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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 

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

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

  • Shell Keeps on Buying.  Shell after spending $5.5 million last week on two properties just spent $650,000 for two more properties along Route 18 in Potter.  I’m sure the buying activities will continue at an accelerated pace as Shell pushes to get the cracker plant up and running.
  • Another Cracker Plant in Western PA?  The potential for another ethane cracker in southwestern Pennsylvania beyond Royal Dutch Shell's confirmed project in Potter Township emerged at a forum Tuesday about how Beaver County can best prepare for a wave of manufacturing development.

    There was brief talk about another cracker — but no details or indication of likelihood — in a discussion about what needed to be done before Shell starts to build the petrochemical plant in earnest within a few years.

    DCED Secretary Dennis Davin, center, speaks at a forum Tuesday in Aliquippa about the economic opportunities of Shell's petrochemical plant in Potter Township. At left is Aliquippa City Administrator Samuel Gill and at right, DCED Deputy Secretary of Business Financing Scott Dunkelberger.

    The forum, held at Aliquippa City Hall, was one of the Department of Community and Economic Development's roundtable discussions about opportunities arising from Shell's decision to build its petrochemical plant. It was highlighted by DCED Secretary Dennis Davin and drew about two dozen community and economic development leaders who talked about how the cracker and associated manufacturing opportunities could boost Beaver County and all of western Pennsylvania.

    "This is only the beginning of the reindustrialization" of the region, said Beaver County developer Charles Betters, one of the audience members who spoke.

    But Betters expressed concern whether there was enough of a trained workforce for the 6,000 construction jobs and hundreds of operating positions Shell will have available in Beaver County. That would be multiplied by other cracker projects in the tri-state region if they went through.

    One of those, at a former FirstEnergy plant in Shadyside, Ohio, is being considered as a cracker site by PTT Global Chemical of Thailand. A final investment decision is expected by early next year, Ohio state officials told the Business Times in June. Betters' company is demolishing the former coal-fired energy plant at the site.

    But the idea of another cracker plant in Pennsylvania would be a new development for a regional petrochemical industry that seemed like a dream less than a decade ago but has become real from Shell's announcement and the follow-up investments in manufacturing that officials and the industry expect in the wake of Shell's decision.

    Officials have said the three best available sites in Appalachia were picked by Shell, PTT and Braskem, the latter's near Parkersburg, W.Va. But there are other sites in western Pennsylvania, including in Washington and Allegheny counties that potentially have the river and rail access that would be needed for an ethane cracker.
  • Tropical Storm Could Give Short Term Boost to Oil & NatGas Prices.  It appears that a number of rigs in the Gulf of Mexico could be evacuated because a tropical storm entering the Gulf this weekend.
  • Stone Energy Selling Appalachian Basin Assets.  Stone Energy Corp., an oil and natural gas producer that’s been in debt restructuring talks with note holders, said it’s negotiating to sell its Appalachian assets in a deal that could fetch $350 million.

    The potential buyer isn’t related to the group of note holders, to which it has offered $150 million of sale proceeds, the Lafayette, Louisiana-based company said Tuesday in a filing. Other proceeds would pay down bank debt and provide working capital, according to the filing. Expressions of interest in the assets earlier this year ranged from $250 million to $400 million.

    Stone has said it’s analyzing various strategic alternatives to reduce debt, including a prepackaged bankruptcy, amid a plunge in oil and gas prices that’s led to eight straight quarterly losses for the company. As of Aug. 1, the energy rout had forced 90 oil and gas producers into bankruptcy since the beginning of 2015, according to law firm Haynes and Boone LLP.

    “Stone’s balance sheet remains in a precarious situation and a restructuring is probable,” John Gerdes, head of research at KLR Group LLC, said in a note to clients Tuesday. “We would not advise ‘fresh’ money to invest” in the company.

    The announcement was made before regular trading began in U.S. markets. Stone fell 16 percent Monday to $11.76. The shares have tumbled 73 percent this year.

    Stone’s assets in West Virginia and Pennsylvania as of January 2014 included leasehold rights in the Marcellus shale basin, America’s biggest gas play by volume.
  • Rex Selling Illinois Basin Assets.  Rex Energy Corporation announced that it has closed on the previously announced sale of its Illinois Basin assets to Campbell Development Group, LLC. The sale of the Illinois Basin assets includes approximately 76,000 net acres in Illinois, Indiana and Kentucky; the assets are currently producing approximately 1,700 net barrels per day. Rex Energy is selling its entire interest in the basin and has received net proceeds from the sale of approximately $40 million with the potential for additional proceeds of up to $10 million over the next three years based on commodity prices during that time frame. The proceeds will be used to pay down the revolving line of credit and for general corporate purposes.

    Rex will probably use these funds to focus on the Appalachian Basin.  It looks like its drilling in the Appalachian Basin will pick up.
  • Howard Energy Partners Gets Funding.  Alberta Investment Management Corporation ("AIMCo") is pleased to announce that it has agreed to the purchase of up to US$500 million of Series B Preferred Units (Preferred Units) of Howard Energy Partners, on behalf of certain of its clients. AIMCo completed its initial purchase of US$300 million in Preferred Units on August 22, 2016, and has committed to purchase an additional US$200 million in Preferred Units in the future.

    Howard Energy Partners is a diversified, growth-oriented midstream provider with assets in the Eagle Ford Shale region of South Texas, along the Gulf Coast of Texas, as well as in the Marcellus Shale region in Pennsylvania. The investment represents a compelling opportunity for AIMCo's clients to participate in an attractive midstream portfolio with exposure to high demand markets. It is supported by a high quality management team with a demonstrated track record of execution and a robust project pipeline that will produce stable, fee-based cash flows.
  • PDC Making Push into the Permian. Independent producer PDC announced late Tuesday it’s paying $1.5 billion for two closely-held companies and 57,000 total acres in the Delaware Basin portion of West Texas’ Permian Basin.

    The Denver, Colorado-based company will pay $915 million in cash and 9.4 million of its shares to Kimmeridge Energy Management, a New York-based private equity fund that manages Arris Petroleum and 299 Resources.

    The privately negotiated transaction includes roughly 57,000 acres in Reeves and Culberson counties in Texas, which currently produce approximately 7,000 barrels of oil-equivalent per day (BOE/d), Kallanish Energy learns.

    “This is truly a remarkable opportunity for PDC, its employees and its shareholders,” said Bart Brookman, PDC’s CEO, in the announcement. He said the deal would “add an extensive inventory of highly-economic drilling locations that complement our already strong portfolio.”

    The company intends to fund the cash portion of the purchase though “potential equity and debt financings,” PDC said. The deal is expected to close in the fourth quarter.

    During the remainder of 2016, PDC plans to spud roughly nine horizontal wells and expand certain midstream infrastructure for an expected total capital outlay of approximately $55 to $65 million.

    Additionally, the company is finishing completion operations on two horizontal wells and plans to operate two drilling rigs by year-end.

    Adding the Delaware position to PDC’s core Wattenberg acreage in central Colorado gives the company more than one billion net barrels of oil-equivalent (BBOE) of liquid-rich reserve potential in two of the “top-tier U.S. onshore basins,” the company said.

    PDC joins other producers including Pioneer Natural Resources, Parsley Energy and Concho Resources which all have announced deals in the Permian this year, growing in one of the few North American oil plays where production is profitable at current prices.
  • Sunbury, PA Pipeline to Panda Power Station.  State and local officials attended a ceremony Wednesday morning to celebrate the groundbreaking for a 20-inch pipeline that will deliver Marcellus Shale gas to a new power plant in central Pennsylvania.

    The Sunbury Pipeline is being built by UGI Energy Services. It will begin in Lycoming County and travel 35 miles to feed into the Hummel Station power plant, which is under construction at the site of the former Sunbury coal plant in Shamokin Dam, Snyder County.

    Construction on the pipeline is expected to be completed by the end of this year. The plant is projected to come online in early 2018 and power approximately 1 million homes. The project is part of a broader, ongoing national trend away from coal, as natural gas takes up an increasing share of electric power generation.

    “The Sunbury Pipeline Project represents an incremental step forward for Pennsylvania natural gas infrastructure and a major step forward for Pennsylvania’s energy future,” UGI Energy Services President Brad Hall said in a news release. “UGI is excited to continue its more than century-long tradition of putting natural gas to work for Pennsylvania by fueling the state-of-the-art Hummel Station along with enhancing local natural gas supplies.”

    Panda Power Funds, a Texas company, is constructing the Hummel Station plant, as well as two other natural gas-fired power plants in Bradford and Lycoming counties.
  • Tenaska Plant Breaks Ground in Westmoreland County, PA.  After nine years of planning and months of battling environmental opponents, a Nebraska energy company Wednesday held ground-breaking ceremonies for its $500 million natural gas-fueled power plant near the Smithton exit off Interstate 70.

    As giant earth-moving machines leveled sections of a hillside where the 925-megawatt plant will be built — land that was once a South Huntingdon farm — Jerry Crouse, chief executive of Tenaska Inc., said the long lead time for the project was caused by a variety of factors.

    “Some of that was the market, and some of that was the Marcellus shale” that needed to be developed, Crouse told a gathering of about 70 state, federal and local government officials, and economic development leaders.

    Jason Rigone, executive director of the Westmoreland County Industrial Development Authority, recalled speaking to a Tenaska representative about the company's plans in 2007 and how it wanted to locate the plant near major pipelines and power lines. After that discussion, Rigone said he thought, “That's the last I will ever hear from him again.”

    While business and labor leaders touted the economic development side of the project, Tenaska was dogged in public hearings in 2015 and 2016 by environmental groups and nearby residents who complained the plant would be a safety hazard and harmful to the area's rural environment.

    Tenaska received final state approval for its Westmoreland Generating Station in February. The company expects to have it finished in 2018, at which time it will produce enough electricity to meet the energy needs of about 925,000 homes.

    Tenaska expects about 300 workers on average will be needed to build the plant, and 25 full-time employees will be hired to staff the facility. There are 55 workers on the site, a number that will swell to about 600 during peak construction in fall 2017, said Vasu Pinapati, project director for engineering and construction.

    To fuel the plant, Tenaska has reached agreements with two pipeline companies, Dominion South and Texas Eastern Corp., said Greg Kelly, president of Tenaska's Development Group. The abundance of natural gas produced in the Marcellus shale reserves, the proximity of two major pipelines and electrical power lines, and the availability of water were among the reasons the site was selected, Kelly said.

    “Natural gas gives us an incredible, incredible opportunity” for development, said Dennis M. Davin, secretary of the state Department of Community and Economic Development.

    Tenaska, which operates nine natural gas-fueled and renewable power plants generating 7,000 megawatts in five states, will connect its local plant to nearby transmission lines that are part of the PJM Interconnection grid. That organization coordinates power movement in Pennsylvania, New Jersey, Maryland and all or parts of 10 other states, plus Washington, D.C.

    Tenaska Westmoreland is owned by Tenaska Pennsylvania Partners LLC, which comprises affiliates of Tenaska and Diamond Generating Corp., a subsidiary of Tokyo-based Mitsubishi Corp.
  • Spectra Energy Presses on for Access Northeast Pipeline.  Despite the loss of utility partners and a damaging court ruling in Massachusetts, the $3 billion Access Northeast natural gas pipeline project, which proponents call key to lowering power costs in New England, and environmental groups label unneeded.

    Spectra Energy said it will move ahead with Access Northeast despite a setback in Massachusetts, the region’s largest energy user. Spectra has estimated the project would save New England consumers $1 billion annually.

    “New England is at a pivotal moment in determining its energy future and the ‘do nothing’ scenario is untenable,” Arthur Diestel, director of stakeholder outreach for Spectra, told the Portland Press Herald newspaper. “Without targeted expansion of natural gas pipeline capacity, New England energy consumers will inevitably bear the brunt of ever-increasing energy prices and ever-diminishing supply reliability.”

    The Maine Public Utilities Commission last month gave conditional approval to a plan in which electric customers would help subsidize the construction of private natural gas pipelines.

    Such was not the case in Massachusetts. Earlier this week, Spectra’s two utility partners told state regulators they were pulling out of the project, Kallanish Energy finds.

    Eversource Energy and National Grid cited last week’s Supreme Judicial Court ruling in Massachusetts, which prohibited ratepayers from financing private pipeline projects.

    The ruling was in response to a lawsuit from plaintiffs that included the Conservation Law Foundation. The environmental group favors renewable energy sources and efficiency measures over expanding fossil fuel use, to counter alleged climate change and air pollution.

    But Diestel stressed the action taken by Eversource and National Grid only involves Massachusetts. The utility partners remain committed to seeking approvals in Connecticut, Rhode Island and New Hampshire, he said, where Access Northeast also would be located.

    Good News for NatGas Producers.  The first shipment of liquefied natural gas from the lower 48 states to China arrived this week.  The expanded Panama Canal’s easing access to the robust Asian market for U.S. means more LNG will moving from to China from the U.S.  E&P Companies in the Permian and Eagle Ford will probably be the biggest beneficiaries of the expanded Panama Canal.

    Chief is expected to be quickly ramping up production efforts (RUMOR)

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 26,, 2016
  • PA     
    • Marcellus 19 up 2
  • Ohio 
    • Utica 13 down 1
  • WV 
    • Marcellus 7 down 1
  • TX
    • Eagle Ford 35 down 1
  • TX & NM
    • Permian Basin – 199 up 3
  • ND
    • Williston – 27 unchanged
  • CO
    • Niobrara – 17 down 1
  • TOTAL U.S. Land Rig Count 468 down 2

PA Permits August 18, to August 25, 2016

County            Township                E&P Companies

1.    No permits issued this week.    

OH Permits for weeks ending August 20, 2016

      County                  Township                E&P Companies

1.    Belmont                 Colerain                  Ascent Resources
2.    Guernsey                Londonderry           Ascent Resources
3.    Jefferson                Mt. Pleasant           Ascent Resources
4.    Jefferson                Mt. Pleasant           Ascent Resources

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019