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NewsLetters

Expo/Industry events for the next few months

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

http://www.dugeast.com/

Latest facts and a rumor from the Marcellus and Utica Shale

  • Where Do Oil Prices Go From Here?  Now that the much heralded OPEC meeting is over everyone wants to know up, down or sideways?

    As I was watching CNBC when the announcement came that nothing was decided regarding a freeze or individual country freezes.  The WTI went down about 2% within the first few minutes, but ended the day, June 2 around $49.

    The fact that there was not a selloff in oil makes me believe a new floor for oil is being established.  Support for this pricing are the following pieces of information that I’ve read over the last few days.

    ♦ The Nigerian conflict is getting worse.  Today, it was reported that two Chevron wells were blown up.  A couple of days some pipelines were blown up.  Nigerian output was down 800,000 barrels per day before today’s news about Chevron.  How many more barrels will be taken off the market remains to be seen.
    ♦ ISIS in Libya is certainly curtailing production.  This conflict is flying under everyone’s radar, but it is removing barrels from the market
    ♦ Iran’s oil and gas infrastructure is in horrible condition.  Different articles are commenting that the Iranians cannot increase production as much as they would like everyone to believe they can.
    ♦ Saudi production is about at its limit.  A number of reports indicate the Saudi’s cannot really increase production much more.
    ♦ Venezuela.  When does the civil war begin?  Schlumberger has pulled out.  An article today reported that the Venezuelan oil company cannot pay BP the storage costs for its oil on BP tankers.  Stick the fork in they’re just about done!  

    When you look at these five situations, it’s hard to believe that oil prices will go down much from here.
     
  • The Reason for NatGas Price Increase.  We watch CNBC everyday looking for updates (actually good news) on the price of oil and nat gas.  It was a real surprise that nat gas jumped to 2.43 at one point this week.   But there was no news on what caused the upward movement but we’ll take it any way we can get it.

    After some research here’s what we found:

    ♦ July contracts are higher due to expectation of higher than average temps.  See below
    ♦ The first two weeks of June will start off bearish.
    ♦ Investors are doing some short covering is likely (most likely) the cause of this rally.
    ♦ July natural gas contracts are higher today, due partly to expectations of a warm summer and short covering.



    There is also speculation that the estimated amount of nat gas stored may not have been correctly calculated, it could be less.  As part of that let’s not forget there is little nat gas being added to storage due to lack of rigs in production and pipelines not all online.

    Many of the traders tend to think this uptick is purely short-covering. They believe current storage levels are still bearish, but the surplus is expected to decrease over the summer. There are a few important weeks coming up, as lower-than-average injection numbers are needed in order for storage levels to remain below capacity at the end of the shoulder season.

    U.S. gas production has been in a decline, and nearly 1 bcf/d of gas production in Canada are shut in due to the Fort McMurray fire.  The investors are currently anticipating U.S. dry gas production to fall to 68 bcf/d by the end of the year, and we don't expect any material growth in 2017. Rig counts will need to rise materially for production to grow as high shale declines eat into production.

    Mexican exports should help alleviate some of the surplus storage over the summer, as exports are expected to increase but it can’t be too much or too soon.  

    While we are pleased with the increases in NatGas, it’s important to remember that the price in the Appalachian Basin is much less.

    Natural gas fuels a third of U.S. electric power generation and heats half of the country’s homes — and those numbers are climbing. But despite historic lows in natural gas prices, America’s lack of natural gas pipeline capacity has prevented most consumers from fully realizing the advantages of this abundant, reliable, affordable and environmentally responsible resource.
     
  • Time to Support Atlantic Sunrise & Natural Gas Infrastructure.  Atlantic Sunrise, which the Federal Energy Regulatory Commission’s (FERC) draft Environmental Impact Statement (DEIS) recently concluded will have “less than significant” environmental impacts – will help solve this problem by adding much needed pipeline capacity.

    Atlantic Sunrise will also:

    ♦ Drive $1.6 billion in new wages, revenues and clean energy investments in our regional economy
    ♦ Provide reliable, affordable and clean energy to up to 7 million homes
    ♦ Directly employ approximately 2,300 people in 10 Pennsylvania counties during the project’s construction phase

    FERC needs to hear from industry supporters and partners like you. Please help support the production of clean, affordable natural gas. Here is how you can help.

    Attend a FERC Public Meeting:

    Monday, June 13, in Lancaster, PA at 7:00 p.m.
    Tuesday, June 14, in Annville, PA at 7:00 p.m.
    Wednesday, June 15, in Bloomsburg, PA at 7:00 p.m.
    Thursday, June 16, in Dallas, PA at 7:00 p.m.

    Submit supportive comments during the FERC public comment period ending on June 27th, 2016. This is a simple and easy way to show your support for this critical energy infrastructure.

    Sign the FERC Support Letter Now!
     
  • Chesapeake’s Future Could Be Looking Better According to Zacks. Chesapeake is on track with its plan of reducing long-term debt by monetizing its assets and cutting lease-hold spending. This monetization initiative is mainly aimed to cope with the mounting debt level as well as to fill the funding gap for its 2016 expenditures that resulted from volatile natural gas prices.

    The company foresees remarkable cost-cut efforts as well as efficiency gains in its core operating areas. Chesapeake has the deepest inventory in the preeminent part of the Utica as well as some of the finest locations in Eagle Ford and Marcellus. These are likely to help the company in achieving its target.

    Chesapeake announced a cut in its 2016 capital spending. For 2016, the company expects capital expenditure in the range of $1.3–$1.8 billion, down 57% from $3.6 billion in 2015. This should help the company in improving cash flows as the pricing weakness continues to weigh on financials.

    Chesapeake remains one of the industry’s most active players in managing asset portfolio through a combination of acquisitions and disposals. With a bigger inventory of unconventional resource potential than probably any other domestic independent, Chesapeake boasts a leading position among the top unconventional liquids-rich plays comprising Eagle Ford, Utica, Granite Wash, Cleveland, Tonkawa, Mississippi Lime and Niobrara and in the Marcellus, Haynesville/Bossier and Barnett natural gas shale plays.

    However, Chesapeake’s oil exposure, though limited, further increases bearishness on the stock as the commodity has nosedived since Jun 2014. With crude prices anticipated to remain weak throughout 2016, financials are likely to remain pressed.

    For 2016, Chesapeake expects total production, after adjusting for asset sales, in the range of flat to 5% decline from 2015. Though the company is the second-largest natural gas producer in the U.S., it has been struggling to fund its capital budget amid diminishing cash flows in a weak natural gas price scenario.

    Though Chesapeake’s ongoing asset monetization initiatives are working well, the company’s balance sheet is still more leveraged than its peers. At the end of the first quarter, the company’s debt balance was $9.4 billion. In the reported quarter, the company retired its 3.25% Senior Notes due Mar 15, 2016, and repurchased approximately $282 million of debt due in 2017 at an average discount of approximately 39%.
     
  • MDS Bullish on the Marcellus.  MDS Energy Partners LP is raising $100 million to acquire oil and gas assets, according to a filing the Kittanning-based company made with the U.S. Securities and Exchange Commission.

    So far, the private placement has raised $1.1 million.

    “It’s a multiyear upstream and midstream offering,” Jason Knapp, a principal at MDS, told the Business Times. “The nature of it is to acquire oil and gas assets that are either distressed or undervalued and then ultimately to sell those assets at a later date.”

    MDS Energy Partners is one of several entities that fall under the umbrella of MDS Associated Companies Inc., owned by Michael D. Snyder.
     
  • Williams Continues Support in NY.  Fire departments, schools and youth sports organizations are a few of the 14 recipients of more than $50,000 in funding from Constitution Pipeline’s community grant program, the company announced today.

    Since its inception in 2012, more than $2 million has been awarded by the Constitution Pipeline Community Grant Program to 159 organizations to help fund noteworthy projects that directly benefit communities in the pipeline project area.

    “We’ve been very pleased with the response received from communities who have benefited over the years from the Constitution Pipeline community grant program,” said Matt Swift, Constitution Pipeline project manager. “It has been a great way for us to demonstrate, in a very tangible way, our desire to be a good neighbor and partner with so many worthwhile organizations to improve and strengthen the communities where we would operate.”

    An advisory committee consisting of community leaders and company representatives helped determine which projects would receive funding and how the dollars would be distributed. Grants were awarded based on overall community need and merit of the proposal. Examples of eligible projects included emergency/first responder support, youth or senior services, education programs, assistance in the enrichment of wildlife habitat and promotion of environmental education.

    Constitution Pipeline Company, LLC is owned by subsidiaries of Williams Partners L.P., Cabot Oil & Gas Corporation, Piedmont Natural Gas Company, Inc. and WGL Holdings, Inc. The 125-mile pipeline project is proposed to connect domestic natural gas production in northeastern Pennsylvania with northeastern markets during the second half of 2017.
     
  • Bakken Pipeline Needs to Provide More Info.  The Iowa Utilities Board told prospective Bakken pipeline builder Dakota Access that it needs more information before it gives the go-ahead for construction, Kallanish Steel sister publication to Kallanish Energy reports.

    The board met Wednesday to decide whether to allow Dakota to begin building its pipeline through the state in areas where its permitting is already complete. Several legs of the planned pipeline are still under review by state regulatory agencies.

    The board is expected to provide more information – and possibly a decision – by the end of the week.

    The finished pipeline will stretch from the Bakken oilfields in North Dakota to Patoka, Illinois. Construction on 1,168-mile, 30-inch diameter line is on-going in North Dakota, South Dakota and Illinois.
     
  • WVU Fracking Project a “Success” Those involved in a West Virginia University fracking project are praising its success after the first year.

    The Exponent Telegram reports WVU began the Marcellus Shale Energy Environmental Laboratory project last June.

    The study is meant to give a look at the hydraulic fracking process over five years.

    Those involved in the project say it has put West Virginia and the school at the cutting edge of research.

    Brian Anderson, professor of chemical engineering and director of the WVU Energy Institute, says two production wells were drilled last fall, along with a scientific observation well.

    “Everything went swimmingly. Of course, some of the schedules were changed with the rain last June, but it was really a huge success during the stimulation drilling in the early part of the test,” Anderson said.

    Anderson says he has spoken about the impact of the project in China, and that delegations from Colombia and Mexico have visited regarding the project.

    “It puts us in a unique position to lead in this globally,” he said.

    Charlie Burd, executive director of the Independent Oil and Gas Association of West Virginia, said that’s exactly where the state should be.

    “We should be at the cutting edge, we should be at the forefront, because the largest natural gas reserves in the world lie under Monongalia County, combined with Marcellus and Utica,” he said. “Hundreds of years of natural gas supply lies there. It is only appropriate that this would be the place such information would be garnered.”
     
  • Eclipse Resources and Halliburton Complete Longest US Lateral.  Halliburton has announced that it worked with Eclipse Resources Corporation to complete hydraulic fracturing of the extended reach lateral test well known as “Purple Hayes”. The Utica Shale well had a lateral length of over 18,500 feet and was completed with 124 frac stages in 24 days.  The total depth was 27,046 feet, including the lateral extension which Eclipse believes is the longest horizontal onshore lateral ever drilled in the United States.

    The fracturing operations performed by Halliburton utilized the company’s Q10™ pumps, equipped with dual fuel technology, which performed with zero down time.  In addition, SandCastle® PS-2500 units equipped with Halliburton Dust Control systems provided superior sand loading logistics while reducing the environmental footprint on site.  The efficiencies achieved with this equipment allowed Eclipse to improve its daily completion rate by 20% over the original plan, lowering their ultimate cost per BOE.

    Tony Angelle, area vice president for Halliburton says, “The Halliburton and Eclipse team worked incredibly efficiently on this well, setting 124 of our Obsidian® Frac plugs, averaging 5.3 frac stages per day and achieving a North America land record of 26,641 feet in plug set depth.  We are proud this accomplishment was made using our complete Frac of the Future fleet, including dual fuel pumps that reduced fuel consumption by 40%.”

    Thomas Liberatore, executive vice president and chief operating officer for Eclipse says, “I am pleased to say that the drilling and completion of the well progressed almost exactly as designed, which, although expected by us, was truly remarkable and ground-breaking execution by our team.”http://www.shaledirectories.com/blog/

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 June 3, 2016
     
  • PA
    • Marcellus 14 down 2
  • Ohio
    • Utica 11 unchanged
  • WV
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford –29 unchanged
  • TX & NM
    • Permian Basin – 142 up 5
  • ND
    • Williston – 22 unchanged
  • CO
    • Niobrara – 13 unchanged
       
  • TOTAL U.S. Land Rig Count 382 up 8

PA Permits for May 26, to June 2 2016

       County       Township   E&P Companies

1.    Fayette        Luzerne     Chevron

2.    Greene        Morris        EQT

3.    Greene        Morris        EQT

4.    Greene        Morris        EQT

5.    Greene        Morris        EQT

6.    Greene        Morris        EQT

7.    Greene        Morris        EQT

8.    Greene        Morris        EQT

9.    Greene        Morris        EQT

10.    Tioga          Rutland       Shell

11.    Washington  Canton   Range

12.    Washington  Carroll    EQT

OH Permits for weeks ending May 28, 2016

       County        Township    E&P Companies

1.    Belmont        Goshen       Rice

2.    Belmont        Goshen       Rice

3.    Jefferson        Knox          Chesapeake

4.    Monroe          Salem        Statoil

5.    Monroe          Salem        Statoil

Joe Barone jbarone@shaledirectories.com 610.764.1232

Vera Anderson vera@shaledirectories.com 570.337.7149

DUG Technology