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Expo/Industry events for the next few months

Marcellus Utica Midstream
January 26-28
David L. Lawrence Convention Center
Pittsburgh, PA

Utica Upstream
April 6, 2016
Pro Football Hall of Fame
Canton, OH

Upstream PA 2016
April 19, 2016
Penn Stater Inn
State College, PA

Ohio Valley Regional Oil & Gas Expo
April 26-27, 2016
Belmont County Carnes Center
St. Clairsville, OH

Latest facts and a rumor from the Marcellus and Utica Shale

  • Kinder Morgan Moving with OH Pipeline.  Kinder Morgan is moving forward with plans to build a 240-mile pipeline across Ohio to ship propane and ethane to Canada.

    Kinder Morgan wants to build the 12-inch-diameter Utopia East pipeline from Cadiz to the Ohio-Michigan border west of Toledo, where it will connect to an existing pipeline.
  • After the Carnage, Shale Will Rise Again.  (Thank you Mark Mills & WSJ).  How low can oil prices go? When pundits start competing to predict where the barrel will hit bottom, you know that a rebound is inevitable. It’s the inverse of what happens before a high-price bubble bursts. Only a few years ago forecasters were suggesting that oil might hit $300 a barrel.

    The unpleasant reality is that petroleum prices are cyclical. Starting with the 1973-74 Arab oil embargo, they have been through six extremes. Because the peaks and the valleys both wreak financial havoc, producers and politicians imagine a Goldilocks ideal, with prices “just right”—not so high that legislators feel pressure to claw back “windfall profits,” and not so low that suppliers fall like dominoes, destroying jobs and tax revenue.

    The latter is what we’re seeing now, with oil falling below $30 a barrel. Survey the damage so far: More than 100,000 jobs are gone, most of them last year. The number of shale rigs in service has collapsed by 60%. Banks are worried about their oil loans. Shale states are readjusting budgets for shortfalls. About $200 billion of oil and gas assets are up for sale world-wide.

    American shale oil companies—whose booming production is a principal cause of the global glut—has been hit hard. Last year two dozen defaulted and 15 filed for bankruptcy. Standard & Poor’s puts junk ratings on three-fourths of the oil and gas producers it monitors.

    Here’s the big question, the one that makes this cycle different: What happens to shale oil? The jobs and revenues from America’s newest industry literally kept the country out of recession during the years of tepid growth that has characterized the current administration.

    The bad news is that there will be more pain to come. Low prices will continue to drive out companies that are overleveraged or poor performers. Stronger firms might suffer collateral damage. In the end, though, most companies will survive. Many will emerge well positioned for the next cycle, having acquired new assets (at distressed costs) that can be deployed as demand rises.

    Even with China’s economy slowing, global oil use will still rise by 1.3 million barrels a day this year—equal to the peak daily output of the entire Bakken Shale field. Middle-class automobile ownership in Asia is raising steadily, from today’s average of 60 to 80 cars per 1,000 residents toward the West’s 600 to 800 cars. All the fundamentals point to growing demand for oil.

    When prices rise again, even modestly, as they eventually will, shale producers will be ready—and this is what worries OPEC, Russia and Iran. Many foreign producers need oil above $80 a barrel to balance their national budgets. Yet industry experts at RBN Energy foresee vast swaths of American shale profitable at just north of $40 a barrel. And it can come online extremely quickly.

    The billion-dollar projects of conventional oil require long planning by enormous corporations or nation-state monopolists. Each shale well is comparatively tiny—which is why tens of thousands are drilled. Permits are obtained in weeks on private and state lands (where so much shale resides), and the wells are drilled in months instead of years. Structurally speaking, shale resembles a multitude of small tech-factories “manufacturing” oil from rocks.

    When prices tick up, thousands of profit-seeking investors make individual decisions to turn each factory’s switch to “on.” That’s how the U.S. so rapidly achieved, from 2009 to 2015, the record-breaking rise in production of four million barrels a day. Remember, global prices are affected by changes of only one to two million barrels a day. The upshot is that absent something like a major war, oil prices won’t be able to spike again. That’s especially true now that America can finally sell oil in world markets, courtesy of Congress’s recent lifting of the export ban.

    Shale 2.0, when it comes, will be even better. The technology is advancing at a speed usually associated with Silicon Valley. Over the past half-decade, average output per rig has risen at least 400%. Productivity rose 40% last year, despite cost constraints. The rigs are getting cheaper, and the efficiencies brought by the latest tools—from data analytics to robotics to advanced materials—have yet to be deployed.

    The shale industry expanded during a period of cheap money from the Federal Reserve. Over the past decade, a collective $1 trillion was exuberantly invested in a vast infrastructure of pipes, tanks, refineries and factories, as well as intellectual property and skills. In a sense, the boom looks a lot like the 1990s investments in dot-com firms.

    Just as a new Internet ecosystem rose from the ashes of the dot-com crash, Shale 2.0 will emerge—and for the same structural reasons. Underlying physical and intellectual assets don’t evaporate in bankruptcies, and America’s investors and entrepreneurs are resilient. There is plenty of capital standing by; more than a half-trillion dollars sits in the coffers of oil companies and petroleum private-equity firms. The bellwether for Shale 2.0 will be a boom in mergers and distressed asset acquisitions.

    In 2016, however, low oil prices will likely persist, and there’s an argument for letting creative destruction take its course. Competition is about to get fiercer as Iran, now sanction-free, adds to markets as much as a million barrels a day. Why not create incentives to propel America’s Shale 2.0 technology, the key to competing at low costs? Congress could fund shale science and technology programs, without tapping taxpayers, by selling, over time, some of the $10 billion-plus in excess oil stored in the Strategic Petroleum Reserve. Less oil is needed in the reserve anyway, thanks to the shale industry.

    Lawmakers should create a public-private program on Strategic Petroleum Research Technology to get next-generation shale tech out of the lab and into the field. Today hydrocarbons account for only 8% of federal energy research, though they supply 80% of America’s energy. It’s time to send a signal to markets, our allies and not-always-friendly competitors. America’s tech-centric shale “factories” are here to stay—and getting better all the time.

    Mr. Mills is a senior fellow at the Manhattan Institute and author of its forthcoming paper, “Geopolitics in the New Oil Era: Why and How America Should Expand its Petroleum Power.”
  • Getting Busy in the Permian.  I was in San Antonio this past week and a friend of mine spoke with a representative working for a trucking working in Midstream who told him that “All hell has broken loose.”  People have been saying the oil action this year will be in the Permian.  Let’s see.  (RUMOR)
  • Dominion’s Cove Point Project Meeting Deadlines.  Maryland’s largest construction project has reached the halfway point of completion. The $3.8 billion project at Dominion Cove Point Liquefied Natural Gas (LNG) Plant in Lusby began in late 2014. According to Dominion spokesman Karl Neddenien, the effort to build natural gas liquefaction and export facilities is “on schedule, on budget” and is on pace to reach completion by the end of 2017.

    Neddenien said currently approximately 1,000 contractors are working on-site. An estimated 35 percent of the current workers are residents of the three Southern Maryland counties. The project will reach its peak in March when nearly 1,400 workers will be engaged on-site.

    Wide-load transports and heavy hauls, which truck large components of the new facility from a barge docked at a temporary pier on the Patuxent River in Solomons to the plant off Cove Point Road in Lusby, are on-going. A notice regarding a wide-load transport planned for Tuesday, Jan. 19 stated the Maryland State Police would control traffic while escorting the material hauler from Route 2/4 to the Dominion Cove Point LNG terminal.

    Dominion has touted the project as environmentally sound, stating the new facility “will have the smallest environmental footprint of its kind, preserving the 1,000-acre nature preserve surrounding Cove Point.”

    Opponents of the project, however, claim the new facility will spew pollutants into the air and the natural gas will be obtained through a controversial process known as hydraulic fracturing or fracking. The drilling for natural gas is expected to occur in the Marcellus shale, an area that includes Western Pennsylvania, Western Maryland, Eastern Ohio, a small portion of Virginia and most of West Virginia.

    Currently, Maryland has a ban on fracking. The moratorium is due to expire in early 2018, about the same time the Cove Point project is expected to be completed.

    Dominion officials have also promoted the projected economic benefits of converting the 40-year-old gas plant into an export facility. Once in operation, the new facility is expected to create 75 new permanent jobs at Cove Point. Calvert County is expected to receive an annual average of $40 million in additional tax revenue.

    The latest protest against the Cove Point project will be aimed at one of the plan’s financial backers. According to the organization We Are Cove Point, a demonstration is planned for high noon Thursday, Jan. 21 outside a Bank of America location near the White House in Washington, DC.

    “We delivered letters to bank managers from Connecticut to North Carolina on Dec. 16, 2015,” the We Are Cove Point missive stated. “We sent letters to Bank of America’s press officers, board and CEO—no response. This time we are going to make a lot of noise so they can hear us.”

    Sunoco Logistics is about to put into operation its Mariner East 1 pipeline, which will bring ethane from the Marcellus Shale to the Marcus Hook refinery and shipyard in Philadelphia.

    “We are beginning to transport ethane this month on Mariner East 1, with the first ethane ships to be loaded in February,” said Sunoco Logistics spokesman Jeff Shields.

    That’s good news for Range Resources Corp., the Fort Worth, Texas-based natural gas producer that has major operations in southwestern Pennsylvania and a contract with Sunoco Logistics.

    Range’s contract with Sunoco Logistics (NYSE: SXL) includes 20,000 barrels of ethane and 20,000 barrels of propane daily between here and Marcus Hook, as well as storage there.

    In an investor presentation Jan. 6, Range (NYSE: RRC) said it should see a jump in cash flow of about $90 million a year once the Mariner East 1, Mariner West and ATEX pipelines are up and running.    
  • Bakken Oil Price Is Below Zero.  The term "low oil prices" just took on a whole new meaning.

    Bidding for a specific type of low-quality crude in North Dakota has gone sub-zero. That's right; a buyer is saying it needs to be paid 50 cents a barrel to take delivery of crude.

    Not even the perma-bears saw this one coming. Here's the crude oil posting bulletin with the first sub-zero crude oil bid price

    Koch's refining arm, Flint Hills Resources, LLC, is the bidder and the negative 50 cent bid is down from $47.60/barrel two years ago.

    The negative bid has some caveats. First, this is a very low quality of crude. Second, so many barrels are behind pipe (infrastructure needs to catch up), that undue pressure is being placed on this particular grade of oil.

    None-the-less, this gives a whole new perspective to "low oil prices."
  • WV Lowers Severance Tax.  One week ago, West Virginia Governor Earl Ray Tomblin delivered his State of the State Address to highlight key pieces of legislation and what he identified as his top priorities. Everything from economic development to education is covered (you can read his full address here) including a section on what he calls fiscal responsibility.

    The Governor specifically indicates his desire to reduce West Virginia’s severance tax rates on the natural gas industry to “[provide] much-needed relief for energy businesses struggling with low prices.”

    Given current market prices for natural gas and natural gas liquids, this move comes as it is most needed. With producers cutting back their budgets, the trickledown effect to supporting industries – environmental scientists, trucking, engineering firms – is being felt across the region and by the hundreds of thousands of people employed.

    Just three months ago, Governor Tomblin joined forces with Governor Wolf and Ohio Governor Kasich to promote an agreement to work together and maximize the opportunities in the region thanks to the shale development. One can only hope that Governors Wolf and Kasich, their administrations and other elected leaders are taking notice of Governor Tomblin’s efforts to continue the promotion of this industry.

    We’d like to throw a hat tip to the folks at United Shale Advocates for bringing this information to our attention.
  • PA Pipeline Task Force Report Coming Out in February.  Over the next 20 years, as many as 30,000 miles of new pipeline could be built to take the abundant supplies of natural gas from the Marcellus and Utica shale plays to market, according to the PA DEP. Last year, Governor Wolf appointed 25 members to his Pipeline Infrastructure Task Force, which is comprised of twelve workgroups including representatives from agriculture; county government; conservation and natural resources; the oil and gas industry and workforce and economic development.

    The task force was tasked with accomplishing four goals: (1) plan, site and route pipelines in ways that avoid or reduce environmental and community impacts; (2) amplify and engage in meaningful public participation; (3) maximize opportunities for predictable and efficient permitting; (4) employ construction methods that reduce environmental and community impact and (5) ensure pipeline safety and integrity during operation of the pipeline.

    On Nov. 10, the Pipeline Infrastructure Task Force, chaired by PA DEP Secretary John Quigley, released its first draft report, which contained 184 recommendations. A 30-day public comment period on the report closed on December 16. The group, which has been meeting monthly since July, 2015, will hold its last meeting in January to finalize the recommendations, and the final report will be presented to the governor in February.
  • PA To Tighten Methane Gas Emissions. Pennsylvania Gov. Tom Wolf's administration will impose new regulations on methane released from the drilling industry as part of the state's aggressive campaign to reduce its greenhouse gas emissions.

    The Pennsylvania Department of Environmental Protection will revise its permitting process for new gas wells and pipelines by the end of 2016 and will also submit new regulations on methane from existing sources, the Democratic governor and DEP Secretary John Quigley said during a town hall meeting broadcast over Facebook yesterday.

    "We're uniquely positioned to be a national leader in addressing climate change while supporting and ensuring responsible energy development, creating new jobs and protecting public health and our environment," Wolf said.

    Pennsylvania has become the second-biggest natural gas producer after Texas in the last decade, as new technology made it possible to drill into the Marcellus Shale formation.
  • SWN Cuts Back in the Niobrara and Appalachian.  Southwestern Energy Co., which has been drilling in northwest Colorado recently, will lay off nearly half its workforce, the company said.

    And Houston-based Southwestern’s exploration activities in northwest Colorado will be pushed to the back burner.

    In a filing Thursday, the company said the layoffs will affect more than 1,100 employees and come on top of a “smaller reduction” that occurred in the third quarter of 2015.

    Natural gas producer Southwestern Energy Co. is shedding 40 percent of its workforce as it struggles with low prices that won't budge.

    The cuts, announced Thursday, include 200 workers in the company's operations in Northeastern Pennsylvania and the Marcellus and Utica shale areas in Southwestern Pennsylvania, leaving about 230 employees in the Appalachian region.

    Southwestern said it had 2,781 employees at the end of 2014.
  • Atlantic Coast Pipeline Meeting Resistance.  The U.S. Forest Service has rejected the proposed route of the Atlantic Coast Pipeline because of its potential damage to the habitat of sensitive animal species protected by two national forests in Virginia and West Virginia.

    In a letter to the natural gas pipeline company on Tuesday, the forest service said the proposed route is "inconsistent" with forest service plans and commitments to protect the habitats of the Cow Knob salamander, Cheat Mountain salamander, and West Virginia northern flying squirrel, as well as the red spruce ecosystem in which they live.

    "Therefore, alternatives must be developed to facilitate further processing of the application," state Kathleen Atkinson, regional forester for the Eastern Region, and Tony Tocke, regional forester for the Southern Region.

    "Alternatives must avoid the Cheat Mountain and Cow Knob salamanders and their habitats, the West Virginia northern flying squirrel, and spruce ecosystem restoration areas," they said in the letter, filed Thursday at the Federal Energy Regulatory Commission.

    The forest service also said it will review the technical feasibility of the pipeline company's plan to drill under the Blue Ridge Parkway and Appalachian Trail in the Blue Ridge Mountains, next to the entrance to the Wintergreen resort in Nelson County.

    The regional foresters cautioned that the agency could require the company to complete the proposed horizontal directional drilling successfully before allowing construction of the pipeline through sections of the George Washington and Monongahela national forests.

    The pipeline company, led by Richmond-based Dominion, proposed the route in late October as a way to satisfy forest service concerns about harm to Cow Knob salamander habitat on Shenandoah Mountain, between Highland and Augusta counties in the George Washington National Forest, and the Cheat Mountain salamander in the Monongahela National Forest in West Virginia.

    "The Atlantic Coast Pipeline, LLC, will continue to work with the U.S. Forest Service to find a route for the interstate natural gas pipeline that is needed to bring reliable supplies of energy to Virginia and North Carolina," Dominion spokesman Jim Norvelle said Thursday. "Today’s letter is part of the permitting process as we work cooperatively to find the best route with the least impact. We appreciate the (forest service's) examination of this option and remain confident we will find an acceptable route."

    Will the Forest Service provide electricity to the populace when the coal fired power plants stop producing electricity?  Don’t they realize that we could begin experiencing brownouts because there is not enough natural gas getting to the converted coal burning power plants?


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

Rig Count

  • Baker Hughes Rig Count the week of January 22, 2016
  • PA
    • Marcellus 23 down 3
    • Utica 0  
  • Ohio
    • Utica 14 up 1
  • WV
    • Marcellus 12 unchanged
  • TX
    • Eagle Ford – 64 down 4
    • Permian Basin  171 down 1
  • NM
    • Permian Basin – 28 down 2
  • ND
    • Williston – 45 down 2
  • CO
    • Niobrara – 17 unchanged
  • TOTAL U.S. Land Rig Count 608 down 18

PA Permits for January 14, to January 21, 2016

        County            Township            E&P Companies

1.    Cameron            Shippen                Seneca
2.    Cameron            Shippen                Seneca
3.    Cameron            Shippen                Seneca
4.    Cameron            Shippen                Seneca
5.    Cameron            Shippen                Seneca
6.    Cameron            Shippen                Seneca
7.    Cameron            Shippen                Seneca
8.    Cameron            Shippen                Seneca
9.    Tioga                  Morris                  SWN

       County          Township            E&P Companies

1.    Jefferson        Springfield            Chesapeake

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019