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Expo/Industry events for the next few months

Ohio Valley Regional Oil & Gas Expo
April 24-25, 2018
Belmont County Carnes Center
St. Clairsville, OH
http://ohiovalleyoilgasexpo.com/

 The New Upstream PA 2018
May 17, 2018
Penn Stater Conference Center
State College, PA
www.upstreampa.com

Appalachian Storage Hub Conference
June 7, 2018
Hilton Garden Inn, Southpointe
Canonsburg, PA
https://www.appastorage.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

Cabot to Start Drilling in OH.  Cabot Oil & Gas is getting ready to drill test wells in Ashland and surrounding counties in north-central Ohio.

“We’ve got a really neat group of geologists who think they see something in Ohio,” said George Stark, a Cabot spokesman based in Pittsburgh. “They see something, and we want to go touch it.”

Cabot is looking for natural gas and oil a hundred miles northwest of the Utica Shale play’s core in eastern Ohio.

The Houston-based company has filed paperwork with the Ohio Department of Natural Resources for two well pads in Ashland County, and plans to drill up to five test wells in an area that includes parts of Richland, Knox, Wayne and Holmes counties.

“You don’t want one test to be the smile face or the frown face,” Stark said. “You need more data.”

Explored before

During the early days of Utica exploration, Devon Energy drilled a few wells in the area Cabot is targeting, but moved on.

Cabot is planning to explore below the Utica Shale, Stark said.

Paperwork filed with ODNR indicates the company is targeting the Rome and Knox formations, but Stark declined to be specific. The agency has yet to issue the company a drilling permit.

The company plans to drill vertical wells and take samples that will show the ratio of oil to natural gas and the pressure and thickness of the rock, factors that determine whether it makes economic sense to drill more wells, Stark said.

Cabot has obtained the right to drill vertical wells into rock formations 3,000 to 4,000 feet beneath a natural gas storage field owned by Columbia Gas Transmission, but Cabot still needs to get horizontal-drilling rights from surface landowners.

Casings around the wells will isolate the wellbore from the storage field and any other formations that aren’t the target of the well, Stark said.

If Cabot’s exploration pays off, Canton, the self-styled Utica Capital, could find itself in a strategic spot between two drilling plays.

“Whether it’s Mansfield or Canton, I think there are opportunities from the supply chain, from the manufacturers, from lower gas costs, from more opportunities for the workforce,” Stark said.

Pennsylvania record:

For the past 10 years, Cabot has been drilling Marcellus Shale horizontal wells in Pennsylvania’s Susquehanna County.

Cabot was producing natural gas from 561 horizontal wells at the end of 2017, and has another 3,000 undrilled Marcellus locations among its 172,000 acres in northeast Pennsylvania, according to the company’s latest investor presentation.

The company plans to drill approximately 85 wells in the Marcellus Shale this year.

Stark said Cabot has spent almost $5 billion in Susquehanna on wages, supply purchases, equipment rentals, well drilling and pipeline construction. Landowners in Susquehanna and a neighboring county have earned more than $1.5 billion in royalties and signing bonuses, according to the company.

Perry Supports Energy Regulatory Cuts.  U.S. Secretary of Energy Rick Perry said last week it’s time for the U.S. to start considering its export potential, particularly in the liquefied natural gas arena, Kallanish Energy sister publication, Kallanish, reports.

In an editorial published in Cleveland, Ohio’s The Plain Dealer newspaper, Perry credits the Trump administration’s regulatory rollbacks with increasing conventional steel-heavy infrastructure projects and forward-looking energy projects.

“Washington should not be directing local decisions or controlling local purse strings. One look at our nation's crumbling bridges and roads illustrates quite clearly how well that approach has worked out in the past,” he said.

“But, infrastructure is more than just roads and bridges. And improving it will have broad-reaching benefits at home and abroad. For those of us focused on energy, infrastructure is also the complex networks of pipes, rails, and wires that move the water, energy, and commodities upon which American families and the American economy rely.

“These networks carry the nation's lifeblood -- the energy that fuels our cars, heats our homes, and powers our businesses -- and it is in desperate need of an upgrade,” Perry said.

The U.S. is now a net exporter of LNG via two export facilities, on the Gulf Coast and in Maryland. An additional six are under construction, helped along by President Trump’s proposed policy of cutting permitting reviews to two years or less – the so-called “One Federal Decision” proposal.

“Energy infrastructure projects like these mean more than just temporary construction jobs. Facilities like these represent opportunities for high-paying American careers - not just at the export facilities themselves, but up and down the supply chain,” Perry said. “It means quality, long-term employment for drillers, pipe rollers, welders, and stevedores, as well as chemists, electricians, and engineers. Past private infrastructure projects, like these export facilities, have languished for years under a burdensome and multi-layered federal permitting process, even though most infrastructure is not federally owned.”

Ascent Comes Out of Bankruptcy.  Bodes Well for Drilling in OH.  Ascent Resources Marcellus Holdings announced last Friday the company and its wholly-owned subsidiaries emerged from chapter 11 bankruptcy roughly seven weeks after filing for protection from creditors.

On Feb. 6, Ascent Marcellus Holdings, along with Ascent Resources – Marcellus and Ascent Resources Marcellus Minerals filed voluntary petitions for reorganization under Chapter 11 in the U.S. Bankruptcy Court for the District of Delaware.

The bankruptcy filing was part of a consensual financial restructuring approved by certain holders of ARM's first- and second-lien term loans.

At the time of the filing, Ascent estimated creditors totaling between 200 and 999, total assets of between $500 million and $1 billion, and total debt between $1 billion and $10 billion, Kallanish Energy reports.

The largest unsecured creditor was Blue Racer Midstream, owed via a trade pact $4 million.

Ascent traces its founding to American Energy Partners, a number of independent oil and gas producers founded by now-deceased Aubrey McClendon, formed after he was forced from the company he co-founded, Chesapeake Energy.

The Ascent companies currently own or have the right to develop roughly 43,000 net acres in the Marcellus Shale play in northern West Virginia.

Constrained Permian NatGas Will It Be Forever? The natural gas industry has been intensely focused on what is going on in the Permian over the past year. For good reason too. What happens with the associated gas molecules out of the Permian will have far reaching impacts to the broader natural gas market, even impacting Dominion South pricing and production 1,500 miles away. We have discussed these dynamics in detail in our most recent edition of our Northeast Gas Outlook, but today I wanted to take a step back and look past the next couple years to what is yet to come after the first wave of new Permian gas takeaway.

To start with, where do we stand today? Permian associated gas production is surging. Waha who??  continues to weaken. And a spate of gas takeaway projects has been announced. Kinder Morgan and DCP’s Gulf Coast Express seems to be the farthest along with a firm in-service date of October 2019. Other projects announced include NAmerico’s Pecos Trail slated for late 2019, Sempra and Boardwalk’s P2K (Permian to Katy) project, expected in 3Q 2020, and Tellurian’s Permian Global Access Pipeline, which just recently began a non-binding open season.

The next natural question is ‘does the market need this approximately 8 Bcf/d of new takeaway out of the Permian?’ To answer that let’s move our point of reference out a few years. The graphic below shows a projection of Permian dry gas production, using current activity levels. Note that this does not represent BTU Analytics’ outlook on Permian production, which considers additional factors in its forecasts. Included with that production projection is demand (local as well as exports to Mexico), existing pipe capacity, and Gulf Coast Express’ proposed capacity.

Based on projected production, Gulf Coast Express alone won’t provide takeaway relief to the basin for very long, with its capacity full by the end of 2020. Projecting that capacity and demand forward gives us a capacity shortfall of 4.4 Bcf/d by 2025 and 7.2 Bcf/d by 2030. Compare that to the additional three projects following Gulf Coast Express that have a capacity of approximately 6 Bcf/d. That would suggest that all of the announced projects’ takeaway will be needed by 2030. However, there is another potential solution just across our southern border.

Permian exports to Mexico have provided ever elusive hope for relief out of the basin. As shown by the graphic below, exports out of West Texas have shown little growth even with surging Permian associated gas and cross-border capacity. The limiting factor seems to reside on the other side of the border, where projects have been plagued by delays and opaque statuses.

That being said, with projects in Mexico set to eventually come online over the next year, we would expect the effective export capacity across the border to increase. However, once that effective capacity comes online one of two things can happen: imported gas from the Permian can serve new demand in Mexico or exports out of the Permian can displace exports out of South Texas (Agua Dulce), thereby helping the Permian, but impacting the broader US gas market.

What does this all mean for gas prices at Waha and Henry Hub? And how will this affect both Permian oil and gas production? For the answers to these questions, and more, see our Spotlight Report in the February edition of the Upstream Outlook.

Appalachian Rig Count.   In the latest US rig count released by Baker Hughes (BHI), the number of active US rigs drilling for natural gas grew by four last week to 194. There were 160 active natural gas rigs a year ago. According to the latest numbers, 57 rigs now lie in the Marcellus Shale, which had 44 active rigs last year around the same time.

In the Utica, there are currently 22 active natural gas rigs, per BHI’s latest report, compared to 44 active rigs around the same time last year.

The Marcellus and Utica together make up the Appalachian Basin. So the Marcellus and Utica combined represent ~8% of total oil- and natural gas–directed rigs, or 993 rigs operating in the United States.

Appalachian oil and gas rig counts have gone up between 2016 and 2018. New well natural gas production per rig has increased particularly sharply over the last few years.

Growing Appalachia production spurring midstream infrastructure end of sentence

As we’ve seen, natural gas production in the Appalachian Basin has supported significant growth in natural gas production over the past decade. The Appalachian Basin spans across New York, Ohio, Pennsylvania, and West Virginia.

In a report released by the EIA on January 26, natural gas production in Ohio, Pennsylvania, and West Virginia increased from a combined 1.4 billion cubic feet per day (Bcf/d) in 2008 to nearly 24 Bcf/d in 2017.

The rapid development of natural gas processing plants in these regions has been driving this increase. According to a separate report from the EIA, combined natural gas processing capacity in Kentucky, Ohio, Pennsylvania, and West Virginia has grown from 1.1 billion cubic feet per day (Bcf/d) to 10.0 Bcf/d between 2010 and 2016. Per the EIA, natural gas processing capacity in Appalachia is expected to increase by 2.5 Bcf/d over the next two years.

The Appalachia-based midstream MLPs include Antero Midstream Partners (AM), EQT Midstream (EQM), and Western Gas Partners (WES).

Increasing natural gas production in Appalachia has also created the need for new takeaway capacity.

Pipeline Cyberattacks.  At least four U.S. pipeline companies have seen their electronic systems for communicating with customers shut down over the last few days, with three confirming it resulted from a cyberattack. On Tuesday, Oneok Inc., which operates natural gas pipelines in the Permian Basin in Texas and the Rocky Mountains region, said it disabled its system as a precaution after determining that a third-party provider was the “target of an apparent cyberattack." A day earlier, Energy Transfer Partners LP, Boardwalk Pipeline Partners LP, and Chesapeake Utilities Corp.’s Eastern Shore Natural Gas reported breakdowns, with Eastern Shore saying its closure occurred on March 29. The Department of Homeland Security, which said Monday it was gathering information about the attacks, had no immediate comment Tuesday. The attacks follow a U.S. government warning in March that Russian hackers are conducting an assault on the U.S. electric grid and other targets. Last month, Atlanta’s government was hobbled by a ransomware attack.

Kenexis, a Shale Directories member, was the presenting sponsor at Utica Midstream and Ed Marszal, Kenexis president, discussed the danger of cyberattacks in his opening presentation.  He said that they are happening all the time companies need to have the appropriate security.

Pennsylvanians Still Have Favorable NatGas Attitude.   A poll released by Franklin & Marshall College shows that Pennsylvanians still have a favorable view of the natural gas industry, indicating general support for shale production, but questioning more strongly the potential environmental risks associated with it. In a poll of 423 registered state voters conducted March 19-26 by the Lancaster, PA-based College, 50% said they either “strongly” support or “somewhat” support “the extraction of natural gas from shale deposits in Pennsylvania.” Another 42% said they strongly or somewhat oppose shale production, while 9% said they didn’t know.

TX Crude Production Up in January.  Crude oil production in Texas in January was up slightly, while natural gas production dipped slightly, Kallanish Energy reports.

Texas crude oil production averaged 2.6 million barrels per day (MMBPD), compared to the 2.4 MMBPD average in January 2017, says the Railroad Commission of Texas, in a new report.

Natural gas production in January averaged 18.51 billion cubic feet per day (Bcf/d), compared to the 19.63 Bcf/d average in January 2017.

Initial production reported to the state agency in January was 80.58 MMBbl of crude oil and 573.93 Bcf of total gas from oil and gas wells.

Those are preliminary figures and will be updated as late and corrected figures are filed.

In January 2017, initial production was 75.33 MMBbl of crude, updated to the current figure of 86.87 MMBbl; and 608.40 Bcf of total gas, updated to the current total of 650.82 Bcf.

In January 2018, Texas’ production came from 180,363 oil wells and 91,358 gas wells.

The Top 5 counties for crude production in January were: Midland, 8.15 MMBbl; Karnes, 5.33 MMBbl; Reeves, 4.92 MMBbl; Loving, 4.32 MMBbl; and Upton, 4.27 MMBbl.

The Top 5 counties in January for natural gas were Webb, 58.9 Bcf; Tarrant, 33.6 Bcf; Reeves, 25.0 Bcf; Midland, 19.6 Bcf; and Panola, 18.4 Bcf.

The Top 5 counties in January for condensate were Reeves, 1.2 MMBbl; Culberson, 1.1 MMBbl; De Witt, 1.0 MMBbl; Webb, 953,635 Bbls; and Karnes, 871,494 Bbls.

Utica Midstream Article (Thank you, Shane Hoover, Canton Repository) Ohio has produced more natural gas than it uses since early 2015. Driven by prolific Utica Shale wells, the state produced a record 1.7 trillion cubic feet of natural gas last year.

Much of the regional economic development around that production has been in the form of pipelines and processing facilities.

Two interstate natural gas pipelines — Energy Transfer’s Rover project and the NEXUS Gas Transmission pipeline — cross Stark and neighboring counties.

Marathon Petroleum also has built or acquired assets in the region to supply its Canton refinery with liquids from Utica Shale wells.

Ohio’s industry boosters want to turn the state’s natural gas reserves into even more economic development, but are facing headwinds from Wall Street and Washington, D.C.

Attendees of the fifth annual Utica Midstream conference on Wednesday heard updates on natural gas production, local pipeline projects and efforts to sell the Ohio River valley as the world’s next petrochemical hub.

The Canton Regional Chamber of Commerce and ShaleDirectories.com presented the conference at Walsh University’s Barrette Center.

Pipeline progress:

The Rover project is partially operational and will carry 3.25 billion cubic feet of natural gas a day to customers in Canada and the United States when completed. But the project has run afoul of environmental regulators in Ohio and West Virginia and encountered delays, notably after spilling drilling fluid into a wetland next to the Tuscarawas River in Bethlehem Township last year.

But as soon as Rover began partial operation of one of its two 42-inch diameter mainlines last year, producers started shipping gas to reach better markets, which opened space on other pipelines that producers were also eager to use, said Colette Breshears, a natural gas analyst with Genscape.

Construction on NEXUS started in October, and work crews in Michigan have already started welding and burying pipeline, said Erika Young, a business development project director with Enbridge, the Canadian company partnering with DTE Energy to build the pipeline.

Locally, workers have been clearing trees and building work areas for NEXUS, which should be in service by the end of the third quarter. When completed, the 36-inch diameter pipeline will carry 1.5 billion cubic feet of natural gas a day to markets in Ohio, Michigan and Canada.

Rover and NEXUS shipping natural gas should help to relieve the regional surplus raise prices and spur more drilling, Breshears said.

Drilling update:

According to the Ohio Department of Natural Resources, 2,349 horizontal shale wells have been drilled in Ohio, most of them in the Utica Shale, and 1,894 were producing as of Saturday.

There are 23 rigs drilling in Ohio, less than half the number in late 2014 and early 2015.

Richard Simmers, chief of ODNR’s Division of Oil and Gas Resources Management, said he didn’t expect the number of rigs to increase much, even if more wells are drilled. Companies drill wells more efficiently now than they used to, often putting multiple wells on a single pad. One pad in the state has 28 wells on it and room for more, Simmers said.

Drillers also are going deeper and longer with their wells than they did five years ago. Early Utica wells typically went down 7,000 feet vertically and 5,000 feet laterally.

Now, companies are going 10,000 feet vertically and laterally for 14,000 feet, and some drillers are drilling laterals of more than 20,000 feet, Simmers said.

Since early 2015, Ohio has produced more natural gas than it consumed, but heavy industry is starting to use more natural gas.

Simmers said he doesn’t see the state going back to being a natural gas importer, but the construction of 10 gas-burning electric power plants in the state, along with multi-billion-dollar petrochemical plants in the region, would shrink the surplus.

“That’s a good thing,” Simmers said. “That means these industries are staying in our state and in the Appalachian Basin.”

Pitches and headwinds:

Shell, the global energy giant, is building a cracker plant next to the Ohio River in Monaca, Pennsylvania. The petrochemical plant will take ethane from shale wells and turn it into chemicals used to make plastics.

PTT Global Chemical, a Thai company, is exploring a similar project on the Ohio River in Belmont County, but has yet to commit.

Building a petrochemical industry along the river in Ohio, Pennsylvania and West Virginia could generate 100,000 jobs, said Jerry James, president of Artex Oil and an advocate for Shale Crescent USA, a group pitching the region.

The tri-state area produces more natural gas than Texas and is the third largest natural gas producer in the world behind the rest of the United States and Russia, he said. The Ohio River valley also is within a day’s drive of half the U.S. population.

“As long as something lands in one of the three states, we’re all going to benefit,” James said.

But the idea of a petrochemical hub in the Appalachian Basin has doubters among investors and White House officials, said Bryce Custer, a real estate agent with NAI Spring and NAI Ohio River Corridor.

Custer said skeptics have asked why the industry would spend billions of dollars on new plants in the region when pipelines can be built for less to take ethane and natural gas to existing plants on the Gulf Coast.

Custer said companies are looking for building sites, industrial facilities, retail space and office buildings in eastern Ohio and West Virginia’s northern panhandle as they wait to see if PTT Global Chemical builds its cracker.

A good part of the audience indicated by a show of hands their belief that PTT would build, but Custer said he thought the odds were even.

“I am still very, very concerned,” Custer said, “so we have to continue to make a compelling case to PTT that this is the place to be.”

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           PA Permits March 29, to April 5, 2018

              County                                   Township                                          E&P Companies

  1. Allegheny                                     Findlay                                               Range
  2. Allegheny                                     Findlay                                               Range
  3. Bradford                                       Columbia                                           Reposol
  4. Bradford                                       Columbia                                           Reposol
  5. Clarion                                         Perry                                                   Laurel Mountain
  6. Lycoming                                     Gamble                                              Inflection
  7. Susquehanna                            Auburn                                              Chesapeake
  8. Susquehanna                            Auburn                                              Chesapeake
  9. Susquehanna                            Auburn                                              Chesapeake

OH Permits for week ending March 31, 2018

             County                                       Township                                        E&P Companies

  1. Belmont                                       Washington                                      XTO
  2. Belmont                                       Washington                                      XTO
  3. Belmont                                       York                                                  XTO
  4. Belmont                                       York                                                  XTO
  5. Harrison                                       German                                           Chesapeake
  6. Harrison                                       German                                           Chesapeake

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

Midstream PA