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NewsLetters

Expo/Industry events for the next few months

Marcellus Utica Midstream Conference
January 24-26, 2017
David L. Lawrence Conference Center
Pittsburgh, PA
http://www.marcellusmidstream.com/ 

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

Mr. President-Elect Here’s $17 Billion to Get the Economy Moving.  There are seven major pipelines in the Appalachian Basin that have been delayed even though FERC has approved the pipeline projects.  The $17 billion sum is the budgets have been approved for the Nexus, Rover, Atlantic Sunrise, PennEast, Mariner East 2, Mountain Valley and Constitution pipelines. 
 
This is money that is waiting to be spent.  It’s been approved.  It’s in the budget.  Yes, they are “shovel ready” projects.  The economic impact of these projects would be huge in PA, OH and WV.  All the businesses and towns along the paths of these pipelines will feel the economic impact within months maybe even weeks of their final approvals. 

Various groups are trying all types of tactics to keep the pipelines from being built.  The ultimate goal of many of these groups is to stop fracking.  Despite numerous studies by President Obama’s EPA, there is no scientific evidence that fracking is harmful to well water or water supplies.  Would the fracking still be happening if the EPA found it harmful? Absolutely not.

Let’s hope with a new administration in Washington FERC will “stick to its guns” on the pipeline projects which it approved.  

Busy in OH.  An E&P company has a work plan for 2017 that has the construction of 60 well pads in it.  That’s some serious drilling.  (RUMOR)

You Have to Keep Up.  I heard that an environmental company was removed from a project because it could not work fast enough.  We could be getting back to the “crazy days” of 2011 and 2012.  (RUMOR)

The Reason for the Big Drop in NatGas Prices.  The fickleness of commodity markets has been demonstrated lately as natural gas prices collapsed when traders began to suspect that the warm temperatures of this fall may become the prevailing trend for the upcoming winter. The latest thinking of meteorologists is that the emergence of this La Niña weather event may not have as significant an impact on the winter weather as originally anticipated. That means the more populous northern regions of the United States might not have a severe or overly cold winter that would consume the large supplies of natural gas in storage and set the producers up with a stronger price environment during the winter and early spring to attract them to drill more gas wells and help restore a somewhat depleted storage inventory.

Good News for NatGas.  Demand for natural gas will grow faster than for coal or oil over the next quarter-century; whether or not the world meets carbon-reduction targets set in last year’s Paris agreement on climate change, the International Energy Agency said Wednesday.

The IEA’s influential World Energy Outlook did not take into account the election of Donald Trump as U.S. president but presented its forecasts on the basis of three possible scenarios: the new policies that are expected to be implemented following recent agreements; no change in current policies on energy and climate change, and the policies that would be needed to meet the Paris target.

Assuming the expected development of energy sectors in coming decades, gas producers like those in Pennsylvania will see global demand increase by an average 1.5 percent a year between 2014 and 2040, while demand for oil and coal will edge up by only 0.4 percent and 0.2 percent, respectively.

Europeans Want U.S. LNG Badly.  Seven European ambassadors to the U.S. have signed a letter urging the U.S. to expedite liquefied natural gas (LNG) permitting and export facilities so their countries in Eastern and Central Europe can receive such shipments, Kallanish Energy reports.

That, they said, is “a timely and significant issue.”

The letter to congressional leaders, dated Nov. 14, was signed by ambassadors from the Czech Republic, Hungary, Poland, Slovakia, Estonia, Latvia and Lithuania.

Such shipments would increase liquidity in the global market and create an opportunity for diversification of sources, suppliers and routes and boost energy security in the region, the ambassadors said.

Their countries have “inherited from the Cold War” a pipeline system dominated by a single supplier who did not hesitate to use its privileged position in the region to dictate terms of cooperation,” an obvious reference to Russia.

In recent years, the seven countries have developed alternative supply routes, including LNG terminals in Lithuania and Poland that could take shipments from the U.S., the ambassadors wrote. With pipeline connections, the natural gas could also be delivered to Ukraine and southern Europe, they said.

But before the U.S. can become a major LNG supplier to Europe, more export facilities must be built in the U.S. and the permitting process should be simplified, the seven countries said.

LNG exports to countries that have free-trade agreements with the U.S. are automatically considered in the U.S. national interest under current federal law. Exports to non-FTA nations must undergo special reviews at the Department of Energy.

There is legislation in Congress to establish time limits for such reviews.

Chesapeake Selling Assets in the Appalachian Basin.  Chesapeake Energy is selling a package of shallow gas assets in the Appalachian Basin, according to Zacks Investment Research, Kallanish Energy finds.

Though the sale will not be highly accretive to revenue, it will help the independent producer continue to streamline its portfolio. Reportedly, Core Minerals, an Evansville, Indiana-based, privately-held producer, is the buyer, but neither company confirmed deal reports.

Chesapeake is divesting roughly 882,000 acres and about 5,600 wells, as well as associated assets and infrastructure in the Devonian Shale play in West Virginia and Kentucky.

As part of the deal, Chesapeake will have to repurchase a volumetric production payment (VPP), which assists an operator in selling rights to a specific amount of production over a given period of time in return for an advance payment.

Per the terms of the 2007 Kentucky and West Virginia VPP, Chesapeake brought in $1.1 billion in exchange of the rights to 208 billion cubic feet (Bcf) of natural gas production.

The agreement, which generated average output of about 34 million cubic feet per day (MMcf/d) in the third quarter, has more than six years and 68.8 Bcf of reserves remaining for production before it expires.

Much of the proceeds received by Chesapeake from the asset sale will be used to buy the VPP.

The deal is in line with Chesapeake’s strategy to exit from the Barnett Shale, which was taken over by joint venture partner Total SA.

In addition to its Devonian sale, Zacks reports Chesapeake intends to offload a pair of its asset packages in the Haynesville Shale play. The company has already taken bids on a package of 73,000 acres in southern Desoto and northern Sabine parishes in Louisiana that have a net production capacity of about 30 MMcf/d.

Chesapeake Selling More Now in the Utica.  A Worthington oil and gas company that has focused on conventional drilling since its inception in the 1980s has acquired wells and acreage from one of the biggest natural gas producers in the country.

Geopetro LLC acquired 27 wells and 37,000 acres of land from Chesapeake Appalachia LLC, the Appalachian subsidiary of Oklahoma City-based Chesapeake Energy Corp. Terms weren't disclosed.

Chesapeake Energy has ranked No. 1 in each year’s Oil and Gas Producers List.

The wells are in Columbiana County in Ohio and the neighboring Beaver County in Pennsylvania. Most are natural gas producers in the Utica shale play, while one is producing oil.

"(The acquisition) is a tremendous growth opportunity. It fundamentally alters our production operations from primarily conventional production in Central Ohio to primarily unconventional natural gas production," Geopetro said in a statement.

Ohio companies drilled for oil long before the recent shale boom (and bust) came to the eastern side of the state. The conventional drillers suck up a consistent amount of fossil fuels but far less than the amount shale drillers gather from far below the ground via hydraulic fracturing and horizontal drilling.

Geopetro said its focus will be on wells that have already been drilled and are producing. Drilling rigs in Ohio today number far fewer than a few years ago because oil and gas prices have fallen to levels that make it largely cost-prohibitive to drill.

Chesapeake Energy (NYSE:CHK) has long dominated shale natural gas drilling in Ohio since its founder, the late Aubrey McClendon, barnstormed into the state. One of most prolific natural gas producers in Ohio, Chesapeake has since significantly tightened its belt post-McClendon, selling assets and cutting staff locally and elsewhere. Its revenue in 2015 fell to $12.77 billion from $23.13 billion the year prior.

Despite the industry-wide slowdown, Ohio is viewed as a long-term bright spot for oil and gas activity.

AEP to Convert Coal-Fired Unit to NatGas in Muskingum County, OH.  The Public Utilities Commission of Ohio (PUCO) has approved utility American Electric Power’s plan to convert its 615-megawatt (MW) coal-fired unit at the three-unit Cardinal power plant at Brilliant, to natural gas by 2030.

PUCO said the conversion should not raise customer bills by more than 5% — at least not for the first two years of the agreement. The deal also mandates AEP develop at least 900 megawatts (MW) of wind and solar energy projects in Ohio over the next four years, enough to power roughly 900,000 homes.

AEP spokeswoman Tammy Ridout told the Martins Ferry (Ohio) Times Leader said the PUCO decision officially affirms an agreement the parties made in late 2015.

“As part of that agreement, AEP will retire or refuel to natural gas Conesville plant Units 5 and 6 (1,149 MW of coal-fired capacity) and Cardinal Unit 1 by the end of 2029 and 2030, respectively,” Ridout said.

The Conesville facility is in Muskingum County, north of Zanesville, Kallanish Energy reports.

AEP only owns one of the Cardinal Plant units, as Buckeye Power owns the remaining two, totaling 1,265 MW of capacity. Buckeye Power officials said the firm has no immediate plans to change its generation fuel at Cardinal.

“We’re pleased to see that AEP will be moving forward, in partnership with private industry, to develop a significant amount of clean energy for Ohio,” said Dan Sawmiller, senior campaign representative for the Sierra Club’s Beyond Coal Campaign. “This stipulation was difficult to put together, and we’re happy to see that PUCO is showing its support for a clean-energy plan that moves Ohio forward.”

Seventy Seven Energy 3rd Qtr. Report.  Seventy Seven Energy reported a net loss of $36.5 million for the two months ending Sept. 30, and an additional $11.6 million net loss for the single month of July, Kallanish Energy reports.

The unusual financial report is due to the fact the company emerged from bankruptcy reorganization on Aug. 1, and initiated a fresh-start financial approach beginning Aug. 1.

The reorganization allowed the company, a wellsite services and equipment provider, to reduce its debt by $1.12 billion.

The company had revenue of $119.8 million over the three months. That is a 44% drop from revenue of $312.5 million for Q3 2015, the company said.

“Having completed the restructuring process in the quarter, we are now focused completely on maximizing our strong asset base and operational expertise to grow our business as the industry seems to enter the start of a recovery period,” said CEO Jerry Winchester, in a statement.

The Oklahoma-based company has 29 rigs in operation and 22 more rigs under contract. It said its active rig count has more than doubled in the last six months.

Yes, the Permian Is Hot.  The majority of new oil and natural gas drilling in the U.S. is happening in Texas, according to a report published Tuesday by the federal Energy Information Administration (EIA).

American oil and gas drilling is increasingly concentrated in the Permian Basin, which spans parts of western Texas and southeastern New Mexico. The Permian now has nearly as many active oil rigs as the rest of the U.S. combined, according to an EIA report.

Oil production in the region has spiked drastically since early 2015, while production in other areas has fallen due to low oil prices. Permian oil is relatively cheap to access and refine since it’s close to most American refineries.

Fracking for oil and natural gas in Texas produces $11.8 billion each year and creates more than 107,000 permanent jobs, according to a report published by the industry group North Texans For Natural Gas.

And the Permian Has Lots of Oil Reserves.  Drillers have worked West Texas for decades, but there is still plenty of oil that can be tapped in the Wolfcamp Shale in the Permian Basin.

That is the assessment from the U.S. Geological Survey released Tuesday.

The federal agency reported the Midland Basin’s Wolfcamp Shale, between Lubbock and Midland, may hold 20 billion barrels of undiscovered, technically recoverable oil, Kallanish Energy learns.

That is the largest estimate of continuous oil that the USGS has ever assessed in the U.S., the agency said. That is three times as much as the Bakken Shale in North Dakota and Montana, based on a 2013 USGS report.

The Wolfcamp Shale could also yield 16 trillion cubic feet of natural gas and 1.6 billion barrels of natural gas liquids, the agency said in its first assessment of the Wolfcamp.

“The fact that this is the largest assessment of continuous oil we have ever done just goes to show that, even in areas that have produced billions of barrels of oil, there is still the potential to find billions more,” said Walter Guidroz, program coordinator of the USGS Energy Resources Program, in a statement.

His agency makes estimates of undiscovered, technically recoverable resources or oil that could be extracted with modern technology. That is different from proven reserves that oil companies list on balance sheets.

USGS has looked at the Permian Basin previously, but the new report was its first look at the Wolfcamp Shale, the agency said.

The USGS report did not look at the Wolfcamp Shale in the Delaware Basin of the Permian Basin.

Energy companies are aggressively going after Permian Basin acreage in West Texas and southeast New Mexico. It is the No. 1 drilling area in the United States.

The USGS said more than 3,000 horizontal wells have been drilled in the Wolfcamp Shale in recent years.

To view the new report, go to: www.usgs.gov/news/usgs-estimates-20-billion-barrels-oil-texas-wolfcamp-shale-formation.

Penn Virginia Will Be Drilling in the Eagle Ford.  Penn Virginia says it intends to resume drilling in the Eagle Ford Shale in South Texas by the end of November, Kallanish Energy reports.

The announcement comes after the Houston-based company emerged from Chapter 11 bankruptcy reorganization on Sept. 12. It was previously one of the largest drillers in the Eagle Ford.

The company stopped its Eagle Ford drilling last February and filed for federal bankruptcy protection last May.

Penn Virginia officials said the firm intends to complete its three Sable wells by Dec. 31. It also plans to drill the three-well Axis pad by Dec. 31, and to begin production in first quarter 2017.

In 2017, the company intends to drill 16 to 19 lower Eagle Ford wells with 13 to 16 net wells turning to sales during the year.

That is based on capital spending of $95 million to $115 million in 2017, and having as many as two rigs working, Penn Virginia said.

That 2017 plan could be altered if oil prices stay low, said John A. Brooks, interim principal executive officer and chief operating officer, in a statement.

The company said it will be focused on the Texas counties of Gonzales and Lavaca.

Total production in third quarter was 979,000 barrels of oil-equivalent (BOE), or 10,629 BOE per day, with 70% of that production comprised of oil.

Energy Transfer Partners File Suit on Dakota Access.  Energy Transfer Partners, the primary force behind the controversial $3.8 billion Dakota Access crude oil pipeline, is seeking federal court intervention to finish the project without further action from the Army Corps of Engineers, which controls some of the land where it’s to be built.

Energy Transfer and partner Sunoco Logistics Partners (SXL) Tuesday said they filed two lawsuits with the U.S. District Court in Washington, D.C., seeking a judgment declaring a legal right-of-way to build the pipeline, Kallanish Energy reports.

“In these actions, Dakota Access Pipeline is requesting the court to confirm that the Corps has already granted all of the relevant authorizations and given Dakota Access Pipeline its right-of-way to finish the pipeline beneath the federal land that borders Lake Oahe in North Dakota as a result of its prior actions in granting a permit to allow Dakota Access Pipeline to cross the Missouri River at Lake Oahe,” according to the plaintiffs.

The filing comes after the Departments of the Army and Interior deferred a final decision on the controversial North Dakota section of the pipeline and highlighted concerns about the “repeated” dispossession of tribal lands.

“Dakota Access Pipeline has been granted every permit, approval, certificate, and right-of-way needed for the pipeline’s construction. It is time for the Courts to end this political interference and remove whatever legal cloud that may exist over the right-of-way beneath federal land at Lake Oahe,” said Kelcy Warren, CEO of Energy Transfer Partners.

Niobrara Oil Productions Falls.  The EIA (U.S. Energy Information Administration) released its Drilling Productivity Report on November 14, 2016. The report estimates that the Niobrara Shale produced ~0.40 million barrels per day of crude oil in October 2016. This was 1.3% less than its production in September 2016, and 18% less than its production in October 2015.

Month-over-month, the Niobrara Shale’s October 2016 crude oil production number represents its 11th fall in the past 12 months.

Obama’s Now Targeting the Niobrara.  Sally Jewell, the U.S. interior secretary, just cancelled leases to drill for natural gas on federal land in Colorado, in a last-ditch effort to stop an energy boom bigger than Bakken Shale discovery in North Dakota.

Jewell’s Bureau of Land Management claimed that the 25 “Mancos” energy drilling leases now being cancelled were just a non-performing portion of 65 leases on “lands managed by the White River National Forest” and “amount to less than ½ of 1 percent of the active leases on public lands in the state of Colorado.”

But the 25 properties were “non-performing” only because they have been tangled in red-tape since President Barack Obama took office in 2009, even though they were leased in 2005 during George W. Bush’s administration.

The BLM manages nearly 700 million acres of federal lands in the United States. Because of tight restrictions, the “onshore” oil and gas wells on BLM lands accounts for just 11 percent of the natural gas supply and five percent of the oil supply in the United States.

BLM leases generated just $5.4 billion in lease payments during 2013, with the majority of funds going to the U.S. Treasury to reduce deficit spending. Despite the agency’s congressional mandate to maximize the value of public property, the agency website reveals the BLM has reduced issuing drilling permits every year since 2011.

To justify the sudden cancellation of the decade-old Mancos drilling permits, the BLM worked with the Thompson Divide Coalition of environmentalists to commission a resource report that appeared to exist for the sole purpose of undermining energy exploration in the Mancos Shale formation, according to the Western Energy Alliance, an industry group.

The timing of the cancellation of Mancos leases is especially egregious, because the United States Geological Survey just announced in June that the gas resources in the Mancos Shale formation that covers much of Northwestern and Western Colorado, has 40 times more natural gas than the USGS had projected.

The USGS originally estimated in 2003 that the Mancos Shale’s Piceance Basin held up to 1.6 trillion cubic feet of gas. Their latest estimate is the formation holds about 66.3 trillion cubic feet of gas.

The area has now been upgraded to “at least the second largest shale gas resource in the United States.” Its potential exceeds the size of the Bakken Shale Play” covering North Dakota and Montana that has almost doubled U.S. oil production since 2009.

“Mancos Shale Play” is second only to the giant Marcellus gas fields that cover much of Pennsylvania, West Virginia, Ohio and New York. To get a sense of Mancos Shale potential, Marcellus dry gas production has gone from almost zero in 2008 to producing about 20 billion cubic feet of gas a day, or about 40 percent of all U.S. gas production.

In fact, the U.S. is now producing so much gas that U.S. companies have built the expensive ports and specialized ships needed to export super cooled natural gas to foreign customers, including manufacturing and energy companies in the United Kingdom. The first shipment to the U.K. arrived in September.

President Obama claims that he is Advancing American Energy, but the president has continually fought America’s oil and gas energy boom and spending tens of billions of taxpayer dollars each year to advance weak solar and wind power.

The White House website features Obama and Chinese President Xi Jinping setting “new targets to reduce carbon pollution.” This is obviously a good topic for China, because about 57 percent of solar panels installed in the U.S. last year were made in China.

Taxpayers Protection Alliance determined that “Taxpayer-backed loans to the solar industry, bailouts, and publicly funded grants cost Americans more than $39 billion annually.”

PennEast Pipeline May Get Help from Trump Administration.  A recent decision by the Federal Energy Regulatory Commission to delay its environmental review of the controversial PennEast gas pipeline may indicate the agency is becoming more responsive to public concern over pipeline projects, but that could be reversed by new appointments to FERC’s board by the incoming Trump administration, analysts said.

FERC last week pushed back the completion date for its Environmental Impact Statement on the proposed 118-mile natural gas pipeline from Pennsylvania to New Jersey until February 17 next year, two months after the previous deadline of December 16. The agency also demanded a lot more information from the pipeline’s builders, PennEast Pipeline Co., after it proposed 33 route modifications.

I discussed in last week’s newsletter how pipeline could the initial beneficiary of the Trump administration.

Obama Keeps Targeting O&G Industry.  The Obama administration plans to hold more discussions and conduct further analysis before deciding on a permit for the controversial Dakota Access crude oil pipeline, further delaying work on a segment of the project that’s been stalled since September.

The U.S. Army Corps of Engineers, which is deciding whether the pipeline can cross federal land near Lake Oahe in North and South Dakota, said in a statement Monday further talks are warranted given the importance of the lake to the Standing Rock Sioux Tribe.

“Today, the Army informed the Standing Rock Sioux Tribe, Energy Transfer Partners, and Dakota Access that it has completed the review that it launched on Sept. 9, 2016,” the Corps statement said. “The Army has determined that additional discussion and analysis are warranted in light of the history of the Great Sioux Nation’s dispossessions of lands, the importance of Lake Oahe to the Tribe, our government-to-government relationship, and the statute governing easements through government property.”

The Corps said it’ll work with the tribe on a timeline “that allows for robust discussion and analysis to be completed expeditiously,” Kallanish Energy understands.

The delay prevents Energy Transfer Partners from finishing work on its $3.8 billion project. It comes a day before opponents are scheduled to hold a nationwide protest at Army Corps of Engineers offices, to call for a permanent rejection of the pipeline.

While the Army Corps decision prevents the pipeline’s completion for now, analysts have said Energy Transfer will probably receive approval to finish the project under President-elect Donald Trump’s administration, Bloomberg reported.

Opponents of Dakota Access have argued that it would damage culturally significant sites and pose an environmental hazard where it crosses the Missouri River.

The 1,172-mile, 470,000 barrels per day line had been expected to start carrying oil from North Dakota’s Bakken shale to terminals in Patoka, Illinois, in the first quarter of 2017. Energy Transfer has said the project is 84% complete, and drilling beneath the lake would take 90 to 100 days.

Sunoco Logistics Asks for One Month Extension.  Sunoco Logistics Partners (SXL) has asked the Pennsylvania Department of Environmental Protection for a one-month extension to respond to identified issues with its Mariner East 2 pipeline application.

“Basically, we asked for an extension from Nov. 7 to Dec. 7 to complete our response to the DEP as part of the permitting process,” company spokesman Jeffrey Shields said. “There’s a lot of detail and we want to make sure that we get all their requests answered.”

Shields said the request would likely push back the completion and startup date for the 350-mile pipeline from mid-2017 to the third quarter of 2017, Kallanish Energy understands.

Mariner East 2 would cross 17 Pennsylvania counties to transport natural gas liquids, including propane, ethane and butane from Ohio, West Virginia and Western Pennsylvania to Marcus Hook near Philadelphia for processing and export overseas.

The $2.5 billion project initially is a 20-inch line that would deliver roughly 275,000 barrels per day (BPD), but could ramp up to 450,000 BPD, according to SXL. An optional secondary 16-inch pipeline could also deliver an additional 250,000 BPD.

The project has received pushback from residents statewide with multiple lawsuits filed to halt construction.

“The detail involved in the Pennsylvania DEP permit application has necessitated a longer-than-anticipated regulatory review process, but we are convinced that this project will be environmentally responsible and will be creating significant economic development in the Commonwealth,” said Mike Hennigan, CEO of SXL, last week.

Marcus Hook-based Braskem America, the North American branch of major Brazilian petrochemical company Odebrecht, recently decided to expand operations at its plant in La Porte, Texas, over its Delaware County facility, citing a lack of local infrastructure.

“We’ve been saying for a long time that pipeline infrastructure is critical to the growth of the economy in southwest Pennsylvania and we think these projects are the cataclysm for the economy to grow,” Shields said.

Philadelphia-based Econsult Solutions conducted a study for Sunoco last year that found Mariner East is expected to add up to $4.2 billion to the state’s economy and supporting 300 to 400 permanent jobs once completed.

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

http://www.shaledirectories.com/blog/

Rig Count

Baker Hughes Rig Count the week of November 18, 2016

  • PA     
    • Marcellus 25 down 1
  • Ohio
    • Utica 18 up 3
  • WV 
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 38 unchanged
  • TX & NM
    • Permian Basin – 229 up 11
  • ND
    • Williston – 34 down 1
  • CO
    • Niobrara – 18 up 2
       
  • TOTAL U.S. Land Rig Count 546 unchanged

PA Permits November 10, to November 17, 2016

County            Township                E&P Companies

No permits were issued this week.

OH Permits for week ending November 12, 2016

       County            Township              E&P Companies

1.    Monroe                Center                Gulfport

Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149

Utica Summit