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Expo/Industry events for the next few months

Marcellus Utica Midstream Conference
January 24-26, 2017
David L. Lawrence Conference Center
Pittsburgh, PA 

Bulwark FR Webinar
Drilling is picking up.  Get the latest FR info
November 16, 2016

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

Lots of Optimism at OOGA’s Technical Conference and Expo.  I spoke with a number of companies at the Expo, I found everyone to be very upbeat about 2017.  All of the companies are busy responding to bids.  Many of these bids are for downstream projects.  

As we look at 2017 and beyond, the work opportunities are going to be from all three levels of the supply chain – upstream, midstream and downstream.  Activity in these three components of the supply chain raises the question, “Are there enough resources/companies to meet the demands of increased drilling, the build out of the pipelines and the construction of NatGas power and cracker plants?”

With every expo conference, there are always a few good rumors.  Here’s what I heard:

  • Ascent Resources is looking to bring a number of rigs into OH.  (RUMOR)  It’s worth noting that Ascent Resources has been active securing permits.
  • Gulfport is bringing two or three more rigs up.  This is a rumor that I’ve heard before from other sources which give its chance credibility a little higher.  (RUMOR)  Gulfport has been ever more active securing permits.  In fact this past week, Gulfport acquired eight permits.  
  • Halliburton just hired a fracking crew in Zanesville, OH. (RUMOR)  

Kudos to OOGA for a very good conference.  There were some good networking opportunities and number of people left with some new contacts.

GE and Baker Hughes Do the Deal.  General Electric Co. reached a deal to combine its oil-and-gas business with Baker Hughes Inc., creating a publicly traded energy powerhouse that would give GE a cost-effective way to play any recovery in the industry.

GE will contribute its oil-and-gas business and $7.4 billion through a special one-time cash dividend of $17.50 for each Baker Hughes share. The new company will be publicly traded on the New York Stock Exchange and will be 62.5% owned by GE and 37.5% owned by Baker Hughes shareholders.

Dominion Receives FERC approval.  The Federal Energy Regulatory Commission last week gave Dominion Transmission approval to begin operations on its Clarington Project in West Virginia and Ohio.

The $76.5 million project adds 16,000 horsepower of compression to pipelines and provides connections for Appalachian Basin natural gas to interstate pipelines and markets, Kallanish Energy has learned.

The project is based in Marshall County, West Virginia, and Monroe County, Ohio. It can move 250 million cubic feet per day (MMcf/d) of natural gas.

The Clarington Project will benefit CNX Gas, part of Consol Energy.

Cove Point Shipping LNG to India and Japan in 2017.  Dominion one of the nation's largest energy companies, today celebrated with its international business partners and Maryland community leaders the construction of the Dominion Cove Point LNG Liquefaction project. 

Kenichiro Sasae, the Japanese ambassador to the United States, and Maryland Gov. Larry Hogan joined Dominion Chairman Thomas F. Farrell II at the ceremony, along with Diane Leopold, president, Dominion Energy; Kazuhiro Takeuchi, president, CEO, and general manager for the Americas, Sumitomo Corp of Americas; Jayanta Sinha, president, GAIL Global U.S.A., and Steven R. Weems, president, Calvert County Board of County Commissioners.

"Cove Point will supply critical American allies in India and Japan with much-needed natural gas that will help reduce global greenhouse gas emissions," said Farrell. "Although the doubters said it could not be done, in late 2017 our liquefier will be online, and ships will begin receiving LNG for export."

Obama Forcing U.S. Army Corps of Engineers to reroute Dakota Access. The U.S. Army Corps of Engineers is considering a rerouting option for the Dakota Access Pipeline in North Dakota, President Obama said late Tuesday, Kallanish Energy has learned.

That news comes after a week in which 140 protesters were arrested.

“We’re monitoring this closely,” Obama said in an interview with NowThis and reported by the Washington Post and other media.

“My view is that there is a way for us to accommodate sacred lands of Native Americans. And I think that right now the Army Corps is examining whether there are ways to reroute this pipeline. We’re going to let it play out for several more weeks and determine whether or not this can be resolved in a way that I think is properly attentive to the traditions of First Americans,” he said.

The Standing Rock Sioux and their supporters have argued the $3.8 billion oil pipeline would threaten ground water and violate sacred tribal sites.

Obama’s comments were the most explicit he has made about the pipeline controversy.

The project has been approved by federal and state agencies and upheld by a federal judge. The pipeline would run 1,172 miles from North Dakota through South Dakota and Iowa to Illinois.

It is being developed and built by Texas-based Energy Transfer Partners. Much of the pipeline has been built or is under construction.

Consol 3rd Qtr. Report.  Since the company made the decision to idle its rig activity in mid-2015, the E&P Division has focused on maintaining and improving proficiencies across all key areas of operations. CONSOL's goal was to bring well costs in Monroe County, Ohio, down to approximately $10 million per well, assuming a 7,000 foot lateral. Through continued efficiency improvements, the company now expects Monroe County well costs to be approximately $9.3 million, assuming a 9,700 foot lateral. Utilizing these well costs, current strip pricing, and EUR's of 2.8 Bcfe per 1,000 feet of lateral, Monroe County, Ohio, dry Utica remains CONSOL's highest rate of return project at approximately 50%.

In August, CONSOL brought back two rigs to begin drilling in Monroe County, Ohio. Since then, the company drilled two dry Utica wells at an average lateral length of approximately 8,600 feet with drilling costs of $1,040 per foot of lateral, which is better than the company's previously stated expectation of $1,060 per foot of lateral. After the end of the quarter, the company drilled its third Monroe County well and further improved drilling costs to $950 per foot of lateral. Also, the first dry Utica well drilled in the quarter was drilled seven days faster than the last well that the company drilled back in 2015. The second well met the previously stated expectation of drilling a Monroe County dry Utica well in 26 days, from spud to total depth.

CONSOL modified its schedule in order to create a one-pad buffer between drilling and completion activity in Monroe County. As a result, CONSOL decided to delay drilling the two Southwest Pennsylvania Marcellus wells that were originally planned for the second half of 2016. The company now expects to drill nine dry Utica wells in Monroe County in the second half of 2016, compared to the company's previous guidance of ten wells, which consisted of eight dry Utica wells in Monroe County and two Southwest Pennsylvania Marcellus wells.

During the quarter, CONSOL continued to complete its Marcellus Shale drilled but uncompleted well (DUC) inventory. Specifically, the company completed the six-well GH58 pad located in Greene County, Pennsylvania. These wells are within the Green Hill field where the company continues to see an increase in EURs to now be between 3.6-3.8 Bcfe per 1,000 feet of lateral, an increase over the company's previous type curve analysis of 3.0-3.5 Bcfe per 1,000 feet of lateral; with some wells performing at over 5.0 Bcfe per 1,000 feet of lateral. CONSOL expects to turn-in-line the GH58 pad during the fourth quarter of 2016.

At the end of the second quarter, CONSOL turned-in-line the six-well ACAA2 Marcellus pad located in Allegheny County, Pennsylvania. During the third quarter, CONSOL turned-in-line the GH53K well located in Greene County, Pennsylvania.

Following the Exchange Agreement with Noble Energy, the company expects to enter 2017 with a DUC inventory of 68 wells, of which CONSOL Energy maintains a 100% working interest in 63 wells.

Braskem Chooses Texas over Marcus Hook for Plant.  

It was very disconcerting to hear the Braskem is building a polypropylene cracker plant in Texas rather than Philadelphia.  Literally, thousands of union jobs building the plant were lost.  Philadelphia can become an energy hub if the Mariner East 2 and other pipelines can be built. 

It’s incumbent on all of us to make sure that we support the midstream companies any way we can.  

For Braskem America Inc., the choice of where to build a new $500 million polypropylene plant came down to two locations: Marcus Hook or Texas.

The Delaware County site, where the Brazilian company already operates a plant, boasts proximity to the Marcellus and Utica Shale formations, which produce the natural-gas liquids that make a key ingredient in polypropylene. Marcus Hook also is close to Braskem’s customers, who convert the plastic into products ranging from carpet to yogurt cups.

But Braskem decided earlier this year to build the new production unit at its plant in La Porte, Texas. The location near Houston had a critical advantage over Marcus Hook: a ready supply of raw material from a half-dozen nearby Gulf Coast petrochemical operations.

“I was disappointed to choose Texas, but we had to choose the place where we had easy access to feedstocks,” said Mark G. Nikolich, chief executive of Braskem America, based in Center City.

Occidental Expands in the Permian.  Occidental Petroleum is spending $2 billion to add to its holdings in the Permian Basin in West Texas and New Mexico, Kallanish Energy reports.

The Houston-based company purchased 35,000 acres in Reeves and Pecos counties in the southern area of the Delaware Basin. The land was purchased from private parties in multiple deals, and boosts Occidental’s acreage in the area to 59,000.

The holdings currently are producing 7,000 barrels of oil-equivalent per day (BOE/d), of which 72% is oil. There are 68 horizontal wells on the properties.

“These transactions further complement and solidify Occidental’s dominant position in the Permian Basin,” said CEO Vicki Hollub, in a statement. “They leverage our existing infrastructure, utilize our strong balance sheet and create additional operational synergies.”

Occidental also acquired enhanced oil recovery and carbon dioxide properties in West Texas. Those holdings are producing 4,000 BOE/d, of which 80% is oil.

The purchases were paid for with cash on hand, Occidental said.

Noble Energy 3rd Qtr. Report.  Noble Energy announced results for the third quarter of 2016, including a reported net loss attributable to Noble Energy of $144 million, or $0.33 per diluted share. The adjusted net loss(1) attributable to Noble Energy for the quarter was $30 million, or $0.07 per diluted share, which excludes the impact of certain items typically not considered by analysts in formulating estimates. David L. Stover, Noble Energy's Chairman, President and CEO, commented, 'Once again, the strength of our high-quality asset base and operational execution was on display in the third quarter. This was demonstrated by our continued outstanding production performance and cost control. Other recent strategically significant highlights include the successful IPO of the Noble Midstream business, the separation of our Marcellus Joint Venture, and the signing of the first sizable export contract to support Leviathan development. Year to date, we have operated our business within organic cash flows while also monetizing nearly $1.5 billion in assets. Improving our balance sheet has positioned our business for activity acceleration and allowed us to pay down debt. We have already added an additional two rigs to our Texas assets in the fourth quarter and I would expect that we will further increase activity in the near future. Tremendous performance has ensured a bright future for Noble Energy.

Cold 2017 Winter. Temperatures in the 2016-2017 winter in the U.S. are expected to be 20% colder than in 2015-2016, and that’s why energy infrastructure projects are important, according to the American Petroleum Institute.

“This winter, American consumers are set to face colder temperatures as compared to last year,” said API Chief Economist Erica Bowman in a recent talk, Kallanish Energy reports.

“The Energy Information Administration estimates that temperatures in the Northeast, Midwest, and the South are expected to be up to 20% lower than last winter. With temperatures set to drop outside, American consumers will continue to rely on natural gas as the most prominent energy source to heat their homes,” she said.

“Given that natural gas and electricity are the dominant choices for home heating and that the electricity sector is continuing to use more natural gas as an affordable, reliable and environmentally-friendly fuel choice, natural gas supplies and infrastructure now matter more than ever to consumers,” she added.

Obama’s Last Shot at O&G.  The oil industry expects the Obama administration to issue a plethora of final regulations soon after next week’s election, according to the oil industry’s lead lobbying group.

“As this administration prepares to release the last of its regulations and as we approach the election, it’s important that the significant progress that we have made continues,” Kyle Isakower, vice president, Regulation, for industry trade group the American Petroleum Institute, told reporters Tuesday.

“Right now, the United States is leading the world in the production of oil and natural gas,” he said, and Obama’s new regulations could hamper that.

“There are more than 100 rules and regulations recently proposed or pending covering oil and natural gas,” said Erik Milito, API’s group director, Upstream & Industry Operations. “… but some of the most significant would impact hydraulic fracturing, ozone standards, methane controls and the next five-year plan covering access to offshore areas.”

Milito said a key calendar item is the finalization of the Environmental Protection Agency’s five-year, multi-million dollar hydraulic fracturing study, Kallanish Energy learns.

“The EPA’s draft report contains quantitative scientific data (including over 950 sources of information, published papers, numerous technical reports, information from stakeholders and peer-reviewed EPA scientific reports) that support existing language saying that there is no widespread, systemic impact on the quality of drinking water,” according to Milito.

“Overall, the report demonstrates that industry practices, industry trends, and regulatory programs protect water resources at every step of the hydraulic fracturing process.”

Roughly six years ago, the president issued an executive order, calling on agencies to promote predictability and reduce uncertainty, according to Milito.

“Unfortunately today the numerous overlapping rules stand to harm consumers, lower revenue to the government, weaken our national security, and cause job losses.”

Crude Stockpiles Soars; Prices Slump.  U.S. crude oil stockpiles soared more than 14 million barrels last week, the largest weekly build since the U.S. Energy Department started keeping records in 1982, bolstered by hefty imports and a decline in refining runs.

Oil prices fell after the data, with benchmark U.S. crude futures dropping 3.3 percent, or $1.57, to $45.12 a barrel, their lowest level since late September.

Crude inventories rose 14.4 million barrels in the week to Oct. 28, the EIA said on Wednesday, compared with expectations for an increase of 1.0 million barrels.

U.S. crude imports jumped by about 2 million barrels per day to just under 9 million bpd, the highest rate since September 2012.

"The wildly volatile import series has kept these reports interesting to say the least," said John Kilduff, partner at New York energy hedge fund Again Capital.

The massive build in supply represents a rebound after several weeks of sharp drawdowns in inventories that were kicked off by a 14-million-barrel draw in early September. That drop was initially thought to be an anomaly because of storm activity, but six of the seven weeks that followed also showed drawdowns.

Refinery crude runs fell 104,000 bpd as utilization rates fell 0.4 percentage point to 85.2 percent of total capacity, data showed.

Pioneer 3rd Qtr. Report.  Pioneer Natural Resources reported lower-than-expected third-quarter earnings of $22 million, down 46% from one year ago, Kallanish Energy reports.

Increased production, especially in the Spraberry/Wolfcamp plays in the Permian Basin in West Texas, where production was up 36%, helped the company’s bottom line. Production dipped in the Eagle Ford Shale in Texas and elsewhere, the company said.

Its overall production in Q3 totaled 239,000 barrels of oil-equivalent per day (BOE/d), of which 56% was oil. That is a 3%, or 6,000-barrel, increase from the previous quarter, the company said.

Production was hurt slightly by the Fain processing plant being shut down for unplanned repairs, the company said. Production in the Western (Texas) Panhandle dipped by 2,000 BOE/d as a result, the company said.

It is expanding its drilling plan from 12 rigs to 17 rigs in the second half 2016, which is expected to boost 2017 production by 13% to 17%, Pioneer said. It put 46 horizontal wells into production in Q3 in the Spraberry/Wolfcamp, where it has roughly 600,000 acres, plus 200,000 acres in a joint venture.

The company also reported that in the third quarter it made its first two shipments of Permian Basin crude oil totaling 610,000 Bbls to Europe.

Cabot 3rd Qtr. Report.  Third-quarter natural gas production grew for Texas-based Cabot Oil & Gas, although oil and liquids production declined, Kallanish Energy finds.

Natural gas jumped 8%, from 133 billion cubic feet (Bcf) in the third quarter of 2015, to 144.4 Bcf in the recently completed third quarter, the company said.

Downstream maintenance and unscheduled gathering downtime cut into gas production in the quarter by 3.2 Bcf, or 35 million cubic feet per day (MMcf/d), the company said.

Crude oil and condensate volumes dropped from 1.35 million barrels (MMBbls) in Q3 2015, to 941,400 Bbls in Q3 2016, Cabot reported.

Natural gas liquids production also dropped, from 162,000 Bbls in Q3 2015, to 129,600 Bbls in Q3 2016, the company said.

Equivalent production grew 6.1%, from 142.1 billion cubic feet-equivalent (Bcfe) in Q3 2015, to 150.8 Bcfe in Q3 2016, according to the Houston-based independent producer.

Cabot drilled 11 net wells and completed 23 net wells in the quarter. It spent $99.5 million on capital expenditures.

CEO Dan Dinges praised the company for increasing gas production while cutting costs. “The volatility in commodity prices continues to challenge our industry and has driven us to be more efficient,” he said, in a statement.

His company, he said, is “prudently managing this business for the long term.”

Cabot reported a third quarter loss of $10.2 million, compared to a loss of $15.5 million in Q3 2015.

Operating revenue rose 2%, to $310 million in the third quarter, while operating expenses fell 2%, to $304 million.

Consol and Noble Energy Dissolve JV.  Coal and natural gas producer Consol Energy Inc. and Noble Energy Inc said they would dissolve their 50-50 Marcellus shale joint venture, resulting in a payment of about $205 million to Consol on closing.

The joint venture was formed in 2011 to explore and develop about 669,000 acres in the Marcellus Shale in Pennsylvania and West Virginia. The venture produces the equivalent of about 1.07 billion cubic feet of gas per day.

U.S. shale oil production is expected to fall for a 12th consecutive month in November, according to a U.S. government forecast, on the back of a two-year global rout in oil markets, leading several oil and gas companies to sell assets or revisit deals with other companies.

Canadian energy producer Enerplus Co. put its natural gas assets in the U.S. Marcellus shale region up for sale earlier this month, while Norwegian oil company Statoil sold its assets in the same region to EQT Corp early this year. and Consol said they would now own and operate wells in two separate areas where they would have independent control and flexibility over development. deal does not change the total acreage or gathering rates dedicated by Consol and Noble to Cone Midstream Partners, a limited partnership formed by the two companies to develop and acquire natural gas gathering and other midstream energy assets in the Marcellus shale.

Consol will control about 306,000 Marcellus acres with production of nearly 620 million cubic feet per day of natural gas equivalents, while Noble will control about 363,000 acres with production of about 450 million cubic feet per day of natural gas equivalents.

The deal is not subject to a financing condition and is expected to close in the fourth quarter of 2016, the companies said.

William and Williams Cos. 3rd Qtr. Report.  Williams Cos. and the pipeline giant’s Williams Partners LP both swung to a profit for the third quarter, boosted by higher olefin margins at the Geismar plant in Louisiana and lower costs.

Williams Partners also adjusted its 2017 capital spending plans, mostly related to previously disclosed timing changes for the Atlantic Sunrise pipeline—which will help connect Marcellus Shale natural-gas supplies with customers along the East Coast—to go into service. Williams now expects partial service to begin in the second half of 2017 with full service in mid-2018.

Over all, Williams reported a profit of $61 million, or 8 cents a share, compared with a year-earlier loss of $40 million, or 5 cents a share. Excluding losses related to the sale of its Canadian operations, year-earlier asset write-downs and other items, adjusted per-share earnings from continuing operations fell to 20 cents from 22 cents. Revenue increased 5.9% to $1.91 billion.

Analysts polled by Thomson Reuters expected per-share profit of 19 cents and revenue of $1.73 billion.

Over all, Williams Partners reported a profit of $326 million, or 42 cents a share, compared with a year-earlier loss of $194 million, or 32 cents a share. Revenue increased 6.4% to $1.91 billion.

Williams Partners now expects its 2017 capital and investment expenditures will reach between $2.1 billion and $2.8 billion, including $1.4 billion to $1.9 billion related to the expansion of the Transco natural gas pipeline system. Williams Partners previously expected 2017 capital and investment spending of $1.9 billion to $3.1 billion, including $1.3 billion to $2.4 billion related to Transco.

Williams has been focusing on its strategy to continue as a stand-alone company after a planned merger deal with Energy Transfer Equity LP fell through in June and after Enterprise Products Partners LP said it was no longer pursuing a potential combination with Williams.

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

Rig Count

Baker Hughes Rig Count the week of October 28, 2016

  • PA     
    • Marcellus 27 up 2
  • Ohio 
    • Utica 14 unchanged
  • WV 
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 33 unchanged
  • TX & NM
    • Permian Basin – 212 unchanged
  • ND
    • Williston – 35 up 5
  • CO
    • Niobrara – 15 down 2
  • TOTAL U.S. Land Rig Count 533 up 5

PA Permits October 27, to November 3, 2016

        County      Township    E&P Companies

1.    Greene        Center        EQT
2.    Greene        Center        EQT
3.    Greene        Center        EQT
4.    Greene        Center        EQT
5.    Greene        Center        EQT
6.    Greene        Center        EQT
7.    Greene        Center        EQT
8.    Greene        Center        EQT
9.    Greene        Center        EQT
10.    Greene        Center        EQT
11.    Greene        Center        EQT
12.    Greene        Center        EQT

OH Permits for week ending October 29, 2016

        County        Township   E&P Companies

1.    Belmont        Somerset    Gulfport
2.    Belmont        Somerset    Gulfport
3.    Belmont        Somerset    Gulfport
4.    Belmont        Richland      Gulfport
5.    Belmont        Richland      Gulfport
6.    Belmont        Richland      Gulfport
7.    Belmont        Richland      Gulfport
8.    Belmont        Smith           Rice
9.    Monroe         Switzerland   Consol
10.   Monroe        Switzerland   Consol
11.   Monroe        Switzerland    Consol

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement