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Expo/Industry events for the next few months

Utica Midstream
June 8, 2016
Pro Football Hall of Fame
Canton, OH

DUG East
June 21 – 23, 2016
David L. Lawrence Convention Center
Pittsburgh, PA

Latest facts and a rumor from the Marcellus and Utica Shale

  • “The Best Expo in the Appalachian Basin ”  This is the comment that was heard from a number of exhibitors at the Ohio Valley Oil & Gas Expo held this past Tuesday evening and Wednesday.  Congratulations to MPR Supply Chain Solutions, The Belmont County Commissioners and Port Authority.  This is the fourth year of the expo and was probably the best.

    The Ohio Valley Oil & Gas Expo was sold out.  In fact there was a waiting list for exhibitors.  With NatGas prices beginning to recover and the likelihood of the cracker plant happening, I strongly recommend that you reserve your booths as soon as possible next year.  

    There was Networking Reception Tuesday evening that featured speakers, Callum Streeter, COO EdgeMarc Energy, Rob Wingo, and Paul Wojciechowski, Project Director, PPTGC America, LLC, the company looking to build the cracker plant in Belmont County, OH.  

    Wojciechowski’s comments were of particular interest to everyone there.  He outlined some key dates working toward the final “Go-NoGo” decision for the cracker plant.  Bechtel and Flour are currently working on the engineering plans for the cracker.  Both companies are scheduled to deliver the engineering plans with initial costs by June 6, 2016.  These same companies will deliver their final budgets for the plant by September, 2016.  Wojciechowski said that PTTGC will be making the final decision to proceed early in the first quarter of 2017.  

    The economic benefit to be derived from the cracker plant is probably beyond comprehension of most of us.  But it sure will change Southeastern OH and Western WV.   
  • News From Halliburton – Layoffs and Baker Hughes Deal Is Dead.  
    • Layoffs.  Following Schlumberger's 1Q layoffs of 8,000, Halliburton announced its own cuts totaling 6,000 positions. Dave Lesar, Halliburton Chairman and CEO, provided some insight on how the company is managing headcount:

      “Responding to the reality of the market, we force-fit our employee headcount to available activity levels. This provides sustainable structural savings without compromising our ability to add personnel to serve the market when it recovers.

      "This included consolidating management roles across countries and centralizing support functions. This resulted in a workforce reduction of more than 6,000 during the first quarter. Since the downturn began in late 2014, we have reduced our global headcount by approximately one-third."
    • Baker Hughes Deal.  Conference Call Delay Seen As A Sign That The Baker Hughes Merger Is Dead

      Halliburton cited the April 30 deadline on the company's merger with Baker Hughes as the reason for the delayed conference call; rationale analysts are reading as a sign that the deal is dead.

      Following the DOJ's lawsuit to block the merger in early-April, the chances for closing the Baker Hughes transaction have been greatly diminished. Friday's conference call delay is being seen as a sign by analysts that the companies are poised to terminate the merger agreement after its April 30 expiration.
  • Atlantic Coast Pipeline Delayed.  Dominion Energy has delayed the projected construction start of the $5.1 billion Atlantic Coast pipeline to the summer of 2017.

    But spokesman Aaron Ruby says the pipeline, a partnership involving Virginia-based Dominion, Duke Energy, Piedmont Natural Gas and Georgia-based AGL Resources — will still be completed by late 2018.

    Duke Energy, Piedmont Natural Gas and Dominion Resources are involved in building a 442-mile natural gas pipeline into North Carolina.

    Atlantic Coast Pipeline

    “There will be an 18-month construction period, and it will not affect our in-service date,” he says.

    The delay reflects Dominion’s current expectation that it will be early 2017 before the Federal Energy Regulatory Commission issues a permit for construction of the 542-mile pipeline. Nor will the delay affect the ultimate price of the project, Ruby says.

    The partners had initially expected the permit would be issued this spring and construction would start this fall. But Ruby says detailed requests from FERC for additional environmental information and potential alternative routes particularly involving national forests — will delay that permit. He says the pipeline partners feel that the process, while long, has been “constructive and collaborative,” it has taken longer than expected.

    He says Dominion is in the final stages of working out a contract with the primary construction contractor, and the contractor is aware of the new timeline.

    “We believe it can be completed on the same schedule,” Ruby says. “It is just a matter of how we position our resources and work crews.”

    Dominion has not disclosed yet who that primary contractor will be. But Ruby says he expects an announcement soon, since Dominion is close to completing contract talks.

    Environmental opposition

    The pipeline has run into significant opposition from environmental and community groups, particularly in the mountains of western Virginia. But Dominion filed its response to all the objections and two requests from FERC for additional information and alternatives a little over a week ago.

    The proposed pipeline would run from eastern West Virginia, southeast to coastal Virginia and then south and slightly westward through southeastern North Carolina.

    It is designed to bring natural gas from the Utica and Marcellus shale fields of the Northeast and Midwest to Virginia and North Carolina.
  • Shell Takes Another Step Toward the Cracker.  Royal Dutch Shell appears to be moving forward with its plan for a petrochemicals plant in the Western Pennsylvania city of Monaca, according to the Philadelphia-based owner of a nearby shopping mall that expects to benefit from the proposal.

    Shell recently made a fresh land acquisition near the site of the proposed complex and started leasing part of Beaver Valley Mall's parking lot from owner Pennsylvania Real Estate Investment Trust (PREIT) "for a significant sum of money," said Joseph Coradino, the mall developer's chief executive officer.

    "All indications are that Shell is going to go forward," Coradino said during a conference call with analysts Wednesday.

    He did not elaborate on how Shell would use acquired and leased land.

    The energy giant has begun completion of some preliminary work at the site of a proposed $2 billion ethane cracker on the Ohio River in Beaver County, but it has not yet officially committed to the project. The facility would process ethane derived from Marcellus Shale gas into ethylene, which is used in the production of plastics and solvents.
  • Pioneer’s Good News.  In its 4Q report in February, Pioneer announced that it too had made some very tough decisions as oil prices had fallen much faster and steeper than expected since the 3Q report. Most notably, it halved its rig count and halted drilling in the Eagle Ford. On Tuesday, the Permian-focused company released its 1Q16 report, in which it revealed it is maintaining its $2 billion 2016 Capex, that its production rose 3% sequentially to 222,000 boepd, and that it has increased its 2016 production forecast.

    This last point is crucial. The U.S. rig count has dropped by about two-thirds off its high. Many of Pioneer's peers have either cut production or kept it flat. Not Pioneer, which expects production growth of more than 12% in 2016 vs. 10%+ in 2015 based on the $2 billion spending plan.
  • Bad News at Baker Hughes, But … Oilfield services firm Baker Hughes, currently mired in a highly contested merger with larger rival Halliburton, on Wednesday reported a $981 million net loss for the second quarter.

    The loss compared to a $589 million loss in the year-earlier quarter. Among the quarter’s expenses was a more-than $110 million related to the Halliburton purchase.

    Revenue fell 41.8%, to $2.67 billion, from $4.59 billion one year ago.

    In North America, Baker Hughes’ largest market, first-quarter operating revenues plunged more than 59%, to $819 million, from more than $2 billion one year ago.

    Baker Hughes’ world could be changing considerably if Halliburton kills the deal to purchase Baker Hughes.  First, Baker Hughes will receive approximately $3.5 billion as the break fee.  These funds will certainly help offset the tough times which Baker Hughes has been experiencing as the result of the price decline.  

    Baker Hughes was probably handcuffed by the Halliburton deal.  If the deal goes down in flames, Baker Hughes will be moving quickly to regain its momentum as a freestanding company.

    I’m sure employees at Baker Hughes will be experiencing a sigh of relief if the deal is not completed.  We keep monitoring this situation because it impacts so many companies throughout the world, especially in the shale plays where Shale Directories operates.

    Stay tuned.
  • Constitution Pipeline Partners to Fight NY’s Dept. of Environmental Conservation.  The four partners in the proposed Constitution Pipeline, which was turned down for water quality permits last week by New York State, said Monday they will continue pushing the project, using “all available options to challenge the legality and appropriateness” of the ruling by the state Department of Environmental Conservation.

    “In spite of NYSDEC’s [New York State Department of Environmental Conservation’s] unprecedented decision, we remain absolutely committed to building this important energy infrastructure project, which will create an important connection between consumers and reliable supplies of clean, affordable natural gas,” the project sponsors said.

    “We believe NYSDEC’s stated rationale for the denial includes flagrant misstatements and inaccurate allegations, and appears to be driven more by New York State politics than by environmental science,” said the partners, including Cabot Oil & Gas, Williams Partners, Piedmont Natural Gas and WGL Holdings.

    The company said it takes “serious issue” with NYSDEC’s claims its application lacked information related to stream crossings, depth of pipe, or blasting, Kallanish Energy learns.

    “Completely contrary to NYSDEC’s assertion, we provided detailed drawings and profiles for every stream crossing in New York, including showing depth of pipe,” according to the four partners. “In fact, all stream crossings were fully vetted with the NYSDEC throughout the review process. We are appalled with the comments that Constitution failed to provide sufficient data to ensure every crossing was totally in compliance with the NYSDEC guidelines.”
  • Cabot 1st Qtr. Update.  Cabot’s operational highlights are below:

    Marcellus Shale

    During the first quarter of 2016, the Company averaged 1,628 million cubic feet (Mmcf) per day of net Marcellus production (1,913 gross operated Mmcf per day), an increase of 10 percent sequentially compared to the fourth quarter of 2015. During the first quarter, the Company drilled 7 net wells, completed 12 net wells and placed 8 net wells on production.

    Cabot is currently operating 1 rig in the Marcellus Shale and plans to remain at this level for the remainder of the year.

    Eagle Ford Shale

    Cabot's net production in the Eagle Ford Shale during the first quarter of 2016 was 12,975 barrels of oil equivalent (Boe) per day, a decrease of 13 percent sequentially compared to the fourth quarter of 2015. Net oil production during the quarter was 11,908 Bbls per day, a decrease of 6 percent sequentially compared to the fourth quarter of 2015. In addition to natural production declines resulting from reduced operating activity, the primary driver of the lower sequential equivalent production was unscheduled downtime at a third-party processing plant which impacted natural gas and NGL volumes for a significant portion of the quarter. During the first quarter, the Company drilled 3 net wells and completed and placed on production 9 net wells, the majority of which were placed on production late in the quarter.

    Cabot is not currently operating a rig in the Eagle Ford Shale and plans to drill 3 additional wells in 2016, all of which are scheduled for the second half of the year.
  • EQT Thinks the Bottom Could Be In on NatGas.  EQT Corp. CEO David Porges said he sees early indications of a potential uptick in the long-depressed natural gas industry — and his company is ready for the next act when that happens.

    "We are beginning to see some signs of what appears to be a supply reduction" in natural gas, Porges told analysts during quarterly conference call about the Pittsburgh-based E&P company's financial results. A drop in supply, which has been one of the problems plaguing the industry, could suggest higher natural gas prices in the future, Porges said. But he stopped short of saying when things would get better.

    But he said that EQT would be positioned comparatively well to take part in any recovery, including increasing the pace of natural gas drilling and midstream projects that take the gas and other liquids from the shale fields to market. There's a plan in place that could shorten the time from drilling to market from about nine months to between five and six months but EQT is waiting to make the investments until the industry better recovers, said President Steve Schlotterbeck.

    And EQT could also ramp up faster than some other drillers that have idled their rigs. EQT has reduced drilling but has not stopped it altogether; it has plans to drill about 70 Marcellus Shale wells and five Utica wells. By comparison, Consol Energy Inc. said earlier this week that it would make a decision within the next three to six months when to resume its drilling.

    Porges said that other companies may have laid off land people, making it harder to get permits, or their rigs have been cannibalized for parts while idled, or there may not be a way to reconstitute the former drilling crews.

    "I have a feeling the rest of the market might see longer lead times of a ramp up, assuming prices move up enough to justify" such a move, Porges said.
  • Range 1st Qtr. Update.  Despite reporting a hefty first-quarter loss, Range Resources is predicting smoother sailing ahead after becoming the first North American company to export ethane and establishing a $3 billion credit line to help it weather the energy industry’s tough times.

    During the first quarter, the Fort Worth-based company lost $91.7 million, compared to a $27.7 million profit in the first quarter of last year. Overall revenues dropped 28 percent, with the company reporting $331.4 million compared to $462.8 million a year ago.

    Still, Range CEO Jeff Ventura said the company continues to achieve excellent operational results, having cut costs 10 percent year-over-year, a factor that helped convince its 29-member bank group to unanimously reaffirm its $3 billion borrowing base. The balance drawn on that credit was $31 million.

    Another “monumental” event for the company was the start of Mariner East pipeline, making it the first domestic company to export ethane to Europe, he said. Ventura said that ability will be “increasingly valuable” during periods of local oversupply.

    “Since the beginning of the year, we have seen improved pricing for condensate and NGLs, and sentiment seems to be more optimistic regarding potential improvements in natural gas fundamentals and pricing,” Ventura said in a statement.

    Like other energy companies, Range has been scaling back its drilling operations and workforce. Earlier this year, the company trimmed jobs in Fort Worth and Pittsburgh, the hub for its Marcellus Shale operation. The company laid off 55 people, including 20 in Fort Worth.

    Range also slashed its capital budget by 45 percent, saying it would spend $495 million. Despite those cuts, the company said production was up 17 percent in the Marcellus versus last year.

    It closed the sale of its Bradford County non-operating Marcellus assets in March, bringing in $110 million, the company reported. This month, Range also signed a sale agreement for $77 million on assets in central Oklahoma.
  • Pipelines to Mexico Are a Lifeline to Texas NatGas.  Everyone who speaks about NatGas in Texas speaks about Mexico’s need for U.S. NatGas.  Pemex’s problems only highlighted the need for more NatGas to Mexico.  As Mexico’s manufacturing base expands (more U.S. companies going to Mexico, i.e. Ford and Carrier to name a few), its need for energy and U.S. NatGas is the only solution.  Below is a map from the Financial Times which identifies these pipelines.

  • Japanese Businesses Targeting the Appalachian Basin.  Gov. Earl Ray Tomblin and U.S. Sen. Joe Manchin, along with the West Virginia Department of Commerce and the Discover the Real West Virginia Foundation, hosted a luncheon with Japanese business leaders on Friday.

    The event aimed to highlight the strong partnership between West Virginia and Japan and to explore new investment opportunities in natural gas statewide.

    “Today’s luncheon marked the celebration of a shared vision between our state and Japan that has continued to foster and grow for nearly three decades. This long-term partnership continues to play a critical role in our state’s economy, as Japanese investments help strengthen our workforce and create jobs for hardworking West Virginians,” Tomblin said in part of a statement.

    The luncheon’s feature segment on West Virginia’s growing shale gas industry included presentations from Kyle Mork, president of Energy Corporation of America, and James Crews, vice president of Northeast Business Development with MarkWest Energy Partners.

    JobsOhio is also courting Japanese businesses.  At our Utica Upstream Seminar, Dr. Iryna Lendel commented that JobsOhio has been in Japan courting businesses to build plants in OH.

    Where is PA’s business development effort to leverage low cost NatGas?  Governor Wolf is more concerned with driving the industry out of the state.  
  • Hilcorp Voluntary Stops Fracking Due to Earthquake Concerns.  A natural gas company voluntarily halted fracking activity on a Marcellus shale well in Lawrence County this week while state officials investigate a minor, nearby earthquake.

    Houston-based Hilcorp Energy stopped fracking one of the four wells it drilled on its North Beaver NC Development pad west of New Castle about noon Monday, hours after a 1.9 magnitude earthquake was detected nearby in Mahoning.

    The Department of Environmental Protection is investigating the tremor with the Department of Conservation and Natural Resources, said DEP spokeswoman Melanie Williams.
  • Whiting Keeps Drilling in the Bakken.  North Dakota’s largest crude oil producer, Whiting Petroleum, on Wednesday scrapped plans to halt drilling and hydraulic fracturing after an unnamed investor provided an unidentified amount of cash to the producer.

    “On April 14, 2016, Whiting entered into a wellbore participation agreement with a private party who will pay 65% of drilling and completion costs to earn a 50% working interest in 44 gross Williston Basin wells,” Whiting said.

    The deal includes a $30.7 million cash payment Whiting received in April for wells already in progress. Under this agreement, Whiting will continue to run two drilling rigs and will add a completion crew.

    With this participation agreement, Whiting plans to add production and proved reserves with no increase to its capital budget, Kallanish Energy understands.

    The plan, announced as Whiting reported a quarterly loss, led the company to boost the bottom range of its output forecast for the year despite having less than half of its production hedged.

    The cash serves as a major infusion for a company with only $1 million in the bank.

    Whiting had stopped fracking at the beginning of the month and had begun to wind down drilling operations, announcing plans to spend only $160 million this year after June, mostly on maintenance.

    Based on the new operations, Whiting now plans to produce 131,400 to 136,900 barrels of oil-equivalent per day (BOE/d) this year, compared to a previous forecast of 128,000 to 138,000 BOE/d.

    Most of the new wells are expected to start production in the second half of 2016.

    Denver, Colorado-based producer Whiting posted a first-quarter loss of $171.7 million, compared to a net loss of $106.1 million in the year-ago period.

    First-quarter revenue plunged 44.8%, to $292 million, from $529.23 I the year-ago quarter.

    Production fell 12%, to 146,770 BOE/d.
  • Hess Reduces Rig Count in the Bakken.  Hess said it planned to focus on its operations in the core of its core area in the Bakken. Greg Hill, COO of Hess, said in that earnings call that the company would reduce activity to 2 rigs in the play. This compares to an average of 17 rigs in 2014 and 8.5 rigs in 2015.
  • NatGas to Portugal.  The first shipment of liquefied natural gas from the U.S. has reached its destination of Portugal, Kallanish Energy understands.

    The U.S. cargo ship Creole Spirit arrived early Wednesday at the port of Sines, Portugal, carrying a shipment from Houston, Texas-based Cheniere Energy’s Sabine Pass LNG export facility in western Louisiana.

    The U.S., the world’s largest natural gas producer, began expanding its forays into overseas markets earlier this year. While this was the first shipment to Europe, U.S. producers have already shipped gas to Argentina, Brazil, and India.

    LNG shipments to the world will only grow probably substantially as more countries accept these shipments.  

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

Rig Count

  • Baker Hughes Rig Count the week of April 29, 2016
  • PA
    • Marcellus 16 unchanged
  • Ohio
    • Utica 11 unchanged
  • WV
    • Marcellus 10 down 2
  • TX
    • Eagle Ford – 37 down 3
  • TX & NM
    • Permian Basin – 134 down 2
  • ND
    • Williston – 26 unchanged
  • CO
    • Niobrara – 16 down 1
  • TOTAL U.S. Land Rig Count 391 down 10

PA Permits for April 21, 2016 to April 28, 2016

       County            Township       E&P Companies

1.    Tioga                 Richmond       Shell
2.    Washington        Buffalo           Range
3.    Washington        Buffalo           Range
4.    Washington        Buffalo           Range
5.    Washington        East Finley    EQT

OH Permits for weeks ending April 23, 2016

      County    Township    E&P Companies

1.    None this week

Joe Barone 610.764.1232
Vera Anderson 570.337.7149


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