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Expo/Industry events for the next few months

Upstream PA 2017
March 21, 2017
Penn Stater Conference Center
State College, PA
http://upstreampa.com/  

Utica Upstream 
April 5, 2017
Walsh University
Canton, OH
http://www.uticacapital.com  

Ohio Valley Oil & Gas Regional Expo
April 25-26, 2017
Belmont County Carnes Center
St. Clairsville, OH
http://www.ohiovalleyoilgasexpo.com/ 

Appalachian Storage Hub Conference
June 15, 2017
Hilton Garden Inn
Southpointe, PA
http://www.appastorage.com/ 

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

Chesapeake Rigs May Be Coming into Ohio.  Chesapeake is now operating two rigs – one in Jefferson County, OH and another one that goes back and forth between PA and OH.  

By late summer, Chesapeake may be bringing a couple more rigs into Jefferson County to drill in the dry gas.  By late fall, Chesapeake may be bringing another rig or two to drill in the wet gas area in Carroll County, OH.  (RUMOR)

CAPEX in 2017 Is Up.  Friday it was reported that U.S. Drillers added more rigs for the seventh straight week.  For the past several months the commodity price of natural gas has been on a rollercoaster depending on the day and weather outlook however hoovering around $2.75 for a while now (spot price today @ 2.81).

North American exploration and production companies will spend one-quarter more this year, leading global spending growth among oil and gas companies. The biggest swing comes in North America, fueled by U.S. shale drillers, where spending had dipped by 38 percent in 2016, according to Barclays. Larger companies could boost spending by as much as 58 percent this year.

With the newly approved pipelines in the Appalachian Region, decrease in DUCs and Shell cracker plant progression plus an anticipated one or two more crackers in the northeast, drilling almost has to start in the next six to 12 months.   Some pipeline companies have expressed a concern that with the long-term downturn (or as would say a complete halt of drilling) ‘will there be enough gas to move when these pipeline are complete?’  And if that’s not enough to be optimistic of the anticipated increased drilling these companies are committed to increased drilling by earmarking money into specific plays;

  • Range Resources- $1.15 billion increased budget for 2017 with 2/3 allocated to Marcellus Shale and 1/3 to N. Louisiana. An estimated 80% of the Marcellus budget is directed to drilling.
  • Rice – $1.04 billion on drilling completions for Marcellus and Utica plays with and an additional $225 million for land acquisition. Rice’s Marcellus’ wells costs $7.4 million vs. Utica at $13 million.
  • EOG – Is projected to spend $3.7 billion to $4.1 billion for 2017.
  • ExxonMobil – 2017 plan is to spend $22 million on CAPEX, 15.8% increase; $775 million for 2017 capital spending vs $400 million in 2016
  • Cabot – Looking to spend between $575 million to $650 million; 2/3 earmarked for Marcellus with remaining 1/3 in Eagle Ford
  • Eclipse – Budgets spending $300 million on capital projects in 2017, up sharply from the $176.9 million spent in 2016

And this is just a few of the companies that we know have disclosed their 2017 budgets with the prospective allocation where the funds are committed.   Even though budgets have greatly increase for 2017 companies are concerned that operating costs and the uncertainly of the commodity price could still bring drilling about at a slow pace.   Stay tuned and stay connected for updates with ShaleDirectories.com.

Rover Finally Can Move Forward.  The Rover Pipeline can begin construction, Kallanish Energy reports.

That approval, the final step for the $4.2 billion project, came from the Federal Energy Regulatory Commission on Friday in a two-page letter.

Rover Pipeline, an affiliate of Dallas-based Energy Transfer Partners, had filed a request last Thursday seeking immediate approval for construction on the natural gas pipeline.

All other approvals are in place, FERC said in issuing the construction certificate.

The company reported that trees have been cleared along 37.55 miles of the pipeline route and that work is continuing. Fifteen contractor yards are being set up.

Rover Pipeline had made numerous requests of FERC to expedite final approval. Last October, it had asked for approval by December, saying without that timely action by FERC the project could be delayed up to one year.

The 713-mile pipeline across northern Ohio is likely to be completed this year with Phase 1 done by July and Phase 2 by November, Energy Transfer Partners said in a statement.

It is designed to carry natural gas from the Utica and Marcellus shales to the Midwest, Ontario and the Gulf of Mexico. It calls for two lines that are both 42 inches in diameter would move up to 3.25 billion cubic feet per day. That’s enough to heat 35,000 houses for a full year.

It would run from western Pennsylvania and northern West Virginia across Ohio to Michigan where it would connect to existing pipelines.

The initial application filed with FERC in June 2014. Initially, the plan called for the first part of the pipeline to begin service in late 2016 with the rest in early 2017.

The Rover Pipeline can begin construction. That approval, the final step for the $4.2 billion project, came from the Federal Energy Regulatory Commission on Friday in a two-page letter.

Pruitt Beginning to Make his Mark on EPA.  The recently confirmed Environmental Protection Agency administrator has made one of his jobs changing the mindset he believes has permeated the more-than 15,000-employee organization.

“We have adopted a mindset that regulations can’t be good for both the environment and the energy industry; if a regulation benefits the energy industry, it can’t benefit the environment,” said Scott Pruitt, the 14th EPA administrator, on the job three weeks.

Pruitt intends to rein in the EPA, do away with the sue and settle method of putting regulations into place, and steer the massive agency away from adding to its power to regulate.

“The EPA only has the authority the U.S. Congress gives it,” Pruitt said, addressing a lunch audience during Day 4 of CERAWeek by IHS Markit, in Houston. Kallanish Energy is covering the five-day energy conference.

The EPA under the Obama administration forgot the process of how regulations are enacted, according to the administrator.

“Regulations aren’t put into place without following a process, they shouldn’t be put into place without hearing voices across the spectrum express their opinion” on any legislation.

“It’s fifth-grade civics; the rule of law matters,” Pruitt said. “The greatest impediment to economic growth is regulatory uncertainty.”

Pruitt referenced two pieces of energy-related legislation/regulation which illustrates how far off the grid the EPA has drifted.

“The Waters of the U.S. Act (expands the EPA’s jurisdiction so far) the EPA is regulating water puddles and dry creek beds,” Pruitt said.

The Clean Power Plan — whose implementation has been stayed by the U.S. Supreme Court – has reimagined and enlarged the EPA’s authority in reducing carbon emissions from power plants, Pruitt said.

Pruitt said while trying to expand its authority, EPA has moved away from the work it should be doing. “There are more than 1,300 Superfund (highly polluted locations) in the U.S. which needs to be mediated, but some of them have sat for three or four decades,” according to Pruitt.

EPA Removes Ethane Reporting Requirement.  The U.S. Environmental Protection Agency last week announced it was withdrawing an Obama administration requirement that oil and natural gas drillers provide information on methane emissions from their operations, Kallanish Energy reports.

EPA Administrator Scott Pruitt, in his ninth day in charge at the agency, said the withdrawal is effective immediately. Pruitt said he wants to analyze the need for the information the agency has been collecting under a federal directive issued last November.

The EPA sent letters to 15,000 owners and operators in the drilling industry, requiring them to file certain information with the agency on emissions from existing operations. It said the additional data was needed to prepare new regulations under Obama’s plan to fight climate change.

Last week's “action will reduce burdens on business while we take a closer look at the need for additional information from this industry,” Pruitt said, in a statement.

Eleven states had challenged the reporting request as overly burdensome.

Pruitt said his action shows the EPA under his command takes the concerns of state officials seriously. But environmental groups said Pruitt’s action was giving in to states with oil and natural gas drilling operations.

Pipelines Now Needed in the Permian.  The EPIC Pipeline Co. has kicked off an open season for capacity on a new 730-mile pipeline for crude oil and condensate in the Permian Basin in West Texas and New Mexico.

The liquids would be moved from the western part of the Permian Basin to Corpus Christi, Texas, Kallanish Energy reports.

The pipeline is expected to be in operation in first quarter 2019.

No cost estimate was released.

The open season for the first 200,000 barrels of capacity closes on April 15.

A second open season may be held later, and the Eagle Ford Shale in South Texas might be connected to the pipeline, officials said.

The pipeline would have at least four receipt points in West Texas: Orla, Pecos, Crane and Midland.

It would have 16, 20, 24 and 30-inch pipeline with capacity to deliver up to 440,000 barrels per day from the Delaware and Midland basins, said the company that is based in San Antonio.

The project is being developed by TexStar Midstream Logistics in San Antonio, Castleton Commodities International in Stamford, Conn., and Ironwood Midstream Energy Partners with offices in Dallas and San Antonio.

“TexStar and its partners are excited to extend our business into the Permian Basin where we see tremendous opportunity and continued growth,” said Phil Mezey, CEO of TexStar’s general partner in a statement.

Marathon Does Deal in the Permian.  In conjunction with the sale of its 20% interest in the Athabasca Oil Sands Project (AOSP) in Alberta to Royal Dutch Shell and Canadian Natural Resources for $2.5 billion (see story elsewhere), Marathon also announced it’s acquiring roughly 70,000 surface acres in the Permian basin from BC Operating and other entities for $1.1 billion in cash.

The acquisition includes 51,500 acres in the Northern Delaware Basin of New Mexico, and current production of roughly 5,000 net barrels of oil-equivalent per day (BOE/d).

“Divesting of our oil sands mining business at an attractive value while also acquiring 70,000 net acres in the world-class Permian basin are transformative milestones that will further align our portfolio with our strategy," Marathon Oil CEO Lee Tillman said. “Historically, our interest in the Canadian oil sands has represented about a third of our company’s other operating and production expenses, yet only about 12% of our production volumes.”

Marathon said the Permian assets include up to 10 target benches within approximately 5,000 feet of stacked pay; base case assumes up to 6 target benches, Kallanish Energy learns.

The BC acquisition is expected to close in second quarter, with an effective date of Jan. 1, 2017.

Goldman, Sachs and TD Securities served as advisors on the divestiture transaction, and Evercore acted as advisor on the acquisition.

Chesapeake Will Sell Assets.  Chesapeake Energy has 11 billion barrels of net recovery reserves and an extremely strong asset portfolio – and will not hesitate to continue selling assets to maintain a strong balance sheet — company CEO Robert Lawler said on the sidelines of the IHS Markit’s CERAWeek energy conference.

Kallanish Energy is covering the five-day conference in this oil and gas center.

Lawler told a handful of reporters following his presentation as part of a CERAWeek panel discussion he/his company realizes debt is its primary challenge.

“Our portfolio is strong and we see a good level of interest in our assets, from private equity firms,” and other potential buyers, Lawler said.

Lawler in January said Chesapeake anticipates reducing debt by an additional $2 billion to $3 billion during the next two to three years, which will include asset sales. The company announced or finalized divestments of $2.5 billion in 2016, exceeding its previously stated goal by $500 million.

As the oil and gas industry continues to come off the proverbial mat after 2-1/2 years of tears, Lawler said Chesapeake will continue to closely monitor oilfield service costs, which are on the way up – some substantially.

“We see some services climbing 25%, like the cost of sand,” Lawler said.

While the U.S. oil industry is currently centered on the Permian Basin of West Texas/southeast New Mexico, Lawler said it’s not the only play where producers can make money.

“With demand increasing on average 1-1/2 million barrels per day annually, the Permian cannot satisfy demand alone,” Lawler said.

Lawler, who assume command of Chesapeake when former CEO and co-founder, the late Aubrey McClendon was pushed from the company, said he believes the industry has learned its lesson when it comes to disciplining its actions.

“I see a lot of discipline in the industry in the next few years,” Lawler said. “We’re not going to give that up. I believe we will protect capital integrity.”

ExxonMobil Makes Big Commitment to Downstream.  ExxonMobil will spend $20 billion through 2022 to expand its chemicals and refinery operations on the Gulf Coast in Texas and Louisiana, newly named CEO Darren Woods announced Monday.

The announcement came at IHS Markit’s CERAWeek energy conference, in this oil and gas hub. Kallanish Energy is covering the five-day annual conference.

Woods, who assumed command of the world’s largest publicly-held energy company on Jan. 1, when former CEO Rex Tillerson resigned to become President Trump’s Secretary of State, said ExxonMobil put its so-called growing the Gulf plan into motion in 2013.

The plan involves 11 chemical, refinery and liquefied natural gas projects Woods said will create 45,000 new jobs – many paying an average of $100,000 annually.

“These projects are export machines, generating products that high-growth nations need to support larger populations with higher standards of living,” Woods said. “Those overseas markets are the motivation behind our investments. The supply is here; the demand is there. We want to keep connecting those dots.”

The announcement followed last week’s disclosure ExxonMobil is shifting half its worldwide drilling budget to U.S. shale plays in 2018.

“Shale is incentivizing manufacturing (in the U.S.) to grow,” Brown told the CERAWeek audience.

Trump praised ExxonMobil’s spending plans as an example of "a true American success story." "This is exactly the kind of investment, economic development and job creation that will help put Americans back to work," Trump said.

Woods also tackled the particularly thorny issue of fossil fuels impact on climate change. The global economy can grow while also improving the climate, he said.

"We understand there is risk with climate with the use of fossil fuels – but we believe we can mitigate that risk with technology,” Brown said.

Anadarko Focused on the Permian.  Anadarko Petroleum intends to spend $4.5 billion to $4.7 billion in 2017 capital projects with increased drilling in the Permian Basin West Texas and New Mexico and in the DJ Basin in Colorado, Kallanish Energy reports.

The company said it net resources in the Permian’s Delaware Basin (Wolfcamp A) have grown by 50% to more than 3 billion barrels of oil equivalent and its resources in the DJ Basin have increased by 33% to more than 2 billion barrels of oil equivalent, the company said.

In 2017, Anadarko intends to spend about $820 million in the Delaware Basin with an additional $560 million planned in midstream spending.

The company expects to drill 150 operated mid-lateral equivalent wells in the Delaware Basin. It intends to have 10 to 14 rigs at work in the basin.

The company intends to spend $840 million in 2017 in the DJ Basin in northeast Colorado to drill 290 what it called mid-lateral equivalent wells. It will operate five or six rigs in the area.

“We expect our current 2017 U.S. onshore capital allocation to deliver significant oil growth toward the end of the year as we overcome the effects of last year’s reduced activity levels on our shorter-cycle onshore opportunities,” said chairman, president and CEO Al Walker in a statement.

The company is focusing on “higher-margin oil production” and is expected to grow over the next five years, he said.

It is projecting a 25% increase in oil sales volumes in 2017, compared to 2016, the company said.

It is projecting year-end 2017 oil production in the DJ Basin to be about 100,000 barrels per day, a 30% increase over 2016, and about 50,000 barrels of oil per day in the Delaware Basin, an 80% jump from 2016, Anadarko said.

The company said it will spend about $1.1 billion in its deepwater Gulf of Mexico, Algeria and Ghana.

A Small Hiccup in GE – Baker Hughes Deal.  The U.S. Department of Justice (DOJ) has requested further information from General Electric (GE) and Baker Hughes related to their pending combination, which created the second-largest oilfield services business behind world's No. 1 Schlumberger.

The companies said in a joint statement earlier this week that the second request, issued under an antitrust improvement act, was expected and a normal part of the DOJ review process. “The effect of the second requests is to extend the waiting period … until 30 days after GE and Baker Hughes have substantially complied with the requests,” they added.

The transaction is still subject to clearance from Baker Hughes’ shareholders and other approvals, but it remains on schedule to close in mid-2017, Kallanish Energy learns.

Under the deal announced last October, Baker Hughes' shareholders would receive a special, one-time cash dividend of $17.50 per share — $7.5 billion — and 37.5% of the new, New York Stock Exchange-traded company. GE would hold control of the new company.

The proposed combination creates a company with more than $32 billion in revenue that could cut costs to better compete with rivals such as Schlumberger and Halliburton. It would also allow GE to benefit from an expected recovery in the industry without having to pay for a full acquisition of Baker Hughes.

The U.S. Department of Justice (DOJ) has requested further information from General Electric (GE) and Baker Hughes related to their pending combination, which created the second-largest oilfield services business behind world's No. 1 Schlumberger.

We’ll have to feel if this hiccup leads to indigestion. As usual, we’ll monitor this closely and keep you updated.

Another Permian Deal.  Resolute Energy has agreed to acquire 4,600 net acres in the Permian Basin in West Texas for $160 million, Kallanish Energy reports.

The assets being purchased are in Reeves County in the Permian’s Delaware Basin.

The property is being acquired from undisclosed private sellers.

The deal is expected to close around May 15.

The assets being purchased include the 2,187-acre Orla project and the 2,405-acre Southwest Rim project, Resolute Energy said.

The Orla project includes two drilled 4,500-foot horizontal Wolfcamp wells that produce about 800 barrels of oil equivalent per day, the company said.

There are also six drilled but uncompleted Wolfcamp wells. One non-operated Wolfcamp well is being drilled.

After the deal closes, the company plans to complete the drilled but uncompleted wells and to have all of them in production by mid-July 2017.

“This is exactly the kind of targeted, focused, consolidating opportunity that leverages the strengths of our team and our assets,” said CEO Rick Betz in a statement.

The company expects production to jump in the second half of 2017, he said.

When the deal closes, the company’s acreage in Reeves County will grow by 28% to 21,000 net acres.

The company is operating two rigs in the Delaware Basin and may add a third rig in the second half of 2017 to speed up the Orla development, it said.

Belmont County #1 in OH.  Belmont was Ohio's most-drilled county in 2016, with the most drilled wells, 120, and the most drilled footage, at 1.94 million vertical and lateral feet.

Those figures were part of a fact-filled presentation by Martin Shumway, president of Shumway Resources, Thursday at the Ohio Oil and Gas Association’s 70th annual winter meeting in the Ohio capital of Columbus. Kallanish Energy attended the meeting.

The number of wells drilled in Belmont, in the heart of the Utica Shale’s dry-gas window, jumped 67% in 2016, Shumway said, in presenting the Debrosse Memorial Report on 2016 drilling.

The other top counties for wells drilled were Harrison with 102; Monroe, 87; Noble, 56; and Carroll, with 47. In 2016, Ohio drilled 620 wells, of which 477 were horizontal wells, he said.

The top drilling companies were Chesapeake Energy with 99 wells (down 31% from 2015); Ascent Resources, 66; Antero Resources, 64; Gulfport Energy; 62; and Eclipse Resources with 46.

Belmont’s 2016 footage jumped by 72% while Carroll’s dropped by 44%, Shumway said. Overall, Ohio’s 2016 footage drilled was 7.96 million feet for 504 wells, up 15% from 2015, he said. Total footage has grown from 1.8 million feet in 2011.

Shumway said the top five companies for drilling footage in 2016 were Chesapeake, 1.6 million feet; Antero and Gulfport, tied with 1.1 million feet; Ascent Resources, 1.0 million feet; and Eclipse, 728,000 feet. Chesapeake’s total was down 41% from 2015, he said.

Shumway said he was especially intrigued by two bits of new data for Ohio. Ascent has reported high initial production data from a well in Jefferson County, creating a new potential drilling “hot spot,” he said. Similar “hot spot” results have been reported in Belmont and Monroe counties, he added.

Also Protégé Energy has reported promising results from a new well north of Marietta, in Washington County. That is at the very southern end of the Utica play, but could result in more drilling in that area, he said.

In other OOGA news, Shawn Bennett, executive vice president of the association, said it appears unlikely the Ohio Legislature will raise Ohio's severance tax on drillers as had been requested by Gov. John Kasich. He based his opinion largely on conversations with legislators.

Coal-Fired Plant Converting to NatGas in PA.  A shuttered coal-fired power plant in the southwest corner of Pennsylvania could soon be replaced by a smaller, more efficient natural gas-fired facility.

Hatfield's Ferry, a 1,710-megawatt coal plant in Greene County, closed in 2013, because owner FirstEnergy was losing money on its operation.

Now, New Jersey-based APV Renaissance Partners, a subsidiary of American Power Ventures, said it plans to submit a permit to the Pennsylvania Department of Environmental Protection within the next month for a combined-cycle, gas-fired facility, the Pittsburgh Post-Gazette newspaper reported.

David Neurohr, a spokesman for APV, told the Post-Gazette it’s plan is a “redevelopment project” with details to be disclosed at a public information meeting on April 5.

However, in January, grid operator PJM Interconnection received an application from an operator to connect 1,140 MW of natural gas-powered generation on the same transmission line that once served the coal plant. The projected operating date for the project is the second quarter of 2022.

APV, according to its website, has developed four natural gas projects since its founding: three in New Jersey and one in New York, Kallanish Energy learns.

At least three of the firm’s leaders, including CEO John Seker, came from Competitive Power Ventures, a Massachusetts-based power developer and asset manager that’s currently looking to build the $900 million, 1,050 MW Fairview Energy Center project near Johnstown, Pa., the Post-Gazette reported.

Rex 4th Qtr. Update.  Rex Energy is getting better returns on its Utica Shale wells in Carroll County.

Assuming natural gas worth $3 per thousand cubic feet and oil at $55 a barrel, the rate of return on Carroll wells grew from 28 percent to 47 percent in 2016, according to a press release announcing Rex Energy's earnings Tuesday.

Rex drilled seven wells, fracked ten wells and began production from 13 wells in Carroll last year. No wells remained to be drilled or fracked at the end of the year.

Among the new wells in production were the four wells of the Vaughn pad in Washington Township. The wells had a 5-day average sales rate per well equal to 1,500 barrels of oil per day, with liquids accounting for 65 percent of production.

Rex is based in State College, Pa., and has drilled 31 Utica wells in Ohio.

The company had a net loss of $67.4 million for the fourth quarter and $176.7 million for the year. The company spent $29.5 million on capital projects, about $6 million less than anticipated.

Rex produced 71.5 billion cubic feet of natural gas equivalent in 2016, up 6.6 percent from the previous year.

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Average daily production is estimated at 194 million to 204 million cubic feet of natural gas equivalent per day in 2017.

Rex agreed last year to sell 14 wells and the drilling rights to approximately 4,100 acres in Guernsey, Noble and Belmont counties to Antero Energy.

Rex has said it plans to spend up to $80 million drilling and fracking wells this year, with one-fifth of that money invested in its Utica holdings in Carroll.

The rest of the money will be spent in the company's Marcellus and Upper Devonian Burkett shales in Pennsylvania.

In total, Rex plans to operate one rig and drill 21 wells, complete 26 wells and begin production from 23 wells during 2017. All but four of the producing wells will be brought into production in the second half of the year.

The company has said it doesn't plan to spend any money on Utica Shale drilling in 2018.

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Rig Count 

  • Baker Hughes Rig Count the week of March 10, 2017
     
  • PA     
    • Marcellus 32 unchanged
  • Ohio 
    • Utica 21 up 2
  • WV 
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 68 down 1
  • TX & NM
    • Permian Basin – 309 up 1
  • ND
    • Williston – 38 unchanged
  • CO
    • Niobrara – 24 up 4
       
  • TOTAL U.S. Land Rig Count 743 up 9

PA Permits March 2, to March 9, 2017

       County        Township    E&P Companies

1.    There were no permits this past week.

OH Permits for week March 3, 2017

        County      Township     E&P Companies

1.    Belmont     Colerain       Ascent
2.    Jefferson    Smithfield    Ascent
3.    Jefferson    Smithfield    Ascent
4.    Jefferson    Smithfield    Ascent

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

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