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Expo/Industry events for the next few months

Utica Midstream
April 4, 2018
Walsh University
North Canton, OH

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


FERC Gives Rover Approval to Recommence.  The U.S. Federal Energy Regulatory Commission (FERC) on Feb. 6 authorized Energy Transfer Partners LP to recommence a horizontal drill under the Tuscarawas River in Ohio as the company works to complete its Rover natural gas pipeline by the end of the first quarter.

FERC said in a filing it allowed Rover to start drilling again after the company provided a revised drilling plan for the second pipe under the Tuscarawas River on Sunday and some analysis on Feb. 5 of residential water wells in the vicinity of the drill.

Rover will monitor the quality of the water in the wells during and for a period of time after the drill.

FERC ordered Rover to cease drilling of the second pipe under the river on Jan. 24 and asked the company to evaluate alternatives to the drill after Rover lost some drilling fluid¾a mixture of clay and water¾in the hole.

Those alternatives included completing the current drilling, finding another location to cross under the river or go with just one pipe across the river.

ETP said in a letter to FERC last week that it was not unusual for some fluid to be lost and that none has returned to the surface or caused any harm.

The $4.2 billion Rover project is designed to carry up to 3.25 billion cubic feet per day (Bcf/d) of gas from the Marcellus and Utica shale fields in Pennsylvania, Ohio and West Virginia to the U.S. Midwest and Canada’s Ontario province.

ETP already has one pipe in service under the Tuscarawas, with more than 1.1 Bcf/d of gas flowing through it. One Bcf/d of gas is enough for about 5 million U.S. homes.

While drilling that first pipe, the company spilled about 2 million gallons of drilling fluid into a wetland in April. That spill led FERC in May to ban Rover from horizontal drilling temporarily.

Energy companies use horizontal drilling to cross under obstacles like highways and rivers.

ETP said on Feb. 5 it was still on track to complete the project by the end of the first quarter. Some analysts, however, have said completion of the project would probably be delayed into the second quarter, at least.

Major producers that signed up to use Rover include units of privately held Ascent Resources, Antero Resources Corp, Range Resources Corp, Southwestern Energy Co, Eclipse Resources Corp and EQT Corp.

Mariner East 2 Resumes Construction.  The state Department of Environmental Protection announced Thursday  they are fining Sunoco Pipeline, LLP $12.6 million for permit violations related to the construction of the Mariner East 2 pipeline project.  The penalty is one of the largest civil penalties collected in a single settlement, according to the state agency.

The Sunoco Pipeline has made changes since work  halted on January 3  on the $2.5 billion Mariner East 2 pipeline. At the time, DEP issued an order suspending construction of the pipeline in response to dozens of environmental violations. In its order, DEP told Sunoco to “fully explain the failures that led to the violations” and come up with a plan to fix them.” The company also has to restore or replace the water supply of two homeowners in Silver Spring Township, Cumberland County who complained in December about “cloudy water” resulting from pipeline construction.

“Throughout the life of this project, DEP has consistently held this operator to the highest standard possible. A permit suspension is one of the most significant penalties DEP can levy,” said DEP Secretary Patrick McDonnell.

“Since the permit suspension over a month ago, Sunoco has demonstrated that it has taken steps to ensure the company will conduct the remaining pipeline construction activities in accordance with the law and permit conditions, and will be allowed to resume. DEP will be monitoring activities closely to ensure that Sunoco is meeting the terms of this agreement and its permit” McDonnell added.

The pipeline, which spans 350 miles, will carry natural gas liquids from the Marcellus Shale in Western Pennsylvania and eastern Ohio, to an export terminal near Philadelphia. The majority of the gas will be sent to a plastics manufacturer in Scotland.

The $12.6 million penalty will go to the Clean Water Fund and the Dams and Encroachments Fund, according to DEP.

Nexus Settles OH Lawsuits.  The Green, Ohio, City Council voted 4-3 Wednesday to drop the city’s legal challenges and accept money, land and other conditions to allow the Nexus natural gas pipeline to be built through the city.

About 100 people attended a standing-room-only meeting Wednesday evening — the third special meeting the council held to discuss the Nexus offer, Kallanish Energy learns.

All but one of 19 residents who addressed the council spoke against the agreement that includes $7.5 million in cash, around-the-clock monitoring of the pipeline and 20 acres west of Boettler Park .

Earlier Wednesday before the meeting, Councilman Stephen Dyer said this on Facebook: “After careful consideration of the proposed Nexus agreement with the City of Green, as well as close consultation with my family and the many, many constituents who have contacted me through email and Facebook, I cannot in good conscience support this agreement,” the Akron (Ohio) Beacon Journal newspaper reported.

Dyer was joined by council members Justin Speight and Matt Shaughnessy in voting against the deal while Council president Chris Humphrey, vice president Bob Young and members Barbara Babbitt and Rocco Yeargin voted for it.

“The harshest thing we have to realize is that the pipeline is coming. The vote isn’t about whether Nexus is coming,” Yeargin said on Facebook. “I have to do the best I can for this city. Based on the advice of legal counsel and advisers, as much as I want to fight with you, I think it is time to benefit the community.”

The city also agreed to grant easements to Nexus totaling about 2½ acres in two city parks and through various roads along the pipeline’s eight\mile path through Green.

The high-pressure, 36-inch natural gas pipeline will run east to west in Green to carry natural gas to Canada through parts of Ohio.

The city had until midnight Wednesday to accept the offer made two weeks ago, Green Law Director Diane Calta told the Beacon Journal.

She also said that all but one of the 90 properties directly in line with the project have agreed to a lease with Nexus.

Ascent Enters Voluntary Bankruptcy.  Ascent Resources Marcellus Holdings, LLC and its wholly owned subsidiaries, Ascent Resources – Marcellus, LLC ("ARM") and Ascent Resources Marcellus Minerals, LLC (collectively, the "ARM Entities") commenced voluntary chapter 11 cases in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") to implement a consensual financial restructuring (the "ARM Restructuring") approved by certain holders of ARM's first and second lien term loans. The ARM Restructuring is a negotiated balance sheet restructuring being undertaken to reduce the long-term debt of, and improve the liquidity of, the ARM Entities. The ARM Restructuring is not an operational restructuring and is not intended to restructure or compromise any vendor, service provider, contractor, lessor, working interest owner or royalty owner obligations.

On February 2, 2018, the ARM Entities began the solicitation of votes to accept the negotiated chapter 11 plan of reorganization (the "Plan") from ARM's secured creditors. Only holders of ARM's first and second lien term loans are entitled to vote to accept or reject the Plan.  Vendors and service providers will not be impaired by the Restructuring and will be paid in the ordinary course of business.  As of the chapter 11 filing, the ARM Entities have the creditor votes necessary for the Plan to receive approval from the Bankruptcy Court, with holders of 78% of the first lien term loans and 79% of the second lien term loans having voted to accept the Plan.

We anticipate that the ARM Entities will be in chapter 11 for approximately 45 to 60 days and that the ARM Entities will continue to operate in the ordinary course of business during this period.  Upon emergence from bankruptcy, a new board of directors will be appointed for the ARM Entities, including one director appointed by the current equity owners, and the ARM Entities will enter into a new management services agreement with Ascent Resources Management Services, LLC, whereby the existing management team will continue to manage the day-to-day operations of the ARM Entities.

Ascent Resources, LLC, Ascent Resources Utica Holdings, LLC, Ascent Resources – Utica, LLC and Ascent Resources Management Services, LLC (together, the "Ascent Entities") are not included in the ARM Restructuring and their operations remain unaffected by the ARM Restructuring. The Ascent Entities are separate and distinct entities that have their own capital structures, financing and operations. The Ascent Entities do not guarantee any of the ARM Entities debt.

PA DEP to Double Fees.  Let’s hope it means faster turnarounds.  The price of a permit to drill a shale gas well in Pennsylvania will more than double under a proposal that state environmental regulators plan to present to an industry advisory board next week.

The increase — from $5,000 to $12,500 per well — is necessary to protect the state’s oil and gas oversight program from running a deficit beginning in the summer of 2019, according to a program cost analysis that the Department of Environmental Protection will discuss with its oil and gas technical advisory board on Feb. 14.

“The number of well permits submitted to DEP does not generate sufficient revenue to cover the costs of administering DEP’s oil and gas program,” the agency wrote.

Permit fees are paid once, at the beginning of a well’s life, but DEP’s inspection responsibilities continue until the well is plugged, usually decades later.

The majority of the oil and gas program’s funding comes from well permit fees, with fines and $6 million from the annual impact fees paid by shale gas companies making up the rest. It does not draw money from DEP’s share of the state general fund budget. The program’s annual expenses are expected to be $23 million this fiscal year.

Applications to drill tapered in recent years as the plunging price of natural gas forced Marcellus Shale companies to cut back on new drilling. Shale well permit applications rose slightly but remained low in the last fiscal year, and “permit volumes are not expected to rebound in the near term,” the agency wrote.

DEP has cut staff and reduced operating costs to conserve money until a reliable funding source is restored, the agency said. The number of people working in the oil and gas program declined from 226 to 190 employees, and operating and fixed asset costs were reduced 39 percent over the past three years.

Those cuts have strained the department, contributing to significant delays in processing some types of permits, especially in the southwest regional office where the number of staff reviewing well permits has been cut by 43 percent.

Chesapeake 4th Qtr. Update.  Chesapeake Energy reported fourth-quarter 2017 production grew by 15% over Q4 2016 when adjusting for asset sales, Kallanish Energy reports.

Fourth-quarter production was 593,000 barrels of oil-equivalent per day (BOE/d), including oil production of 100,000 barrels per day (BPD) as had been previously targeted, the Oklahoma-based company said.

That Q4 production included 2.6 billion cubic feet (Bcf) of natural gas and 59,500 barrels (Bbls) of natural gas liquids per day, the company said.

The production growth was due largely to stronger oil production from the Eagle Ford Shale in South Texas, plus significantly higher natural gas production from the Marcellus Shale in the Appalachian Basin and the Haynesville Shale in northern Louisiana, the company said.

Company CEO Doug Lawler said Chesapeake is projecting flat production in 2018, with lower capital spending.

In other news, Chesapeake reported three separate asset sales in Oklahoma’s Mid-Continent that will generate $500 million. The sales include 238,00 net acres and 3,000 wells producing about 23,000 BOE/d (roughly 25% oil).

The sales mark the company’s exit from Oklahoma’s Mississippi Lime in the state’s northwest corner, plus the sale of other properties in central and western Oklahoma.

One deal closed in January. The other two are scheduled to close in March. No buyers were identified.

Chesapeake said it will use the proceeds from the sales to reduce its debt.

Also Tuesday, Chesapeake raised $78 million in the initial public stock offering for FTS International, a provider of hydraulic fracturing services and a company Chesapeake has owned a significant stake in since 2006.

Chesapeake sold about 4.3 million shares and will continue to hold about 22 million shares in the publicly-traded company.

“In 2018, we are committed to making meaningful progress in decreasing the amount of debt outstanding on our balance sheet and improving our margins,” Lawler said, in a statement.

Hess 4th Qtr. Update.  Exploration and production company Hess Corp. reported a fourth-quarter 2017 net loss of nearly $2.7 billion, which compares to a net loss of $4.9 billion in Q4 2016.

The New York-based company said Q4 2017 results included net after-tax charges totaling $2.4 billion, including a non-cash accounting charge of $1.7 billion to reduce the carrying value of Hess’ interests in the Stampede and Tubular Bells deepwater projects in the Gulf of Mexico, the result of a lower long-term crude oil price outlook.

The adjusted net loss in Q4 was $304 million compared to a net loss of $305 million in the year-ago quarter, Kallanish Energy calculates.

“In the past year, our company successfully completed an ambitious asset sales program, replaced 351% of production at an attractive F&D cost of just over $5 per barrel, continued our extraordinary exploration success in the Stabroek Block in Guyana, and sanctioned the Liza Phase 1 development with plans under way for the next two phases,” said CEO John Hess, in a statement.

In 2017, the company sold off assets in Norway and Equatorial Guinea for $4.8 billion.

“We enter 2018 well positioned to deliver a decade-plus of capital efficient growth with increasing cash generation and returns to shareholders,” Hess said.

His company said it intends to spend $2.1 billion on E&P capital and exploration in 2018. That is down slightly from $2.25 billion budgeted in 2017.

The company reported its Bakken Shale production in North Dakota increased 16%, from 95,000 barrels of oil-equivalent per day (BOE/d), to 110,000 BOE/d.

It drilled 27 Bakken wells and brought 34 wells online in Q4 with four rigs. Two additional rigs are to be added.

Hess reported net production in the quarter, excluding Libya, was 282,000 BOE/d, down from 307,000 BOE/d in the year-ago quarter.

Factors in the decline were assets sales, a fire at a third-party Gulf of Mexico platform and natural declines from wells, the company said.

Consol 4th Qtr. Update.  Consol Energy reported a net loss of $24.6 million in the fourth quarter of 2017, which compares to a net loss of $22.9 million in Q4 2016.

The company, with headquarters south of Pittsburgh, became an independent, publicly-traded producer and exporter of coal on Nov. 28, 2017.

The company achieved record annual coal production of 26.1 million tons in 2017. That is a 6% increase from 2016 and a 14% increase from 2015, the company said. The volume in 2016 was 24.7 million tons, Kallanish Energy learns.

Production in Q4 was 6.2 million tons at the Pennsylvania Mining Complex, a drop from 7.1 million tons in Q4 2016, the company said.

The mining company said overall production is expected to grow in 2018.

Average revenue per ton was up 5% compared to 2016, driven largely by improved market conditions and pricing in the thermal and crossover metallurgical export markets, it said.

It announced a record annual throughput of 14.3 million tons of coal through the company’s Marine Terminal in Baltimore, Md., in 2017, up 77% over 2016.

The company exported a record 8.3 million tons of Pennsylvania coal through the Maryland terminal in 2017, up from 5.4 million tons exported in 2016.

The coal being exported is 70% thermal coal and 30% crossover metallurgical coal, it said.

Full-year 2017 terminal revenue in 2017 totaled $60.1 million, compared to $31.5 million in 2016, Consol said.

The company’s Harvey mine in southwestern Pennsylvania produced a record-high 4.8 million tons of coal in 2017, surpassing its previous high mark set in 2015.

The company said it is 95% contracted for 2018 production, 70% contracted for 2019 and 24% contracted for 2020, assuming annual production rates of 27 million tons annually going forward.

Pin Oak Purchases Shale Assets in OH and PA.   Pin Oak Energy Partners LLC announced that it has closed on a series of transactions with multiple sellers to allow it to acquire more shale assets in Ohio and Pennsylvania — including nearly 70,000 acres for Utica/Point Pleasant development across both states and 33 conventional wells in Ohio that produce from the Knox Group of geologic formations.

In addition, Pin Oak acquired two taps into Tennessee Gas Pipeline in northern Pennsylvania and associated gas processing capabilities, according to a news release.

Financial terms of the acquisitions were not disclosed.

"These acquisitions add a significant development component to our existing acreage position along with expanded midstream assets and capabilities in a key growth area for Pin Oak Energy," CEO Christopher Halvorson said in the release. "This is a pivotal moment for our Company as we materially add acreage to our future development position."

The transactions include leasehold acreage in Ohio's Mahoning and Trumbull counties, and Mercer County in Pennsylvania, all of which are part of Pin Oak Energy's northern Utica/Point Pleasant position, the release said. Adding to the company's activities in the southern Ohio Utica/Pleasant Point is leasehold acreage in eastern Guernsey County.

Associated pipeline rights-of-way were included in the deals, the company said.

Pin Oak added to its midstream assets with the addition of processing facilities and multiple taps into interstate pipelines across its northern Pennsylvania position, the release said. The two taps into the Tennessee Gas Pipeline each have the capability of up to 100 million cubic feet per day.

Another tap in Elk County, Pa., delivers into one of National Fuel Gas Supply Corp.'s interstate pipelines, Pin Oak said.

The purchase of the 33 vertical wells in southern Ohio, which have an average producing depth of 8,500 feet, includes assets, additional offset drilling locations and deep acreage primarily in eastern Muskingum County, Ohio.

"These acquisitions provide Pin Oak Energy with greater opportunities and offer us optionality that we believe will be beneficial to the Company for years to come," Mark Van Tyne, Pin Oak chief business development officer, said in a statement. "We are very pleased with our continuing efforts of executing our growth strategy in both the conventional and unconventional arenas."

In October, Pin Oak purchased shale assets in four Pennsylvania counties from Seneca Resources Corp. of Houston. That included 14 producing Marcellus Shale wells and two producing Utica/Point Pleasant Shale wells across about 4,300 acres.

Pioneer Doubles Down on the Permian.  Pioneer Natural Resources is moving to become a Permian Basin-only energy company, Kallanish Energy learns.

The company announced plans to sell off all of its non-Permian Basin acreage and infrastructure to focus solely on the Permian in West Texas and southeast New Mexico.

Those moves will include divesting 70,000 acres in the Eagle Ford Shale in South Texas, the company said. All of that acreage is held by production and it represents all of Pioneer’s 46% working interest in the play, it said.

Production from the Eagle Ford totaled 27,000 barrels of oil-equivalent per day (BOE/d) in the fourth quarter of 2017, it said. Production was 33% oil, 33% natural gas and 33% natural gas liquids.

It is also selling its assets in the West Panhandle natural gas play in Texas, oil and gas acreage in the Sinor Nest Wilcox Field in South Texas, and gas production in the Raton Basin along the Colorado-New Mexico border.

Net production in Q4 2017 from the Panhandle was 7 million barrels of oil-equivalent per day (MMBOE/d), said the Dallas-based company.

Net production from Raton averaged 86 million cubic feet per day (MMcf/d) of natural gas in Q4, the company said.

“After these divestitures are completed, Pioneer’s operations will be solely in the Permian basin,” president and CEO Timothy Dove said, in a statement.

The company said it intends to open data rooms for the planned divestitures later in the first quarter.

Pioneer said it expects to place 250 to 275 wells into production in the Permian in 2018.

TX Crude to the Middle East.  The United Arab Emirates, a model Persian Gulf petro-state where endless billions from crude exports feed a giant sovereign wealth fund, isn’t the most obvious customer for Texan oil. Yet, in a trade that illustrates how the rise of the American shale industry is upending energy markets across the globe, the U.A.E. bought oil directly from the U.S. in December, according to data from the federal government. A tanker sailed from Houston and arrived in the Persian Gulf last month. The cargo of American condensate, a type of very light crude oil, was preferred to regional grades because its superior quality made more suitable for the U.A.E.’s processing plants, a person with knowledge of the matter said, asking not to be identified discussing a commercially sensitive matter. The end of a ban on U.S. exports in 2015 coupled with the explosive growth of shale production, has changed the flow of petroleum around the world. Shipments from U.S. ports have increased from a little more than 100,000 barrels a day in 2013 to 1.53 million in November, traveling as far as China and the U.K.

PA Impact Fees Up 26.6% in 2017.  Tax revenue from Pennsylvania’s unconventional natural gas wells for 2017 jumped 26.6% from 2016, buoyed by higher natural gas prices, and more newly-drilled wells, primarily in the Marcellus Shale, the state’s Independent Fiscal Office projects.

Last year, the impact fee is  expected to produce $219.4 million, up $46.1 million from $173.26 million in 2016, and the highest amount since 2014’s $223.50 million, Kallanish Energy reports.

“Pennsylvania’s natural gas tax provides critical funding for community and environmental programs across the Commonwealth,” said Marcellus Shale Coalition president David Spigelmyer. “This report, along with strong support from local leaders, demonstrates the benefits and effectiveness of this tax, which will total nearly $1.5 billion since 2012.

“Additional and higher energy taxes jeopardize these local benefits and jobs, along with the significant cost-savings that families are seeing in their natural gas and electricity costs” Spigelmyer added.

The impact fee, enacted in 2013, is determined according to a bracketed schedule, based on the number of years since a well became subject to the impact fee, the type of well – vertical or horizontal – and the price of natural gas.

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PA Permits February 1, to February 8, 2018

             County                                   Township                                          E&P Companies

  1. Bradford                                       Stevens                                             SWN
  2. Bradford                                       Stevens                                             SWN

OH Permits for week ending February 3, 2018

            County                                   Township                                          E&P Companies

  1. Belmont                                       Colerain                                             Ascent
  2. Belmont                                       Colerain                                             Ascent
  3. Belmont                                       Colerain                                             Ascent
  4. Jefferson                                     Mt. Pleasant                                      Ascent

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Northeast Supply Enhancement