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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  

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 

Texas Permitting Up 73%.  The Texas Railroad Commission in February approved 991 original drilling permits, compared to 573 permits issued in February 2016, a 72.9% year-to-year increase said the state agency, which oversees drilling in Texas.

The February 2017 total included 847 permits to drill new oil or gas wells, 11 to re-enter plugged well bores and 133 to re-complete existing well bores, Kallanish Energy learns.

The breakdown for type of wells for those permits are 258 for oil; 37, gas; 640, oil or gas; 43, injection; one, service; and 12, other permits, the commission reported.

Last month, the commission also reported processing 677 well completion permits. That total is down 36.5% from the 1,066 completion permits in February 2016.

Year-to-date, Texas has approved 1,213 well completions, down from 2,270 recorded in the same period in 2016, a drop of 46.6%, the agency said.

The Midland area in West Texas was No. 1 for drilling permits in February with 434 of Texas’ 991 permits. It was also No. 1 for oil completions, with 154 permits.

The San Antonio area was No. 1 for natural gas completions, with 25 permits.

Texas is the No. 1 drilling state in the U.S. As of March 10, well service company Baker Hughes reported there were 392 drilling rigs at work in Texas, about 51% of the country's total.

Crude Inventories Down.  U.S. commercial crude oil inventories fell 200,000 barrels (Bbls) during the week ended March 10, from one week earlier, the Energy Information Administration reported in the Petroleum Status Report (PSR).

The drop ended nine consecutive weeks of increases that sent inventory levels to record highs. Crude inventories currently stand at 528.2 million Bbls (MMBbls), above the upper limit of the average range for late winter.

Propane-propylene inventories fell 800,000 Bbls, but are in the middle of the average range. Total commercial petroleum inventories lost 7.8 MMBbls.

U.S. crude oil refinery inputs during the week ended March 10 averaged 15.5 million barrels per day (MMBPD), down 20,000 BPD from the previous week’s average. Refineries operated at 85.1% of their operable capacity, Kallanish Energy learns.

Over the last four weeks, crude imports averaged 7.6 MMBPD, down 4.4% from the same four-week period of 2016.

Power Projects Coming into Northeast.  Researched by Industrial Info Resources (Sugar Land, Texas)--Industrial Info is tracking $11.52 billion in Power Industry projects that are set to kick off this year in the U.S. Northeast, which includes the states of Pennsylvania, New York, New Jersey and Delaware. Many of the capital projects in the region are set to take advantage of the abundant natural gas coming from the Marcellus Shale in Pennsylvania.

Spectra Energy Buying Into PennEast.  According to a statement from PennEast on Monday, the company is pleased with the pipeline's progress and is "excited to have Spectra Energy Partners, with its extensive experience in the region, become an equal equity partner".

New Jersey's largest utility has found a buyer for its stake in a pipeline project that's created to carry Marcellus Shale natural gas from northern Pennsylvania to New Jersey. They said the company was looking to sell its share in the roughly 120-mile pipeline in order to focus more on its core business of running and building power plants. The deal is subject to the approval of the PennEast board and other conditions, but if it closes in 2Q2017, Spectra would increase its investment in the almost $1 billion project to 20%.

"The equity transfer would be subject to approval by the PennEast Pipeline board of managers", said Pat Kornick, spokeswoman for PennEast Pipeline.

Bill Yardley, president of Spectra Energy Partners, said the deal enables Spectra Energy to solidify its regional profile.

Drilling Could Be Coming to Delaware River Basin.  Defenders of a longstanding de-facto moratorium on natural gas drilling in the Delaware River Basin say there are gathering signs of a renewed push to allow natural gas production by the industry and its allies.

Environmental groups including Delaware Riverkeeper Network say officials from the Delaware River Basin Commission, which is composed of representatives from New York, New Jersey, Pennsylvania, Delaware and the federal government, have been in talks with member states about finalizing work on oil and gas regulations that began before a de-facto moratorium was imposed seven years ago.

Opponents of any move to open the basin to shale gas development also worry about a lawsuit brought by a group of Wayne County landowners who challenge the DRBC’s right to regulate drilling.

And they fear that there will be new pressure from the Trump administration, via the U.S. Army Corps of Engineers, its representative on the DRBC, to allow gas drilling at the eastern edge of the Marcellus Shale.

Pioneer Selling Permian Assets.  Pioneer Natural Resources said today it’s signed a purchase-sale agreement with an undisclosed buyer to sell an acreage package in northeastern Martin County, in West Texas, for $266 million.

Current net production from the sold assets in the Permian Basin is roughly 1,500 barrels oil-equivalent per day (BOE/d), Kallanish Energy learns.

The acreage, when combined with previously-announced acreage sales in Texas’ Upton and Andrews counties and ongoing acreage trades, are part of Pioneer’s upgrading of its portfolio in the Midland Basin, the Irving, Texas-based independent producer said.

The sale, effective Jan. 1, 2017, is expected to close by May 1.

Pioneer Natural Resources said today it’s signed a purchase-sale agreement with an undisclosed buyer to sell an acreage package in northeastern Martin County, in West Texas, for $266 million.

PA NatGas Production Up 10% in 2016.  Pennsylvania posted a 10 percent increase in natural gas production from shale gas plays in 2016 in a year that was marked by a slow recovery in pricing and well drilling.

There were 5.05 trillion cubic feet of natural gas produced in shale plays in the commonwealth during the year, according to data released Tuesday by the Pennsylvania Department of Environmental Protection. That’s up from 4.6 trillion cubic feet recorded in 2015.

The high-water mark for production was in December, when there was 446.5 trillion cubic feet of natural gas produced. The lowest was in September, with 404.3 trillion cubic feet produced. The highest increase was in February, with a 17.6 percent jump in production compared to February 2016. The lowest pace of growth was in August, with a 4.5 percent increase.

The data showed that the double-digit growth in natural gas production seen in Pennsylvania over the course of the past decade of the Marcellus Shale boom has slowed for another year. It was up 13 percent in 2015 compared to the year before, although it’s no surprise: Marcellus and Utica shale production has been heavily impacted by the severe decline in price that started in 2014.

The high-water mark for production in 2016 was in December, when there was 446.5 trillion cubic feet of natural gas produced. The lowest was in September, with 404.3 trillion cubic feet produced. The highest increase was in February, with a 17.6 percent jump in production compared to February 2016. The lowest pace of growth was in August, with a 4.5 percent increase.

The downturn forced a number of natural gas producers to cut back on drilling and completion of wells, which in turn had an impact on growth. Last May, a Rice Energy (NYSE: RICE) executive said a study showed that between 50 and 55 rigs were required in the Appalachian basin for it to maintain production levels. At the time, there were only about 35 rigs running in Ohio, West Virginia and Pennsylvania.

Trump Wants to Cut EPA Budget.  President Trump proposes slashing the Environmental Protection Agency’s annual budget by 31%, focusing the department on core legal requirements, the role of states in implementing environmental laws, and easing “unnecessary” federal regulations that impose significant costs without justifiable environmental benefits.  

The President’s 2018 budget requests $5.7 billion for the EPA, a savings of $2.6 billion.

The White House's proposed 2018 budget for the agency comes as Trump seeks to cut regulations he believes are hobbling U.S. businesses. The proposed cuts are a starting point in negotiations with Congress, Kallanish Energy reports.

FERC Approvals Could Be Coming.  Help may soon be on its way to the short-handed Federal Energy Regulatory Commission, Kallanish Energy reports.

President Trump has chosen Jones Day attorney Kevin McIntyre and Neil Chatterjee, senior energy advisor to Senate Majority leader Mitch McConnell, to serve on the five-member board that has three vacancies and cannot conduct most business, according to media reports.

McIntyre would become chairman, according to Bloomberg. The third vacancy apparently remains unfilled at this time. Members serve five-year terms.

The nominations are subject to Senate approval and that could take months, according to some observers.

The agency oversees interstate pipelines, the power grid and other energy projects. A coalition of 130 grass-roots groups has pledged to fight for stricter review of pipeline projects by FERC.

The current commissioners are acting Chairman Cheryl LaFleur and Colette Honorable. FERC needs three commissioners to take final action on projects.

DUC’s Are Increasing. The number of drilled, but uncompleted (DUC) wells in the Lower 48 States’ seven most prolific plays inched up 1.7% from January to February, according to the Energy Information Administration’s latest Drilling Productivity Report.

The number of DUCs in February totaled 5,443, up from 5,352 drilled but uncompleted wells, Kallanish Energy finds. Four of the seven plays included in the monthly DPR, including the Bakken, Eagle Ford, Haynesville and Permian Basin saw a month-to-month increase in DUCs.

A trio of drilling areas, including the Marcellus, Niobrara and Utica Shale play, saw a decrease in DUCS from March to April.

The biggest month-to-month increase by far was the Permian, up 95 DUCs from January to February, to 1,764 from 1,669. The biggest DUC well drop was in the Niobrara, down 22 DUCs, to 678, from 700, DPR found.

This report counters some other research that we’ve reported in Facts & Rumors.  Most of the research that we’ve seen demonstrated that the DUCS are almost gone.

Tax Cut Could Provide $10 to O&G Industry.  The Trump administration’s plan to reduce corporate tax rates could provide more than $10 billion annually for U.S. oil producers, opening new opportunities to boost drilling, Kallanish Energy understands.

Crude prices in New York have fallen 10% since the end of 2016 as added drilling in America’s shale plays offset an OPEC-led drive to raise prices by cutting production. The U.S. push has spurred concern that another price drop could come soon, following a two-year decline that saw prices fall as low as $26.05 a barrel in February 2016.

Oil prices slid to three-month lows on Tuesday after OPEC reported an increase in global crude stocks and a surprise jump in self-reported production from Saudi Arabia that occurred despite output curbs by the group.

Brent futures, which fell below their 200-day moving average for the first time since late November, were down 45 cents, or 0.9%, at $50.90 a barrel (Bbl) by 2:34 p.m. EDT. West Texas Intermediate crude ended Tuesday's session down 68 cents, or 1.4%, to $47.72/Bbl, marking its seventh straight daily decline — its longest such streak since January 2016.

Secondary sources had said Saudi output fell in February to 9.797 million barrels per day (MMBPD), but Riyadh told OPEC it rose to 10.011 MMBPD.

Oil prices have given back almost all gains notched since OPEC's Nov. 30 announcement of cuts aimed to stabilize prices and draw down global stockpiles.

Republicans led by President Trump have said they want to cut the top corporate rate to 15 or 20%, from 35% now. That could mean more than $10 billion in savings for oil producers that are one of the country’s most-heavily taxed industries, according to Bloomberg Intelligence research.

The final number will hinge on whether drillers surrender other tax breaks in exchange, said Vincent Piazza, a senior analyst at BI, told Bloomberg. “In theory,” explorers would divert tax savings to more domestic drilling, Piazza said. “But nothing is ever one-for-one.”

Still, the discussion comes as the future of the global industry is under debate. At last week’s CERAWeek by IHS Markit, the largest annual gathering of industry leaders (attended by Kallanish Energy), some top executives warned against a rapid increase in drilling by U.S. drillers.

Harold Hamm, the billionaire shale oilman, said the U.S. industry could "kill" the oil market if it embarks on another spending/drilling binge.

U.S. production "could go pretty high," Hamm, founder and CEO of Continental Resources, said at the meeting. "But it’s going to have to be done in a measured way, or else we kill the market."

Saudi Arabia’s oil minister, Khalid Al-Falih, told a CERAWeek audience global oil stockpiles haven’t drained as quickly as expected, opening the door for an extension to OPEC production cuts that were originally due to expire at mid-year.

Bidell Comes to WV.  Bidell Gas Compression, a subsidiary of Canadian-based Total Energy Services Inc., will base its first United States manufacturing operation, 29.5 miles north of Wheeling, in Weirton, West Virginia.

The company will repurpose a 100,000 square foot decommissioned machine shop to fabricate, sell, lease and service natural gas compression equipment to customers operating throughout North America and internationally.

Bryce Custer, CCIM, SIOR with Harvey Goodman Realtor (West Virginia) and NAI Spring Commercial Realty (Ohio) represented Frontier Group in the sale of the property to the WV Business Development Group.  Bryce Custer, CCIM, SIOR also represented the WV BDC in the Lease to Bidell.

Northern to Drill 12 Wells in Bakken.  Northern Oil and Gas said it expects to drill 12 new wells in 2017 in the Bakken Shale in North Dakota and Montana, Kallanish Energy reports.

The Minnesota-based company said its 2017 capital budget will be roughly $102.2 million, compared to $75.6 million in 2016. The company also said it expects 2017 production to equal or modestly exceed 2016 production of nearly 5 million barrels of oil-equivalent (BOE), down 16% from 2015. Average daily production was 13,653 BOE, also a 16% decline from 2015.

In 2016's fourth quarter, the company's net loss was $12.3 million, compared to a net loss of $172.3 million in Q4 2015. That loss was tied to lower commodity prices and less production, Northern Oil and Gas said.

For full-year 2016, the company reported a net loss of $293.5 million, vs. a net loss of $975.4 million in 2015.

The company has roughly 155,016 acres in the Bakken Shale and had 213 producing wells at year-end 2016

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Rig Count 

  • Baker Hughes Rig Count the week of March 17, 2017
  • PA     
    • Marcellus 32 unchanged
  • Ohio 
    • Utica 21 up 2
  • WV 
    • Marcellus 10 unchanged
  • TX
    • Eagle Ford 70 down 2
  • TX & NM
    • Permian Basin – 308 down 1
  • ND
    • Williston – 42 up 4
  • CO
    • Niobrara – 25 up 1
  • TOTAL U.S. Land Rig Count 765 up 22

PA Permits March 9, to March 16, 2017

        County        Township           E&P Companies
1.    Greene        Washington        EQT
2.    Lycoming    Upper Fairfield     Inflection Energy

OH Permits for week March 10, 2017

         County      Township    E&P Companies

1.    Belmont       Union        Ascent
2.    Carroll        Orange        Chesapeake
3.    Carroll        Orange        Chesapeake
4.    Carroll        Orange        Chesapeake
5.    Carroll        Orange        Chesapeake
6.    Guernsey    Millwood    Eclipse Resources
7.    Guernsey    Millwood    Eclipse Resources
8.    Guernsey    Millwood    Eclipse Resources
9.    Guernsey    Millwood    Eclipse Resources
10.  Jefferson    Warren        Ascent
11.  Jefferson    Warren        Ascent
12.  Jefferson    Warren        Ascent
13.  Washington Liberty        Protégé Energy

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019