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Expo/Industry events for the next few months

Utica Midstream
June 7, 2017
Walsh University
North Canton, OH  

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

DUG East
June 20-22
David L. Lawrence Convention Center
Pittsburgh, PA  

For other events visit

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

Anti-Fracking Web Stories Are “Fake News.” An oil and gas drilling advocacy group published an open letter to Google asking the search engine giant to consider “purging or demoting” websites spreading misinformation about hydraulic fracturing. 

Google rewrote its search engine algorithm to bury “fake news” websites in the wake of the 2016 presidential election. Now the industry-funded Texans for Natural Gas want Google to include anti-fracking websites.

“We believe many of the most prominent anti-fracking websites have content that is misleading, false, or offensive – if not all three,” the group wrote in an open letter to Google published Monday.
Dear reader:

Fracking involves injecting large amounts of water, mixed with some chemicals and sand, deep underground to unlock vast reserves of oil and natural gas. The drilling technique sparked an energy boom, but riled up environmentalists who saw it as a threat to the planet.

Texans for Natural Gas argue that environmental groups have put out plenty of false information about fracking.

The Sierra Club, for example, claims on its website that “[f]racking has contaminated the drinking water of hundreds of thousands of Americans.” It cites no evidence to back up this charge.

The Environmental Protection Agency released its final study on fracking’s impacts on groundwater in late 2016, and found no widespread evidence that fracking was contaminating groundwater.

“While the number of identified cases of drinking water contamination is small, the scientific evidence is insufficient to support estimates of the frequency of contamination,” Thomas Burke, the former deputy assistant administrator at EPA, told reporters in December.

In another example, Sierra Club Executive Director Michael Brune said fracking was harming newborn babies, pointing to a study he thought found such an association. The 2015 study in question, however, did not make that finding.

Study co-author Dr. Bruce Pitt of the University of Pittsburgh said it’s “important to stress that our study does not say that these pollutants caused the lower birth weights.”

Some environmentalists have gone even further. Sharon Wilson of Earthworks compared fracking to “rape.”

“It is a violation of justice and it is despoiling the land,” Wilson wrote in a 2015 blog post. “Victims usually suffer PTSD.”

“Claims made by the radical environmentalist campaign against hydraulic fracturing are protected by the First Amendment,” Texans for Natural Gas wrote to Google, adding:

Groups that wish to peddle misleading information about oil and natural gas are fully within their rights to do so. Many of the groups engaging in anti-fracking advocacy have devoted significant resources to Search Engine Optimization (SEO), and as a result they receive significant web traffic.

But that is no reason for Google to reward such misinformation with its powerful search engine. We urge you consider adding these groups’ websites to your review of fake news and the kinds of content that you do not wish to promote.

Drilling Permits Up in TX.  The number of drilling permits issued in Texas continues to rebound, Kallanish Energy reports.

The Railroad Commission of Texas, which oversees drilling, issued 909 original drilling permits in April, up from 683 permits in April 2016. The April total included 821 permits for new oil or gas wells, nine permits to re-enter plugged well bores and 79 to re-complete existing well bores.

The breakdown of those permits is 223, oil; 55, gas; 576, oil or gas; 36, injection; 1, service; and 18, other.

In April 2017, the state agency issued 530 well completion permits. That is down nearly 50% from the 1,047 completion permits issued in April 2016.

The Midland area in the Permian Basin was No. 1 for new drilling permits in April, with 401. It was also the top area for oil completion permits with 185 and was second for natural gas completions with 11.

The Midland area represented 44.1% of the drilling permits issued in the state in April.

The San Antonio area was No. 2, with 183 permits to drill oil or gas wells, followed by the Refugio area with 60 permits.

Texas is the No. 1 drilling state in the U.S. with 443 rigs at work, according to oilfield services firm Baker Hughes. That represents about 50% of all active rigs in the U.S.

Two FERC Nominees.  President Donald Trump announced two nominations to the Federal Energy Regulatory Commission on Monday, marking the first step toward restoring a voting quorum at the agency. Among other regulatory responsibilities, FERC is tasked with reviewing and approving interstate natural gas pipelines.

The nominees include Robert Powelson, a member of Pennsylvania’s Public Utility Commission since 2008. A Chester County Republican, Powelson has been a member of the PUC during the period of rapid natural gas development in Pennsylvania’s Marcellus Shale region. Also nominated to FERC is Neil Chatterjee, an energy policy adviser to United States Senate Majority Leader Mitch McConnell, R-Kentucky.

Two proposed natural gas pipelines have rankled opponents in the Delaware Valley in recent years. A PennEast natural gas pipeline is proposed to run from Luzerne County, Pennsylvania, to Mercer County, New Jersey, passing through a far northern corner of Bucks County along the way.

We are extremely pleased with this announcement for two reasons.  First, there is $50 billion dollars of midstream money to be spent.  Second, Robert Powelson spoke at Shale Directories Upstream PA 2017 seminar in March.  Bob will be a great commissioner.

National Fuel Threatens Cuomo.  (Thanks, MDN)  National Fuel Gas Company (NFG), headquartered in Western New York State, is making noises (threats) that Gov. Andrew Cuomo should be very concerned about. NFG covers the full span of the oil and gas business–from upstream (with its wholly-owned drilling subsidiary Seneca Resources), to the midstream (with wholly-owned subsidiary Empire Pipeline) to downstream (NFG’s natural gas utility service to 740,000 customers in NY and PA). It’s a big company that generates a lot of jobs and revenue for New York State. Yet NY is metaphorically crapping all over NFG–and the company is signaling its willingness to retaliate by leaving. No, not move the company HQ, or sell off its gigantic utility business. Nothing of that sort (yet, anyway). But NFG CEO Ronald Tanski said on an earnings call last Friday that NFG is “getting lousy regulatory treatment in New York State” and that “Given this type of regulatory treatment in the state, we have to take a serious look at our ability to achieve any reasonable growth in New York.” Translation: We’ll stop launching new projects that invest billions in the Empire State, and instead invest that money and the jobs it creates in PA and other states. The “lousy treatment” NFG is getting is related to NY’s corrupt Dept. of Environmental Conservation decision to deny it permits to build the Northern Access Pipeline (see NFG Calls Cuomo DEC Denial of Northern Access Pipe “Troubling”). NFG has taken the Cuomo DEC to court to try and get the DEC’s capricious pipeline decision overturned. However, the damage is now done. NFG is threatening to invest elsewhere–and we take them at their word. 

U.S. NatGas Production Up.  The US Energy Information Administration (EIA) today revised higher its outlook for US natural gas production as price gains buoy field development.

US output of dry gas, which excludes amounts lost during processing and production, should rise this year 74.1 Bcf/d (2.1bn m³/d), nearly offsetting the year-over-year decline in 2016, the EIA said today in its Short-Term Energy Outlook. Today's forecast represents an increase of 980mn cf/d, or 1.3pc from the agency's April outlook but puts US production slightly below 2015 levels of 74.14 Bcf/d.

US gas market participants are keeping a close eye on US production figures this year following the sharp rebound in prices and a subsequent increase in drilling. Spot prices at the Henry Hub so far this month have averaged $3.09/mmBtu, up by about 60pc from a year earlier. In addition, the US rig count, an indicator of where production is headed, shot last week to 877, more than double the year-earlier level of 415.

Gas production has yet to show marked increases, despite that ramp up in drilling. Dry-gas output rose in February to about 72.1 Bcf, up by 1.9pc from a January but down by 3.4pc from a year earlier, according to the most recent EIA data.

Year-over-year production growth could resume later this year as operators tap gas-rich formations such as the Permian basin in west Texas and southeastern New Mexico and the Marcellus shale in Pennsylvania and West Virginia, according to some market analysts.

The EIA said it expects Henry Hub spot prices this year to average $3.17/mmBtu, up by 26pc from the 2016 average and a 2.4pc increase from the agency's April forecast.

Antero 1st Qtr. Update.  Antero Resources Corporation released its first quarter 2017 financial and operational results. The relevant condensed consolidated financial statements are included in Antero's Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which has been filed with the Securities and Exchange Commission.

First Quarter Highlights Include:

  • Net daily gas equivalent production averaged a record 2,144 MMcfe/d (28% liquids), a 22% increase over the prior year quarter
  • This includes a record 99,119 Bbl/d of liquids production, a 45% increase over the prior year quart.
  • Liquids production contributed 32% of total product revenues, before hedging, up from 25% the prior year
  • Realized C3+ NGL price of $29.52 per barrel, 57% of average Nymex WTI price before hedging
  • Realized natural gas price of $3.35 per Mcf before hedging, a $0.03 per Mcf premium to Nymex
  • Realized natural gas equivalent price of $3.80 per Mcfe including NGLs, oil and hedges
  • GAAP net income of $268 million, or $0.85 per share, compared to a net loss of $5 million, or $(0.02) per share, in the prior year quarter
  • Adjusted net income of $56 million, or $0.18 per share, a 19% increase compared to the prior year quarter
  • Adjusted EBITDAX of $365 million, a 3% increase compared to the prior year quarter

Recent Developments

Borrowing Base Reaffirmed at $4.75 Billion

As a result of the recent spring borrowing base redetermination, the borrowing base under Antero's upstream credit facility was reaffirmed at $4.75 billion.  Lender commitments under the facility remain at $4.0 billion.  The bank syndicate, which is co-led by JPMorgan Chase Bank, N.A. and Wells Fargo, N.A., is currently comprised of 29 banks.

Natural Gas Firm Transportation Update

In February 2017, Energy Transfer Partners, L.P. ("Energy Transfer") received FERC approval to proceed with the construction of the Rover Pipeline ("Rover").  Energy Transfer has confirmed its plans to place Rover into service in the third quarter of 2017, with Phases 1 and 2 expected to come on line in July 2017 and November 2017, respectively.  Antero is an anchor shipper on Rover with an 800,000 MMBtu/d firm commitment.  The pipeline will connect Antero's Marcellus and Utica Shale assets to the Midwest and Gulf Coast via additional downstream firm transportation already in service.  The project will also enable Antero to transport natural gas both from the Seneca (via Phase 1) and Sherwood (via Phase 2) Processing Facilities, allowing for maximum optionality on its firm transportation portfolio, and further strengthens the Company's ability to deliver on its long-term production targets through 2020.

NGL Infrastructure Update

In February 2017, Sunoco Logistics Partners LP ("Sunoco") began construction on the Mariner East 2 pipeline project after receiving the necessary permits from the Pennsylvania Department of Environmental Protection.  The pipeline will transport NGLs from Southwestern Pennsylvania and Eastern Ohio to the Marcus Hook terminal and export facility near Philadelphia, Pennsylvania.  Antero is an anchor shipper on Mariner East 2 with a 61,500 barrel per day commitment (11,500 barrels of ethane, 35,000 barrels of propane and 15,000 barrels of butane).  The pipeline is expected to be placed into service in the fourth quarter of 2017.  Antero is forecasting a C3+ NGL price realization improvement once Mariner East 2 is placed into service as the Company will have the ability to export ethane, propane and butane to international markets.

Firm Processing Update

Antero Resources recently committed to plants 8 through 11 at the Sherwood Facility and they are expected to be placed into service over the next 12 to 18 months. These four 200 MMcf/d plants at the Sherwood Processing Facility, in addition to Sherwood 7, will be owned by the recently formed joint venture between Antero Midstream Partners LP (NYSE: AM) ("Antero Midstream" or the "Partnership") and MarkWest Energy Partners, L.P. ("MarkWest"), a wholly owned subsidiary of MPLX, L.P.  Plants 8 through 11 are expected to be placed into service in the third quarter of 2017, first quarter of 2018, third quarter of 2018 and fourth quarter of 2018, respectively. Plant 7 was placed into service in February of 2017.  

Marcellus Shale — Antero completed and placed on line 25 horizontal Marcellus wells during the first quarter of 2017 with an average lateral length of 8,850 feet.  All 25 wells completed in the first quarter of 2017 have been on line for more than 30 days and had an average 30-day rate on choke of 18.6 MMcfe/d while rejecting ethane (21% liquids).

Current average well costs are $0.87 million per 1,000 feet of lateral in the Marcellus, which represents a 29% reduction from 2015 and in line with the fourth quarter of 2016.  In the Marcellus, average drilling days from spud to final rig release declined to 12 days in the first quarter of 2017, a 49% reduction from 2015 and an 18% reduction from 2016.  Antero is currently operating four drilling rigs and five completion crews in the Marcellus Shale.

One notable Marcellus pad that was completed late in the fourth quarter of 2016 had 4 wells with an average lateral length of 10,017 feet, an average BTU content of 1227 and an average of 1,700 pounds of proppant per foot.  The average EUR for this pad is 2.4 Bcf/1,000 at the wellhead and 2.9 Bcfe/1,000' processed (ethane rejection).  This pad had an all-in development cost of $0.39 per Mcfe, driving attractive rates of return.

Ohio Utica Shale — Antero did not complete and place on line any wells during the quarter while managing Utica development ahead of the anticipated Rover in service date.  However, the Company drilled an average of 2,757 feet per day in its laterals while drilling and casing 13 wells during the quarter.  Antero is currently operating three drilling rigs and one completion crew in the Utica Shale.  The Company has plans to move one of these rigs to the Marcellus Shale in the second quarter of 2017.

Current average well costs are $1.01 million per 1,000 feet of lateral in the Utica, which represents a 26% reduction from 2015 and in line with the fourth quarter of 2016.  Drilling days from spud to final rig release averaged 18 days in the Utica in the first quarter of 2017.

Gulfport 1st. Qtr. Update.  Gulfport Energy on Tuesday reported first-quarter 2017 earnings of $154.5 million, on revenue of $330.0 million, Kallanish Energy reports.

That compares to a loss of $242.5 million, on revenue of $156.96 million in the year-ago quarter. Its latest quarterly adjusted net income was $53.9 million.

Production was up sharply in the first quarter, said the company, one of the biggest drillers in the Utica Shale. It reported Q1 production of 849.6 million cubic feet-equivalent per day (MMcfe/d). That is a 23% increase from the year-ago quarter.

The independent producer's realized prices were $2.68 per thousand cubic feet of natural gas, $47.52 per barrel (Bbl) of oil and $26.46 per barrel of natural gas liquids, it said. Production was 87% natural gas, 9% natural gas liquids and 4% oil-condensate.

The first quarter was “an eventful quarter for Gulfport,” said CEO and President Michael G. Moore, in a statement. The company had “yet another solid quarter operationally” in the Utica Shale and in closing on SCOOP acreage in Oklahoma, he said.

The company completed its first two SCOOP wells in the wet gas window in southern Grady County and turned the wells to sales. The company called the wells “top performers relative to offsets,” he said.

One well was producing 14.6 MMcf/d and 57 barrels per day (BPD) of oil. The other is producing 16.9 MMcf/d and 48 BPD.

In Q1 2017, Gulfport spud 26 gross (23.5 net) Utica wells with average laterals of 8,145 feet, and drilled in just under 21 days. It also spud five gross (4.2 net) SCOOP wells in the quarter.

The company plans to spud an additional 55.5 Utica wells and 13.8 SCOOP wells in 2017.

Net production in the Utica in Q1 was 750.7 MMcfe/d, up 12% over Q1 2016, the company said.

Gulfport has six rigs working in the Utica and four in the SCOOP.

It also spud three wells in in the first three months of 2017 at its West Cote Blanche Bay and Hackberry fields in southern Louisiana.

EOG 1st Qtr. Update.  EOG reported its first quarterly profit in nearly two years, $28.5 million, compared to a loss of $471.8 million in Q1 2016. It was EOG’s first profit since the second quarter of 2015.

Revenue rose to $2.6 billion from $1.4 billion.

The company also said drilling costs have been cut by 6% over the last year in the Eagle Ford in South Texas, the Delaware Basin in West Texas and New Mexico and the Bakken Shale in North Dakota.

Total first-quarter production was 51.4 million barrels of oil-equivalent (MMBOE), up from 50.0 MMBOE in Q1 2016.

“EOG continues to lead the industry in well productivity with record-setting well performance driving company crude oil volumes,” said William Thomas, company chairman and CEO, in a statement.

His company completed 33 wells in the Delaware Basin Wolfcamp play with an average lateral length of 5,600 feet and average 30-day initial production of 2,865 barrels of oil-equivalent per day (BOE/d), or 1,850 barrels (Bbl) of oil per day, plus 450 Bbl of natural gas liquids and 3.3 million cubic feet per day (MMcf/d) of natural gas.

EOG reported two Delaware Basin wells both exceeded the prior all-time industry record for 30-day initial production from Permian Basin horizontal wells. The Whirling Wind 14 Fed Com No. 701H and the Whirling Wind 11 Fed Com No. 702H produced 5,060 BOE/d (3,510 Bbl of oil), plus 700 BPD of NGLs, and 5.1 MMcf/d of natural gas. The two wells are in Lea County, N.M.

U.S. Shale Producers Outspending the World.  Flush with cash from a short-lived OPEC-led crude rally, North American producers plan to boost 2017 capital budgets by 32%, to $84 billion, according to Barclays Plc analysts, Kallanish Energy learns.

That’s bad news for OPEC and its partners in the global campaign to cut production and raise prices. Consulting/analytics firm Wood Mackenzie projects new spending will add 800,000 barrels (Bbl) of North American crude this year, equivalent to 44% of the reductions announced by the Saudi- and Russia-led group.

“The specter of American supply is real,” Roy Martin, a Wood Mackenzie research analyst in Houston, told Bloomberg. “The level of capital budget increases really surprised us.”

Drilling budgets around the world collapsed in 2016 as the worst crude market collapse in a generation erased cash flows, forcing explorers to cancel expansion projects, cut jobs and sell oil and natural gas fields to raise cash.

Oil prices that initially jumped above $55 in the weeks after the OPEC-led producer cuts were announced late in 2016, have since fallen to roughly $46/Bbl, reflecting pessimism the deal can withstand the U.S. shale onslaught.

So far, independent U.S. producers such as EOG Resources are sticking to their growth plans, Bloomberg reported. EOG, the second-largest U.S. explorer that doesn’t own refineries, plans to boost spending by 44% this year, to between $3.7 billion and $4.1 billion.

North American independents collectively are targeting $53 billion in spending this year, up from $35 billion in 2016, according to Barclays analysts led by J. David Anderson.

New Player in the Marcellus.  A Birmingham-based energy company recently acquired a large portfolio of Marcellus oil and gas wells in Pennsylvania and West Virginia.

Titan Energy - which entered the Marcellus Shale with the acquisition of Atlas Resource Partners LP' assets last year- sold roughly 8,400 conventional and Marcellus oil and gas wells to Diversified Gas & Oil PLC (AIM: DGOC) for $84.2 million. Roughly 7,300 of those are producing wells.

The deal also includes wells in Tennessee, Ohio and New York. Collectively, the production capacity of the deal consists of 30 million cubic feet per day of mostly natural gas liquids.

"The proposed transaction highlights the strength of our business model in that we are able to acquire complementary assets in a proven, stable and low-risk environment at compelling valuation metrics," Diversified CEO Rusty Hutson said in a release. "This transformational deal for DGO will materially increase the scale of our portfolio within the Appalachian Basin, taking up further acreage in the states of Ohio and Pennsylvania and entering southern New York and northeast Tennessee.

Diversified was founded by Huston in 2006 after acquiring Diversified Resources, Inc. in West Virginia.

Marathon Invests in the Permian.   Marathon Oil reported a first-quarter 2017 net loss from continuing operations of $50 million, as it exited the Canadian tar sands and invested in the Permian Basin, Kallanish Energy reports.

It is raising 2017 production guidance based on strong operational results, the company said.

The company said its Canadian oil sands business is now reflected as discontinued operations. The net loss of $4.96 billion includes certain items not usually included in analysts' earnings estimates. The adjusted net loss was $57 million.

"We're off to a strong start in 2017, highlighted by our transformative portfolio moves to enter the Northern Delaware Basin and exit the Canadian oil sands," said Marathon Oil president and CEO Lee Tillman, in a statement.

"With solid operational execution and strong well results in the first quarter, we held production flat sequentially in the resource plays, and are well positioned to resume high-return production growth there in the second quarter. We're on track to deliver our 2017 capital program, having ramped up resource play activity from 12 to 20 rigs in the first quarter. We've also raised production guidance to reflect our Northern Delaware acquisitions,” he added.

North American production averaged 208,000 net barrels of oil-equivalent per day (BOE/d), flat sequentially on a divestiture-adjusted basis and above the top end of the company's guidance. That is down 4% from Q1 2016.

It is raising 2017 resource play exit rate to 20% to 25%. It also reported success in well spacing tests in Oklahoma's STACK play.

Overall, the company reported the average daily production including Libya was 338,000 net BOE.

The company reported its Eagle Ford Shale production in South Texas was up 5% from Q4 2016. It brought 47 wells to sales in the quarter.

It plans to add three rigs in Oklahoma's STACK play and to increase the rigs working 91,000 acres in the Northern Delaware that closed on May 1, from one to three by mid-year.

LNG to China.  The US and China have reached a 10-point trade deal that opens the Chinese market to US credit rating agencies and credit card companies.  Under a the deal, China will also lift its ban on US beef imports and accept US shipments of liquefied natural gas.

US Commerce Secretary Wilbur Ross said the deal should reduce China's trade surplus with the US by the end of 2017.

The information on this deal happened yesterday morning.  Details will probably becoming for weeks.  What’s important is that the market for LNG is now open in China.  It will be interesting to see the projected LNG sales to China.

Eclipse’s 19,300 foot lateral.  It took Eclipse Resources only 17 days to drill what is reportedly North American longest lateral.

The Great Scott 3H in Ohio's Utica Shale stretches 27,400 feet from the surface to endpoint with a lateral measuring 19,300 feet. That is roughly 1,000 feet longer that the company's Purple Hayes well that previously was No. 1 in lateral length.

Both are part of the company's Super Lateral program.

The Pennsylvania-based company also last week reported first-quarter 2017 net income of $26.8 million, compared to a Q1 2016 loss of $45.53 million.

Revenue more than doubled to $101.9 million, compared to $49.6 million in Q1 2016.

Chairman, president and CEO Benjamin Hurlburt said the company had “another tremendous quarter.”

It reported average net daily production of 290.0 million cubic feet-equivalent per day (MMcfe/d). Total production was 26.10 billion cubic feet-equivalent (Bcfe), up from 18.30 Bcfe in the year-ago quarter, the company said.

Its average realized prices were $3.17 per thousand cubic feet of natural gas, $46.13 per barrel of oil and $25.66 per barrel of natural gas liquids.

Second-quarter production may dip because the company is beginning trials on its new completion design techniques, officials said. Eclipse added a second rig in the condensate area of Ohio's Utica Shale in Q1.

The company spent $78.7 million on capital projects in the latest quarter. It drilled four (3.5 net) operated wells, all in the Utica Shale's dry gas area, completed seven gross (seven net) wells and turned five (4.7 net) wells to sales.

The company also reported it has revised upward its estimated ultimate recovery data by 13%, based on a new Utica production curve analysis.

Carrizo 1st Qtr. Update.  Carrizo reported first quarter of 2017 net income of $40.0 million, or $0.61 per basic and diluted share compared to a net loss of $311.4 million, or $5.34 per basic and diluted share in the first quarter of 2016. The net income for the first quarter of 2017 and net loss for the first quarter of 2016 include certain items typically excluded from published estimates by the investment community. Adjusted net income, which excludes the impact of these items as described in the non-GAAP reconciliation tables included below, for the first quarter of 2017, was $12.1 million, or $0.18 per diluted share compared to $9.2 million or $0.16 per diluted share in the first quarter of 2016.

For the first quarter of 2017, Adjusted EBITDA was $94.2 million, an increase of 2% from the prior year quarter due to higher production volumes and commodity prices, partially offset by lower cash receipts for derivative settlements. Adjusted EBITDA and the reconciliation to net income (loss) are presented in the non-GAAP reconciliation tables included below.

Production volumes during the first quarter of 2017 were 4,173 MBoe, or 46,367 Boe/d, an increase of 10% versus the first quarter of 2016. The year-over-year production growth was driven by continued performance from the Company's Eagle Ford Shale and Delaware Basin drilling activity, the addition of production from the Sanchez property acquisition in late 2016, and an increase in Marcellus Shale production given improved netbacks. Oil production during the first quarter of 2017 averaged 28,844 Bbls/d, an increase of 12% versus the first quarter of 2016; natural gas and NGL production averaged 78,088 Mcf/d and 4,508 Bbls/d, respectively, during the first quarter of 2017. First quarter of 2017 production exceeded the high end of Company guidance due primarily to stronger-than-expected production from the Company's Niobrara Formation and Delaware Basin assets.

Drilling and completion capital expenditures for the first quarter of 2017 were $128.2 million. More than 85% of the first quarter drilling and completion spending was in the Eagle Ford Shale, with the balance weighted towards the Delaware Basin and Niobrara Formation. Land and seismic expenditures during the quarter were $14.5 million. As a result of the improvement in commodity prices earlier this year, Carrizo has seen a material increase in planned non-operated activity on its acreage in the Niobrara Formation and Delaware Basin. Given this, the Company has increased its planned non-operated budget by approximately $30 million. Carrizo expects to offset this incremental capital through efficiency gains realized since the beginning of the year as well as a slight reduction in planned completion activity in the Eagle Ford Shale during the year. As a result, the Company is maintaining its 2017 drilling and completion capital expenditure guidance of $530-$550 million. The Company is increasing its land and seismic capital expenditure guidance to $45 million for the year from $20 million previously.

Carrizo Pulls Out of the Marcellus.  Carrizo Oil and Gas is preparing to sell off its Appalachian Basin assets, Kallanish Energy reports.

That plan was revealed during an earnings call earlier this week by CEO S.P. “Chip” Johnson with analysts and the media. Quarterly reports filed by the company made no mention of possible sales.

On the call, Johnson said, “We have elected to test the market for our Appalachian assets, as they do not currently compete for capital with our three core oily plays. Monetization of these assets would leave Carrizo with a core position in three high-return, oil-weighted plays and should enhance our long-term production growth profile.”

The company is focusing on the Eagle Ford Shale in Texas, the Permian's Delaware Basin in West Texas and New Mexico and the Niobrara in Colorado.

It has not drilled in the Appalachian Basin since mid-2015.

Carrizo has roughly 25,900 acres in the Utica Shale in Ohio and about 16,000 Marcellus Shale acres in Pennsylvania, West Virginia and New York.

Rover Problems in OH.  U.S. natural gas futures surged after federal regulators limited construction on a pipeline, a move that may delay new Appalachian supplies from reaching the market.

Energy Transfer Partners LP is barred from new drilling along some segments of its $4.2 billion Rover pipeline, the Federal Energy Regulatory Commission said in an order posted Wednesday. The move follows a request by Ohio regulators to review spills of drilling fluid and other environmental violations related to construction of the line. Ohio has fined Energy Transfer $431,000 for those violations.

Construction is being closely watched as Rover has the potential to unlock a new wave of supply from the largest U.S. gas producing region. The Marcellus, which saw a slowdown in drilling after prices fell to a record low last year, is displacing traditional supplies out of the Gulf Coast and putting the U.S. on track to become a net gas exporter in 2018 for the first time in decades.

“The market is really focused on the Rover expansion and the market took the order that came out earlier today in a very bullish way,” Kyle Cooper, director of research at IAF Advisors in Houston, said in a phone interview. “Reading the order, it looks like FERC is going to be in their business a lot. At a minimum it’s really going to slow down the progress.”

The order could delay the project timeline by 30 to 90 days, he said.

Permian Pipelines Will Handle Increases.  New and expanded pipelines should be able to handle the expected increase in Permian Basin crude oil production without creating pricing problems, according to the Energy Information Administration.

A lack of infrastructure between West Texas/New Mexico and Gulf Coast refineries had previously caused crude oil at Midland, Texas, to sell at a $15 discount per barrel compared to crude oil moving through pipelines to Cushing, Okla., Kallanish Energy reports.

Those discounts have shrunk as new and expanded pipelines are providing nearly equal pricing, the EIA said.

That price differential between Midland and Cushing had shrunk to 18 cents a barrel in 2015, and 7 cents a barrel in 2016, as new pipelines came online to deliver Permian crude to the Gulf Coast, the EIA said.

It has jumped recently to $1 a barrel, but that is not seen as a major problem, the federal agency said.

Pipelines, including Magellan’s BridgeTex Pipeline, Sunoco Logistics’ Permian Express and Plains All American’s Cactus pipelines are being expanded to add 340,000 barrels per day (BPD) of capacity.

Enterprise Products Partners is building a new Midland-to-Houston pipeline with capacity of 450,000 BPD. Other pipeline projects in the Gulf Coast will allow Permian crude to be shipped to Corpus Christi and Houston, plus St. James, La. Additional Permian pipeline projects are on the drawing board.

Crude oil production in the Permian Basin in West Texas/New Mexico has grown from 886,430 BPD in early 2010, to nearly 1.5 million barrels per day (MMBPD) in 2014 and that volume is expected to grow even more.

Oil production in April 2017 is estimated at 2.3 MMBPD, or nearly 300,000 BPD more than April 2016, EIA said. According to the agency, there are 310 oil-directed rigs in the Permian Basin, 158 more than this time last year.

Methane Flaring Rule to Remain in Place.  By a 51-49 vote, the U.S. Senate voted to keep a methane flaring rule from former President Obama’s administration, Kallanish Energy reports.

Republicans failed to muster enough votes to kill the rules under the Congressional Review Act. Sens. John McCain of Arizona and Lindsey Graham of South Carolina, both Republicans, voted to keep the rules that have been strongly opposed by the energy industry.

The House passed its resolution of disapproval last February.

The rule on flaring or burning methane affects drilling on public lands, mostly in the West. Under the rule, such gas must be captured and sold rather than flared.

The Bureau of Land Management rule adopted last November seeks to curb greenhouse gas emissions from oil and gas flaring, venting and leakage on public and tribal lands.

A lawsuit against the rules by industry groups and Western states is pending in U.S. District Court in Wyoming.

McCain and Graham are dumb and dumber.  

Rex 1st. Qtr. Update.  Rex Energy reported first quarter 2017 net income attributable to stockholders of $2.1 million, compared to a loss of $62.2 million in the year-earlier quarter, Kallanish Energy reports.

Adjusted net loss for the quarter was $5.5 million, which compares to a loss of $12.7 million in Q1 2016.

Operating revenue in Q1 was $52.1 million, up 103% from a year earlier, said the company, which is active in the Marcellus and Utica shales.

Commodity revenue was $48.6 million in the quarter, an increase of 25%, it said. Revenue from natural gas liquids and condensate represented 38% of the company’s commodity income in the quarter, Rex Energy said.

The company paid 30% higher transportation costs for shipping natural gas to the Gulf Coast in Q1, but that provided more income, the company said.

Production in Q1 was 173.4 million cubic feet-equivalent per day (MMcfe/d). That includes 110.1 million cubic feet

(MMcf) of natural gas per day, plus 4,700 barrels per day (BPD) of natural gas liquids, 5,000 BPD of ethane, and 800 BPD of condensate.

The company’s realized prices were $3.04 per thousand cubic feet of natural gas, $25.19/Bbl of natural gas liquids, $9.72/Bbl of ethane, and $46.14/Bbl of condensate.

The company spent about $25.5 million on capital projects in Q1 2017. That funded drilling seven gross (3.3 net) wells and hydrofracture stimulation of four 4 gross (1.4 net) wells in the Appalachian Basin.

Rex is an active driller in Butler County in western Pennsylvania and in Carroll County in eastern Ohio.

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Rig Count 

  • Baker Hughes Rig Count the week of May 12, 2017
  • PA     
    • Marcellus 33 unchanged
  • Ohio 
    • Utica 23 up 1
  • WV 
    • Marcellus 11 unchanged
  • TX
    • Eagle Ford 83 unchanged
  • TX & NM
    • Permian Basin – 357 up 8
  • ND
    • Williston – 44 up 1
  • CO
    • Niobrara – 25 unchanged
  • TOTAL U.S. Land Rig Count 860 up 7

PA Permits May 4, to May 11, 2017

     County               Township           E&P Companies

1.    Elk                      Jones                 Seneca
2.    Greene                Center                Consol
3.    Greene                Center                Consol
4.    Greene                Center                Consol
5.    Greene                Center                Rice
6.    Greene                Center                Rice
7.    Greene                Center                Rice
8.    Washington          Carroll                EQT
9.    Washington          Somerset           Range
10.  Washington          Somerset           Range
11.  Washington          Somerset           Range

OH Permits for week May 6, 2017

      County               Township            E&P Companies

1.    Belmont                Mead                  Gulfport
2.    Belmont                Mead                  Gulfport
3.    Belmont                Mead                  Gulfport
4.    Belmont                Mead                  Gulfport
5.    Belmont                Mead                  Gulfport
6.    Belmont                Mead                  Gulfport
7.    Monroe                Perry                    EM Energy
8.    Monroe                Perry                    EM Energy
9.    Monroe                Perry                    EM Energy
10.  Monroe                Perry                    EM Energy
11.  Monroe                Malaga                  Antero
12.  Monroe                Switzerland           Consol
13.  Monroe                Switzerland           Consol
14.  Monroe                Switzerland           Consol

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement