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Expo/Industry events for the next few months

Midstream PA 2018
September 25, 2018
Penn Stater Conference Center
State College, PA

Utica Summit
October 10, 2018
Walsh University
North Canton, OH

For other events visit

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

DUG East – Shell, CNX, and Range.  Shell is very comfortable drilling in one county in north-central Pennsylvania.

The company is heavily focused on Tioga County, where it started drilling in 2010 with more drilling planned, said Tonya Williams, a general manager of Shell Oil Co.

Dry gas sweet spot

Shell has found a very productive “dry gas sweet spot” in the Utica and Marcellus shales and is very happy with the results,  Tonya Williams said, addressing the audience during Day One of the 10th Annual DUG East Energy Conference, in Pittsburgh. Kallanish Energy was in attendance.

The Appalachian Basin natural gas is a short-term financial advantage and a “wonderful” hedge against long-term prices, she said.

The company is confident Pennsylvania will be lucrative for upstream operations moving forward with the state’s 230 years of available natural gas, she said.

$150 million in Tioga

The company expects to spend about $150 million in Tioga County in 2018, and to complete four news pads, she told a crowd of roughly 550.

Shell has leases on roughly 250,000 acres in and around Tioga County, said Williams, who oversees Shell's unconventional drilling in Pennsylvania.

Tioga County had 555 active wells in 2017 drilled by Shell and other operators, according to state records.

Shell says on its Website it has 300 dry gas wells in the county,

The company has additional acreage in Bradford County, with 150,000 acres, and other areas in north central Pennsylvania, with an additional 90,000 acres, she said.

It has 544,000 acres in Pennsylvania, along with acreage in Ohio and New York State.

Tioga County wells are producing roughly 444 million cubic feet of natural gas per day (MMcf/d), and the company has significant reserves, she said.

Utica to remain undeveloped

Shell has assets in eastern Ohio in the Utica Shale, but they will likely remain mostly undeveloped, Williams said. That is because the company's assets in north-central Pennsylvania are its top priority, she said.

Shell has made changes and its wells are now among the top producers in the Appalachian Basin. She said 89% of the company's wells are now among the top 5% of wells in the Appalachian Basin. At year-end 2015, none of Shell's wells were among that top 5%, Williams added.

In other conference news, CNX Resources is aggressively pursuing stacked development in the Appalachian Basin, said Tim Dugan, chief operating officer.

CNX - Drilling from the same pad

The company has already drilled a few Marcellus and Utica wells from the same pads, and that strategy will be pursued in the future, Tim Dugan said, because it makes economic sense to do that.

CNX Resources has 542,000 acres of Marcellus shale and 656,000 acres of Utica shale in three states: Pennsylvania, Ohio and West Virginia.

Having the shallow Marcellus and the deeper Utica assets makes such stacked drilling possible, he said. The company also intends to stack drill into the Upper Devonian Shale in some areas, he said.

Blending gas in Greene County

The stacked approach will be a game-changer, Tom Dugan said.

CNX has started blending dry Utica natural gas with damp Marcellus natural gas in Greene County, Pa.

The blending reduces the BTUs to make it possible to transport the natural gas by pipeline. The blending also makes the damp Marcellus more economical.  As well, that blending is a “critical component” for CNX in southwestern Pennsylvania.  Tom also stated that CNX is adding a fourth rig in the Appalachian Basin, he said.

Range - Proud of its longer laterals

The company has 1 million net acres in the Appalachian Basin. It produces 1.4 billion cubic feet of natural gas per day. That is up 4% from year-end 2017.

Range Resources, the first driller in the Marcellus Shale, in 2004, is very proud of its longer laterals, said Dennis Degner, senior vice president of Operations.

Most of the longer laterals have been drilled by Range in the last 12 to 18 months, he said.

A few years ago, a long lateral for Range was 6,000 to 7,000 feet, Dugan said. Now the company has drilled laterals that are 17,000 to 18,000 feet in length. It is unclear how long laterals can successfully get, he added.

Range expects perhaps half of its drilling in 2018 will be after returning to previously built pads to add new wells. It is likely that the number of wells per pad will jump from 4 to 6 to 8 to 12, he said.

Some new laterals will be drilled in the same direction as existing laterals. Others will be drilled in the opposite direction from pads, Tom explained.

The company remains very interested in the deep Utica Shale in Pennsylvania but is still testing that resource and is not ready to develop it.

“Do we like the Utica? You betcha,” Dugan stated

Range has 875,000 acres in Pennsylvania and produces 1.8 billion cubic feet per day.

Eclipse Resources 2018 Outlook.  With natural gas prices low, Eclipse Resources will rely heavily on condensate or oil from Ohio to boost its 2018 revenue, Kallanish Energy reports.

That assessment came Wednesday from company president and CEO Benjamin Hulburt, speaking at the 10th Annual DUG East Conference and Exhibition, which drew an audience of nearly 1,000, to Pittsburgh.

Jump in condensate production

The Pennsylvania-based company is projecting a 40% jump in condensate production in 2018, he  said. It is projecting 14,600 barrels a day of oil production, up from 11,900 BPD in 2017, he said.

“Condensate, we like a lot,” he told the audience.

Overall liquids production is expected to grow by 36% from 2017, and the company is estimating 45% of its 2018 revenue will come from liquids, Hulburt said.

Big liquids producer

Eclipse is producing more liquids than most producers in the Appalachian Basin, he said.

The company has eight of the Top 10 oil wells in Ohio, all in Guernsey County. Many experts are surprised to learn Eclipse is getting 2,000 BPD from oil wells in Ohio, he said with a laugh.

About half of the company’s 150,000 net acres are condensate-rich acreage, he said.

In the past, the company said that 73% of its production came from natural gas, 15% is natural gas liquids and 12% is condensate.

Capital budget drops 20%

Eclipse said its 2018 natural gas production will likely be roughly 330 million cubic feet a day (MMcf/d). That will reflect “modest growth due to the low prices,” Hulburt said. Production of natural gas was 311 MMcf/d in 2017, he said.

Its 2018 capital budget is roughly $250 million, a drop of 20% because of low prices, Hurlburt said.

Hulburt said the company also drilled its first two condensate-rich Marcellus Shale wells in southeast Ohio. The initial results “vastly exceed our expectations,” he said. That area is only about 18,000 acres in size, he said.

Lateral lengths growing

Eclipse is continuing to drill some of the longest laterals in the Appalachian Basin. The average lateral in 2018 will likely be just under 17,000 feet in length, Hulburt said.

Its average lateral in 2015-2016 was 8,200 feet. It grew to 13,600 feet in 2007 and to about 16,300 feet in 2017, he said.

The company in 2017 drilled 15 of what it calls Super Laterals, with an average length of 18,700 feet.

It has identified 347 drilling sites where extra-long laterals may be drilled over the next 16 years, he said.

The company is working on wells with laterals that exceed 20,000 feet and it has a well under way that will likely total 32,000 of vertical and lateral length, likely a record, he said.

The company can reduce costs by developing longer laterals so it makes economic sense to drill them, he said.

Hydraulic fracturing or fracking will begin in the next two weeks at the Flat Castle site in north-central Pennsylvania, Hulburt said.

The company has drilled its first well with a 14,000-foot lateral in 17 days. The first results are expected in late August, he said.

“We’re really, really excited by the potential,” he said.

The company is expecting to produce 40% more natural gas than southeast Ohio, he said.

Chesapeake Activity in Harrison County, OH.  Chesapeake is planning to drilling three well in Harrison by end of the year and early next year. (RUMOR)

More Information LyondellBasell – Braskem Deal.  Chemical giant LyondellBasell Industries and Odebrecht SA, the controlling owner of petrochemicals producer Braskem, said Friday they have entered into exclusive talks for Lyondell to acquire control of Braskem, numerous media reported.

Sources tell Kallanish Energy, a takeover could be good news for West Virginia and the Appalachian Basin.

A deal could breathe life into the ethane cracker Braskem proposed for a site near Parkersburg, W.Va., roughly five years ago.

“LyondellBasell is running out of land in Texas, and this deal could give them land they need to expand,” one source told Kallanish Energy. “It will be a while (for a deal to be consummated), but everything is pointing to the (West Virginia) cracker.”

Two people familiar with the LyondellBasell-Odebrecht matter told Reuters the companies are planning a cash and stock deal that could top $9 billion.

LyondellBasell and Odebrecht expect to reach a final deal in two months, but there is no deadline yet for LyondellBasell to deliver a binding proposal, the sources told Reuters, speaking on condition of anonymity.

The sources said Odebrecht expects a premium over Braskem’s market capitalization, which was $8.93 billion at last Thursday’s market close.

Once LyondellBasell and Odebrecht reach an agreement on price, the acquirer will extend the same terms for the stake owned by state-controlled oil company Petroleo Brasileiro SA, known as Petrobras, Braskem’s No. 2 shareholder, the sources told Reuters.

According to Braskem, Odebrecht controls 50.1% of the voting shares in the company, while Petrobras controls 47%.

Petrobras previously said it planned to divest fully from its stake in Braskem, as the company continues to whittle away at its massive corporate debt, once the largest in the upstream industry.

LyondellBasell and privately held Odebrecht declined to comment on details of the deal. Petrobras said in a filing it had been informed of talks.

Most of LyondellBasell’s 55 plants are in the U.S., Europe and Asia, including 14 of 22 in the U.S. in Texas — a footprint complimentary to that of Braskem, which has 29 plants in Brazil, five in the U.S., four in Mexico and two in Germany.

“The discussions are preliminary and no agreements have been reached,” the two companies said in a statement. “There can be no assurance the discussions will result in a transaction or on what terms any transaction may occur.”

PA Impact Fees $210 Million.  The Pennsylvania Public Utility Commission reported Thursday about $209.6 million in impact payments collected from gas producers in 2017 will be distributed. That is a $36.3 million increase from last year.

That revenue total – specifically $209,557,300 – is the third-highest disbursement in the seven years since Act 13 of 2012 became law.

Of that figure, $114,784,380 will go to county and municipal governments affected by drilling in the state; $76,522,900 to the Marcellus Legacy Fund, which supports environmental, highway, water and other projects; and $18.25 million to state agencies.

Feds Approve Mountain Valley.  U.S. federal energy regulators approved EQT Midstream Partners LP’s request to proceed with construction along various segments of its $3.5 billion Mountain Valley natural gas pipeline from West Virginia to Virginia. The segments include construction in parts of Harrison County, West Virginia and Roanoke County, Virginia, the U.S. Federal Energy Regulatory Commission (FERC) said in a filing on Monday. In addition, FERC said it will allow the company to cross the Blue Ridge Parkway in Virginia. The Blue Ridge is a national parkway linking the Shenandoah National Park in Virginia to the Great Smoky Mountains National Park in North Carolina and Tennessee.

Railroad Grant to Improve PTTGC’s Tracks.  An Ohio county that could become home to a new $10 billion ethane cracker is getting a $16.25 million federal grant to improve 30 miles of existing railroad tracks, Kallanish Energy reports.

The grant came from the U.S. Department of Transportation to the Ohio Rail Development Commission for track work in Belmont County, in eastern Ohio.

The project would help advance the proposed cracker plant by Thailand-based PTT Global Chemical America and its partner, South Korea-based Daelim, said U.S. Rep. Bill Johnson, R-Ohio, in a statement to the Martins Ferry Times Leader newspaper.

PTT spokesman Dan Williamson told the newspaper the grant is good news for Belmont County and that it would be good news for PTT, if the cracker project moves forward at Dilles Bottom.

A final investment decision by the companies is expected later this year.

The rail work includes improvements to the Norfolk Southern River Line that runs from Jefferson County through Belmont County to Monroe County.

The Belmont County cracker has attracted nearly $150 million in investment to date.

The plant would take ethane from drilling in the Utica and Marcellus Shale plays and turn it into ethylene for plastics and the petrochemical industry.

Royal Dutch Shell is developing a similar $6 billion facility at Monaca, on the Ohio River in Beaver County, Pa., roughly 30 miles northwest of Pittsburgh.

China Energy Investment in WV in Jeopardy.  The ongoing saber-rattling between the U.S. and China concerning tariffs is impacting billions of dollars of potential investment in the state of West Virginia.

China Energy Development's announcement last November it was willing to invest $83.7 billion over two decades in the "Mountain State" has been placed on hold, Brian Anderson, director of the West Virginia University Energy Institute, said Monday.

Speaking at the Third Annual Northeast PetroChemical Construction Conference in Pittsburgh (attended by Kallanish Energy), Anderson said executives with the Chinese company were slated to attend the conference, with the first project using the company’s pledged investment, to be announced.

“Nothing has been announced yet, and the investment by China Energy has been put in jeopardy due to the U.S.-China trade war,” Anderson told his audience.

The announcement took the proverbial wind out of Anderson’s presentation, entitled “China Energy Investment: A Game Changer for West Virginia.”

He said not only was the China Energy investment a game change for West Virginia – it also was a game changer for the region.

Anderson added the investment was to focus on the buildout of technologies and infrastructure.

LNG Still Going to China.  It’s not a surprise the proposed retaliatory Chinese tariffs on U.S. imports doesn’t include liquefied natural gas (LNG), Wood Mackenzie’s head of Asia-Pacific Gas and LNG, Nicholas Browne, said Monday.

According to Browne, China’s announcement last Friday, that it would pursue duties against the U.S. if Washington made effective its tariffs plan on July 6, excludes LNG for two key reasons. “Firstly, LNG demand is growing rapidly in China. Secondly, the U.S. will be the key source of incremental supply growth in 2018 and 2019,” he said.

The list from the Chinese government includes nearly all commodities, such as mineral fuels, mineral oils, bituminous substances and mineral waxes. Although LNG seems to be excluded from the list, natural gas in a gaseous state is included. That, however, would have no significance given China can’t import pipeline gas from the U.S., Browne noted.

LNG has played a crucial role in limiting the extent of gas shortages during the last Chinese winter, with demand for the liquid fuel rising by a record 12 million tons (MMt) to reach 38 MMt in 2017. U.S. LNG met 1.6 MMt, or 4%, of that demand last year, Kallanish Energy learns.

Tariffs on US LNG would increase costs and potentially limit availability of LNG, Browne said, adding CNPC recently signed two long-term deals with Cheniere Energy, one of which starts in 2018.

“For flexible U.S. volumes, the introduction of tariffs would have posed a significant challenge for Chinese buyers as they seek to meet surging demand. It would also have created logistical headaches for suppliers to optimize their portfolios to ensure they could meet Chinese demand while redirecting U.S. LNG to other markets,” he explained.

The U.S.-China trade war is at a “nascent stage” with an uncertain extent or duration. However, Browne believes LNG is clearly seen as an essential good by the Chinese government.

“In the event of an escalation, LNG is likely to remain outside the bounds of any additional tariffs,” he concluded.

New Player in the Appalachian Basin.  Diversified Gas & Oil said it plans to buy oil and natural gas assets in the Appalachian Basin for roughly $575 million, as it continues to bet on the U.S. shale boom, Kallanish Energy reports.

The deal, if completed, will be a reverse takeover and will be subject to shareholder approval, said the company, which is traded on the London Stock Exchange and has offices in Birmingham, Ala.

The seller was not identified. The companies last week signed a non-binding letter of intent.

The deal includes 11,350 wells with current net total gas production of 32,100 barrels of oil-equivalent per day (BOE/d). That would more than double the company’s net daily production, Diversified said.

With the deal, the company’s net daily production will increase by 114%, the company said. Its acreage under lease would grow from 4 million to 6.5 million acres.

It said it would fund the deal through a new $1 billion debt facility and a share sale worth $225 million.

The company said the deal is expected to boost earnings and that it would more than double the company’s proven developed producing reserves by 393 million barrels of oil-equivalent (MMBOE), up from 163 MMBOE. The deal also includes pipelines and compression stations.

Diversified spent $180 million last February on two other deals in the Appalachian Basin.

More Spending Needed in the Permian.  Oil majors led by Exxon Mobil and Chevron will need to increase their spending in the booming Permian Basin by billions of dollars over the next three years to meet their production goals, likely leading them to acquire more companies and acreage while increasing demand — and costs — for oilfield services, according to a new report. The report, by the research firm IHS Markit, argues that Exxon Mobil, Chevron and, to a lesser extent, Royal Dutch Shell, will need to spend nearly $30 billion from 2018 to 2020 in the West Texas shale play. IHS last week projected that the Permian is on track to become the world’s largest oil field by 2023, producing by itself more than any other country in the world, except Russia and Saudi Arabia. The expansion in the Permian of the largest energy companies, called supermajors, could pressure smaller exploration and production companies to sell as they struggle to keep up with cost inflation driven by demand for workers, pipeline and oilfield services. At the same time, the Big Oil companies will need to balance rising costs in the Permian against the pressure from shareholders to hold down

Shutting in Wells in the Permian.  The fastest-growing oil producing region in the United States, the Permian, is nearing the limits of its pipeline takeaway capacity and some producers may be forced to shut in wells within months, according to the chairman of one of the biggest U.S. shale producers, Pioneer Natural Resources. A lot of new pipelines are being planned and approved, but none of them are expected to come online before the second half of 2019—possibly leaving production stranded.

Water Problems in the Permian.  The Permian Basin, the largest shale oil-producing region in the United States, is on a path to become one of the world's largest oilfields, according to recent estimates. But as producers extract more and more resources from the region, which stretches across Texas and New Mexico, an unusual problem is bubbling up: a surplus of water. "In the Permian Basin, you make a lot of water," Chip Johnson, the CEO of independent oil and gas driller Carrizo Oil & Gas, and told CNBC on Tuesday. "Typically, you'll make five barrels of water for every barrel of oil." When companies like the $2.2 billion Carrizo extract oil from the Permian, salt water comes out with it, creating issues around handling the extra fluids, Johnson said. "It's probably the most water-rich or water-problem oil basin," Johnson told "Mad Money" host Jim Cramer. "You have 15 million barrels a day of salt water right now that has to be dealt with, usually re-injected back into briny reservoirs that are deeper than anything else." But Carrizo, which recently whittled down all of its operations to just the state of Texas, is working on alternative solutions to the water problem.

Russians in FA Manipulating Anti-Groups. There's a tangible money trail that links Vladimir Putin’s Russian government with U.S. environmental groups -- and, yes, some of those groups are in Florida. Why can't we find a word about it in the mainstream media? Because the Left decrees environmentalists' motives are pure, they mustn't be questioned. And that's the truth of it. Yet, the Kremlin is, and has been for long time, manipulating environmental groups to smash the oil and gas industries in the U.S. and return America to its dependency on foreign products.

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PA Permits June 14, to June 21, 2018

        County                                   Township                                          E&P Companies

  1. Jefferson                                     McCalmont                                        XTO
  2. Jefferson                                     McCalmont                                        XTO
  3. McKean                                       Norwich                                             PA Gen Energy

OH Permits for week ending June 16, 2018

       County                                   Township                                          E&P Companies

  1. No Permits Last Week

Joe Barone 610.764.1232
Vera Anderson 570.337.7149

Utica Summit 2019