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Expo/Industry events for the next few months

Shale Insight
September 21-22, 2016
David L. Lawrence Convention Center
Pittsburgh, PA

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

Utica Summit
October 11, 2016
Embassy Suites
Canton, OH 

Midstream PA 2016
October 13, 2016
Penn Stater Conference Center
State College, PA 
Limited seating- sign up early   

Got Goals, Got Google, Get  Found
Learn how to get your company found on Google through the newest techniques!
Webinar – September 14, 2016
Details to Follow

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

  • Yes, Business Is Picking Up.  You have been experiencing, reading and hearing that drilling activity is pickup and you can ensure that it continues.  One of the keys to long-term drilling activity is the build out of these pipelines.  

    Thank you to those of you that have responded to emails asking for your supporter.  Folks working with Williams and Sunoco Logistics told us that your efforts are much appreciated, but more is needed.  We are in the final approval stages with more hearings and opportunities for letter writing support from YOU.  

    One final push can make this $12.7 billion in pipeline projects a reality.  If you have not supported any activities, please consider doing it now.  If you have ready supported these efforts, there may be an opportunity for one more.

    Here are the links for information about supporting the Mariner East 2, Atlantic Sunrise and PennEast Pipelines.

    Mariner 2 East         

    Atlantic Sunrise 

  • Bullish Drilling Outlook for the Appalachian Basin in 2017.  Low energy prices already have quashed domestic energy exploration, driving down revenue, Wyoming, New Mexico, Colorado, Alaska, North Dakota and Montana, which receive a substantial revenue share from oil and gas activity on U.S. lands.

    The Northeast/Appalachian Basin/Marcellus and Utica Shale plays for years wore the moniker “Beast of the East,” referencing the region’s huge production supply and potential production.

    But beginning this year, the region went from supply beast to “Beast on a Leash,” as the combination of ongoing low commodity prices and lack of pipeline or line bottlenecks finally caught up to the prolific Northeast.  Unleash the “Beast”, go to those links, show your support of the pipeline, and act now. But any slowdown in the Northeast will be short-lived, with a number of analytics/consulting types pointing to the backlog of “DUCS,” drilled, but uncompleted wells, rapidly dwindling, meaning just to maintain the status quo, new wells must be spud.

    Drilling imminent

    “New drilling is imminent in the Northeast,” according to Luke Jackson, senior energy analyst for S&P Global Platts, during a Tuesday Webinar, attended by Kallanish Energy.

    Jackson said producers are rapidly completing DUCs, down from a high of roughly 2,600 Northeast DUCs last October, to approximately 1,500 this past May.

    “Producers are completing about 160 DUCs a month, which means during the first quarter of 2017, the Northeast backlog will be burnt through,” according to Jackson.

    Marissa Anderson, a senior energy analyst with BTU Analytics, said Tuesday in her blog if you want to know when and how much producers will need to ramp up drilling activity in the region, look at rig efficiency and the spud-to-sales time.

    “The number of rigs in the Marcellus and Utica has stabilized around 35 over the past few months,” Anderson said. “In recent earnings releases, several operators have indicated they are adding rigs back to the region, such as Southwestern, Eclipse and Gulfport.”

    Drilling times improve

    The BTU analyst said improved drilling times and efficiency gains also continue. Looking at total wells drilled in the Marcellus and Utica vs. the rig count highlights gradual efficiency gains over the past few years, which has averaged 1.7 wells drilled per rig per month year-to-date, according to Anderson.

    “This, coupled with the number of wells drilled to meet production targets, helps give an indication of overall rig activity required,” she said.

    However, drilling is only one step in the process of turning a well to sale. Given the nature of pad drilling where operators typically drill all the wells on a pad and then go back to complete them, there’s a natural lag in the time from drilling to completion.

    And infrastructure constraints in the region and weakness in pricing allowed an inventory of completed wells to build (COBs), according to Anderson.

    The average spud-to sale-time was about six months across the Marcellus and Utica in 2015, Anderson stated, down from nine months for the last few years.

    “In today’s infrastructure environment in the Northeast, it likely takes at least 6 months to drill a well and get its first molecules to market,” Anderson surmises, “So for any wells drilled today, we likely won’t see an impact to production from that well until early next year.”

    Possible infrastructure problems

    S&P Global Platts’ Jackson pointed out the Northeast will contribute production totaling 2 billion cubic feet per day (Bcf/d) next year.

    Jackson said the bugaboo seemingly forever for the Northeast, lack of infrastructure, continues to haunt the region.

    Five major pipeline projects designed to flow nearly 10 Bcf/d out of the Marcellus and/or Utica have run into approval problems, with in-service dates pushed back for each between six and nine months from late December 2017, to mid-2019.

    It is more important than ever that you support the pipeline projects by attending FERC and state hearings. The Atlantic Sunrise, Mariner East 2 and PennEast are moving closer to final approval but we need to make a final support push to put them over the top.  Go back to the pipeline links and show your support.
  • Chesapeake Exiting the Barnett.  Chesapeake Energy Corp. agreed to give up its Barnett Shale holdings, exiting the birthplace of the shale revolution to escape almost $2 billion in onerous pipeline contracts.

    Chesapeake will convey all interests in the Barnett region in North Texas to First Reserve Corp.-backed Saddle Operating LLC, according to a statement released Thursday. Quitting the gas fields will slash Chesapeake's shipping and processing costs by $715 million between now and the end of 2017 and eliminate a total of $1.9 billion in long-term pipeline agreements.

    Battered by cratering fuel prices, credit downgrades and a shareholder revolt that cost the company founder his job, Chesapeake has been shedding fields, cutting jobs and exchanging stock for debt to revive the second-largest U.S. gas supplier. The company will receive no proceeds from Saddle for handing over the Barnett assets.

    Once ground zero for the U.S. shale boom, the Barnett Shale in North Texas faded in importance as gas prices collapsed and explorers discovered new deposits such as the Marcellus and Utica shales that are closer to urban demand centers along the eastern seaboard. For Chesapeake, the Barnett is its second-smallest production region, accounting for 10 percent of the company's output.

    The divestment of one of the cornerstones of Chesapeake's portfolio expands Chief Executive Officer Doug Lawler's deconstruction of the shale empire amassed by his predecessor, the late Aubrey McClendon. At one point during McClendon's quarter-century reign, Chesapeake controlled drilling rights across 16 million acres, an area equivalent to half of New York State. Lawler has sold gas fields, reduced the workforce and slashed spending to cope with a debt load that reached $10.4 billion at the end of the first quarter.

    It’s obvious Chesapeake is cleaning up its balance sheet, but the move also means it will probably be focusing on the Appalachian Basin.  We have to see if Chesapeake brings in any more rigs to PA or OH and rebuilds the empire it once enjoyed.
  • Seneca Getting Good Results in the Utica in Northern PA. Seneca Resources is very pleased with its first Clermont/Rich Valley area Utica Shale well in northern Pennsylvania, and will drill six additional Utica wells in that area of Elk County in the next year.

    The company, the exploration and production arm of National Fuel Gas, could decide to go after the deeper Utica Shale in a big way instead of the Marcellus Shale, Kallanish Energy has found.

    That decision would likely come late in 2018, CEO John McGinnis said on a recent earnings call with analysts and the media.

    The first well on the company’s Utica appraisal program has been online for 45 days, and the company is “quite pleased” with the initial results, he said.

    The well has short laterals of 4,500 feet because the company is trying to learn more about the Utica rock, not to maximize production, he said.

    The initial results were 60% to 70% higher than nearby Marcellus wells, the company said.

    A second Utica well has already been completed and will come online in late 2016. The six new Utica wells will be drilled off existing Marcellus pads and that will make it easy to tie those wells into pipelines, McGinnis added.

    The Utica wells are projected to cost between $5.5 million and $6.5 million, only 30% more than what the company spends on its Marcellus wells, he said.

    If the Utica results are promising, the Houston, Texas-based company could make the Utica “our primary target” in the future, McGinnis said.

    In its most recent quarter, Seneca Resources produced 44 billion cubic feet-equivalent (Bcfe), an increase of 4.8 Bcfe, or 12%, more than the previous quarter.

    In Pennsylvania, the company produced 38.8 Bcf of gas, a 14% jump, in its fiscal year third quarter.

    Seneca Resources plans to spend $125 million to $135 million in 2017 on Pennsylvania drilling. It intends to keep one rig at work.

    Using up to $325 million provided by IOG-CRV Marcellus, Seneca Resources is drilling 75 Marcellus wells, of which 59 have been drilled and 39 are producing in the Clermont/Rich Valley area of Elk, McKean and Cameron counties. That JV project will be completed in late 2017 or early 2018.
  • Methanol Plants Coming to WV.  U.S. Methanol is planning to develop two plants in West Virginia to produce methanol, a liquid chemical feedstock, from natural gas, Kallanish Energy reports.

    The plants would be able to tap into the Marcellus and Utica shales for natural gas.

    The company outlined the plans in a post on its Website.

    The first phase of the plan calls for the acquisition and relocation of an existing methanol facility to West Virginia. The existing plant is capable of producing 175,000 metric tons per year, or about 58.1 million gallons per year.

    Production at what would be known as Liberty No. 1 is expected to begin in the second half of 2016 at the new and undisclosed West Virginia location, U.S. Methanol said. The methanol will be marketed in the northeast U.S.

    The relocation will result in minor upgrades, repairs and modifications and the plant is expected to operate for 30 years, U.S. Methanol said.

    The company is also planning Liberty No. 2, a 150,000-metric-tonne per year plant, also to be located in West Virginia, at an undisclosed location.

    The plants would initially heat the natural gas to remove sulfur compounds. The natural gas is then reformed to produce synthesis gas which consists of carbon monoxide, carbon dioxide and hydrogen.

    A copper catalyst is then used to produce crude methanol. It generally contains water and small quantities of by-products.

    High-purity methanol is then produced through a two-column distillation system. The first column removes volatile impurities. The second column removes water and other by-products such as heavy alcohols.

    U.S. Methanol is based in Aliso Viejo, California.
  • NatGas Usage Being Affected.  For the first time in 15 weeks, since April 8, there was a drawdown in the volume of working natural gas in storage, the Energy Information Administration reports.

    For the week ended July 29, 6 billion cubic feet (Bcf) of gas was pulled from storage, with the total amount of working gas in storage falling slightly, to 3.288 trillion cubic feet (Tcf), from 3.294 Tcf one week earlier.

    The latest total was up 389 Bcf, or 13.4%, from the year-ago total of 2.90 Tcf (all numbers are rounded), and up 464 Bcf, from the five-year average of 2.82 Tcf, Kallanish Energy calculates.

    Looking at the individual regions of the country EIA divides working gas in storage into, two reported minuscule increases, and one saw no change and two reported drawdowns in stock.

    The biggest drawdown came in the South Central Region of the Lower 48 States, down 26 Bcf, or 2.1%, to 1.21 Tcf, from 1.23 Tcf.

    The latest total was up 152 Bcf, or 14.4%, from the year-ago total of 1.06 Tcf, ad was up 239 Bcf, or 24.7%, from the five-year average of 968 Bcf.
  • Summit Experiencing Success in the Utica.  Summit Midstream Partners reported second-quarter pipeline volumes of 1.512 billion cubic feet per day (Bcf/d) of natural gas, with continued growth coming in Ohio’s Utica Shale, Kallanish Energy reports.

    That is an overall drop of 2.5% from the 1.55 Bcf/d that flowed via Summit lines in the second quarter 2015, said The Woodlands, Texas-based company.

    Crude oil and produced water volumes in the quarter totaled 86,000 barrels per day (BPD), an increase of 36.7% from a year ago.

    Second-quarter Utica Shale natural gas volumes jumped by 26.5% from the first quarter in the Summit Utica system in Ohio’s Belmont and Monroe counties, as additional wells came online, the company said.

    It grew from 16 MMcf a year ago and 132 MMcf in the first quarter of this year, to 167 MMcf/d in the second quarter.

    Its Ohio Gathering system saw volumes increase from the first quarter by 5.5%, the company said. That system is in Harrison, Guernsey, Noble, Belmont and Monroe counties in southeast Ohio.

    Volume on the Ohio Gathering averaged 937 MMcf/d in the second quarter. That compares to 526 MMcf/d a year ago and 888 MMcf/d in the first quarter of this year.

    The two Ohio gas-gathering systems produced a second quarter EBITDA (earnings before interest, taxes, interest, depreciation and amortization) of $17.5 million, up 172% from the $6.4 million a year ago.

    “We continue to be optimistic about our prospects for continued volume and segment adjusted EBITDA growth from these assets,” said CEO Steve Newby, in a statement.

    Summit Midstream announced a net loss of $50.6 million in the second quarter. That compares to a $2.4 million loss from a year ago.

    Most of the latest loss is attributable to a $37.8 million impairment charge attributed to a condensate stabilization facility in Ohio’s Harrison County, and $17.5 million from a 2016 drop-down transaction, the company said last week in its earnings report.
  • Hurray for Texas.  The Texas Railroad Commission, the state’s energy regulator, is cutting some of the “red tape” to help the oil and gas industry better survive the industry downturn, Kallanish Energy learns.

    The commission introduced roughly 12 initiatives aimed at reducing some of the regulatory burdens, including a plan to erase some redundancies in the drilling permit process.

    Known as the Texas Oilfield Relief Initiative, Commissioner Christi Craddick said the effort eases some of the pressure on an industry working through a market downturn, while protecting public and environmental health.

    “This initiative is an extension of our commitment to best serve Texas with innovative regulatory practices, yet calls for a more thorough review in a time of industry slow-down when we should find ways to save time and money for the state and those doing business at the agency,” she said, in a statement.

    Texas is the No. 1 oil producer in the U.S. and is facing financial pressures because of the downturn in crude oil prices.

    Craddick’s initiatives were welcomed by those working in the Texas energy sector. John Tintera, executive vice president of the Texas Alliance of Energy Producers, said the effort would streamline the regulation process to the advantage of the oil and gas industry.
  • Good News from Williams on Constitution Pipeline.  Williams Partners LP and its co-developers in the $925 million Constitution natural gas pipeline are favored to prevail in one of two legal challenges to New York’s opposition to the project, according to Bloomberg Intelligence.

    The developers argument that the project can go forward even as permits are pending before the state favors “a company win,” Bloomberg Intelligence analyst Brandon Barnes wrote in research published Monday. In a case before the U.S. District Court for the Northern District of New York, Constitution is challenging the New York State Department of Environmental Conservation’s decision to require permits relating to impacts on wetlands.

    Constitution and other proposed pipelines are facing opposition from environmental groups and landowners as the nation’s network of gas links expands to accommodate booming production from shale basins. Last month, the Federal Energy Regulatory Commission, which has approved the 124-mile (200-kilometer) pipeline from the Marcellus shale region in northeast Pennsylvania to markets in New England and New York, granted developers a two-year extension to Dec. 2, 2018.

    It’s “a defensive move geared toward putting a fence around the delays,” Barnes wrote. “Constitution seeks a declaration from the court that requiring other state permits as a condition precedent to construction is an overreach.”

    In a separate proceeding, the developers are challenging New York’s denial of a water-quality permit before the U.S. Court of Appeals for the Second Circuit. The water-quality permit alone is required for the project to move ahead, Barnes said.

    Sean Mahar, a spokesman for the Department of Environmental Conservation, didn’t immediately return a call seeking comment.

    Williams applied more than three years ago to build the pipeline.

    “We believe the court will agree that the NYSDEC’s permit denial was arbitrary and unjustified,” Williams spokesman Chris Stockton said Monday by e-mail. “We are optimistic the court will overturn this veiled attempt by the state to usurp the federal government’s authority and essentially ‘veto’ a FERC-certificated energy infrastructure project.”

    Other partners in the Constitution pipeline include Cabot Oil & Gas Corp., Piedmont Natural Gas Co. and WGL Holdings Inc.
  • PDC 2nd Qtr. Update.  Colorado-based PDC Energy produced 57,000 barrels of oil-equivalent per day (BOE/d) in the second quarter from Colorado’s Wattenberg Field and Ohio’s Utica Shale, the company reported.

    That’s a 54% increase from a year ago and a 14% increase from first quarter 2016, Kallanish Energy found.

    The company began production from 37 gross wells in the quarter, including 34 in the Wattenberg. It also completed its Neff well in Ohio with its 10,000-foot lateral.

    PDC expects to spud 52 wells and, put 62 wells into production in the second half of 2016, the company said.

    It reported that its Wattenberg production jumped by 14%, to 54,478 BOE/d, compared to the previous quarter.

    The company also raised its 2016 mid-point production guidance to 21.5 MMBOE, a 40% jump from 2015 production volumes.

    The company said it expects to exit 2016 at 64,000 BOE/d of production.

    It said it expects to begin drilling longer laterals in Colorado, after completing land trades to acquire the needed land in the Middle Core Wattenberg. PDC also intends to reduce its Wattenberg rig count from four to three due to an increase in efficiency.

    PDC is also reducing its 2016 capital expenditures (CAPEX) from a range of $410 million to $440 million, to $400 million to $420 million.

    The company reported a second quarter loss of $95.5 million, which compares to a loss of $46.9 million in the second quarter of 2015.
  • EIA’s Short Term Energy Outlook.  This short term report gives an overview of the EIA’s perspective on NatGas and Oil for the next year.  Important forecasts in the Outlook:
    • More NatGas shipments to Mexico.  The demand for electricity generation is much greater than the country can supply internally.
    • Current options and futures prices imply market participants place the lower and upper bounds for the 95% confidence interval for November 2016 contracts at $2.12/MMBtu and $4.28/MMBtu, respectively. That’s up from $2.08/MMBtu and $4.06/MMBtu one year ago.  
    • More and more natural gas is need for electricity generation.  As more and more coal plants close, the demand for NatGas is only going to increase.  Hence, we have the pressure to get the Atlantic Sunrise, Mariner East 2, PennEast, Nexus, Rover and Constitution pipelines approved.  Go to the pipeline link and show your support.
    • Crude oil production will fall from 9.2 MMBPD in the first quarter of 2016 to 8.2 MMBPD in third quarter of 2017.

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

Rig Count 

  • Baker Hughes Rig Count the week of August 12, 2016
  • PA     
    • Marcellus 15 unchanged
  • Ohio 
    • Utica 14 up 1
  • WV 
    • Marcellus 7 unchanged
  • TX
    • Eagle Ford 36 down 1
  • TX & NM
    • Permian Basin – 189 up 12
  • ND
    • Williston – 29 up 1
  • CO
    • Niobrara – 18 unchanged
  • TOTAL U.S. Land Rig Count 461 up 18

PA Permits August 4, to August 11, 2016

       County            Township             E&P Companies

1.    Butler                Donegal               Rex
2.    Butler                Donegal               Rex
3.    Elk                    Ridgway              Hunt
4.    Potter                Eulalia                JKLM
5.    Potter                Eulalia                JKLM
6.    Potter                Eulalia                JKLM
7.    Potter                Eulalia                JKLM
8.    Wyoming           Windham             Chesapeake

OH Permits for weeks ending August 6, 2016

       County               Township              E&P Companies

1.    Belmont              Colerain                Ascent Resources
2.    Belmont              Colerain                Ascent Resources
3.    Belmont              Colerain                Ascent Resources
4.    Carroll                Washington           Rex
5.    Monroe               Switzerland           Consol
6.    Monroe               Switzerland           Consol

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019