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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 

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Upstream PA 2017
March 21, 2017
Penn Stater Conference Center
State College, PA  

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

Shell Moving on Pipeline.  Shell Pipeline Co. has secured 11 right-of-way easements for its proposed 94-mile pipeline, laying out the path where exactly the pipeline will be placed.  Called Falcon Ethane Pipeline System, the pipeline is expected to carry about 107,000 barrels of ethane per day to Shell’s Chemical Co.’s proposed cracker plant in Potter Township, Beaver County, PA.  The Falcon project would be built by Shell Pipeline LLC, a subsidiary tasked with pipeline operations.

The pipeline is expected to be built in 2018 and be operational in 2020.

Plans are for the Falcon pipeline to connect three major ethane source points in the Ohio and Pennsylvania to the cracker plant in Potter Township.  Those locations Are Scio and Cadiz in OH and Houston, PA.

Gulfport Expanding in the Utica.  Gulfport Energy announced its purchase of 12,600 undeveloped acres in Ohio’s Utica Shale in Monroe County for $87 million from an unidentified seller.

The dry-gas tract lies within the gas-rich area of northern Monroe County, Kallanish Energy reports.

The Oklahoma-based company, one of the main producers in the Utica Shale, said it will fund the acquisition with available cash-on-hand. The acreage is located near or adjacent to Gulfport’s existing acreage and is about 50% held by production.

Gulfport has leased in excess of 223,000 acres in the Utica Shale. It had three rigs working last month. Its third-quarter Utica production was 713 million cubic feet-equivalent per day.

Senior equity analyst Gabriele Sorbara of The Williams Capital Group said Gulfport paid about $6,905 per acre. That compares to core per-acre prices that typically exceed $10,000, so the company got a good deal, he said.

He expects the company’s stock to rise with the news of the deal. Gulfport, he said, is “our top pick for dry-gas exposure.”

The deal is expected to close by Dec. 31.

Chesapeake Still #1 in OH.  Chesapeake Energy remains the No. 1 driller in Ohio’s Utica Shale.

The Oklahoma-based energy company has received 825 permits since late 2010 from the Ohio Department of Natural Resources and its Division of Oil and Gas Resources Management. That represents 35.6% of Utica Shale permits in Ohio, Kallanish Energy reports.

No.2 is Gulfport Energy with 321 permits, followed by Antero Resources with 210 permits and Ascent Resources with 196 permits. In all, 39 drilling companies have been issued drilling permits in Ohio, ODNR said this week in a new report.

Ohio has 1,473 producing Utica wells, 300 wells that have been drilled, 458 that have been permitted, 48 that are inactive/shut-in, 33 that are lost holes/final restoration, three that are dry/abandoned, and three that are plugged/abandoned, ODNR said.

George Stark Column in Times Leader.  Residents across Pennsylvania take comfort. If you use natural gas or electricity (increasingly fueled by natural gas) for heating, cooking and everyday uses, Pennsylvania’s natural gas producers are ready for this upcoming winter.

At Cabot, we produce over 1.5 billion cubic feet of natural gas every day from Pennsylvania’s vast shale supplies. Cabot’s development in Northeastern Pennsylvania helped the commonwealth become the country’s second-largest natural gas producing state in 2015, as Pennsylvania’s natural gas production exceeded 4.6 trillion cubic feet.

Ascending to the country’s second-highest gas producing state has meant savings for families and businesses. More and more households and commercial customers are converting to natural gas, utilities are working to build out their local delivery networks, and the state just announced $24 million in grant funding to help construct the last few miles of natural gas distribution lines to businesses, schools and municipalities.    

UGI Utilities provided the details on their growth and customer savings at a luncheon in Hazleton this year. Compared to 2008, UGI estimates that residential customers are saving approximately $700 a year on average. That equates to $415 million saved in 2015 compared with 2008. Since 2008, UGI has converted 53,000 households and more than 70 large commercial and industrial facilities to natural gas.

The state’s other utility customers are experiencing this type of savings as well. The Pennsylvania Utility Commission shows the price utilities have paid for natural gas across the commonwealth has dropped more than 50 percent from 2008 to 2015. Lower natural gas prices mean savings on your electric bill as well. According to the PUC, the electric cost savings for the consumers from Marcellus Shale natural gas from 2011 through the first half of 2014 were $2.1 billion.

Pennsylvania’s economy – its families and businesses – have benefited greatly from the state’s natural gas revolution. However, the often unmentioned and unseen link between natural gas production and energy costs savings are pipelines.

Simply put, pipelines deliver savings.

As electric power plants shift to greater reliance on natural gas, as large manufacturer’s site or expand operations in the region, and as utilities seek to serve new customer demand, the pipeline transmission network has become critically constrained. We have the supply of natural gas, but need expanded and additional pipeline infrastructure to continue delivering savings to homes and businesses.

However, help is on the way. One new pipeline project that will address regional constraints is the PennEast Pipeline.

Cabot is a “shipper” on this proposed project – meaning the company has contracted to use part of PennEast’s one billion cubic feet of natural gas per day capacity. Cabot is excited to help eastern Pennsylvania and New Jersey families and businesses have a new, direct link to Pennsylvania’s prolific natural gas reserves.

With regard to savings, had PennEast been in service in the 2013-2014 winter, Pennsylvania and New Jersey energy customers would have saved $893 million. That’s only one winter.

Of PennEast’s projected savings during just the 2013-2014 winter, $530 million would have been realized by electric customers. That savings is indicative of the growing role of natural gas in the electric sector, and reveals insufficient pipeline capacity when natural gas and electricity demand spikes.

Reliable natural gas supplies to fuel our electric grid are essential.

Natural gas is a vital part of our clean energy future. Cabot is committed to safely and responsibly developing local natural gas, and to providing the fuel to help keep families warm. However, it’s vital to add new cost-saving pipelines, like PennEast, to ensure natural gas is able to affordably and reliably reach local communities.

George Stark is the director of external affairs at Cabot Oil & Gas Corporation. Cabot is independent oil and gas company engaged in the development and exploration of oil and gas and is a leading producer of natural gas from the Marcellus Shale formation.

PPTGC Cracker Update.  DILLES BOTTOM–Site preparation for PTT Global Chemical’s planned multi-billion-dollar ethane cracker project in Belmont County is nearly complete, as all signs of the former R.E. Burger power plant along the Ohio River are now nothing more than a memory.

After more than a year of evaluating the viability of the project — which would create thousands of construction jobs in the construction phase and hundreds of permanent jobs once it’s up and running — officials expect the Thailand-based chemical giant to make a final investment decision by the end of March.

“So far, all the signs we see are positive,” Belmont County Commissioner Mark Thomas said. “We anticipate them making their final decision by the end of March.”

In September 2015, Ohio Gov. John Kasich joined PTT President and CEO Supattanapong Punmeechaow at the Statehouse in Columbus to confirm plans to spend at least $100 million for engineering and design plans for the plant, which some estimate would cost about $5.7 billion to complete. In July, FirstEnergy Corp. officials blew up the 854-foot-tall smoke stack at the former Burger plant to make room for the giant ethane cracker, which will also include a significant number of acres to the south and west.

“It’s a very good sign that FirstEnergy worked so quickly to remediate the site,” Belmont County Commissioner Ginny Favede said. “They have worked with Jobs Ohio on this.”

Jobs Ohio is the private economic development corporation Kasich and Republican legislators created in 2011. Matt Englehart, spokesman for Jobs Ohio, said Friday that officials are close to being able to make some announcements, but couldn’t provide more details. PTT spokesman Dan Williamson also said he had no new information.

“Things are moving very smoothly. The company’s due diligence continues,” Thomas said. “The remediation of the FirstEnergy site is, in effect, complete.”

Thomas said the company continues working its way through the Ohio Environmental Protection Agency permitting process for both water discharge and air emission certificates.

If PTT makes an affirmative final investment decision, the construction project will require thousands of construction workers.

“The majority of the contracting work will be done by those from the local area,” Favede said.

“All the local labor that can be provided will be working,” Thomas added. “The project is so big that, at times, there will not be sufficient labor here.”

Although several new hotels and apartment complexes have opened across the Upper Ohio Valley during the last few years, Thomas and Favede said most of these will fill up rather quickly.

“You are going to have a lot of out of town people here. Those who have private apartments and hotels, they are going to be full for four years,” Thomas said.

Royal Dutch Shell is already building its giant ethane cracker north of Pittsburgh, but the majority of industry leaders believe there is so much ethane in the Marcellus and Utica shale region that it can both support multiple new cracker plants and provide feedstock to other established plants around the globe. Ethane now flows across Pennsylvania to the Marcus Hook refinery via the Sunoco Logistics Mariner East 1 project. The material then goes to Europe for processing in trans-Atlantic sea vessels.

Sunoco is now working on the Mariner East 2 pipeline, which the company plans to carry additional ethane, propane, butane and other natural gas liquids through Pennsylvania by next year. The company estimates the total cost of its Mariner East project at $3 billion. Pipeline giant Kinder Morgan is also working on the $500 million Utopia Pipeline, which would send the ethane from MarkWest’s Cadiz plant to a connection with existing infrastructure in Michigan. The ethane would then go onward to Corunna, Ontario, Canada for processing by NOVA Chemicals Corp.

These pipeline projects are in addition to the active ATEX Express pipeline that sends Marcellus and Utica ethane to the Gulf Coast, as well as Sunoco’s Mariner West project that already ships the material to the Nova facility in Canada.

“This entire region is going to be a major player in the energy sector for a long time to come,” Thomas added. “And Belmont County is right in the heart of it all.”

Pruitt New EPA Head.  Donald Trump announced that he will nominate Oklahoma attorney general Scott Pruitt to head the Environmental Protection Agency. Pruitt is a Republican from an energy-rich state, so his opinions on the EPA are about what one might expect — namely, that the EPA’s worthy purpose is not an excuse for holding America’s energy industry hostage. 

Pruitt will bring a rational approach to EPA regulations.  Let’s hope he can immediately start rolling back “nonsense” regulations day #1.

125 More Rigs in West Texas.  With the Organization of Petroleum Exporting Countries agreeing to cut production, resulting higher crude prices will spur U.S. producers to add 125 rigs by mid-2017, analytics/consulting firm Genscape projects.

A large number of the 125 rigs will go back to work in West Texas – in the hottest liquids play in North America – the Permian Basin, Kallanish Energy understands.

“West Texas Intermediate prices above the $50 per barrel support level should increase levels of drilling and investment, specifically in the Permian Basin, but also across other shale plays including the North Dakota Bakken, SCOOP/STACK in the Midcontinent, Niobrara mostly in Colorado, and South Texas Eagle Ford,” according to Genscape.

The cuts by OPEC members have stirred bullish sentiment towards U.S. producers by offering an opportunity to regain market share. At the same time, a new wave of U.S. production could cap oil prices as production rises. U.S. production is anticipated to grow again in mid-2017, and additional takeaway infrastructure will be required, particularly in the Permian Basin, Genscape believes.

Rice to Sell NatGas to consumers.  A subsidiary of independent natural gas producer Rice Energy has applied to Ohio regulators to sell its product directly to Ohio customers.

Rice Energy Marketing has applied to the Public Utility Commission of Ohio (PUCO) to become a competitive retail natural gas supplier, Columbus Business First newspaper reports.

The company, based south of Pittsburgh in Cecil Township, is a major gas producer in Pennsylvania and eastern Ohio, Kallanish Energy reports.

“As Rice Energy’s production volumes grow we are actively seeking out new markets and ways to maximize the value of our gas,” Rice states in its application to PUCO. “Also, we believe in sharing in the cheap and abundant supply of natural gas we are producing with the local markets around us.”

Rice controls a combined 336,000 acres in the core of the Utica in Ohio and Pennsylvania’s Marcellus Shale.

It’s the second time in two months an oil and gas company has applied to sell natural-gas related products in Ohio. Shell Energy North America, a subsidiary of oil supermajor Royal Dutch Shell wants to sell power to industrial and large and large commercial businesses in Ohio, according to Columbus Business First.

Chesapeake Selling More Assets.  Independent oil and gas producer Chesapeake Energy announced its selling part of its acreage and producing properties in the Haynesville Shale in northern Louisiana for roughly $450 million to an unnamed, private company.

Included in the sale are roughly 78,000 acres, 40,000 acres considered by Chesapeake as core acreage. The sale also includes 250 wells currently producing approximately 30 million cubic feet of gas per day (MMcf/d), net to Chesapeake.

“We are pleased to announce the first of two proposed Haynesville asset sales for $450 million,” said Doug Lawler, Chesapeake’s CEO. “With this proposed transaction and our previously announced Devonian asset divestiture, the company has reached approximately $2 billion gross proceeds from divestitures either signed or closed in 2016, excluding certain volumetric production payment repurchase transactions.”

The company expects this transaction to close in 2017’s first quarter, Kallanish Energy learns.

In addition, Chesapeake is marketing roughly 50,000 acres located in the northeastern portion of its Haynesville Shale operating area, which the company also expects to close in the first quarter.

“It is good to see the company make good on these divestiture goals given the proceeds can be used to both fund operations and reduce its liabilities; with a second Haynesville package also in the market currently, we believe CHK will be able to meaningfully reduce debt in 2017 through these endeavors,” Wunderlich Securities energy analyst Jason Wangler said in a Monday research note.

Following these planned sales; Chesapeake will retain approximately 250,000 acres in the core of the Haynesville. The company’s 2017 development program in the Haynesville will be focused on longer laterals and further enhanced completions, resulting in projected adjusted production growth of approximately 13% from the Haynesville in 2017.

More Deals Coming to the Permian.  Driven by the potential for profit at current oil prices, oil and gas companies are competing for more acreage in the Permian Basin and its sub-plays, spending close to $20 billion year-to-date in 2016, according to new analysis from information/analytics firm IHS Markit.

The spending was for 24 merger and acquisition (M&A) deals larger than $50 million in size, Kallanish Energy understands. The Permian is located primarily in West Texas, extending into southeastern New Mexico.

According to IHS Markit, the pace of deals will continue to accelerate, since acquisition activity ramped up dramatically in 2016, particularly in the third quarter, and shows no signs of slowing as 2017 approaches.

“From an M&A perspective, the Permian Basin is hotter than the Fourth of July in Midland (Texas),” said analysis author Andrew Byrne, director of Energy Company and Transaction Research at IHS Markit. “The Permian area is now considered the top U.S. onshore liquids region, and this popularity is driving an increase in deal flow in the area.”

Byrne added the increase in deals has been quite dramatic, since deals in the Permian — as a percentage of total U.S. deals — have risen from 7% in 2011, to 40% year-to-date. At that percentage, the Permian is now the premier M&A target in the U.S.

Byrne described the Permian deals as primarily acreage deals, and sees the M&A craze in the region just beginning given both the optimism surrounding the Permian’s well economics, and fragmented land ownership in both the Midland and Delaware basins.

Dominion Plans Cove Point Pipeline.  Dominion plans to upgrade its Cove Point pipeline to allow more gas from the Marcellus and other fields to flow into the growing metropolitan Washington, DC area.

The $147mn Eastern Market Access project would add 284mn cf/d (8mn m³/d) of west-to-east capacity along a section of the 88-mile (142km) pipeline, Dominion told the US Federal Energy Regulatory Commission (FERC) in an application for construction approval.

The expansion is scheduled to come on line by 1 September 2018 and has been fully subscribed under 20- and 25-year firm transportation contracts. Dominion plans to start construction in November 2017 and asked FERC to approve the project by September 2017.

Regional gas utility Washington Gas Light (WGL) has contracted for 145mn cf/d of the capacity and the planned 990MW Mattawoman Energy Center gas-fired generation facility in Prince George's county, Maryland, has subscribed to the remaining 139mn cf/d of capacity.

WGL already has some capacity on Cove Point pipeline to serve some of its 1.1mn customers but wants to accommodate expected demand growth.

Mattawoman, a wholly owned subsidiary of Dallas-based Panda Power Funds, is scheduled to come on line in 2019 and would provide power to more than 990,000 Maryland homes. Maryland now buys 40pc of its power from out of state, causing significant transmission constraints.

U.S. Army Corps Stops Dakota Access in Native American Lands.  The U.S. Army Corps of Engineers said Sunday it turned down a permit to run the Dakota Access Pipeline under Lake Oahe, a victory for Native Americans and activists who have protested against the project for months.

The 1,172-mile, $3.8 billion line, owned by Texas-based Energy Transfer Partners, had been complete except for a segment planned to run under Lake Oahe, a reservoir formed by a dam on the Missouri River.

That stretch required an easement from federal authorities, which delayed a decision on the permit twice in an effort to consult further with the tribe.

“(The) Department of the Army will not approve an easement that would allow the proposed Dakota Access Pipeline to cross under Lake Oahe in North Dakota,” the Army’s Assistant Secretary for Civil Works announced Sunday.

President-Elect Trump totally supports the Dakota Access Pipeline.  It will be interesting to see what happens once Trump is in office.

Rover Pipeline Delayed by Historic Building.  Rover Pipeline LLC and the Federal Energy Regulatory Commission appear to be at odds over the demolition of a historic house in Ohio’s Carroll County.

And that, some say, has stalled action by the federal agency on approving the $4.2 billion, 711-mile pipeline to carry natural gas from the Utica and Marcellus Shale plays to the Midwest, Ontario and the Gulf of Mexico, Kallanish Energy has learned.

A picture of what happened has been reported by various media, although Texas-based Energy Transfer Partners has not publicly commented on the razing of the house earlier this year.

But bits of information have surfaced in correspondence between the company and FERC. The company reportedly bought the 1843 Federal-style house on Azalea Road in Orange Township in May 2015.

The Stoneman House had been proposed for inclusion on the National Register of Historic Places, but had not been added to that prestigious federal list.

The company initially planned to use the house for offices. It is located across the street from a planned compressor station on the Rover Pipeline that is pending before FERC.

The company, in a seven-page response to FERC, said the building would not work for offices. It decided to raze the structure, apparently without notifying the agency.

Rover Pipeline said it was within its rights because the house was not on the National Register and even if it were, it could be demolished as long as no federal funds were used.

It has stated in papers filed with FERC its purchase of the Stoneman House had nothing to do with the pipeline itself and that only pipeline-related activities must be reported to FERC.

FERC has contacted the federal Advisory Council on Historic Preservation; an independent federal agency involved in saving old buildings, to determine what steps should be taken.

The Rover Pipeline project includes two 42-inch lines that would move up to 3.25 billion cubic feet per day (Bcf/d) of natural gas, enough to heat 35,000 homes for a full year.

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

Rig Count

  • Baker Hughes Rig Count the week of December 9, 2016
  • PA
    • Marcellus 31 up 2
  • Ohio
    • Utica 18 unchanged
  • WV
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 43 up 3
  • TX & NM
    • Permian Basin – 246 up 11
  • ND
    • Williston – 32 up 1
  • CO
    • Niobrara – 24 up 6
  • TOTAL U.S. Land Rig Count 601 up 27

PA Permits December 1, to December 8, 2016

       County             Township             E&P Companies

1.    Armstrong            East Franklin       Snyder Bros.
2.    Armstrong            East Franklin       Snyder Bros.
3.    Armstrong            West Franklin      Snyder Bros.
4.    Beaver                Economy Boro     PennEnergy
5.    Greene                Aleppo                Rice
6.    Greene                Aleppo                Rice
7.    Greene                Aleppo                Rice
8.    Greene                Aleppo                Rice
9.    Greene                Richhill               Rice
10.    Greene              Richhill               Rice
11.    Washington        Carroll                EQT
12.    Washington        Donegal             Range
13.    Washington        Donegal             Range
14.    Washington        Donegal             Range
15.    Washington        East Finley        Range
16.    Washington        East Finley        Range
17.    Washington        East Finley        Range
18.    Washington        Fallowfield         EQT
19.    Washington        Smith                Range
20.    Washington        Smith                Range
21.    Washington        Smith                Range
22.    Washington        Derry                 WPX Energy

OH Permits for week ending December 3, 2016

       County                 Township          E&P Companies

1.    Belmont                Richland             XTO Energy
2.    Monroe                 Malaga               Antero
3.    Monroe                Malaga                Antero
4.    Monroe                Malaga                Antero
5.    Monroe                Malaga                Antero
6.    Monroe                Malaga                Antero
7.    Monroe                Perry                  EM Energy
8.    Monroe                Salem                 Statoil
9.    Monroe                Salem                 Statoil
10.  Monroe                Malaga                Antero

Joe Barone 610.764.1232
Vera Anderson 570.337.7149


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