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Expo/Industry events for the next few months

West Virginia Oil and Gas Expo
Oct. 5, 2016
Mylan Park's Expo Center
Morgantown, WV

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

Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, Bakken and Niobrara Shale Plays

  • FERC Gives Nexus Pipeline Favorable Report.  The Federal Energy Regulatory Commission has issued a favorable report on the Nexus Gas Transmission Pipeline, Kallanish Energy has learned.

    The federal agency that oversees interstate pipelines released a favorable draft on the Environmental Impact Statement for the pipeline that would cross northern Ohio and connect with pipelines in Michigan.

    Building the 255-mile pipeline would create some environmental issues, but those problems can be reduced and minimized by taking certain steps, the agency said in the 1,498-page document.

    The $2 billion project would transport natural gas across northern Ohio to Michigan and Ontario. It would also connect to the Midwest and the Gulf of Mexico Coast.

    The 36-inch pipeline would transport up to 1.5 billion cubic feet of natural gas per day.

    It is considered one of the key projects to get Utica and Marcellus Shale natural gas to markets.

    It is being developed by Texas-based Spectra Energy and Michigan-based DTE Energy.

    FERC will schedule public hearings in August on its report and accept public comment through Aug. 29.

    A final decision on the Nexus Pipeline is expected by Nov. 30, and the pipeline could be in operation in the fourth quarter of 2017.
  • PA Commonwealth Court Agrees with Sunoco Logistics.  A Pennsylvania appeals court upheld Sunoco Logistics' status as a public utility, striking a blow to a batch of lawsuits challenging the company's ability to use eminent domain to seize land for its planned Mariner East 2 gas liquids pipeline.

    Commonwealth Court ruled in three combined Cumberland County cases that the Philadelphia-based company is certified by the state Public Utility Commission, which allows it to take land through legal action in cases where it could not reach deals with landowners.

    “The court's decision reaffirms every decision by lower courts across Pennsylvania as to Sunoco Pipeline's status as a public utility corporation,” the company said in a statement.

    Attorney Michael Faherty, who represented landowners in the Cumberland County cases, did not return a call for comment.

    The proposed pipeline will move ethane, butane and propane from Marcellus shale wells in Western Pennsylvania to Sunoco's terminal at Marcus Hook, south of Philadelphia. The first phase, which involved reversing flow and improving an older pipeline, went online this year.
  • Well Completions Drop.  Estimated oil well completions in the United States dropped 69% in the second quarter 2016, compared to a year earlier, the American Petroleum Institute reported.

    Estimated exploratory gas well completions in the second quarter decreased 84% compared to year-ago levels.

    So far this year, development well footage has decreased 53% percent and exploratory well footage has decreased by 64%.

    Well completions in the first quarter were down 70% from a year earlier with exploratory wells declining by 90% and total feet drilled declining by 73%, Kallanish Energy has learned.

    To boost America’s shale boom, “we must revisit current energy policy, speed up the LNG export approval process and avoid unnecessary regulations to help U.S. producers to compete effectively in the global market under the low-price environment,” said Hazem Arafa, director of API’s statistics department.

    The analysis of 60,000 fields worldwide, conducted over a three-year period by the Oslo-based group, shows total global oil reserves at 2.1tn barrels. This is 70 times the current production rate of about 30bn barrels of crude oil a year, Rystad Energy said on Monday.
  • Statoil – EQT Close Marcellus Deal.  Norway-based Statoil has completed its sale of roughly 62,500 acres, including 31 Marcellus Shale wells, in northern West Virginia to EQT for $407 million, Kallanish Energy has learned.

    The sale, announced last May, covers acreage largely in Wetzel, Tyler and Harrison counties.

    Equity production from the properties in the first quarter of 2016 was roughly 9,300 barrels of oil-equivalent per day (BOED), Statoil said in announcing the deal’s closure.

    Natural gas production was estimated at 50 million cubic feet per day (MMcfe/d) when the deal was announced.

    Statoil and Statoil USA Onshore Properties retain operated assets in Ohio and its non-operated Marcellus positions.

    The deal increases EQT’s core undeveloped Marcellus acreage by 29%, the Pittsburgh, Pennsylvania-based company said. The deal includes drilling rights on roughly 53,000 acres for deep Utica Shale.

    The purchase complements EQT’s current drilling in Wetzel County, the company said.
  • Sunoco Logistics’ Mariner 2 Review.  Pennsylvania’s Department of Environmental Protection has begun its technical review of the $2.5 billion Mariner East 2 Pipeline, Kallanish Energy has learned.

    Officially, the 350-mile pipeline, that will carry natural gas liquids from Ohio, West Virginia and western Pennsylvania to Marcus Hook near Philadelphia, is known as the Pennsylvania Pipeline Project.

    The liquids, primarily propane and butane, will then be shipped to domestic and overseas markets from Marcus Hook.

    The project by Sunoco Logistics is designed to handle 275,000 barrels per day (BPD) from the Marcellus and Utica Shale plays.

    The company’s Mariner East 1 Pipeline currently is transporting ethane and propane to Marcus Hook.

    The two pipelines will largely follow the same route, which will traverse 17 counties across southern Pennsylvania.

    The pipelines are primarily regulated by the U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration, although state permits are required.

    Pennsylvania will extend the public comment period on the project from 30 to 60 days and will hold five public hearings in August. The deadline for comments is Aug. 24.

    The Mariner East 2 has come under attack by local residents and activist groups.
  • EnLink Opens Bidding Season in the Permian.  EnLink Midstream, LLC launched a binding open season for volume commitments for common carrier transportation service on its new Greater Chickadee crude oil gathering system (Greater Chickadee) with origin points in Upton and Midland counties in Texas and destination points at two terminals in Midland County, Texas. The design capacity of Greater Chickadee will be determined based upon the level of interest shown by potential committed shippers during the open season. The open season began July 11 at 8 a.m. Central time and will close at 5 p.m. Central time on August 10.

    A complete description and additional details regarding the Greater Chickadee open season are available at or by contacting Rick Van Eyk, Vice President of Business Development, at 713-739-3244 or   

    “EnLink is focused on expanding our position in the Permian and offering a full range of integrated midstream services to our customers,” said Barry E. Davis, Chairman, President, and Chief Executive Officer of EnLink Midstream. “With Chickadee, we are leveraging and growing our existing Midland Basin crude oil assets to better serve customers looking to transport crude to major market hubs.”

    In June 2016, EnLink announced that it is investing approximately $70 million to $80 million to build Greater Chickadee, which will include over 150 miles of high- and low-pressure pipelines. The project includes the construction of multiple central tank batteries and pump, truck injection, and storage stations to maximize shipping and delivery options for EnLink’s customers. Greater Chickadee is expected to be fully operational early next year.
  • Resolute Energy Selling Permian Assets.  Independent producer Resolute Energy last week announced an agreement to sell certain Permian Basin midstream assets to an undisclosed midstreamer for up to $110 million, Kallanish Energy learns.

    Denver, Colorado-based Resolute has entered into a series of related agreements under which Resolute and an unnamed existing minority interest holder will sell the gas gathering and water handling systems currently operated by Resolute in its Appaloosa and Mustang project areas in Reeves County, in West Texas.

    The purchase price is comprised of two components: a $50 million payment for the assets currently in place, and up to $60 million in earn-out payments tied to field drilling activity through 2020 that will deliver gas and produced water into the system.

    An earn-out is a contractual provision stating that the seller of an asset will obtain additional compensation in the future if the business achieves certain financial goals, which are usually stated as a percentage of gross sales or earnings.

    Resolute will receive $32.85 million of the initial payment, while the Company’s partner in the Mustang area will receive the $17.15 million balance.

    The proceeds of the sale initially will be used to reduce debt and to fund development activity in Resolute’s properties in the Delaware Basin.

    The transaction is expected to close on Aug. 1.

    Following closing of the transaction, the unnamed purchaser will operate and expand the gathering systems to accommodate all current and future volumes of gas and water produced by Resolute and its partner in the Appaloosa and Mustang areas.

    Resolute and its partner have agreed to dedicate and deliver all gas and water produced from their acreage within the Appaloosa and Mustang areas to the purchaser for gathering, compression and disposal services for a 15-year term.
  • More NatGas to Mexico.  Natural gas pipeline exports to Mexico have risen this year, and the Energy Information Administration expects growth to continue because of growing demand from Mexico’s electric power sector and because of flat natural gas production in Mexico.

    Gross pipeline exports are expected to increase by 0.7 billion cubic feet per day (Bcf/d) in 2016, before falling by 0.2 Bcf/d in 2017, to an average of 5.3 Bcf/d, Kallanish Energy finds in EIA’s July Short-Term Energy Outlook (STEO).

    EIA/STEO projects LNG gross exports will rise to an average 0.5 Bcf/d in 2016, with the startup of Cheniere Energy’s Sabine Pass LNG liquefaction plant in western Louisiana, which shipped its first cargo in February.

    EIA projects gross LNG exports will average 1.3 Bcf/d in 2017, as Sabine Pass ramps up capacity. With expected growth in gross exports, net imports of natural gas decline from 2.6 Bcf/d in 2015, to 0.2 Bcf/d in 2017, and the U.S. is expected to become a net exporter of natural gas during the second half of 2017.
  • Bullish Report on NatGas.  Natural gas Henry Hub spot prices rose in June and averaged $2.59 per million British thermal units (MMBtu) for the month — the highest monthly average since September – the Energy Information Administration reports.

    The increase in prices comes as production has declined and as demand for natural gas to fuel electricity generation has increased, said EIA, reporting in its July Short-Term Energy Outlook (STEO).

    The Henry Hub natural gas spot price averaged $2.59/MMBtu in June, up 67 cents/MMBtu from the average price in May. EIA expects natural gas prices to gradually rise throughout the forecast period, but remain lower than they were last summer.

    Forecast Henry Hub natural gas prices average $2.36/MMBtu in 2016 and $2.95/MMBtu in 2017.

    April’s marketed natural gas production was 78.8 billion cubic feet per day (Bcf/d), a 0.3 Bcf/d decline from March 2016, and in April 2015, according to the most recent EIA data.

    EIA projects increases in the natural gas price will continue through 2016, and will contribute to a reversal in production declines in the second half of the year, Kallanish Energy learns.

    The EIA/STEO forecast of U.S. total natural gas consumption averages 76.5 Bcf/d in 2016, and 77.7 Bcf/d in 2017, compared with 75.3 Bcf/d in 2015.

    In 2016, increases in total natural gas consumption are mainly attributed to increases in electric power sector use. Forecast electric power sector use of natural gas increases by 4.9% in 2016, then declines by 1.4% in 2017, as rising natural gas prices contribute to increasing coal use for electricity generation.

    Forecast industrial sector consumption of natural gas increases by 2.7% in 2016 and by 1.5% in 2017, as new fertilizer and chemical projects come online.

    EIA’s estimated natural gas production in June averaged 79.1 Bcf/d, down almost 1 Bcf/d from the record-high daily average production in February.

    Production will rise by 1% in 2016, and 2.4% in 2017, in response to forecast price increases and increases in liquefied natural gas (LNG) exports, EIA/STEO reports.
  • Ethane Consumption Increasing.  Hydrocarbon gas liquids (HGLs) consumption is forecast to increase by 20,000 barrels per day (BPD) in 2016, and 60,000 BPD in 2017, as increased ethane consumption more than offsets reduced consumption of other HGLs, the Energy Information Administration projects.

    U.S. ethane consumption is forecast to increase by 70,000 BPD (6.3%) in 2016, as expansion projects at ethylene-producing petrochemical plants increase feedstock demand for ethane, EIA reports in the July Short-Term Energy Outlook (STEO).

    In 2017, forecast ethane consumption increases by an additional 80,000 BPD (7.4%), as five new petrochemical plants and a previously deactivated plant begin operations, Kallanish Energy understands.

    Planned terminal builds and expansions and a growing ship fleet allow more U.S. ethane, propane, and butanes to reach international markets, with forecast net HGL exports averaging 1.1 MMBPD in 2016, and 1.4 MMBPD in 2017.

    U.S. crude oil production is projected to decrease from an average 9.4 million BPD (MMBPD) in 2015, to 8.6 MMBPD in 2016, and to 8.2 MMBPD in 2017.

    The forecast reflects declining Lower 48 onshore production that is partly offset by growing production in the federal Gulf of Mexico, according to STEO.

    EIA estimates total U.S. crude oil production has fallen by 1.1 MMBPD since April 2015, to an average 8.6 MMBPD in June 2016. Almost all of the production decline was in the Lower 48 States onshore.

    Based on the current oil price forecast, EIA/STEO expects oil production to continue declining in most Lower 48 onshore oil production regions through mid-2017.

    EIA/STEO projects U.S. crude oil production to decline from 9.2 MMBPD in the first quarter of 2016, to an average of 8.1 MMBPD in the third quarter of 2017.

    Production of 8.1 MMBPD would be 1.6 MMBPD below the April 2015 level, which was the highest monthly production since April 1971.

    Increases in production in late 2017 reflect productivity improvements, lower breakeven costs and a forecast oil price increase.
  • Diamond Does Deal in the Permian.  Independent producer Diamondback Energy said Wednesday it has a deal with an unnamed third party to acquire leasehold interests and related assets in the Southern Delaware Basin for $560 million.

    Upon completion, the pending acquisition will provide Diamondback with primarily operated leasehold interests, the majority of which are located along the Pecos River in Reeves and Ward counties, Texas.

    “Diamondback’s accretive entrance into the Delaware Basin represents another strategic milestone for our company,” said Travis Stice, Diamondback’s CEO. “The acreage sits within the most coveted area of the southern Delaware Basin and has significant multi-zone and long-lateral potential.”

    Specifically, the Midland, Texas-based Diamondback (ticker symbol: FANG) is buying 19,180 net surface acres, roughly 1,000 barrels of oil-equivalent per day (BOED) of current net production based on data provided by the seller and net proved developed reserves, based on internal estimates as of July 2016, of approximately 2.2 million barrels of oil-equivalent (MMBOE).

    “This transaction puts FANG square in the middle of the Delaware and we believe the timing couldn’t be better … as we look for FANG to bring its best-in-class operations to another place with strong potential, plenty of oil, and good economics,” said Jason Wangler, an energy analyst with Wunderlich Securities, in a Wednesday research note.

    Also part of the deal is saltwater disposal infrastructure and additional assets valued at $10 to $15 million, Kallanish Energy understands.
  • Antero 2nd Qtr. Update.  Antero Resources (NYSE: AR) provided its second quarter 2016 operations update:
    • Average net daily gas equivalent production was 1,762 MMcfe/d (26% liquids), a 19% increase over the prior year quarter and flat sequentially
    • Average net daily liquids production was a record 75,041 Bbl/d, a 63% increase over the prior year quarter and a 10% increase sequentially
    • Realized natural gas price before hedging averaged $1.93 per Mcf, a $0.02 differential to Nymex
    • Realized natural gas price after hedging averaged $4.31 per Mcf, a $2.36 premium to Nymex
    • Realized C3+ NGL price before hedging averaged $17.08 per barrel, 38% of WTI
    • Realized natural gas equivalent price including NGLs, oil and hedges averaged $3.95 per Mcfe
    • Current drilling and completion costs have declined to $0.9 million per 1,000 feet of lateral in the Marcellus and $1.04 million per 1,000 feet of lateral in the Utica, both for a 9,000 foot lateral, each representing a 24% reduction from 2015
    • Drilled an Antero record 7,274 feet of lateral in 24 hours
    • Signed definitive agreement to acquire approximately 55,000 net acres in the core of the Marcellus Shale for $450 million and received notice from a third party regarding intention to exercise tag-along rights for an additional 13,000 net acres
    • Successfully executed an underwritten public offering of 26.75 million common shares for net proceeds of $753 million
  • Laredo Petroleum Does Deal in the Permian.  Laredo Petroleum said its acquiring additional acreage within the company’s existing footprint in the Midland Basin from an unnamed seller for $125 million.

    The acquisition adds roughly 9,200 acres, of which approximately 6,300 are in the Spraberry interval and roughly 2,900 acres are in the Spraberry, Upper, Middle and Lower Wolfcamp, Canyon and Cline zones.

    “This acquisition combines the acreage attributes and strategic investments that are drivers of the company’s capital efficiencies,” said Randy A. Foutch, Laredo CEO.

    The purchase includes roughly 300 barrels of oil-equivalent per day (BOED) of Laredo-operated production from existing vertical wells through increased working interest in the wells.

    The independent producer said the primary focus of the acquisition is Laredo’s acreage position in western Glasscock County, just east of Midland, Texas, Kallanish Energy learns.

    The contiguous acreage block allows capital efficiencies by enabling the building of Laredo’s Western Glasscock production corridor.

    In other Laredo Petroleum news, the company said yesterday it began an underwritten public offering of 12 shares of its common stock.

    The company expects to grant the underwriters a 30-day option to purchase up to 1.8 million additional shares of Laredo common.

    Laredo intends to use the net proceeds from the sale to repay borrowings under its senior secured credit facility incurred for working capital purposes, and to fund the purchase price of the Midland Basin assets.
  • NatGas Creating More Electricity. Natural gas will be creating more electricity in the U.S. in 2016 than ever before, Kallanish Energy has learned.

    That prognosis came from the Energy Information Administration, the statistical arm of the U.S. Department of Energy.

    Natural gas-fired electric generation is expected to provide an average of 3.8 million megawatt-hours per day, a 4% increase from 2015, the agency said.

    Monthly natural gas-fired generation is expected to reach record highs in July and August when weather-related demand for air conditioning boosts electric demand.

    Natural gas surpassed coal in April 2015 as the No. 1 fuel for electricity and will fuel 34% of America’s electricity in 2016. Coal is expected to produce 30% of power; nuclear, 19%; and renewables, 15%.

    EIA says the natural gas share of power production is expected to decline for several years after 2016, as natural gas prices rise and as it competes with renewables.

    It projects that natural gas-fired generation will drop by 2% in 2017.

    Natural gas usage for electric generation will grow again about 2020 and continue for the next two decades, with natural gas again surpassing coal in 2022, the agency said.

    To hear more about natural gas-fired electric generation attend the Midstream PA 2016 event where Panda Patriot representative is speaking.  Oct 13, 2016 State College, PA.  

    Register for Midstream PA 2016.

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

Rig Count

  • Baker Hughes Rig Count the week of July 15, 2016
  • PA     
    • Marcellus 14 up 1
  • Ohio
    • Utica 12 unchanged
  • WV
    • Marcellus 10 down 1
  • TX
    • Eagle Ford –33 unchanged
  • TX & NM
    • Permian Basin – 160  up 2
  • ND
    • Williston – 27 up 1
  • CO
    • Niobrara – 16 up 1
  • TOTAL U.S. Land Rig Count 422 up 5

PA Permits for July 7, to July 14 2016

      County      Township    E&P Companies

1.    Butler        Oakland        Rex
2.    Butler        Oakland        Rex                

OH Permits for weeks ending July 9, 2016

       County        Township    E&P Companies

1.    Belmont        Goshen        Rice
2.    Belmont        Goshen        Rice
3.    Monroe         Salem         Statoil
4.    Monroe         Salem         Statoil
5.    Monroe         Salem         Statoil

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement