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Expo/Industry events for the next few months

Midstream PA 2016
October 13, 2016
Penn Stater Conference Center
State College, PA

Latest facts and a rumor from the Marcellus and Utica Shale

  • Comments from DUG East.  DUG East ended another good conference.  While attendance was expectedly down, the value for attendees was the number of representatives from Appalachian Basin E&P Company walking the aisles.
    • Commonly heard remark “not enough take away continues to hamper the drilling activity”
    • PA permitting is still a challenge compared to other states
    • No replacement for efficient engineering
    • On-going decisions for E &P companies ‘refracking vs. new fracking
    • “Unlikely to see number of rigs at 2000; more likely around 1400” Reduction of rigs will effect number of suppliers needed; efficiencies and cost will be paramount even when activity resumes
    • Mergers and acquisitions will be active; some have strong balance sheets and there are good assets available with funding by equity companies
    • Marcellus, Utica and Devonian appear to be a longer better investment than most other shales
    • Experienced workers could be a challenge when activity does resume; companies may need to pay a sign-on bonus to sway good workers back to the oil &gas

      One prediction – NatGas will be at $3.00 by October 2016
  • More U.S. Downstream Projects.  North America and Asia will drive the global liquefied natural gas (LNG) industry, with the addition of significant liquefaction and regasification capacity coming online in the next four years, UK’s research and consulting firm GlobalData said Monday in its latest LNG report, Kallanish Energy reports.

    According to the firm, 42 of the 75 planned liquefaction terminals expected to come online worldwide by 2020 will be located in North America. Meanwhile, India and China are expected to spend the most of all countries to bring planned projects to life, with combined investments of $17.1 billion between 2016 and 2020. The countries’ regasification capacity will increase by 7.4 trillion cubic feet (Tcf).

    Some 13 LNG regasification projects have been added to GlobalData’s LNG capacity report published last November.  As of now the confirmed cracker plants will be foreign owned
  • Downstream Project in the Permian.  Midstreaming giant Enterprise Products Partners announced plans to build a new cryogenic natural gas processing facility and associated natural gas and natural gas liquids pipeline infrastructure in the Delaware Basin of West Texas/southeastern New Mexico.

    The site for the new processing plant, which will have a nameplate capacity of 300 million cubic feet per day (MMcf/d) and the capability to extract more than 40,000 barrels per day (BPD) of liquids, must be finalized.

    The project is anchored by long-term commitments from a major, unnamed producer, Kallanish Energy reports.  

    This project, which complements our ongoing growth in the region, is the third cryogenic natural gas processing plant Enterprise has announced in less than 24 months,” said A.J. “Jim” Teague, CEO of Enterprise’s general partner.

    With yesterday’s project announcement, Enterprise by mid-2018 will have Delaware Basin processing capacity totaling 800 MMcf/d – up from just 40 MMcf/d in 2012.

    In addition to providing new gas processing capabilities, the project also includes construction of rich-gas gathering lines, a residue pipeline to the nearby Waha Hub and a liquids pipeline to Enterprise’s Mid-America Pipeline system.
  • Utica’s Top Drillers and Wells.  Drillers keep pumping natural gas from eastern Ohio’s Utica shale, and Rice continues to lead the way with big wells.

    The Pennsylvania company continued its quarterly trend of owning the top well in the state. In the first quarter of 2016 Rice (NYSE:RICE) operated a well on its formidable Mohawk Warrior pad that pumped out 1.63 billion cubic feet of natural gas.

    Belmont and Monroe counties are where drillers are finding the most success lately.

    Twenty-three drillers produced a total of 329.5 billion cubic feet of gas in the first three months of 2016, according to new ODNR figures, up 8.7 percent from the prior quarter.

    Oil production, however, fell to 5.5 million barrels from 6.3 million barrels in the previous quarter.

    Here are the top gas wells from each driller, ranked in descending order.
  • Rice Energy, Belmont County, Mohawk Warrior 12H, 1.63 billion cubic feet
  • Ascent Resources, Belmont County, Smith A 1H-12, 1.35 billion cubic feet
  • Antero Resources, Monroe County, Delong Unit 4H 1.3 billion cubic feet
  • Eclipse Resources, Monroe County, Fuchs A 4H, 1.1 billion cubic feet
  • Gulfport Energy, Belmont County, Lorna 2A, 1.08 billion cubic feet
  • Consol Energy, Monroe County, Brewster SWITZ6HHSU, 1.03 billion cubic feet
  • Chesapeake Energy, Jefferson County, Keystone Trust 34-10-3 10H, 935.4 million cubic feet
  • Exxon Mobil, Belmont County, Kemper A Unit 1H, 882.4 million cubic feet
  • EdgeMarc Energy, Monroe County, Moonraker 2-PPH, 822.7 million cubic feet
  • Hess Ohio, Harrison County, Cadiz D 4H-8 811.2 million cubic feet
  • Magnum Hunter Resources Corp., Monroe County, Stalder Unit A 3UH, 661.2 million cubic feet
  • Hilcorp Energy, Columbiana County, Fairfield-Nolker 7H, 503.9 million cubic feet
  • Atlas Noble, Columbiana County, Firestone Homestead Pad A 3H, 360 million cubic feet
  • Protégé Energy III, Washington County, Caywood A 1H, 276.8 million cubic feet
  • Rex Energy, Guernsey County, J Hall Unit 2H, 219.4 million cubic feet
  • Carrizo Oil, Guernsey County, Wagler 2H, 142.2 million cubic feet
  • Chevron, Harrison County, E Clark South 7-25HD, 99.2 million cubic feet
  • PDC Energy, Washington County, Garvin 3H, 79.4 million cubic feet
  • Statoil USA, Monroe County, Dangel 5-H, 64 million cubic feet
  • Halcon Operating, Trumbull County, Kibler 2-3H, 46 million cubic feet
  • Artex Oil Co., Noble County, Frec Nobl Olive A-1H, 42.3 million cubic feet
  • EnerVest Operating, Carroll County, Cairns 5H, 16.7 million cubic feet
  • NGO Development, Coshocton County, Cosh Mill Creek A-1H, 14 million
  • Rex Energy Making Moves in Western PA.  An additional $45.7 million capital commitment from development partner Benefit Street Partners (BSP) will grow by 12 wells Rex Energy’s Moraine East Area development program in Western Pennsylvania, the independent producer announced Tuesday.

    The additional funding lent to Rex by Benefit Street is part of a $350 million capital package committed by the investment/private equity firm since March 1, Kallanish Energy calculates.

    BSP’s election increases the total capital commitment to date by the firm to $98.1 million, from $51.6 million, and BSP’s total well participation in the Moraine East Area in Butler County to 30 wells.

    “The increased $45.7 million capital commitment from BSP, plus the proceeds from the recently announced Illinois Basin sale [$40 million and as much as $50 million], will provide Rex Energy with over $80 million of additional liquidity in 2016,” said Tom Stabley, CEO of State College, Pennsylvania-based Rex.

    The liquidity will allow Rex to continue its plan to hold the majority of its roughly 130,000 Appalachian Basin acreage by production by mid-2017.

    With the additional capital commitment from BSP, the company expects full-year 2016 net operational capital expenditures to be roughly $35.5 million.
  • NatGas Power Plants Going Online.  Power plant developer Gemma Power Systems said it’s substantially completed the twin 829-megawatt (MW) Panda Liberty and Panda Patriot combined cycle power plants in Pennsylvania.

    The projects, located in Bradford and Lycoming counties, are state-of-the-art natural gas-fired facilities that will provide power to more than two million homes.

    These facilities were the first projects to be designed and sited specifically to capitalize on the Marcellus Shale play in Pennsylvania, Kallanish Energy finds.

    Both facilities technically have been substantially completed, which means the developer (Gemma) has turned each over to their owner, Panda Power.
  • New Leader at Range.  The biggest natural gas producer in southwestern Pennsylvania will soon have a new leader for its local operations.

    Range Resources Corp. (NYSE: RRC) announced Tuesday afternoon that Dennis Degner is now heading its operations for this region, replacing Senior Vice President John Applegath, who will move over to head Range's Midcontinent and Northern Marcellus Division and be based in Fort Worth, Texas, where Range is headquartered. Degner's title is now Southern Marcellus Shale Division vice president.

    Degner, a 2015 winner of the Pittsburgh Business Times Energy Leadership Award, has been with Range since 2010. Range EVP Ray Walker, who gave a keynote address at Tuesday's DUG East conference held by Hart Energy at the David L. Lawrence Convention Center, said Degner has done a great job in his time at Range.

    "I'm actually the guy who recruited him," Walker said.

    Degner was promoted to vice president of operations at Range Resources in July 2014 with responsibility for the drilling, completion and production of Range's 500,000 acres in the region. He spent four years as Range's director of completions, having joined Range in July 2010 after a career as an engineer at EnCana and Sierra Engineering.

    Applegath is a well-known force in Marcellus Shale development, and joined the Fort Worth, Texas-based company in 2008. He also has worked at Anadarko Petroleum, Exxon Mobile, Champlin Petroleum and others.
  • Consol Focusing on NatGas in Monroe County, OH.  Since selling five West Virginia coal mines for $3.5 billion in 2013, Consol Energy has also unloaded Virginia’s Buchanan Mine for $460 million — all in an effort to help set new Marcellus and Utica shale natural gas production marks in Monroe County.

    More than one industry official speaking Wednesday at the 2016 DUG East Conference in Pittsburgh referenced Monroe County as a center of operations, as Edgemarc Energy Holdings’ “Moonraker” well near Woodsfield gives firm officials hope for the future.

    During the first quarter of 2016, Consol reached a company record for natural gas production at 97.5 billion cubic feet. This is a 36-percent increase from the 71.6 billion the firm pumped at the same time last year.

    “We are in position to be a dominant player in the Utica Shale for years to come,” Consol Chief Operating Officer Tim Dugan said. “Our initial area of focus has been Monroe County, Ohio.”

    Dugan said Consol used substantial portions of the proceeds from selling the coal mines to become a major player in the oil and natural gas business. Information he provided indicates Consol controls 622,000 acres for Utica development.

    “At Consol, we are quite proud of our work in the Utica,” he said.

    Consol’s “Switz 6” pad in Monroe County produced 5.69 billion cubic feet of natural gas from January through March from its four Utica wells, with the best-performing well accounting for 1.77 billion cubic feet of the production.

    The company also has the “Moundsville 6H” well in Marshall County that yielded 39 million cubic feet of natural gas during its first 24 hours. The well features a horizontal shaft nearly two miles in length underground.

    Marcellus production volumes in the quarter for Consol were 51.2 billion cubic feet, while the firm pumped 22.9 billion cubic feet from the deeper Utica formation.

    EdgeMarc Chief Operating Officer Callum Streeter said the Canonsburg; Pa.-based firm also operates in Washington County, Ohio. The substantial portion of the driller’s financial support comes from global financial services giant Goldman Sachs and the Ontario Teachers’ Pension Plan.

    “We believe in holding back pressures on these Utica wells to realize their profitability,” Streeter said of allowing natural gas to flow from the well at a slower rate.

    Mark Rothenberg, CEO of Apex Energy, discussed the impact of lower active rig counts related to natural gas production. According to oilfield services giant Baker Hughes, there are now 474 rigs running in North America. This compares to 989 at this time last year — and 2,101 two years ago.

    “We feel today’s shortage of rigs is not going to be felt until mid-2017 for natural gas,” Rothenberg said of a slowdown in drilling causing commodity prices to rise.
  • EdgeMarc and Apex Overviews.  Executives at two privately owned drilling companies based in Pittsburgh pulled back the curtain on some of the growth strategies they are adopting.

    Two companies, EdgeMarc Energy Holdings LLC in Southpointe and Apex Energy LLC in Wexford, are much smaller in scale than other more recognizable names in the Marcellus and Utica shales like Range Resources Corp., EQT Corp. and Consol Energy Inc. But flying under the radar -- and not being publicly traded -- has advantages that both companies highlighted Wednesday at Hart Energy's DUG East natural gas industry conference downtown.

    EdgeMarc is about four years old with about 35 employees and 50,000 net acres in the Marcellus and Utica shales and 56 wells so far. It's backed by private equity firm Goldman Sachs and last year received a $300 million commitment from the Ontario Teachers’ Pension Fund.

    "We're very pleased to have that kind of financial strength behind us," said Callum M. Streeter, EdgeMarc's chief operating officer.

    EdgeMarc's strategy is to acquire high-quality assets, with most of its acreage (25,000) and wells (52) in Butler County. But Streeter said in recent months, EdgeMarc has begun to shift capital and energy into the dry-gas Utica Shale, which is a hotter market these days than the wet-gas Marcellus. It has about 12,000 acres in Monroe County, Ohio, in the dry-gas Utica, as well as about 16,000 acres in Washington County.

    For the remainder of this year and into next year, EdgeMarc plans to focus on dry-gas Utica Shale in Monroe County. It's seeing what Streeter called "bullish results" from one of its Monroe County wells, called Moonraker.

    "We're very pleased with how things are going," Streeter said.

    The strategy of another private driller, Wexford's Apex Energy, is diverting from other E&P companies -- and that's by design, said CEO Mark Rothenberg.

    "We asked ourselves, what is the market missing," Rothenberg said.

    That has led Apex Energy to focus its efforts on the dry Utica in western Westmoreland County, in and around Salem and Hempfield Townships -- areas where the acreage had proven value and was viewed by others as a higher-risk area. It has about 30,000 acres in western Westmoreland County and has been able to prove its wells' performance would be just as good as the ones coming from further south in Washington and Greene counties.
  • Blue Racer to Begin Barging.  Blue Racer Midstream LLC, a joint venture of Caiman Energy II LLC and Dominion Resources Inc., plans to begin transporting its natural gas products via barge along the Ohio River later this year.

    On Tuesday, Casey Nikoloric, a spokesperson for Blue Racer, confirmed to NGI's Shale Daily that CEO Stephen Arata said the company will begin moving its products by barge sometime in 3Q2016. He made the comments after Blue Racer officials gave a presentation at the Utica Midstream seminar on June 8. The event was organized by the Canton Regional Chamber of Commerce and held at the Pro Football Hall of Fame.

    Blue Racer operates in southeast Ohio and the panhandle of West Virginia, in the heart of the Marcellus and Utica shales. According to company's website, Blue Racer currently operates 688 miles of natural gas gathering lines and 153 miles of natural gas liquids (NGL) and condensate gathering lines. It also has 800 MMcf/d of natural gas processing capacity in the region, as well as 123,000 b/d of fractionation capacity and 12,500 b/d of condensate capacity. The company would not specify which products would be transported by barge.

    The company would presumably make barge shipments from its facilities along the Ohio River at Natrium, WV (see Shale Daily, Jan. 31, 2012). The Natrium complex is situated on a 95-acre site in Marshall County, WV, and has two cryogenic natural gas processing plants, each with 200 MMcf/d of processing capacity. A 200 MMcf/d processing train currently under construction at Natrium would increase the facility's capacity to 600 MMcf/d when completed (see Shale Daily, Jan. 29).

    According Blue Racer's website, the company held four gathering contracts -- with aggregate acreage dedications of approximately 211,000 acres, including 48,000 acres associated with 40 dedicated well pads -- at the end of July 2015. The company also has one volumetric gathering commitment, under which a customer pays a fee based on a minimum throughput of 180 MMcf/d.

    In a related matter, last February the U.S. Coast Guard (USCG) withdrew a proposal to allow barges to transport wastewater in bulk from hydraulic fracturing operations along the nation's waterways (see Shale Daily, Feb. 25). The USCG said it withdrew the idea in part due to tepid support from the oil and gas industry, but it may revisit the idea in the future.
  • Finally, Some Rational Fracking Decisions.  (Thank you, JURIST)   A judge for the US District Court for the District of Wyoming [official website] ruled  Tuesday that the Department of the Interior and the Bureau of Land Management (BLM) "lacked Congressional authority to promulgate" regulations concerning fracking on federal and Indian lands. The court came to this conclusion by applying the test, as formulated in Chevron USA Inc. v. Natural Resources Defense Council, Inc. [opinion], which asks whether Congress has "directly spoken to the precise question at issue." Upon a negative answer "a reviewing court must respect the agency's construction of the statute so long as it is permissible." In this case, the court found that the BLM's attempt to regulate fracking was "in excess of its statutory authority and contrary to law." It is expected that the government will appeal the ruling.

    Fracking or hydraulic fracturing is a controversial method of tapping natural gas deposits with highly pressurized fluids, sand and minimum chemicals. The method, commonly used in Marcellus Shale deposits, has raised environmental and public health concerns. In October the same judge issued a preliminary injunction prohibiting the Department of the Interior and the BLM from enforcing regulations applying to fracking. US Secretary of the Interior Sally Jewell announced the publication of the rules at issue in this case in March of last year. The New York Department of Environmental Conservation banned fracking in the state last June.

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Rig Count

  • Baker Hughes Rig Count the week of June 24, 2016
  • PA
    • Marcellus 13 unchanged
  • Ohio
    • Utica 12 unchanged
  • WV
    • Marcellus 11 down 1
  • TX
    • Eagle Ford –34 unchanged
  • TX & NM
    • Permian Basin – 150 up 4
  • ND
    • Williston – 26 up 2
  • CO
    • Niobrara – 12 unchanged
  • TOTAL U.S. Land Rig Count 397 down 1

PA Permits for June 16, to June 23, 2016

      County      Township             E&P Companies

1.    Butler        Butler Township      XTO
2.    Sullivan      Davidson               Exco
3.    Tioga         Middlebury            Schell

OH Permits for weeks ending June 18, 2016

        County        Township    E&P Companies

1.    Jefferson        Ross           Chesapeake
2.    Jefferson        Salem         Chesapeake

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

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