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Expo/Industry events for the next few months

OOGA Winter Meeting
March 8-10, 2017
Hilton Columbus at Easton, OH 

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

Utica Upstream 
April 5, 2017
Walsh University
Canton, OH  

Ohio Valley Oil & Gas Regional Expo
April 25-26, 2017
Belmont County Carnes Center
St. Clairsville, OH 

Appalachian Storage Hub Conference
June 15, 2017
Hilton Garden Inn
Southpointe, PA 

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

Mariner East 2 Approved.   After five public hearings and 29,000 public comments, the DEP approved two outstanding permits needed for Sunoco Logistics LP to move forward with the construction of the controversial pipeline, which will traverse 36 miles of Westmoreland County. The 20-inch pipeline will run parallel to Sunoco's 12-inch Mariner East line, with carrying propane, ethane and butane to the company's Marcus Hook plant in Southeast Pennsylvania.

According to the DEP permit, the pipeline will cross about 270 properties in Jeannette, Murrysville and Rostraver, South Huntingdon, Sewickley, Hempfield, Penn, Salem, Loyalhanna and Derry townships. Before Sunoco Logistics LP can move forward with construction, the company must first gain approval from the Army Corps of Engineers.

There were mixed emotions associated with Monday's approval.

Mountain Watershed Association Deputy Director Krissy Kasserman previously expressed disdain for the project.

“It's going to cross underneath the Youghiogheny River. It's also going to be developed in an area where there is a substantial number of homes,” Kasserman said.

Jobe said he and township officials approached the project with concern.

Last April, a natural gas transmission line operated by Spectra Energy ruptured in the township, sparking an explosion that sent a fireball soaring hundreds of feet into the air near the intersection of routes 819 and 22. One man suffered burns on about half of his body when his house was leveled by the blast; about 40 acres of farmland was seared.

“But the general consensus is we're used to having it and we need to have it done and planned in a careful way,” Jobe said. “The relationships with us and the gas companies have been pretty good. We've worked to try to figure something out that maintains the safety of the residents.”

Jobe said Sunoco and the township have had meetings to discuss the process, including eminent domain, which was a cause for concern.

“It was a little questionable,” he said, referring to Sunoco Logistics LP's attainment of eminent domain from the Public Works Committee. “But it's something we're prepared for. We prepped the roads months before and had conversations with those landowners.”

State Rep. Eric Nelson, a Republican who represents Salem, thinks the news is “fantastic.”

“It'll bring jobs and much needed infrastructure to the area. We're kind of at a max capacity right now and that's been driving natural gas prices down,” Nelson said.

“We have to keep our eye on the environmental side of things. But also, it's a big win for jobs and for the ability to increase (natural) gas prices (for the industry),” Nelson said.

Marcellus Shale Coalition President Dave Spigelmyer characterized the project as “key to connecting more consumers and manufacturers to the benefits made possible by our abundant and affordable natural gas supplies.”

PennEast Receives Water Permits.  The Pennsylvania Department of Environmental Protection on Monday approved a critical water-quality permit for the $1 billion PennEast Pipeline project, which would deliver Marcellus Shale natural gas from Northeast Pennsylvania mostly to utilities in New Jersey.

The Water Quality Certifications, which acknowledges measures are in place to minimize the impact on streams and waterways, is required under the Federal Clean Water Act as a prerequisite to receiving a federal license or permit for activities that involve waterways. PennEast is awaiting approval for the project from the Federal Energy Regulatory Commission.

Appalachian Basin unconventional producers for years have asked, pleaded — perhaps begged – pipeline operators to jumpstart takeaway capacity.

“Build it, and we will fill it,” was the producers’ phrase. But in fewer than two years, all that could change, as six Greenfield projects, totaling just under 11 billion cubic feet per day (Bcf/d) of capacity, are slated to come online.  

Chesapeake 4th Qtr. Update.  Doug Lawler, Chesapeake’s Chief Executive Officer, commented, „The execution of our 2017 capital program will position Chesapeake for significant production and earnings growth and cash flow neutrality in 2018. As noted during our October 2016 Analyst Day, our 2017 capital program is driven by improved capital efficiencies and profitability from our significant portfolio of high rate of return drilling opportunities. We will maintain our financial and operational flexibility with a relentless focus on driving differential performance. We look forward to building on our progress, both financially and operationally, in 2017 and beyond.”

2017 Capital Program and Production Outlook

Chesapeake is budgeting planned total capital expenditures (including capitalized interest) in the range of $1.9 – $2.5 billion in 2017, compared to total capital expenditures of approximately $1.65 – $1.75 billion in 2016, excluding 2016 proved property acquisitions and the repurchase of volumetric production payment (VPP) transactions. The company is narrowing its range of projected capital as it gains confidence in market conditions supporting a return to projected production growth in the second half of the year. The company is targeting total production of 194 – 205 million barrels of oil equivalent (mmboe) in 2017, or average daily production of 532 – 562 thousand barrels of oil equivalent (mboe), representing a decline of 3% to modest growth of 2% compared to 2016, after adjusting for asset sales. Of the 2017 projected total production, approximately 33 – 35 mmboe is estimated to be crude oil, 18 – 20 mmboe is estimated to be natural gas liquids and 860 – 900 billion cubic feet is estimated to be natural gas.

Chesapeake plans to operate an average of approximately 17 rigs in 2017, an increase from an average of 10 rigs in 2016. The company intends to spud and place on production approximately 400 and 450 gross operated wells in 2017, respectively, compared to 213 and 428 wells in 2016, respectively. A complete summary of the company’s guidance for 2017 is attached to this release.

Operations Update

Lawler continued, ”We have a number of operational results we are looking forward to in 2017, including our return to the Powder River Basin (PRB) and our first results from the Turner formation in 2017 second quarter, along with additional results from the Sussex and Niobrara and a Mowry test later in the year. In total, we plan to place approximately 30 wells on production in the PRB in 2017. In the Mid-Continent area, we plan to place approximately 100 wells on production during 2017, with roughly 60 of those wells planned from the Oswego formation. The Mid-Continent is expected to provide oil growth in 2017 through development drilling in the Oswego and our exploitation of the Wedge play.” Finally, we plan to operate approximately six rigs and place approximately 165 wells on production in the Eagle Ford Shale in South Texas. Several new tests are planned in the Eagle Ford, which include more than 10 extra-long lateral wells reaching approximately 15,000 feet and we also plan to test the Upper Eagle Ford and Austin Chalk formations. Our increased activity in the Eagle Ford, Oklahoma and the PRB is expected to result in oil growth of approximately 10% from year-end 2016 to year-end 2017, with continued growth in our oil volumes projected to be over 20% by year-end 2018.

”In our natural gas plays, our progress in the Haynesville Shale in Louisiana continues to improve with recent wells placed on production reaching approximately 30 – 45 million cubic feet (mmcf) of gas per day. Our plans for 2017 in the Haynesville include utilizing three rigs and placing approximately 35 wells on production. In Northeast Appalachia, our activities in the Marcellus Shale in Pennsylvania and the Utica Shale in Ohio will be more focused on completing inventory wells compared to drilling and completing new wells. We also plan to begin applying more aggressive fracture stimulation procedures to wells in both the Marcellus and our dry gas Utica areas during the year. We are projecting that natural gas production growth will be relatively flat from year-end 2016 to year-end 2017, but expect that our gas volumes will return to growing again from year-end 2017 to year-end 2018. Nonetheless, we are projecting that these world-class gas producing areas will generate significant free cash flow for us compared to the capital invested during both 2017 and 2018.”

Gulfport 4th Qtr. Update.  Gulfport Energy’s production, mostly in Ohio’s Utica Shale, grew in 2016, but revenue and profit fell due to lower commodity prices, Kallanish Energy reports.

The company reported a fourth quarter net loss of $240.4 million, compared to a loss of $831 million in Q4 2015.

Adjusted for one-time expenses, Gulfport recorded a profit of $44.3 million in the latest three-month period.

Revenue fell from $190 million in Q4 2015, to $63.4 million in Q4 2016.

For full-year 2016, the company lost $979.7 million, compared to a loss of $1.22 billion in 2015. Adjusted net income was $110 million last quarter.

Revenue dropped from $709 million in 2015, to $386 million in 2016.

In Q4, Gulfport reported production of 787 million cubic feet-equivalent per day (MMcfe/d) of natural gas, up 22% from nearly 644 MMcfe/d in Q4 2015.

For the full year, the company reported production of nearly 720 MMcfe/d, up 31.4% from 548 MMcfe/d in 2015.

Production was 86% natural gas, 9% natural gas liquids and 5% oil.

The company also reported its proved reserves have grown to 2.3 trillion cubic feet-equivalent (Tcfe), as of Dec. 31, up 36% from 1.7 Tcfe at the end of 2015.

In 2017, Gulfport's capital spending budget is between $1 billion and $1.1 billion.

The company projects 2017 production will average 1.05-1.10 billion cubic feet-equivalent (Bcfe), an increase of 45% to 53%, the company said.

Gulfport plans to operate six rigs in the Utica Shale and to drill 87 to 97 gross (67 to 74 net) wells and begin sales on 72 to 80 gross (61 to 67 net) wells in the Utica.

In the fourth quarter 2016, the company spud 19 gross (15.6 net) Utica wells and began sales on 11 gross and net wells

Gulfport also plans to operate four rigs in the SCOOP area of Oklahoma where it is acquiring roughly 46,400 acres in Grady, Stephens and Garvin counties. That deal is expected to close later this month.

The company intends to drill 19 to 21 gross (16 to 18 net) wells and turn to sales 17 to 19 gross (14 to 16 net) wells in SCOOP.

The company behind a potential multibillion dollar business development is delaying its decision until the end of the year.

PTTGC Delays Cracker Plant Announcement.  PTT Global Chemical Public Company Ltd. had expected to decide by spring whether to build a giant complex related to the shale oil and gas industry. Now, it’s waiting until late 2017.
PTT Global confirmed an investment of $100 million for engineering design work for the cracker plant in eastern Ohio.


The Thai company’s chief executive says it needs more time to discuss its plans “so that we will be in a stronger position to make our decision on the engineering design and the economic feasibility of this project.”

PTT realizes the malaise this announcement may cause those in Belmont County, the eastern Ohio County that would house the ethane cracker petrochemical plant.

“For some in the Belmont County community, especially the project area residents, we recognize this delay may cause further uncertainty and inconvenience, but we hope that the strong support we have received to date will continue,” Toasaporn Boonyapipat, the CEO of PTTGC America LLC, said in a statement.

This isn't the project's first delay. There’s still a “full willingness and desire to further develop this project. We believe that this added step will lead to a sufficient level of information needed in order to move forward with the complex,” according to the statement. PTT has spent $100 million doing preliminary site work.

There’s a lot riding on the plant. JobsOhio, the state’s private economic development corporation, recently gave the electric utility that owns the land $14 million to clear the development site in Dilles Bottom, along the Ohio River. It is the biggest single amount given by JobsOhio. PTT wanted the site cleared before making its decision that was supposed to happen in a few months.

Indeed, Ohio has offered what PTT describes as “aggressive” incentives since the site was first seriously considered by PTT in 2015.

JobsOhio’s pitch is to make the plant, which takes components from natural gas and “cracks” it to use as a feedstock for plastics and other products, the center of an eastern Ohio renaissance for manufacturing plants in the supply chain. Ohio is home to the Utica shale natural gas play, and nearby Pennsylvania and West Virginia house the Marcellus shale play.

Appalachian Projects Challenge Production.  “Appalachia production has been contingent on new infrastructure, and that is changing,” according to Matt Hoza, an energy analyst with analytics/consulting firm BTU Analytics.

Hoza was addressing roughly 60 attendees at last week’s BTU Analytics-produced “What Lies Ahead 2017” conference in Houston. Kallanish Energy was in attendance.

Hoza said there are 30 projects in the Appalachian Basin, in various stages of progress that will contribute to the basin’s production growth.

Feb. 3 was a big day for pipeline development, as the Federal Energy Regulatory Commission revealed its three members one day earlier had approved four pipeline projects. The project quartet will cost $7.84 billion, carry up to 5.58 billion cubic feet of natural gas daily and, combined, totals more than 1,000 miles of length.

Two of the four FERC-approved lines last week that also are on Hoza’s Big 6 list are Energy Transfer Partners $4.2 billion, 3.25 Bcf/d, 713-mile Rover Pipeline, and Williams $3 billion, 1.70 Bcf/d, 200-mile Atlantic Sunrise Pipeline.

“Three of the six projects can be considered producer-pushed (gas producers driving construction), and three can be considered demand-pulled (local gas distribution companies and utilities are driving the projects),” Hoza said.

Another trio of projects, slated to flow nearly 3 Bcf/d of natural gas into New England, was omitted from Hoza’s list, due to being outright canceled, waiting on specific permits or receiving a negative state court ruling concerning moving forward.

But Hoza pointed out, moving pipeline projects forward, in addition to what generally a multi-year permit approval process, is extremely time consuming, due to such things as lawsuits and protests.

“Greenfield pipes out of the Appalachian region are under intense environmental pressure, and even regional pipelines facing challenges with delays,” according to Hoza.

Gas production in Pennsylvania, Ohio and West Virginia has quadrupled in the past five years to more than 20 Bcf/d, “thanks to displacement of inbound gas, increasing Appalachian demand, and increasing takeaway capacity out of the region,” Hoza said. Takeaway capacity is currently roughly 14 Bcf/d.

However, in the relatively near future, around 2022, Hoza/BTU Analytics projects the region will become overpiped, capacity to flow shale gas out of the region will overtake supply.

“Excess backlog has all but been exhausted, and will not be able to immediately fill new projects,” Hoza said.

Within two years, pipeline capacity will jump to roughly 35 Bcf/d, from approximately 27 Bcf/d in late 2018. Supply during the same timeframe will be relatively flat at 27 Bcf/d.

When pipeline takeaway capacity jumps to 40 Bcf/d in mid-2020 (provided all announced projects are built), production will lag by roughly 8 Bcf/d, according to BTU Analytics.

Texas Drilling Permits.  Original drilling permits in Texas increased from 510 in January 2016, to 956 in January 2017, an 87.4% increase, according to the Texas Railroad Commission.

The agency that oversees drilling in Texas said the January total includes 865 permits to drill new oil or gas wells, 12 to re-enter plugged well bores and 79 for re-completions of existing well bores.

The January breakdown is 259 oil; 67, gas; 607 oil or gas; 18, injection; one, service and four "other" permits, Kallanish Energy learns.

In January 2017, the commission processed 418 oil, 84 gas, 31 injection and three "other" well completions. That compares to 951 oil, 197 gas, 52 injection and four "other" completions in January 2016.

Total well completions last month were 536, down from 1,204 recorded in January 2016, the commission said.

According to well services company Baker Hughes, Texas has 362 drilling rigs at work, as of Feb. 10. That represents about 49% of active rigs in the U.S.

The top area for permits to drill oil and gas wells was the Midland Area in West Texas, with 350 permits. No. 2 was the San Antonio area with 147 and the Refugio area, north of Corpus Christi, was third with 107.

The top areas for oil well completions were the Midland Area with 167, the San Antonio Area with 73 and the Refugio Area with 34. The top areas for natural gas completions were Southeast Texas with 29, the Refugio area with 23 and the San Antonio area with 10.

MPLX Expanding.  Midstreamer MPLX announced today its MPLX Pipe Line Holdings subsidiary is acquiring Enbridge’s Ozark Pipeline for roughly $220 million, Kallanish Energy reports.

The Ozark Pipeline is a 433-mile, 22-inch, 230,000 barrels per day (BPD) capacity crude oil line originating in Cushing, Oklahoma, and terminating in Wood River, Illinois.

"Ozark Pipeline will expand the footprint of our logistics and storage segment by connecting Cushing-sourced volumes to our extensive Midwest pipeline network," said Don Templin, president of MPLX.

MPLX also announced that an open season recently conducted by Enbridge Pipelines (Ozark) received sufficient long-term volume commitments to expand the pipeline`s capacity to roughly 345,000 BPD.

The expansion project includes increasing the horsepower at pump stations along the pipeline and adding drag-reducing agents to the crude oil. The project is expected to be completed in the second quarter of 2018.

The purchase transaction is expected to close by April 1.

Atlantic Sunrise Reaches a Critical Point.  Condemnation efforts have begun to obtain rights of way and temporary easements for the Atlantic Sunrise natural gas pipeline project.

Transcontinental Gas Pipeline Line Co. of Houston, Texas, Wednesday filed the first 10 condemnation complaints in U.S. Middle District Court for rights of way in Columbia, Lebanon, Northumberland and Schuylkill counties.

Another 13 have been filed in the federal Eastern District for property easements in Lancaster County.

The Federal Energy Regulatory Commission last Friday approved the $3 billion project that will increase the transportation capacity of natural gas from the Marcellus Shale region to markets in the Mid-Atlantic and Southeast.

The project would transport about 1.7 billion cubic feet of natural gas a day through central Pennsylvania.

Condemnation is undertaken only when negotiations with property owners are unsuccessful, Williams Partners spokesman Christopher Stockton said Thursday.

He said he could not speculate on how many more condemnations will be filed because "we are still actively working with affected property owners and hope to reach settlements soon."

With receipt of the FERC certificate to proceed, "we have reached a critical point in the project schedule where we need access to these properties so we can wrap up the last remaining environmental surveys," he said.

Stockton stressed condemnation is a last resort and involves only easements, not the acquisition of property. Court documents state Transco has offered more than the appraised value for rights of way.

The project includes about 200 miles of new pipelines, some of which would pass through mid-state plus new compressor, meter and regulator stations in Pennsylvania.

Marathon Oil Doubles Capex for 2017.  Marathon Oil will double its capital spending in 2017 as it ramps up drilling in Oklahoma, Texas and North Dakota/Montana, Kallanish Energy finds.

The company spent $1.1 billion on capital projects in 2016. It is planning to spend $2.2 billion and it projects production will grow by 15% to 20% in the U.S. in 2017 from a year earlier.

The company said $2 billion of its capital budget will be spent in high-return plays to accelerate activity and boost production in the U.S. The increased U.S. spending is part of the company’s “strategic shift,” said CEO Lee Tillman, in a statement.

The company is moving its SCOOP and STACK plays in Oklahoma toward full-field development in 2018, the company said. It intends to operate 10 rigs in Oklahoma and to bring 90 to 100 company-operated wells into production in 2017.

Marathon Oil says it will operate six rigs in the Eagle Ford Shale in South Texas and bring 155 to 170 gross wells to sales in 2017.

In the Bakken, the company intends to focus on the West and East Myrmidon areas and will bring 70 to 75 gross wells to sales in the Bakken Shale in North Dakota and Montana. Six rigs will work the Bakken in 2017. It will focus on enhanced completions moving forward.

Marathon had just 12 rigs at work in the U.S. at the end of 2016.

Marathon Oil reported a full-year 2016 net loss of $2.14 billion. The adjusted net loss for items not typically included was $693 million. The company lost $2.20 billion in full-year 2015.

The company reported a fourth-quarter net loss of $1.371 billion and an adjusted net loss of $83 million. Fourth-quarter results include a $1.35 billion charge to establish a valuation allowance against net deferred tax assets. The company lost $793 million in Q4 2015.

Production in 2016 (excluding Libya) averaged 342,000 net barrels of oil-equivalent per day (BOE/d). Production in 2017 (excluding Libya) is expected to be between 335,000-355,000 BOE/d, about 5% higher than the 2016 midpoint.

NatGas Production Will Be Up in 2017.  U.S. dry natural gas production is forecast to average 73.7 billion cubic feet per day (Bcf/d) in 2017, a 1.3 Bcf/d increase from the 2016 level, according to Energy Information Administration data in the just-released Short-Term Energy Outlook (STEO).

This increase reverses a 2016 production decline, the first decline since 2005, Kallanish Energy reports. Natural gas production in 2018 is forecast to increase by an average 4.1 Bcf/d from the 2017 level.

In January, average Henry Hub natural gas spot prices fell by 29 cents per million British thermal units (MMBtu) from December levels, to $3.30/MMBtu. Mild January temperatures, which were the warmest since 2006, contributed to lower prices, according to STEO.

Increasing capacity for natural gas-fired electric generation, growing domestic natural gas consumption, and new export capabilities contribute to the forecast Henry Hub natural gas spot price rising from an average of $3.43/MMBtu in 2017, to $3.70/MMBtu in 2018.

NYMEX contract values for April 2017 delivery traded during the five-day period ending Feb. 2, suggest a price range from $2.42/MMBtu to $4.38/MMBtu encompasses the market expectation of Henry Hub natural gas prices in April 2017 at the 95% confidence level.

Lower 48 States’ inventories fell below the five-year average in the week ending Dec. 23, for the first time since May 2015 and remained below the five-year average until Jan. 27.

“The 12-month moving average of natural gas consumption plus exports surpassed that of production plus imports in December 2016 for the first time since September 2014,” STEO states. “EIA projects this trend to continue through June 2018, keeping upward pressure on natural gas prices.”

Lower natural gas prices last summer contributed to both a slowdown in production and increased consumption of natural gas in the power generation sector. In addition, new export capabilities led to expanded natural gas exports.

Another NatGas Power Plant Coming to OH.  Massachusetts-based Clean Energy Future LLC and the city of Oregon, OH, announced plans Wednesday for a second natural-gas fired plant in the city expected to cost $900 million.

Construction will begin on the 955-megawatt Oregon Energy Center in early 2018. The new plant is expected to create up to 1,000 construction jobs for local union contractors, and be fully functional by 2020.

OEC’s output will be able to generate enough electricity to serve 900,000 homes in Ohio. It is the 12th natural-gas facility of its kind in Ohio, and Clean Energy Future’s fifth in the northern half of the state.

Along with the first Oregon plant, the company also developed the Fremont Energy Center, and two plants in Lordstown, Ohio, outside Youngstown.

“We’ve been studying the Oregon energy picture for about seven years,” CEF President Bill Siderewicz said. “We noticed there was a tremendous need in both northwest and northeast Ohio.”

The plant will become neighbors with the existing Oregon Clean Energy Center, which is slated to open in May. 

Range Selling Southpointe Property.  Range is expected to continue operating as normal at its regional office in Southpointe.  

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

Rig Count 

  • Baker Hughes Rig Count the week of February 17, 2017
  • PA
    • Marcellus 34 unchanged
  • Ohio
    • Utica 19 unchanged
  • WV
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 61 up 2
  • TX & NM
    • Permian Basin – 303 up 2
  • ND
    • Williston – 36 down 1
  • CO
    • Niobrara – 21 unchanged
  • TOTAL U.S. Land Rig Count 730 up 13

PA Permits February 9, to February 16, 2017

       County            Township            E&P Companies

1.    Greene              Center                EQT
2.    Greene              Center                EQT
3.    Greene              Center                EQT
4.    Greene              Franklin              EQT
5.    Sullivan             Forks                 Chief
6.    Sullivan             Forks                 Chief
7.    Tioga                Liberty                SWN

OH Permits for week February 11, 2017

        County               Township            E&P Companies

1.    Belmont               Colerain               Ascent
2.    Belmont               Colerain               Ascent
3.    Monroe                Malaga                Antero
4.    Monroe                Malaga                Antero
5.    Monroe                Sunsbury            Consol
6.    Monroe                Sunsbury            Consol
7.    Monroe                Switzerland         Consol
8.    Monroe                Switzerland         Consol

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement