent will average $58.57/bbl next year, down 1.4% from the previous forecast. Brent averaged $98.89/bbl last year.
  • $9 billion in planned projects.  Marathon Petroleum Corp. and MarkWest Energy Partners have identified up to $9 billion of planned projects, including reversing pipelines.

    Sending oil and gas from the east to the Gulf Coast was unheard of a short time ago. But the glut of fossil fuels plucked from Appalachia's Utica and Marcellus shale plays has led to numerous planned pipeline reversals.

    "That is certainly a possibility," Heminger told analysts Wednesday at a New York energy investors conference. "I'm not sure it's top of the charts, but it's certainly a possibility to be able to take NGLs and take them to the Gulf Coast," he said of natural gas liquids. "So it just illustrates that we have many opportunities and a lot of flexibility around the NGL business with MPC."

    Natural gas liquids are components derived from gas that include ethane, propane and butane. The proposed $5.7 billion plant in Belmont County would use liquids.

    Marathon, the largest refiner east of the Mississippi River, said in July it would acquire Denver-based MarkWest.

    Heminger said the companies have identified between $6 billion and $9 billion in projects, some of which will be detailed at year's end.

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

Rig Count

  • Baker Hughes Rigs count for the week September 11, 2015
  • PA
    • Marcellus 34 unchanged
    • Utica 1 unchanged
  • Ohio
    • Utica 18 unchanged
  • WV
    • Marcellus 17 unchanged
  • TX
    • Eagle Ford – 90 down 3
    • Permian Basin  205 down 3
  • NM
    • Permian Basin – 45 unchanged
  • ND
    • Williston – 70 down 1
  • MT
    • Williston – 1 unchanged
  • CO
    • Niobrara –27 down 1
  • TOTAL U.S. Rig Count 848 down 16

PA Permits for September 3, to September 10, 2015

       County            Township                E&P Companies

1.    Bradford              Troy                      Chief
2.    Butler                 Butler                    XTO
3.    Butler                 Jefferson                PennEnergy
4.    Lawrence            Mahoning              Hilcorp
5.    Lawrence            Mahoning              Hilcorp
6.    Lycoming            Gamble                Inflection Energy
7.    Lycoming            Gamble                Inflection Energy
8.    Sullivan               Fox                      Chief
9.    Susquehanna      Great Bend           Southwestern
10.    Susquehanna    Great Bend           Southwestern
11.    Susquehanna    Lathrop                 Cabot
12.    Susquehanna    Lathrop                 Cabot
13.    Tioga                Duncan                 EQT
14.    Tioga                Liberty                Southwestern

OH Permits – week ending September 5, 2015

       County                Township            E&P Companies

1.    Harrison                Athens                Hess
2.    Harrison                Athens                Hess
3.    Harrison                Athens                Hess
4.    Washington          Waterford             PDC Energy
5.    Washington          Waterford             PDC Energy
6.    Washington          Waterford             PDC Energy

Joe Barone 610.764.1232
Vera Anderson 570.337.714

Northeast Supply Enhancement