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NewsLetters

Expo/Industry events for the next few months

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

www.uticacapital.com

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

www.upstreampa.com

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

http://www.ohiovalleyoilgasexpo.com/

PIOGA’s 2016 Spring Meeting
April 7, 2016
Rivers Casino

www.pioga.org

OOGA Winter Meeting
March 16 – March 18
Hilton Columbus at Easton
Columbus, OH

http://oogawintermeeting.com/

Latest facts and a rumor from the Marcellus and Utica Shale

  • Rice Trims 2016 CAPEX Budget.  Rice Energy Inc. intends to trim its capital spending in 2016.

    The firm, one of the most active drillers in Ohio’s Utica Shale with some of Ohio's biggest wells, will cut spending on drilling and land acquisition by 14 percent to $640 million due to low commodity prices.

    The firm will spend $275 million in the Utica Shale and $285 million in the Marcellus Shale in western Pennsylvania on well drilling and completion, it said in an earnings call on Thursday with analysts and the media.

    Another $80 million will be spent on land acquisition in Ohio’s Belmont County and two Pennsylvania counties.

    In 2016, Rice intends to drill 12 new Utica wells and to begin production from 13 additional wells in Ohio’s Belmont County.

    It will, with partner Gulfport Energy Corp., drill an additional five Utica wells and complete 14 other wells, all in Belmont County.

    It also plans to drill 25 wells in the Marcellus Shale and to complete 27 wells there in 2016.

    At present, Rice has 44 wells in Ohio and 52 in Pennsylvania in various stages of development.

    It will maintain one drilling rig in the Utica and one rig in the Marcellus.

    The company will spend an additional $305 million on product transportation and processing through Rice Midstream Holdings LLC and Rice Midstream Partners LP. That includes money for gas-gathering system in Belmont County and  freshwater-for-fracking systems in Ohio and Pennsylvania.

    The company is projecting production to grow by 27 to 34 percent in 2016 to 700 to 740 million cubic feet of equivalents per day.

    Production in the fourth quarter 2015 grew to 624 million cubic feet of equivalents per day, 57 percent higher, than fourth quarter 2014, the firm said. Average 2015 production of 552 million cubic feet of equivalents per day was 101 percent higher than 2014 production, Rice said.

    Its Utica production averaged 174 million cubic feet of equivalents per day, a 196 percent increase from fourth quarter 2014, Rice reported.

    The company lost $274 million, or $2.06 per share, during the fourth quarter 2015. That’s down from a net income of $104 million, or 76 cents per share, during the fourth quarter of 2014.

    Its full year income loss in 2015 was $268 million, or $2.14 per share. In 2014, Rice reported a profit of $219 million, or $1.70 per share. CEO Daniel Rice called 2015 "another banner year" for the company.
     
  • Mariner 2 Delayed until Summer.  Construction of the Mariner East 2 pipeline, which has provoked landowner opposition along its route, has been pushed back until summer because of delays in obtaining permits, the pipeline's operator announced Thursday.

    Michael J. Hennigan, the chief executive of Sunoco Logistics Partners L.P., told investment analysts that more time was needed to obtain "hundreds of permits" required to build the cross-state pipeline, which will deliver Marcellus Shale natural gas liquids to Marcus Hook.

    "I don't like the word 'delay,'" Hennigan said in response to an analyst who used the term. He said the prolonged review was "not an intentional action" by any particular regulatory agency. The pipeline requires permits from several federal and state agencies, including the U.S. Fish and Wildlife Service, the Pennsylvania Department of Environmental Protection, and the U.S. Army Corps of Engineers.

    No mention was made of Sunoco's ongoing struggles to obtain rights of way from reluctant landowners along the pipeline route. The route largely follows the pathway of the existing Mariner East pipeline, which last year began propane deliveries and this month began sending ethane to Sunoco's terminal in Marcus Hook.

    Hennigan said the initial shipment of ethane would begin loading in the next few days, marking the first time that the material, which is used in petrochemical production, would be exported from the United States. Two European plastics producers have signed contracts to buy the ethane that Sunoco delivers to the Delaware River port.

    The JS INEOS Intrepid, one of a fleet of new tankers built by European chemical producer INEOS to carry liquid fuels like ethane and propane, is currently moored in Marcus Hook, according to www.marinetraffic.com. A second vessel, the JS INEOS Ingenuity, has been anchored off the Delaware Coast since Sunday night.
     
  • Sunoco Logistics Exporting Ethane.  Sunoco Logistics Partners LP, which operates pipelines and terminals, is poised to export the first U.S. waterborne ethane cargo “within a week,” according to Genscape Inc. The company’s Mariner East 1 pipeline, which stretches from the Marcellus shale deposit in western Pennsylvania to the Marcus Hook terminal on the Delaware River near Philadelphia, boosted ethane deliveries on Feb. 22, said Amanda Townsley, senior adviser of petrochemicals and LNG for Genscape, which is monitoring the line. The jump in flows coincides with the arrival of the terminal’s first tanker, the JS Ineos Intrepid, at the ethane dock, she said. This ethane is contracted to go to Norway as feedstock at processing plants owned by Ineos Europe AG, and will ultimately be used to make products such as plastic. U.S. producers have seen prices for natural gas and liquids tumble as output from shale deposits outpaces demand, as per Bloomberg.

    “The first ship at the ethane dock is exciting; this would be the first waterborne export from the U.S. period,” Townsley, based in Houston, said in a telephone interview. “It’s not a massive volume so it’s not a game changer for the supply and demand balance, but it’s a big deal for the producers in the area.” Range Resources Corp. is contracted to ship 20,000 barrels of ethane on the pipeline to the Philadelphia area terminal, according to its website. Ineos previously announced it also has a long-term contract to purchase ethane from Consol Energy Inc.
     
  • Gastar to Sell Appalachian Basin Assets.  Gastar Exploration Inc. announced that it has entered into a definitive purchase and sale agreement to sell certain Appalachian Basin assets primarily located in Marshall and Wetzel Counties, West Virginia. Gastar also provided a summary of the Company's year-end 2015 reserves, updated fourth quarter 2015 results, preliminary pro forma first quarter 2016 guidance and an update on its Meramec well activity.

    Gastar has entered into a PSA with an affiliate of Tug Hill Inc. for the sale of certain of its Marcellus Shale and Utica/Point Pleasant properties for $80.0 million, subject to customary closing adjustments. The sale includes substantially all of Gastar's producing assets and proved reserves and a significant portion of its undeveloped acreage in the Appalachian Basin. The sale is expected to close on or before March 31, 2016, subject to customary closing conditions including certain required lessor consents to assign, with an effective date of January 1, 2016. Proceeds will be used to reduce borrowings under Gastar's revolving credit facility.
     
  • Chesapeake’s Massive Write-Down.  The $2.06 billion write-down of the value of its oil and gas assets due to low O&G prices was the major force behind Chesapeake Energy’s $2.23 billion fourth-quarter loss, the independent producer reported this morning.

    For all of 2015, the Oklahoma City, Oklahoma-based company reported a net loss of $14.86 billion, with again the write-down of the value of its oil and gas assets due to prices contributing the bulk of the red ink, $14.53 billion for the year.

    Chesapeake's profit in 2014's fourth quarter was $586 million, while the full-year profit was $1.27 billion.

    "In light of the challenging commodity price environment, our focus for 2016 is to improve our liquidity, further reduce our cost structure and address our near-term debt maturities to strengthen our balance sheet,” Chesapeake CEO Doug Lawler said.

    Chesapeake's fourth-quarter daily production averaged roughly 661,100 barrels of oil-equivalent (BOE), a year-over-year increase of 1% adjusted for asset sales, Kallanish Energy finds.

    Average daily production consisted of roughly 100,700 barrels (Bbls) of oil, 2.9 billion cubic feet (Bcf) of natural gas and 75,600 Bbls of natural gas liquids.

    Chesapeake's daily production for 2015 averaged 679,200 BOE, a year-over-year increase of 8% adjusted for asset sales.

    Average daily production consisted of approximately 114,000 Bbls of oil, 2.9 Bcf of gas and 76,700 bbls of NGLs.

    Chesapeake is budgeting total capital expenditures (including capitalized interest) of $1.3 to $1.8 billion for 2016, a 57% reduction using the midpoint from 2015’s CAPEX total of $3.6 billion.

    More completions and less drilling is the plan for this year, as Chesapeake focuses on “shorter cash cycle projects that generate positive rates of return in today's commodity price environment and in mitigation of the company's commitment obligations.”

    “Our tactical focus areas remain asset divestitures, of which we are pleased to have approximately $500 million in net proceeds closed or under signed sales agreements, liability management and open market purchases of our bonds,” Lawler said.

    “We are also renegotiating gathering, transportation and processing contracts to better align with our current development plans and market conditions, aggressively working to minimize the decline of our base production and making shorter-cycle investments with our 2016 capital program.”

    An oil and gas driller lost $68.3 million in 2015, much of it because of its Utica shale operations in Ohio.
     
  • PDC 4th Qtr. Update.  PDC Energy Inc. (NYSE:PDCE) reported the loss Monday, marking a stark contrast from 2014, when it made $155.4 million.

    Tough times across the U.S. oil and gas industry have led to much fewer drilling rigs in Ohio and elsewhere.

    The company said the change is mostly attributable to lower commodity prices, which have impacted the U.S. and led to the sharp drop in gasoline prices.

    The overall loss includes $161.6 million in impairments "primarily related to the company’s Utica Shale asset as a result of low commodity prices," PDC said.

    PDC only operates in shale fields in Ohio and Colorado, and recently decided to focus only on its home state, although it plans to trickle activity in Ohio this year.

    The state's downturn in oil and gas activity has impacted every facet of the once-booming industry, including Ohio's main trade group, the Ohio Oil and Gas Association.
     
  • More Deals Coming in Oil & Gas.  Financial distress caused by oil crude price at $30 a barrel (Bbl) will force more companies to sell assets, fueling M&A deals in 2016, research/consultancy company Wood Mackenzie said on Monday, Kallanish Energy learns.

    Last year, deal flow collapsed because oil price uncertainty created a chasm between what buyers were willing to pay in deals, and what sellers hoped to receive.

    “In 2015, selling assets was often the last option on the table. Increasingly, it’ll become the only option left,” the analysts warned.

    In turn, forced sales and a lack of buyers are forecast to push asset prices down, negatively impacting companies looking to free-up enough capital to survive the current turmoil, but also providing growth opportunities for a few others.

    WoodMac said “now is the time to capture new exploration acreage with few firm commitments and minimal costs of entry.” The Scotland-based consultancy expects future cost reductions across the oil industry, already evident in much lower rig rates.

    Better fiscal terms are slated to help in many basins, making it easier for those O&G firms that are able to take a long-term business perspective to secure exploration opportunities for the future, the analysts said.

    Low cost, high impact acreage capture and a new wave of world-class Discovered Resource Opportunities (DROs) are expected to compete with M&A deals for growth capital.

    DROs relate to negotiations with host governments to access opportunities such as was seen in the Mexican oil industry last year, where the country began opening its doors to international investors.

    Freed from international sanctions, Iran is now believed to offer such growth options, as it seeks long-term partnerships to ramp up exports.
     
  • Halliburton – Baker Hughes Deals Slows Down in Europe.  The European Union suspended the deadline for its review of Halliburton’s acquisition of Baker Hughes after the oilfield service providers presented a plan to sell assets to win over regulators.

    Stopping the clock on a review “is a standard procedure” on merger investigations when companies don’t provide important information, EU spokesman Ricardo Cardoso told Bloomberg.

    The decision could mean the EU delays its decision on the deal beyond the June 23 deadline, Kallanish Energy understands.

    Halliburton said the companies intend to provide the additional information “as expeditiously as possible,” spokeswoman Emily Mir told Bloomberg. The company will make a formal offer of remedies “in the near future” after it made a draft proposal to address the EU’s competition concerns, she said.

    Halliburton agreed to buy Baker Hughes in November 2014 in a cash-and-stock deal that at the time was valued at about $35 billion. The transaction was scheduled to close last year, but has been delayed as the companies seek to resolve antitrust concerns in the U.S. and Europe.

    “The companies continue to work constructively with the commission and other competition enforcement authorities that have expressed an interest in the proposed transaction,” Mir said. “Halliburton remains focused on closing the transaction as early as possible in 2016.”

    The draft offer made by Halliburton and Baker Hughes may enable them to avoid getting a statement of objections listing the EU’s competition concerns if the commission considers the proposal acceptable, Louisa Penny, an antitrust lawyer at Taylor Wessing in London, told Bloomberg.

    Halliburton has been adding assets to the list of businesses it plans to sell to gain antitrust approval. The company plans to divest Baker’s offshore drilling-and-completions fluids division and the bulk of Baker’s completion systems, people familiar with the matter said earlier this month.
     
  • Halliburton Still Cutting Jobs.  Halliburton, which provides well-drilling services for oil companies, is cutting 5,000 more jobs as the industry continues to struggle with lower oil prices.

    Company spokeswoman Emily Mir said Thursday that the latest cuts amount to 8 percent of the Houston-based company's global workforce. The company would not say whether any of the cuts were in the Marcellus shale area.

    Oil prices have tumbled about 70 percent since peaking above $100 a barrel in mid-2014. That has led to less drilling activity and to widespread layoffs in the oil fields.

    Halliburton Co. cut 9,000 jobs in late 2014 and early 2015. Rival Schlumberger cut 10,000 jobs in the fourth quarter.
     
  • Range 4th Qtr. Report.  Fort Worth-based Range Resources reported a fourth-quarter loss of $321.8 million as the company took a big charge on the sale of assets.

    After adjusting for nonrecurring costs and stock option expenses, the natural gas producer which operates in the Marcellus Shale in the northeastern U.S. earned 25 cents per share, well above Wall Street expectations. The average estimate of 15 analysts surveyed by Zacks Investment Research was for earnings of 8 cents per share.

    Revenue for the quarter totaled of $410.7 million, down 53 percent from the fourth quarter of 2014.

    “Range continued to perform well operationally during the fourth quarter, despite the challenges from declining commodity prices,” CEO Jeff Ventura said in a statement. “We will continue to focus on reducing costs, high-grading our operations and staying disciplined financially.”

    Range said it has set its 2016 capital budget at $495 million, a 45 percent reduction from last year. The earnings were released after the close of trading on Wall Street.
     
  • Money Still Flowing into Oil & Gas.  Private equity firm Warburg Pincus agreed to invest as much as $500 million in independent oil and gas producer start-up RimRock Oil & Gas, Kallanish Energy learns.

    Warburg Pincus will give RimRock Oil & Gas a line of equity to help the start-up acquire and develop unconventional energy assets in North America, the companies said Wednesday.

    The money will come from Warburg Pincus’s $12 billion private equity fund and its $4 billion energy fund.

    The start-up enters operations during a global oil glut that caused a collapse in prices and led producers worldwide to reduce drilling, lay off workers, chop capital expenditures and cut dividends.

    West Texas Intermediate (WTI) crude has plummeted 70% since its June 2014 peak, and hit a 13-year low of $26.21 a barrel earlier this month.

    “In light of the current commodity price environment, we believe there is a compelling opportunity to acquire and develop large-scale assets,” Jim Fraser, RimRock’s CEO, said.

    Fraser has decades of experience in O&G, including Canada’s Talisman Energy, where he led the North American shale division, as well as Chesapeake Energy and Burlington Resources, where he served in executive roles focused on upstream operations.

    "Jim and the rest of the leadership team have deep knowledge and operational expertise that positions them well to capitalize on the current market dynamics,” said Saurabh Agarwal, a Warburg principal.
     
  • FERC Delivers Rover Pipeline Impact Statement.  The Federal Energy Regulatory Commission (FERC) has delivered its Draft Environmental Impact Statement (DEIS), including 25 pages of recommendations on Energy Transfer Partner’s $4.4 billion, 800-mile Rover Pipeline.

    The proposed Rover will flow 3.25 billion cubic feet per day (Bcf/d) of natural gas from Pennsylvania, Ohio and West Virginia processing facilities to markets in the Midwest, Northeast, East Coast, Gulf Coast and Canada, with direct deliveries into Ohio, West Virginia, Michigan, and into the Dawn Hub in Ontario, Canada.

    FERC found “adverse and significant” impacts Energy Transfer will need to fix before the project garners FERC approval, Kallanish Energy finds.

    “We determined that construction and operation of the projects [FERC included two associated projects that involve compressor station modifications] would result in limited adverse environmental impacts, with the exception of impacts on forested land,” FERC staff said in the DEIS.

    FERC stated if their many concerns are addressed, they see no reason why Rover would not be approved by the commission.
     
  • Shale Industry Makes Life Tough for OPEC.  The head of OPEC said this week his organization doesn’t know how to coexist with the U.S. shale oil industry.

    “Shale oil in the U.S. — I don’t know how we are going to live together,” Abdalla Salem El-Badri, OPEC secretary-general, told an audience of oil and gas industry executives at the annual IHS CERAWeek conference in Houston, Texas.

    OPEC, the Organization of Petroleum Exporting Countries, never before has encountered a competitor that can respond as rapidly to price changes as U.S. shale producers, El-Badri said.

    That quick response complicates the cartel’s ability to raise industry prices by reducing output, Kallanish Energy understands.

    “Any increase in price, shale will come immediately and cover any reduction,” according to El-Badri.

    OPEC launched a price war against all high-cost producers in November 2014, by not reducing output despite a global oversupply, basically saying it cared about market share, not price.

    Since then, oil prices have plunged by roughly 70%, hitting a 12-year low of about $26 on Feb. 11.

    Admitting the policy hasn’t worked as planned, El-Badri said OPEC didn’t expect oil prices to drop as far as they had when it decided to keep pumping near capacity.

    OPEC’s strategy began to shift last week, when the oil ministers of Saudi Arabia and Russia agreed to freeze their output at the January level, provided other oil-rich countries joined.

    El-Badri said the new policy will be evaluated in three to four months before deciding whether to take other steps.

    “This is the first step to see what we can achieve,” he told the CERAWeek audience. “If this is successful, we will take other steps in the future.”
     
  • XTO finalizes Midstream Deal in the Bakken.  Midstreamer Paradigm Energy Partners’ Paradigm Midstream Services – ND subsidiary has executed a crude oil gathering agreement for Paradigm’s Charlson Gathering System in North Dakota’s Bakken Shale.

    Paradigm reached an agreement with ExxonMobil unit XTO Energy to gather crude from XTO’s Charlson Field in northern McKenzie County for delivery to the Keene Central Delivery Point, Paradigm’s 50/50 joint venture with Phillips 66 Partners near Johnson’s Corner, North Dakota.

    “We are very pleased to have reached this agreement with XTO and look forward to adding their Charlson production to our gathering portfolio,” said Troy Andrews, Paradigm’s CEO.

    The agreement will expand Paradigm’s existing footprint in the Charlson area to roughly 70 miles of pipelines covering approximately 70,000 acres of production, Kallanish Energy reports.

    The Keene delivery point provides producers multi-market delivery options via access to the Palermo Rail Terminal, Paradigm’s joint venture with Phillips 66 located near Palermo, North Dakota, the North Dakota Pipeline terminal in Stanley, North Dakota, several pipeline connections, as well as up to 1.2 million barrels of storage.
     
  • LNG Exporting Begins.  It’s been a long time coming, but Wednesday, Cheniere Energy Partners confirmed the first-ever liquefied natural gas cargo to leave the Lower 48 States was being loaded at the company’s Sabine Pass facility.

    The LNG was loaded on the LNG carrier Asia Vision, chartered by Cheniere Marketing and is bound for Brazil, Kallanish Energy learns.

    “Today, we will finish loading the first commissioning cargo of LNG from our Sabine Pass LNG terminal. This historic event opens a new chapter for the country in energy trade and is a significant milestone for Cheniere as we prepare Train 1 for commercial operation,” said Neal Shear, chairman of Cheniere Partners.

    The Asia Vision is transporting 158,000 cubic meters of LNG to Brazil, Shear told CNBC’s “Power Lunch” (monitored by Kallanish Energy).

    Interviewed at Sabine Pass, located on the Sabine-Neches Waterway less than four miles from the Gulf of Mexico coast in west Louisiana, Shear told CNBC’s Brian Sullivan, 87% of the facility’s LNG capacity produced from seven trains is under 20-year contracts.

    “All of our counterparties are investment-grade,” Shear said. “All of our counterparties are capable of paying their obligations.”

    Shear assured Sullivan Cheniere will be cash flow positive (for the first time) within the “next couple years.”
     
  • Fracking Freeze in the Bakken and Niobrara.  North Dakota's largest producer, Whiting Petroleum, said Wednesday it has enacted the steepest Capex cut of any of its US peers so far in this downturn. Most of the slashed budget will be spent on shutting down its fracing and completion operations starting April 1 (Q2).

    Denver-based Whiting's projected 2016 Capex is $500 million, down approximately 80% from its 2015 capital expenditures. The company expects to spend 88% of the total budget ($440 million) on development activity primarily in its core Bakken and Niobrara areas regions.

    By the end of this year, Whiting expects an inventory of 73 drilled uncompleted wells in the Williston Basin Bakken/Three Forks play and 95 drilled uncompleted wells in the DJ Basin Niobrara play.

    "This inventory of drilled uncompleted wells should afford Whiting a highly capital-efficient means to resume growth upon a rebound in oil prices," the company said.
     
  • Shell Shuts down Unconventional Unit. (It’s really folding into another division.)  Shell announced Wednesday that Marvin Odum, Unconventional Resources Director and US Country Chair, will leave the Anglo-Dutch major at the end of March.

    Shell announced other measures it is taking in order to simplify its structure. Its Athabasca Oil Sands Project and Scotford Upgrader in Canada will join the global Downstream organization under Downstream Director, John Abbott.

    The Shale Resources business will join the global Upstream organization under Upstream Director, Andy Brown.

    Due to these changes, Shell said its "Unconventional Resources Directorate will cease to exist." The decision to shutter the unconventional division is the latest manifestation of the significant changes being made by the supermajor.

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

http://www.shaledirectories.com/blog/

Rig Count

  • Baker Hughes Rig Count the week of February 26, 2016
     
  • PA
    • Marcellus 16 down 1
    • Utica 0  
  • Ohio
    • Utica 12 down 1
  • WV
    • Marcellus 13 up 1
  • TX
    • Eagle Ford – 47 down 7
    • Permian Basin  147 up 2
  • NM
    • Permian Basin – 17 down 3
  • ND
    • Williston – 36 unchanged
  • CO
    • Niobrara – unchanged
       
  • TOTAL U.S. Land Rig Count 475 down 14

PA Permits for February 18, to February 25,  2016

        County          Township    E&P Companies

1.    Allegheny        Forward        EQT
2.    Allegheny        Forward        EQT
3.    Allegheny        Forward        EQT
4.    Allegheny        Forward        EQT
5.    Greene            Jefferson      Vantage
6.    Greene            Jefferson      Vantage
7.    Greene            Jefferson      Vantage
8.    Greene            Jefferson      Vantage
9.    Greene            Jefferson      Vantage
10.  Washington      Amwell        Rice
11.  Washington      Amwell        Rice
12.  Washington      Amwell        Rice
13.  Washington      Amwell        Rice
14.  Washington      Amwell        Rice
15.  Washington      Somerset    Rice

OH Permits for week ending February 13, 2016

         County       Township   E&P Companies

1.    Jefferson       Salem        Chesapeake
2.    Jefferson       Salem        Chesapeake

Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149

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