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NewsLetters

Expo/Industry events for the next few months

 
DUG Eagle Ford
August 29-31, 2017
San Antonio, TX
https://www.hartenergyconferences.com/dug-eagle-ford 
 
Shale Insight
September 27-28, 2017
David Lawrence Center
Pittsburgh, PA
http://shaleinsight.com/ 
 
Utica Summit
October 11, 2017
Walsh University
North Canton, OH
http://www.uticasummit.com/  
 
Midstream PA 2017
October 19, 2017
Penn Stater Conference Center
State College, PA
http://midstreampa.com/ 
 
For other events visit
http://www.shaledirectories.com/site/oil-and-gas-expo-information.html

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

The Shale Is Now About “Manufracturing.”  As many of you know, I’m a CNBC junkie.  I have it on all the time when I’m in my office.  Dennis Gartman, the editor and publisher of the Gartman Letter, was on last week and used the term “manufracturing” when discussing the shale plays.
 
Gartman used the term in describing where the oil and gas industry is in terms of driving down the cost of fracking.  He stated the oil and gas industry has complete command of the fracking process and is now in the process of driving down costs.  
 
As many of you who read our Facts & Rumors newsletter, know Eclipse Resources is drilling 19,000 feet laterals.  That’s over three miles.  The length of the laterals and the increased number of fracking stages is finding new techniques to extricate the oil and NatGas from the shale wells.
 
Jim Cramer also of CNBC fame has stated the E&P Companies in West Texas have driven down their breakeven points to $33 to $38 a barrel.
 
The continuous manfracturing improvements will drive the costs of recovery even lower.  I have made the statement that the U.S. will control the global price of oil and gas industry.  Experts in the oil and NatGas industry have told me that the U.S. will influence the price.  I believe that ultimately maybe five years we’ll control the price.
 
Halliburton Comments Drilling Ramp Up.  
 
Halliburton’s comments are quite interesting from a couple of perspectives.  It says that shale drilling should ease in 2018.  This is contrary to everything I have heard about drilling in 2018.  The current year 2017 is seen as ramp up to 2018.  
 
I like what Halliburton has to say about the 1000 rig count.  The current land rig count from Baker Hughes as of June 7 is 927. It should  not be too much of stretch to hit 1000 rigs this year.
 
What Halliburton failed to discuss in this interview the labor supply.  Where will the workers come from?  The labor shortage is the one major factor that could slow drilling.  
 
The ongoing ramp up in U.S. shale drilling should ease in 2018 because the oilfield services sector cannot maintain the pace, Halliburton's business development head said Tuesday.
 
Halliburton's Mark Richard, senior vice president for Global Business Development and Marketing, sees the rig count rising above 1,000 by the end of the year, but not beyond that number.
 
"I think it might level off then. If our customers put too much out there, it's costing too much and putting too much demand on service companies to provide equipment and people," he told Reuters at the World Petroleum Congress in Istanbul.
 
Oilfield services (OFS) companies slashed personnel and cut back operations in general dramatically when demand for their services and products plunged when oil prices started falling in 2014. It has taken OFS companies longer to readjust their output.
 
Richard said he sees 800-900 rigs as a more sustainable level in the medium term, Kallanish Energy learns.
 
The increase in shale activity has been a boon for companies like Halliburton, and Richard said his company’s been able to raise prices in the U.S. because of rising demand, but declined to give Reuters details.
 
However, the need for OFS is still weak outside the Americas, Richard said.
 
"We've hit the bottom in the first half of this year. Our customers are getting excited about things but we don't yet see a lot of activity increasing," he told Reuters.
 
TX Drilling Permits Double in June.  Original drilling permits in Texas increased from 656 in June 2016, to 1,305 in June 2017, according to the Texas Railroad Commission.
 
The agency that oversees drilling in Texas said the June total includes 1,131 permits to drill new oil or gas wells, 11 to re-enter plugged well bores and 163 for re-completions of existing wells.
 
The June breakdown is 330 oil; 70, gas; 817 oil or gas; 70, injection; two, service and 16, other permits, Kallanish Energy has learned.
 
In June 2017, the commission processed 510 oil, 96 gas, 43 injection and zero other well completions. That compares to 700 oil, 165 gas, 31 injection and four other completions in June 2016.
 
Total well completions in 2017 are 3,872, down from 6,429 in the same period in 2016,  the commission said.
 
According to well services company Baker Hughes, Texas had 463 drilling rigs at work, as of July 7. 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 588 permits. No. 2 was the San Antonio area with 137 and the Refugio area was third, with 120.
 
The top areas for oil well completions were the Midland area with 234, the San Antonio Area with 87 and the Refugio Area with 69.
 
The top areas for natural gas completions were San Antonio with 34. Second was the Midland area with 15 and third was the Refugio area with 14.
 
Texas is the No. 1 drilling state in the U.S.
 
Shell’s Pay a Bit More for Easements.  Bit by bit, piece by piece, Shell is getting landowners in Beaver County, PA to sign easements for its 94-mile Falcon Ethane Pipeline–a pipeline with two “legs” that will feed Shell’s mighty ethane cracker plant. MDN exclusively broke the news in February 2016 that Shell had begun to sign leases with landowners for the pipeline . More easements signed in January, and again in May. However, it was not until last month, June that we learned what money Shell is paying out for those easements. The numbers for leasing 3,138 feet of space for the pipeline in Greene Township worked out to be roughly $75 per foot which is far higher than any other rate we’ve seen for pipeline easements–ever. We now have another recorded easement from Shell for the ethane pipeline in Beaver County. This one is a bit more modest: $43 per foot. That’s still a lot more than the typical pipeline easement, but quite a bit less than the previous deal. Bear in mind this is only the second time we’ve spotted actual numbers, so we have no way of knowing what the average price is that Shell has been paying…
 
Russians Backing Anti-Fracking Groups.  The article below from the Marcellus Shale draws attention to what many of us in the industry have known.  The Russians are not limiting its anti-fracking funding to groups in America.  They are also doing it in Europe.  The Russians are desperate to keep the price of oil and NatGas as high as possible.
 
Why isn’t the media as outraged about this Russian meddling as they are about the election meddling where there is no evidence. 
 
Whispers of Russian interference in American affairs just won’t go away. And it’s not just the alleged interference you’re probably thinking of that’s in the news again.
 
U.S. House Science, Space, and Technology Committee Chairman Lamar Smith (R-Texas) and Energy Subcommittee Chairman Randy Weber (R-Texas) sent a letter Friday to the Trump administration asking for a probe into whether Russia is bankrolling U.S. anti-fracking groups in an effort to sway public opinion against the U.S. shale industry and strengthen Russia’s global market share. Rep. Smith states bluntly in the letter,
 
“If you connect the dots, it is clear that Russia is funding U.S. environmental groups in an effort to suppress our domestic oil and gas industry, specifically hydraulic fracking.”
 
The Congressmen allege state-sponsored Russian entities have used a shell company to funnel “tens of millions of dollars” of Russian money to radical environmental groups such as the Sierra Club, League of Conservation Voters and Natural Resources Defense Council. Rumors of such meddling have circulated for years, and they gained considerable legitimacy when private speeches by Hillary Clinton and a U.S. intelligence report — made public in October and January, respectively — made direct reference to Russian efforts to undermine U.S. shale (more on that in a bit).
 
Specifically, Smith states in the letter that Russia has “established an elaborate scheme” that funnels funds through Bermuda-based shell company Klein Ltd., whose founding members have deep ties to both Russia and the energy industry. The letter notes that multiple reports show this money is then funneled to U.S.-based nonprofit Sea Change Foundation, which subsequently funnels it to U.S. NGO’s, such as the Sierra Club, to “execute a political agenda driven by Russian entities,” according to the letter. The letter alleges $23 million of such funding has been passed from Klein Ltd. to Sea Change in an effort to fight U.S. fracking, a figure that was first reported in 2015 by Business Insider. 
 
“According to Sea Change’s IRS Form 990, Klein contributed $23 million to Sea Change in 2010 and 2011 amounting to 49% of total contributions that Sea Change received in that time period.
 
“This money appears to move in the form of anonymous donations. Sea Change then passes the money originating in Russia to various U.S. 501 organizations such as the Sierra Club, League of Conservation Voters Education Fund, and others. These funds are dispersed as grants that will be used to execute a political agenda driven by Russian entities. The purpose of this circuitous exchange of foreign funds is to shield the source of the money.
 
“Klein is a Bermuda-based corporation apparently established to act only as a pass through for foreign funds. Klein, according to reports, was formed in March 2011, by two attorneys of a Bermuda based law firm, Wakefield Quin. The firm provides a number of services, including those necessary to facilitate the operations of a shell company like Klein.”
 
Pipeline Battle Heats Up in NY.  A battle between the U.S. natural gas industry and the state of New York spilled into court last Friday over what the industry argues is a misappropriation of state authority to block pipeline development.
 
A number of national industry groups filed a brief in the U.S. Court of Appeals for the Second Circuit, supporting a lawsuit filed against New York State by National Fuel Gas Supply and Empire Pipeline over denial of the Northern Access Pipeline project.
 
The primary groups in the Friday amicus brief included the American Petroleum Institute, the American Gas Association, the Interstate Natural Gas Association of America, and the Natural Gas Supply Association, the Washington Examiner newspaper reported.
 
The groups argue New York overstepped its authority by using its permitting powers over water resources to block the pipeline's construction. They argued it’s the Federal Energy Regulatory Commission that has primary siting authority over interstate pipelines, and that the state's water permit denial is irrelevant.
 
Dena Wiggins, president and CEO of the Natural Gas Supply Association, said this is the most recent time the state has used its water certification authority to delay a project that is "far outside of the state's purview."
 
She said the action "undermines the careful balance between federal and state roles in reviewing pipelines" as outlined by Congress in the Natural Gas Act, the Examiner reported.
 
Environmental groups see the pipelines as supporting natural gas in nearby Pennsylvania, thereby benefitting the growth of the fossil fuel industry.
 
The D.C. Circuit Court of Appeals had denied a pipeline company standing last month in a case alleging the New York environmental agency was dragging its feet in issuing permits to hinder pipeline development in the state. But the D.C. Circuit ruling could favor the industry in the industry's latest challenge.
 
"Although the D.C. Circuit held that it did not have jurisdiction to find that the department waived its Section 401 (of the Clean Water Act) rights, the court made clear that the Federal Energy Regulatory Commission does have that power and should exercise it in circumstances like these," Catherine Stetson, an attorney for the company in the lawsuit, told Law 360 in June.
 
JKLM to Drill 12 Wells.  It’s been a while since we’ve updated you on a little-known (but rapidly becoming better known) company called JKLM Energy. In May 2016, the last time we wrote about JKLM, we told you the company had successfully drilled and was flowing gas from Potter County, PA’s first Utica Shale well (see Potter County, PA’s First Utica Well Fracked & Flowing). JKLM is owned by Terry Pegula, the guy who sold most of his Marcellus assets and used the money to buy the Buffalo Bills football team (see Buffalo Bills Stay in Buffalo, Thanks to $1.4B of Marcellus Money and Buffalo “Marcellus” Bills – Team Sold to Fracker for $1.4B). Pegula’s former company is East Resources. JKLM is Pegula’s way of keeping his finger in the Marcellus/Utica pie. So what’s the latest? According to a brief article we spotted, JKLM “continues to move forward with an ambitious plan” to drill a dozen Utica wells in Potter County this year…
 
Rover Update.  MDN brought you the news that Energy Transfer is changing some of its previously planned underground horizontal directional drilling (HDD) to trenching in order to keep the 711-mile Rover Pipeline project that will run from PA, WV and eastern OH through OH into Michigan and eventually into Canada, on schedule (see Rover Pipeline Converts Some Horizontal Drilling to Trenches Instead). Phase I of the project is the section from eastern Ohio, Pennsylvania and West Virginia to the Midwest Hub in Defiance, OH, via what is called Rover’s “Mainline A” segment. That entire segment was supposed to be completed this month–July 2017. Ain’t gonna happen. However, Energy Transfer says a significant portion of Phase I–from Cadiz, OH to Defiance, OH–will be completed this month. That’s a pretty big portion of the Phase I project–essentially spanning the state from eastern OH to northwestern OH. If ET can pull it off, it will be an impressive feat, given delays imposed by the Federal Energy Regulatory Commission…
 
XTO – Summit Midstream Deal in the Permian.  Summit Midstream Partners said Friday it’s signed a deal with ExxonMobil unit XTO Energy to develop/own/operate a natural gas gathering and processing system servicing acreage located in the northern Delaware Basin, in New Mexico’s Eddy and Lea counties.  
 
Summit will initially construct a gathering and processing system with high- and low-pressure gathering and discharge pipelines, two compressor stations and a cryogenic gas-processing plant with 60 million cubic feet per day (MMcf/d) of processing capacity. The Phase One price is $110 million, Kallanish Energy learns.
 
"This greenfield development project establishes Summit as a key midstream service provider in the Delaware Basin, one of the most active, economic and exciting plays in North America,” said Steve Newby, president and CEO of The Woodlands, Texas-based Summit.
 
Summit's complex will have the ability to be expanded to over 600 MMcf/d of processing capacity, as warranted, to meet customer needs.  Summit expects to process production from XTO and other nearby producers.
 
The initial phase of the project is expected to be operational on or before June 1, 2018.
 
Future Oil and Electricity Shortages.  Global investment in energy fell for a second straight year in 2016, and the International Energy Agency is warning about future shortages of oil and electricity.
 
Energy companies and investors last year put $1.7 trillion into fossil fuel exploration, new power plants, upgrades to the power grid, all ways to energize the world, IEA reported Tuesday. That figure is down 12% from 2015, IEA said in its annual World Energy Investment report.
 
The drop primarily was due to falling oil and gas spending during the second full year of the crude price plunge, as well as falling investment in power generation, particularly in coal plants.
 
“Our analysis shows that smart investment decisions are more critical than ever for maintaining energy security and meeting environmental goals,” said Fatih Birol, IEA’s executive director. “As the oil and gas industry refocuses on shorter-cycle projects, the need for policymakers to keep an eye on the long-term adequacy of supply is more important. Even with ambitious climate-mitigation goals, current investment activity in oil and gas will have to rise from its current slump.”  
 
"Falling investment points to a risk of market tightness and under capacity at some point down the line," according to IEA.
 
Investment in oil and gas exploration and production fell by 26%, to $650 billion last year, Kallanish Energy understands. Falling costs in the industry account for most of the decline, but IEA warns a drop in drilling activity also played a major role.
 
That's a problem because oil companies need to continually drill new wells to replace declining production from existing wells. The drop in new production threatens to leave the world with too little oil to meet demand, which has historically pushed up oil prices.
 
"The recent spectacular decline in upstream oil and gas investment raises major concerns about the prospects for the adequacy of supply in the years to come," IEA said.
 
IEA expects an uptick in production from U.S. shale formations, but IEA warns growth in shale oil output won't be enough to offset declining output from conventional oilfields, which provide the bulk of the world's supply.
 
Oil companies made final investment decisions on about 50 conventional oil projects in 2016, down 70% from 2013. Discoveries of conventional oil fell to 2.4 billion barrels, 50% of the level of 2015, when drillers made the fewest new discoveries since 1952.
 
Global electricity investment was nearly flat at $718 billion, with growing network spending mostly offset by fewer coal-power additions, IEA reported. Investment in renewable-based power capacity, the largest area of electricity spending, fell 3%, to $297 billion. While renewable investment is also 3% lower compared with five years ago, it will generate 35% more power thanks to cost declines and technology improvements in solar PV and wind.
 
Crude Production Record in 2018?  The Energy Information Administration forecasts total U.S. crude oil production to average 9.3 million barrels per day (MMBPD) in 2017, up 0.5 MMBPD from 2016.
 
In 2018, crude oil production is forecast to rise to an average 9.9 MMBPD. If achieved, forecast 2018 production would be the highest on record, surpassing the previous record of 9.6 MMBPD set in 1970.
 
The 2018 forecast is 0.1 MMBPD lower than in last month’s Short-Term Energy Outlook (STEO) because of lower forecast crude oil prices in late 2017 and in 2018, Kallanish Energy finds.
 
U.S. crude oil production is forecast to reach 10.1 MMBPD in December 2018, which would be 0.9 MMBPD higher than the June 2017 level, and a 1.4 MMBPD increase since the end of 2016.
 
Increased production from tight rock formations in the Permian Basin and Eagle Ford play in Texas, and the Bakken formation in North Dakota accounts for 1.1 MMBPD of the projected 1.4 MMBPD of crude oil production growth from the end of 2016 through the end of 2018.
 
Most of the remaining 0.3 MMBPD increase is expected to come from the Federal Gulf of Mexico, as seven new projects are expected to come online by the end of 2018.
 
The Permian is expected to produce 2.9 MMBPD of crude by the end of 2018, which is roughly a 0.5 MMBPD increase from estimated June 2017 levels, and would represent roughly 30% of total U.S. crude oil production in 2018.
 
The Eagle Ford is expected to produce an average of 1.3 MMBPD in both 2017 and 2018, up from 1.2 MMBPD in late 2016.
 
The Bakken region is expected to produce an average 1.1 MMBPD in 2017 and 2018, slightly lower than the 1.2 MMBPD produced in 2015.
 
Bakken production has been generally decreasing since early 2015, but recent drilling activity suggests this has already begun to turn around.
 
MPLX Complete Utica Projects.  MPLX last week announced its Utica Build-Out projects, including a new 49-mile oil pipeline in western Ohio, are fully operational, Kallanish Energy reports.
 
The new pipeline runs from Harpster to Lima and is moving condensate and natural gasoline from the Utica Shale in eastern Ohio.
 
The liquids will be moved in batches via the 12-inch line to a refinery and tank farm at Lima, where the liquids can then be moved to refineries in Ohio, Michigan, Indiana and Illinois.
 
It is part of a $1 million project to move Utica/Marcellus Shale liquids across the Midwest.
 
The company is now planning to move diluent to western Canada where it will be used to dilute Canadian tar sands to be moved via pipelines. That project is scheduled to be completed this year.
 
MPLX has also expanded capacity on two Ohio product pipelines: the 81-mile line from East Sparta to Heath and the 67-mile-long line from Heath to Harpster. All three lines have a capacity of 50,000 barrels per day (BPD). Marathon Pipe Line, a MPLX subsidiary, will operate the pipelines.
 
Last December, MPLX reversed the 8-inch RIO pipeline to boost distribution to Midwest refineries from Lima, Ohio.
 
“The Utica Build-Out projects are part of MPLX’s commitment to provide cost-effective industry solutions through expansion of existing pipelines and construction of new pipelines to meet the needs of Utica and Marcellus shale producers,” said MPLX president Michael Hannigan, in a statement.
 
Marathon Pipeline and MPLX are both subsidiaries of Ohio-based Marathon Petroleum.
 
Federal Lands Will Be Opening to Drilling Faster.  U.S. Interior Secretary Ryan Zinke last week signed a departmental order to hold more lease sales and speed up permitting for energy exploration on federal lands, Kallanish Energy reports.
 
He said the federal government has become too slow in facilitating oil and gas development on federal lands and he wants to eliminate backlogs and delays. He also wants to improve access to federal lands for additional mineral development.
 
“The Department of the Interior will be a better neighbor in the new Trump administration,” Zinke said, in a statement.
 
Industry groups were pleased at Zinke’s announcement, while environmental groups were upset.
 
The federal government must streamline its processes in order to help produce more domestic energy and to allow the federal government to get more royalty revenue from drilling, he said.
 
Last year, Interior canceled or postponed 11 lease sales. 2016 was the second lowest amount of federal acreage that was leased in the last 20 years. The lowest year was 2011.
 
In the first six months of 2017, the Trump administration has held more lease sales than the previous year, offered more acreage in those sales and raised more revenue than in the same time period last year.
 
As of Jan. 31, 2017, the federal Bureau of Land Management (BLM) had 2,802 drilling applications that were pending. The average time to process such permits in fiscal year 2016 was 257 days, despite the fact the law calls for a 30-day review.
 
The BLM field offices with the most applications pending were Casper, Wyo., 526; Vernal, Utah, 506; Dickinson, N.D., 488; Carlsbad/Hobbs, N.M., 388; and Farmington, N.M., 152. Each application must include a $9,610 processing fee to the BLM.
 
Zinke said additional staffing for BLM was possible to correct the problems.
 
Zinke’s orders are part of a broader effort by the Trump administration to boost fossil fuel production on federal lands, especially in the West.
 
Halcon Sells Williston Assets.  Halcon Resources announced  it's selling its operated assets in the Williston Basin in North Dakota $1.4 billion, Kallanish Energy learns.
 
The deal will allow Houston-based Halcon to focus on the Delaware Basin in West Texas and New Mexico, officials said.
 
The buyer is an affiliate of Houston-based Bruin E&P, a portfolio company of Arclight Capital Partners.
 
The deal covers 104,000 net acres in North Dakota's McKenzie, Williams, Mountrail and Dunn counties. The assets currently produce about 29,000 barrels of oil-equivalent per day (BOE/d).
 
“The sale of our Williston Basin operated assets transforms Halcon into a single-basin company focused on the Delaware Basin, where we have more than 41,000 net acres in Ward and Pecos counties representing decades of highly economic drilling inventory,” said Halcon chairman, CEO and president Floyd Wilson, in a statement.
 
Cash from the deal will provide Halcon with “a strong balance sheet and liquidity to execute our growth plans,” he said.
 
The deal is dated June 1 and is expected to close within 60 days.
 
Halcon’s current production in West Texas is about 7,5000 BOE/d. It plans to operate two rigs in the Delaware Basin for the remainder of 2017, and to exit 2017 with production in excess of 13,000 BOE/d.
 
Oasis Quadrupling NatGas Processing in the Bakken.  Oasis Midstream has proposed more than quadrupling the natural gas processing capacity in the Bakken play in northwestern North Dakota.
 
The Bismarck (N.D.) Tribune newspaper reported Oasis wants to spend $140 million to expand the Wild Basin Gas Plant in McKenzie County to make it the largest natural gas processing plant in the state.
 
The plant currently processes roughly 80 million cubic feet per day (MMcf/d) of natural gas, Kallanish Energy finds. The expansion would add a new complex next to the existing plant, which would allow the plant to process an additional 265 MMcf/d.
 
The North Dakota Public Service Commission will hold a public hearing on the proposal on Friday.
 
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Rig Count 

 
  • Baker Hughes Rig Count the week of July 14, 2017
     
  • PA
    • Marcellus 34 unchanged
  • Ohio 
    • Utica 27 unchanged
  • WV 
    • Marcellus 13 unchanged
  • TX
    • Eagle Ford 80 down 4
  • TX
    • Permian Basin – 373 up 4
  • ND
    • Williston – 53 up 1
  • CO
    • Niobrara – 29 up 2
       
  • TOTAL U.S. Land Rig Count 928 up 1
 
PA Permits July 6, to July 13 2017
 
    County              Township      E&P Companies
 
1.  Greene             Center           EQT
2.  Greene             Center           EQT
3.  Greene             Center           EQT
4.  Greene             Center           EQT
5.  Washington       Hanover       Range
6.  Washington       Hanover       Range
7.  Washington       Robinson     Range
8.  Washington       Robinson     Range
9.  Washington       Robinson     Range
10. Washington      Robinson     Range
 
OH Permits for week July 8, 2017
   
     County     Township      E&P Companies
 
1. Belmont     Somerset     Gulfport
2. Belmont     Somerset     Gulfport
 
Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149
Utica Summit