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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 

What Does Trump Win Mean to O&G?  Needless to say Trump’s victory will be a major boom to the oil and gas industry.  Trump is a big supporter of the domestic energy whether it’s oil, NatGas, or coal.  These industries will certainly be able to take advantage of opportunities as they arise.  The Trump win will not immediately impact the global production and demand for oil.  However, many analysts think Trump’s infrastructure program will increase oil consumption in the U.S.

Part of the energy independence goal should be to expedite the construction of NatGas pipelines.  The greatest impact on NatGas pricing will be the construction of these pipeline.  In the Appalachian Basin, literally billions of dollars are waiting to be spent on the Rover, Nexus, Mariner East 2, Atlantic Sunrise, Constitution, PennEast and Mountain Valley pipelines.  A more industry friendly EPA and FERC should be able to get the working going on these pipelines.  We expect an easing of regulations as well that will support the campaign promise of jobs.

FERC Delays PennEast EIS.  The Federal Energy Regulatory Commission (FERC) on Tuesday announced a delay in releasing its final Environmental Impact Statement (EIS) for the controversial PennEast Pipeline, Kallanish Energy reports.

The date for issuance of the final EIS is now Feb. 17, 2017, pushed back from Dec. 16. “Based on new route modifications filed by PennEast, the Commission staff intends to issue a notice to newly affected landowners,” FERC wrote. “Commission staff has therefore revised the schedule for issuance of the final EIS.”

FERC also sent PennEast a request for new data and mandated 34 corrections to PennEast’s application to build a 118-mile natural gas pipeline moving Marcellus Shale play natural gas from Northeast Pennsylvania to near Princeton, New Jersey, northeast of Philadelphia.

In a letter dated Nov. 4, FERC told PennEast it must comply with the request within 20 days.

FERC also added a new 30-day public comment period for its Draft Environmental Impact Study (DEIS) on PennEast due to numerous route changes proposed by PennEast after the close of the DEIS comment period.

Opponents to the pipeline cheered the FERC postponement. “Growing opposition, delays, and major red flags from federal and state agencies show that this ill-advised pipeline is certainly in jeopardy,” said Tom Gilbert, campaign director, New Jersey Conservation Foundation and ReThink Energy NJ.

“Opponents of the PennEast pipeline should take heart that FERC is responding to the overwhelming opposition from the public and significant concerns raised by other agencies,” Gilbert added.

Eclipse Resources 3rd Qtr. Report.  Pennsylvania-based Eclipse Resources reported a third quarter loss of $26.8 million, on revenue of $54.5 million, Kallanish Energy finds.

The company lost $81.5 million in the third quarter of 2015.

Average net daily production in the Utica Shale was 221 million cubic feet-equivalent per day (MMcfe/d).

Eclipse’s natural gas production jumped from 13.4 billion cubic feet (Bcf) in the third quarter of 2015, to 15.4 Bcf in the third quarter of 2016, an increase of nearly 15%.

However, production of natural gas liquids and oil dropped from the prior year.

Eclipse resumed Utica Shale drilling in Q2 2016, and is drilling in Ohio’s Monroe County in the dry gas area where a seven-well pad is being developed.

It completed 12 drilled but not completed wells in the third quarter using a new completion design, which involves increasing proppant loading, tighter spacing and 100% slickwater, the company said.

It remains pleased with its Purple Hayes “super lateral” well in Ohio, said CEO Benjamin Hulburt. That well, with its 18,500-foot lateral, has produced 2.4 Bcfe in its first 185 days of production, the company said.

That production is 38% natural gas, 38% condensate and 24% natural gas liquids Eclipse said. The well in Guernsey County is expected to outperform the company’s “type well” reserve expectations by 28% to 50%, the company said.

Eclipse reported it’s getting higher prices for natural gas via a new connection for 205,000 MMBtu per day on the Columbia Gas Transmission’s Utica Access Project/TCO Pool.

Rex Energy 3rd Qtr. Report.  Rex Energy on Wednesday reported third-quarter net income of $5.4 million on revenue of $34 million, as production jumped 8% from a year ago, Kallanish Energy reports.

The Pennsylvania-based company lost $94.7 million in the third quarter 2015.

Third-quarter production grew by 8% over a year ago, to 197 million cubic feet-equivalent per day (MMcfe/d), the company said. Condensate and natural gas liquids accounted for 40% of net production in Q3.

Third-quarter production consisted of 118.8 million cubic feet per day (MMcf/d) of natural gas and 13,200 barrels of oil-equivalent per day (BOE/d) of condensate and natural gas liquids, including ethane.

Rex spent $10.9 million in the most recent quarter on capital projects to drill four gross wells in the Appalachian Basin.

The company expects to ship 50% of its natural gas to the Gulf Coast in 2017 and that should increase the price paid for that gas by 50%, Rex said. The company will be shipping 130 billion Btu per day.

Rex drilled 4.5 gross wells in the third quarter and started production on six wells in eastern Ohio and western Pennsylvania. It has a four-well pad ready to begin production in December and has six wells awaiting completion.

Summit Midstream 3rd Qtr. Report.  Natural gas volumes grew by 8.7% in the third quarter for Summit Midstream, Kallanish Energy reports.

The company, based in The Woodlands, Texas, moved an average of 1.57 billion cubic feet per day (Bcf/d). That compares to 1.45 Bcf/d in the year-ago period.

Crude oil and produced water volumes in the third quarter averaged 92,000 barrels per day (BPD), an increase of 35.2%. That compares to 68,000 BPD in the third quarter of 2015.

Those numbers exclude the company’s share of volume throughput from its 40% ownership interest in Ohio Gathering in the Utica Shale in eastern Ohio, Summit Midstream reported.

The company also has operations in the Williston Basin in North Dakota, the Piceance/DJ Basin in western Colorado, the Barnett Shale in Texas and the Marcellus Shale in Pennsylvania.

The company “generated strong financial results in the third quarter of 2016 due to increasing volumes” driven largely by the Utica and Williston operations, said CEO Steve Newby, in a statement.

Volumes are also growing in the Piceance/DJ Basin as drilling resumes, he said.

His company is also encouraged by the recent trend in M&A in several of the company’s operating assets, Newby said. For example, Total is taking over Chesapeake’s operations in the Barnett Shale in Texas.

Summit Midstream reported third-quarter net income of $2 million, compared to net income of $3.5 million in the third quarter of 2015.

Net cash provided by operations totaled $37.2 million in the third quarter, compared to $33.1 million in the prior-year period.

As U.S. natural gas production slows amid cost-cutting, one U.S. state is bucking the trend.

Sunoco Logistics – ExxonMobil Deal in the Permian.  Sunoco Logistics Partners said it’s forming a joint venture with ExxonMobil, combining assets in the Permian Basin of West Texas, Kallanish Energy learns.

The Permian Express Partners JV will consist of Sunoco Logistics’ Permian Express 1 and 2, Permian Longview and Louisiana Access pipelines. ExxonMobil’s contributions includes its Longview-to-Louisiana and Pegasus pipelines, Hawkings gathering system, an idle pipeline in southern Oklahoma, and its Patoka, Illinois terminal.

The joint venture expands the footprint of Sunoco Logistics in West Texas, and the current prize for oil producers: the Permian. It comes less than two months after an announcement to buy Vitol’s crude oil unit in the Permian for $760 million.

“This combination of certain strategic crude oil assets, together with our existing and recently acquired Midland Basin assets, greatly enhances our service capabilities for the Permian Basin, one of the most prolific shale areas with incredible growth opportunities,” said Michael J. Hennigan, CEO of Sunoco Logistics.

The access to ExxonMobil’s terminal gives Sunoco a stake in the Midwest oil hub of Patoka. Sunoco Logistics will own 85% and will operate the JV, while ExxonMobil will control the remaining 15%.

Concurrent with the transaction, ExxonMobil and its affiliates will enter into a preferred provider agreement with the joint venture.

Ascent Resources Raises Fund for Utica Development.  Independent producer Ascent Resources said it entered into agreements to sell roughly 3.5 billion common units via private placement, expected to result in net proceeds of roughly $787 million.

Upon closing, Ascent will give $175 million from the private placement to Ascent Resources – Utica (ARU) to fund ARU’s ongoing Utica Shale natural gas and oil development program in Ohio, Kallanish Energy finds.

The Oklahoma City, Oklahoma-based company also plans to use roughly $479 million to prepay in full the junior-lien term loans outstanding, pursuant to a pre-existing agreement regarding such repurchase for a combination of cash and equity.

The remaining $132 million of proceeds from the transaction will be used to further Utica Shale development, liability management purposes or capital structure optimization.

“This equity raise represents the culmination of a series of comprehensive, strategic initiatives to identify cost savings, operating efficiencies and balance sheet enhancing opportunities that Ascent Management and its sponsors launched at the end of 2014 to position ARU for success across a variety of commodity price environments,” said Ascent CEO Jeffrey A. Fisher.

In 2016, Ascent has $1.5 billion and, year-to-date through Nov. 15, will have reduced ARU’s outstanding balance sheet debt by more than $1.9 billion.

Ascent Resources – Utica (formerly known as American Energy – Utica) is an indirect, wholly-owned subsidiary of Ascent Resources.

Drilling Permits Up in TX.  Texas issued 855 new drilling permits in October, Kallanish Energy learns.

That is up 4% from 822 permits issued by the Railroad Commission of Texas in October 2015.

The latest total included 679 permits for new oil or gas wells, 10 permits to re-enter plugged bores and 166 for re-completions of existing well bores, said the commission that oversees drilling in Texas.

The breakdown for those October permits included 211 oil, 45 gas, 562 oil or gas, 26 injection and 11 other permits, the commission said.

In October, the commission also approved 445 permits for oil completions plus 203 permits for natural gas completions.

Total Texas well completions for 2016 year-to-date are 9,405, down from 17,545 recorded in the first 10 months of 2015, the commission said.

According to well services company Baker Hughes, the Texas rig count at Nov. 4, was 262, representing 46% of all active rigs in the U.S.

The most active region for permits is the Midland Basin, with 359 permits to drill oil/gas holes, 163 permits for oil completions and six permits for gas completions.

The Midland is part of the larger Permian Basin, the most active drilling area in the country.

Second for permits in Texas is the Lubbock area with 124 permits for oil-gas drilling plus 53 oil completions, but zero natural gas completions.

OH Production Is Going Strong.  Gas output from Ohio, home to the Utica shale formation, jumped 13% in August even as supplies dropped across the bulk of the U.S., including the neighboring Marcellus play in Pennsylvania. Chesapeake Energy Corp., Rice Energy Inc. and Gulfport Energy Corp. drilled most of the new wells in the state, data from Bloomberg Intelligence show.

Producers are doubling down on Ohio amid speculation that gas flows from the Utica will eventually rival output from the Marcellus, America's biggest shale reservoir. An energy price rout earlier this year strained explorers' balance sheets, prompting drillers to refocus their efforts on regions that yield the most fuel at the lowest cost.

Ohio accounted for about 5% of U.S. gas supply in August, up from less than 2% for the same period in 2014, U.S. Energy Information Administration data show. The initial volumes of gas flowing out of wells in the Utica are climbing as operators improve well designs to extract more fuel, said Andrew Cosgrove, an analyst at Bloomberg Intelligence. The number of wells brought online in the play has risen versus a drop of 30% to 40% in the Marcellus, he said.

"If new wells coming online in the Utica flat-line at best, you can expect to see more gains," he said.

Union Gas Moving Marcellus and Utica NatGas to Canada.  Union Gas has started service on a $289.96 million pipeline expansion in Ontario to move Marcellus and Utica Shale natural gas, Kallanish Energy finds.

The addition of 12.4 miles of 48-inch pipeline and a new compressor station near London will help move Marcellus and Utica gas from the Dawn Hub near Sarnia, Ontario, to eastern Canada and the Northeast U.S.

It will move 0.36 billion cubic feet of natural gas per day (Bcf/d) through the Dawn-Parkway System, the company said. The new pipeline was added between Hamilton and Milton, Ontario, and will boost service to Toronto.

The improvements represent a second phase of a $1.5 billion investment in the Dawn-Parkway System between 2015 and 2017, the company said. When completed total capacity of the system will be 7.6 Bcf/d.

That will make it one of the “most robust pipeline systems in North America,” said Union Gas, which is based in Chatham-Kent, Ontario.

“Our investments, in conjunction with related infrastructure projects by Enbridge Gas Distribution and TransCanada Pipelines east of Parkway, provide eastern Canada and U.S. markets with increased access to the Dawn Hub and Appalachian supply,” said Union Gas president Steve Baker, in a statement.

Seneca Plans More Utica Testing.  National Fuel Gas Co.’s exploration and production subsidiary, Seneca Resources Corp., will prioritize additional Utica Shale appraisal drilling in an undeveloped part of Northwest Pennsylvania in its Fiscal Year (FY) 2017, which started in October, after encouraging test results there.

EIA Projects Higher NatGas Prices and Production.  U.S. natural gas prices are expected to rise in 2017 on growing domestic consumption, increased pipeline exports to Mexico, and more exports of liquefied natural gas, the U.S. Energy Information Administration said in its Short-Term Energy Outlook Tuesday.

The agency, part of the federal Department of Energy, predicted the spot price of natural gas will rise to an average of $3.12 per million BTUs next year, up from an average of $2.50 in 2016.

Residential retail prices, measured in dollars per thousand cubic feet, are expected to decline from $10.68 this month to $9.63 in February before recovering toward the middle of 2017.

Natural gas production for 2016 as a whole is expected to post its first decline since 2005 but is due to start a rebound in 2017 in response to more drilling and as more pipelines are built, the EIA said.

“EIA expects production to start rising in November as a result of increases in drilling activity and infrastructure buildout that connects natural gas production to demand centers,” the report said.

It predicted that natural gas production will rise by 2.9 billion cubic feet a day (bcf/d) in 2017 from its level in 2016, when it declined by 1.4 bcf/d from 2015.

In Pennsylvania, the second-biggest gas-producing state after Texas, the projected national price increase will prompt more drilling and more activation of wells that have already been drilled but have not been producing gas because of low prices and a shortage of pipelines, said John Quigley, former Secretary of Pennsylvania’s Department of Environmental Protection.

“Production from Pennsylvania will continue to increase at a significant rate,” Quigley said. “The uptick in prices absolutely will translate into more drilling.”

Quigley, now a senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy, said that around 30 percent of Marcellus Shale wells are not in active use because of the low-price environment that has existed since 2009.

Even with the anticipated spot price gain next year, the average will still be less than half its pre-recession level of $8.89 in 2008, according to EIA data.

Despite the large number of inactive wells – some of which will be brought online – there will also be an increase in the number of rigs drilling new wells, in response to a price increase, Quigley said. “The typical response when prices rise is, regardless of a backlog, we’re going to see an increase in drilling activity.

“Prices have been at historic lows, they don’t have any place to go but up,” he said. “From a directional perspective, I would completely agree that prices are bound to go up.”

Still, any price rise will be limited by the expected increase in production, Quigley said. “It’s in the nature of the resource extraction play. Companies create a glut, then they slow down, and then prices rebound, demand catches up and they repeat the same pattern.”

Nationally, the anticipated rise in natural gas prices is expected to narrow the gap between the share of electricity generated by natural gas and that by coal, the EIA said. Utility-scale power generation from natural gas is expected to drop to 33 percent in 2017 from 34 percent this year, while that from coal will increase to 31 percent from 30 percent. A Pennsylvania judge put a temporary stay on select new rules for Marcellus Shale drilling operations on Tuesday until a court can consider the merits of an industry group’s challenge to the month-old regulations.

U.S Ethane Consumption to Increase in 2017.  U.S. ethane consumption will average 1.12 million barrels per day for the full 2016 calendar year, a 5% increase from last year, and will rise 16% in 2017, according to the latest estimates from the Energy Information Administration.

Consumption of natural gas liquids rose to 2.26 mbd in the third quarter from 2.21 mbd the previous quarter. Aside from ethane, propane accounted for 0.94 mbd and butane for 0.20 mbd.

Meanwhile, Steve Lewandowski, Senior Director, Global Olefins, at IHS Chemical, told an IHS conference in Singapore that global ethylene supply will fall short in 2019-2022 as demand outpaces new capacity additions. While ethylene capacity will rise by 28 mtpa from both conventional and non-conventional sources between 2016 and 2021, capacity is not equivalent to supply, Lewandowski said, and therefore it would be risky to infer margins from those trends.

PA Judge Puts Temporary Halt on New Marcellus Drilling Rules.  A Pennsylvania judge put a temporary stay on select new rules for Marcellus Shale drilling operations on Tuesday until a court can consider the merits of an industry group’s challenge to the month-old regulations.

Commonwealth Court Judge P. Kevin Brobson sided with the Marcellus Shale Coalition, a North Fayette-based trade organization, and stopped implementation of narrow sections of the rules related to public resource protections, large fluid holding ponds, well site restoration standards and monitoring for underground hazards around fracking operations.

He found that some aspects of the rules might exceed regulators’ authority to impose them and that the costs of complying with those provisions now would cause the industry irreparable harm if the sections are later found to be invalid.

He said pausing enforcement of those provisions “will not adversely affect the public interest.”

Judge Brobson denied the coalition’s request to stay rules related to spill cleanup, onsite waste processing and monthly waste reporting.

The state Department of Environmental Protection’s new rules for shale operations took effect on Oct. 8 and are meant to modernize standards to keep up with the sophisticated industry. A DEP spokesman said the agency is still reviewing the court’s decision.

Marcellus Shale Coalition president David Spigelmyer said in a statement that the organization is “pleased with the court’s decision to preliminarily stay unlawful, burdensome, and costly portions of the challenged regulations from going into effect until this matter can be fully decided in the courts.”

Judge Brobson enjoined a section of a rule that would have required companies to consider the impact of their operations on nearby playgrounds, common areas of a school’s property and so-called “species of special concern,” which are not officially listed as threatened or endangered.

He let the rest of DEP’s strategy for minimizing impacts to public resources to stand.

He allowed DEP to continue to require shale gas operators to survey for nearby abandoned and active wells that might be affected by fracking in new wells, but he halted the sections of the rules that would have required companies to monitor and remediate damage to wells owned by others or have no known owners.

He also stayed rules that would have required companies to close existing fluid holding ponds and rebuild them to comply with stronger construction standards, although new impoundments will still have to meet the DEP’s stricter standards.

The Commonwealth Court will now consider the merits of the case, but it has not yet published a briefing or argument schedule.

LNG to Southeast Asia.  Southeast Asian nations could soon double import capacity for liquefied natural gas as domestic energy sources fall short, collectively becoming a key player in the global LNG market.

Energy providers in the region will boost annual LNG receiving capacity from 25 million tons to some 50 million tons over the next five years. The expanded figure equates to about 20% of the LNG carried on tankers worldwide in 2015.

Thai state petroleum giant PTT will double capacity at an import terminal in Map Ta Phut, on the Gulf of Thailand, to 10 million tons by March 2017. New docks for transport ships have been added, and two massive storage tanks are nearly complete, putting the expansion on track to begin operations as scheduled.

Thailand relies on natural gas for 60% of its electricity. Much of that fuel is produced domestically. The country aims to boost production of renewable energy as gas reserves at home decline and electricity demand increases. But the fuel will still account for 40% or so of power production, meaning that more LNG will need to be brought into the country. PTT will soon enter into 15-year supply contracts with affiliates of Royal Dutch Shell and BP to make use of expanded receiving capacity.

Indonesia could also start importing LNG as early as 2019 if no new oil fields are developed, said an official at the Ministry of Energy and Mineral Resources. Domestic oil and gas output is quickly becoming insufficient to meet growing energy needs. The country could become a net importer of LNG by 2030, the official indicated.

State energy giant Pertamina is adding two LNG import terminals to its network, including one in Central Java. These will raise the company's annual import capacity to more than 14 million tons. PetroVietnam Gas, meanwhile, is building Vietnam's first LNG terminal at the southern port of Thi Vai for $286 million.

Singapore LNG is working to boost receiving capacity at a terminal on Jurong Island 80% to 11 million tons by 2017. Additional construction could bring that to 15 million tons in the future. The city-state aims to become a regional natural gas trading hub, with the Singapore Exchange having introduced LNG futures products in January. Brisk trade in the commodity in Singapore would let prices there reflect the state of the entire Asian market, according to S Iswaran, minister for trade and industry.

Global investment in LNG development is in a lull for now on such factors as a letup in Chinese demand. But demand is expected to pick up again in the long term, particularly in Southeast Asia. Thailand, Singapore and Malaysia imported around 5.8 million tons of LNG in 2015, according to the Oxford Institute for Energy Studies. This is around 2% of the total traded globally. In 2021, these countries, plus Vietnam, stand to import around 20 million tons of the fuel. That total is seen surging to between 45 million and 65 million tons in 2030, when Indonesia is added to the mix.

In a median scenario, Japan is seen remaining the world's top LNG importer in 2030 at around 74 million tons. China, with 66 million tons, will be next in line. Southeast Asian companies could work with Japan to source gas from producer nations, such as those in the Middle East.

Some of this need for LNG in Southeast Asia will be met by U.S. O&G companies.  This is evidenced by the expansion of the Cheniere facility in LA.  Additionally, the new Panama Canal channel is seeing much great LNG traffic than it had planned.  

The Thai chemical company mentioned in this story is the same PTTGC Company that will be building the cracker plant in Shadyside facility in Belmont County, OH.

EOG Resource 3rd Qtr. Report.  EOG Resources reported it had dramatically reduced its financial loss in the third quarter, Kallanish Energy reports.

The company, based in Houston, lost $190 million, vs. a net loss of $4.1 billion in the year-ago period.

CEO William R. Thomas said in a statement 2016 “is proving to be a breakout year” for the company.

Crude oil production in the third quarter grew by 1%, the company said. EOG produced 275,700 barrels of oil per day (BPD), which exceeded the midpoint of the company’s guidance by 3%.

Thomas also hailed his company’s acquisition of Yates Petroleum in the quarter, a move that doubles the company’s total oil and gas recovery estimates in the Permian Basin’s Delaware Basin in West Texas. That number jumps from 2.35 billion barrels of oil-equivalent (BBOE), to 6 BBOE, the company said.

The company now has 400,000 net acres in the Delaware Basin.

EOG’s revenue fell by 2% in the third quarter, to $2.2 billion, while expenses dropped by $6 billion, to $2.3 billion in the quarter.

It is boosting 2016 capital spending by $200 million for well completions, projecting 450 well completions and drilling 290 net wells in 2016. Both totals are more than original company plans.

If oil remains at $50, the company said it expects 15% annual growth through 2020.

PDC Energy 3rd Qtr. Reports.  PDC Energy reported a third-quarter net loss of $23.3 million, despite increased production, Kallanish Energy reports.

That compares to a net loss of $41.5 million in the third quarter of 2015, the Colorado-based company said.

Third-quarter production totaled 65,262 barrels of oil-equivalent per day (BOE/d). That’s a 39% increase from a year ago.

Revenue totaled $164 million in Q3, down 29% from $231.1 million in the year-ago quarter, the company said.

Third-quarter production hit 6 million barrels of oil-equivalent (MMBOE), up from 4.3 MMBOE one year ago.

It began production on 40 gross operated wells including its first two, two-mile lateral wells in the Core Wattenberg field in Colorado.

The third quarter 2016 was “truly transformational for PDC,” said CEO Bart Brookman in a statement.

The company is entering the Permian Basin’s Delaware Basin in West Texas with a $1.5 billion acquisition of 57,000 net acres and has completed an acreage trade in the Middle Core area of the Wattenberg, he said. The company also has operations in the Utica Shale in Ohio.

Energy Transfer Partners 3rd Qtr. Report.  Dallas-based Energy Transfer Partners reported third-quarter profit declined to $74 million, down from $417 million in Q3 2015, Kallanish Energy reports.

That was due primarily to a write-down of $308 million on the Midcontinent Express Pipeline.

Revenue fell 16%, to $5.53 billion in the third quarter, the company said.

The company has said it intends to proceed with the Dakota Access Pipeline that has run into opposition from the Standing Rock Sioux tribe in North Dakota and its supporters. The 1,170-mile oil pipeline to Illinois is mostly built, but federal agencies have halted construction for a special review.

According to media reports, a bank in Norway providing $342.4 million in loans, roughly 10% of total funding for the project, is concerned by the continuing protests in North Dakota.

The bank, DNB, issued a statement earlier this week, saying it hoped the problems could be worked out among the parties, Dallas media reported.

Sunoco Logistics 3rd Qtr. Report.  Pennsylvania-based Sunoco Logistics Partners reported third quarter earnings of $154 million, upp from $56 million in the year-earlier period, Kallanish Energy reports.

The increase was due largely to a $140 million positive variance related to non-cash inventory adjustments resulting from changes in commodity prices, plus improved operating results from refined products and natural gas liquids, Sunoco Logistics said.

The adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for natural gas liquids (NGL) increased by $11 million, to $77 million for Q3. The increase is linked to increased volumes and fees from the company’s Mariner NGL pipeline projects in Pennsylvania.

The adjusted EBITDA for refined products jumped by $26 million, to $70 million for the quarter, due largely to increased volumes on pipelines, including the Allegheny Access Pipeline, the company said.

“Our latest expansion projects in the Permian and Marcellus basins generate sustainable cash flow that more than offset a reduction in market-related earnings,” said CEO Michael Hennigan, in a statement.

Sunoco Logistics also reported it had begun operations on the Delaware Basin Extension and Permian Longview and Louisiana Extension pipelines.

It has also completed the $760 million acquisition from Vitol of a Permian Basin crude oil system in West Texas and the remaining interest in SunVit.

NatGas Power Plant Coming to NE PA.  A Pittsburgh-based power-generation firm has filed paperwork with the state Department of Environmental Protection in seeking to build a small electric generation plant off Sky Crest and Adams Pond roads.

The plant would produce about 22 megawatts of electricity using three engines fired by natural gas, which would be processed at the plant.

IMG Midstream has submitted an air-quality plan approval application with the DEP in moving forward with the project.

The DEP's air quality bureau will review the application, which could take a couple of months, said spokeswoman Colleen Connolly.

Berlin Township Supervisor Cathy Hunt and Bailie Rutherford, a member of the township planning commission, said the proposed project is in the infant stages and there are still unanswered questions.

An IMG Midstream representative is expected to be at the next supervisors meeting at 7:30 p.m. Nov. 15.

In a letter to the supervisors, the firm stated electric energy will be produced and placed on the electric grid through the use of three Rolls Royce Bergen lean-burn reciprocating internal combustion engines.

Also at the facility will be a gas processing plant that will use a desiccant system to remove water and a small gas-fired heater.

There will also be tanks for oil, used oil and urea.

The township has no zoning ordinance, but Hunt said the proposed project could be regulated under the municipality's land development ordinance.

All IMG sites are located in proximity to natural gas production as well as local substations to maximize utilization of existing infrastructure and minimize the need for additional infrastructure to be built.

Development plans say such a facility is located on approximately five acres, using about one acre for the building and equipment. Building size averages fewer than 8,000 square feet.

Sand Prices Indicate Pricing Recovery.  U.S. producers of sand used in hydraulic fracturing are raising prices due to stronger demand, seen as a sign higher oil prices are improving the outlook for the domestic fracking industry, Kallanish Energy learns.

Publicly-traded sand companies have pulled thousands of rail cars out of storage after oil hit a one-year high in October, thanks to rising demand, according to recent earnings calls and interviews, Reuters found.

Sand companies idled half of the roughly 125,000 frac sand cars they had in service in 2014 after oil plunged, experts said, but nearly all are expected to return to service by 2018.

Companies including Chesterland, Ohio-based Fairmount Santrol Holdings; U.S. Silica Holdings of Frederick, Maryland; Southlake, Texas-based Emerge Energy Services; and Hi Crush Partners in Houston all saw increased business in the year’s third quarter, Reuters reported.

Smart Sand held its initial public offering on Friday in another sign of industry confidence.

Rangeland Energy, a privately-held logistics company in Sugar Land, Texas, that unloads sand from rail cars to put onto trucks, is eyeing expansion to handle more volumes, Patrick McGannon, vice president for business development, told Reuters.

Hi Crush had just over 600 rail cars in storage at the end of the year’s third quarter, down from about 1,900 six months ago, chief financial officer Laura Fulton said on an earnings call on Nov. 1.

While the increase in sand volume represents a ramp-up of U.S. activity, it does not necessarily correlate with improved global oil demand, said Credit Suisse analyst Charles Foote. Fracking is unique because the sand is instrumental to the process, unlike other types of drilling.

PA Governor Announces Program to Support NatGas.  Pennsylvania Governor Tom Wolf announced the opening of a new Pipeline Investment Program (PIPE) that will offer up to $24 million of total funding to make natural gas available to state residents, manufacturers and other businesses.

Grants will be available for up to $1 million per applicant for pipeline project expenses, with the applicants providing at least 50% matching funds of the total project, Kallanish Energy reports.

Eligible applicants include businesses, economic development organizations, hospitals, municipalities, and school districts.

Qualifying expenses include: construction; acquisition of land, rights of way, and easements; land clearing and preparation; engineering, design, and inspection costs; administrative costs, such as advertising, legal, and documented staff expenses of the applicant to administer the grant; and project contingencies associated with the construction project up to 5% of the actual construction costs.

PIPE is administered by Pennsylvania’s Commonwealth Financing Authority (CFA) and is now accepting applications. The first PIPE approvals are expected in early 2017.

New Pipeline Rules in the Bakken.  North Dakota regulators this week approved revised rules for gathering pipelines to address concerns raised by the oil industry and state lawmakers, Kallanish Energy finds.

The state Industrial Commission voted to approve the revisions, which make the rules narrower and less retroactive than originally proposed. Department of Mineral Resources Director Lynn Helms said the proposed rules are still robust, including a berm requirement that will affect an estimated 1,400 sites.

“We think that will substantially reduce the off-site spills and releases,” he told the Forum News Service.

The rules will take effect Jan. 1 if approved Dec. 5 by the North Dakota Legislature’s Administrative Rules Committee, which voted in September to delay them.

Industry representatives complained at the time the rules would create confusion, additional costs and weren’t what lawmakers intended in a comprehensive bill passed last year.

One revision approved clarifies which sites will need a berm at least six inches tall to prevent spills from leaking off-site, while also adding the language “if deemed necessary by the director” to the section on berms for treating plants, Forum News Service reported.

It also gives operators 180 days to install a berm from the date they’re notified they need one, due to Department of Mineral Resources, Dakota’s long winters, Helms said.

Among the other revisions, a bonding requirement for gathering pipelines will no longer be retroactively applied to pipelines in place before April 20, the effective date of the legislation.

“I think the rules as amended are still a big step in the right direction,” said Governor Jack Dalrymple, who chairs the three-member Industrial Commission that oversees North Dakota oil and gas regulation.

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Rig Count

  • Baker Hughes Rig Count the week of November 11, 2016
  • PA     
    • Marcellus 26 down 1
  • Ohio 
    • Utica 15 up 1
  • WV 
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 38 up 3
  • TX & NM
    • Permian Basin – 218 unchanged
  • ND
    • Williston – 35 down 2
  • CO
    • Niobrara – 16 unchanged
  • TOTAL U.S. Land Rig Count 546 unchanged

PA Permits November 3, to November 10, 2016

        County            Township            E&P Companies

1.    Allegheny          Forward                EQT
2.    Allegheny          Forward                EQT
3.    Allegheny          Forward                EQT
4.    Allegheny          Forward                EQT
5.    Allegheny          Forward                EQT
6.    Allegheny          Forward                EQT
7.    Allegheny          Forward                EQT
8.    Butler               Oakland                Rex
9.   Greene              Center                   EQT
10.  Washington       Carroll                   EQT

OH Permits for week ending November 5, 2016

       County                  Township            E&P Companies

1.    Columbiana            Fairfield                Hilcorp
2.    Columbiana            Fairfield                Hilcorp
3.    Columbiana            Fairfield                Hilcorp
4.    Columbiana            Fairfield                Hilcorp
5.    Columbiana            Fairfield                Hilcorp
6.    Columbiana            Fairfield                Hilcorp
7.    Columbiana            Fairfield                Hilcorp
8.    Columbiana            Fairfield                Hilcorp
9.    Columbiana            Fairfield                Hilcorp
10.    Columbiana          Fairfield                Hilcorp
11.    Columbiana          Fairfield                Hilcorp

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement