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NewsLetters

Expo/Industry events for the next few months

Midstream PA 2018
September 25, 2018

Penn Stater Conference Center
State College, PA
http://midstreampa.com/

WV Energy Expo 2018
October 3, 2018
Hazel and J.W. Ruby Community Center\
Morgantown, West Virginia
http://wvenergyexpo.com/

Utica Summit
October 10, 2018
Walsh University
North Canton, OH
http://www.uticasummit.com/

Shale Insight
October 23-25, 2018
David Lawrence Conference Center
Pittsburgh, PA
http://shaleinsight.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

Ascent Buying Chevron Acreage.  We have heard that Ascent is in talks with Chevron to buy 30,000 acres in Ohio.  This acquisition would make sense for Ascent because it needs to ramp up drilling to meet pipeline capacity agreements.  Ascent has been securing drilling permits in Ohio almost every week in the last few months.  It’s obvious they are ramping up drilling.  (RUMOR)  

BP Making Bid for U.S. Onshore Assets.  BP was in the lead to acquire the US onshore shale oil and gas assets of BHP Billiton after submitting an offer worth well in excess of $10bn, people familiar with the matter said on Friday. The move represents a big bet by BP on US oil and gas production at a time when energy prices are rebounding. It would allow the oil super major to significantly rebalance its business with oil production, after focusing largely on natural gas assets.

$150 Oil.  Exploration and production companies which cut expenditures beyond the bone in trying to remain solvent in the 2014-2016 timeframe, could see their cuts come back to severely impact crude prices.

The dearth of exploration is setting the stage for an unprecedented crude price spike, according to Sanford C. Bernstein & Co., Bloomberg reported.

Companies have been compelled to focus on boosting returns and shareholder distributions at the expense of capital expenditures aimed at finding new supplies, analysts including Neil Beveridge wrote in a Friday research note, Kallanish Energy learns.

That’s causing reserves at major producers to fall and the industry’s reinvestment ratio to plunge to the lowest in a generation, paving the way for oil prices to surpass records reached last decade, according to Bernstein.

“Investors who had egged on management teams to reign in capex and return cash will lament the underinvestment in the industry,” the analysts wrote. “Any shortfall in supply will result in a super-spike in prices, potentially much larger than the $150 a barrel spike witnessed in 2008.”

The world’s oil supermajors, including Royal Dutch Shell, BP Plc and Chevron, navigated the price crash beginning in 2014 by cutting costs, selling assets and taking on debt to help satisfy investors with hefty dividends.

The biggest super, ExxonMobil, was punished by shareholders earlier this year after compounding disappointing results with a massive spending plan and a lack of buybacks, Bloomberg reported.

The oversupply of crude globally in recent years has masked “chronic underinvestment,” Bernstein said in the report. Oil has rebounded to the highest price in more than three years, as OPEC and its allies started reducing production by 1.8 million barrels per day (MMBPD) beginning in January 2017.

Producers aim now to produce more crude to help cool the market, but disruptions from Libya to Venezuela are keeping prices elevated.

Proven reserves of the world’s top oil companies have fallen by more than 30% on average since 2000, with only ExxonMobil and BP showing an improvement, helped by acquisitions, Bernstein said.

Meanwhile, more than 1 billion people will urbanize in Asia over the next two decades and this will drive demand for cars, as well as air travel, road freight and plastics that also require oil, according to Bernstein.

“If oil demand continues to grow to 2030 and beyond, the strategy of returning cash to shareholders and underinvesting in reserves will only turn out to sow the seeds of the next super-cycle,” the analysts wrote, Bloomberg reported.

“Companies which have barrels in the ground to produce, or the services to extract them, will be the ones to own and those who do not will be left behind.”

U.S. Oil Imports to Drop to 1958 Level.  U.S. Net Oil Imports are projected to drop by nearly 60 percent next year compared to 2017, falling to their lowest levels since 1958, the U.S. Energy Information Administration said Tuesday in its latest Short-Term Energy Outlook. "That certainly is eye-popping," says Patrick DeHaan, head of petroleum analysis for GasBuddy. Net imports are expected to fall from an average of 3.7 million barrels per day last year to 2.4 million bpd this year and 1.6 million bpd next year – "a pretty staggering number," he says. The reduction in net imports of foreign oil – a measure of the amount of oil imported versus the amount of oil exported – is being driven by record-setting production that is poised to see U.S. producers extract more oil per day next year than the last record set in 1970.

Top Producing Wells in Texas.  New data collected by a Canadian energy research group shows which oil and gas explorers in West Texas have the most prolific wells. The data from RS Energy Group shows that wells completed by Houston-based EOG Resources in West Texas' Permian Basin oil field had the highest average initial production at 2,051 barrels of oil a day. Other companies in the top five include the Pioneer Natural Resources of Irving, Occidental Petroleum of Houston, the Denver company SM Energy, and the oil major Chevron Corp. Ryan Luther, a senior associate with the Permian Basin team at RS Energy Group, said the firm used state data on a well's initial production rates for the first 24 hours after it was completed.

U.S. Crude Production to Set Record in 2018 and 2019.  The Energy Information Administration forecasts total U.S. crude oil production to average 10.8 million barrels per day (MMBPD) in 2018, up 1.4 MMBPD from 2017.

In 2019, crude oil production is forecast to average 11.8 MMBPD. If realized, the forecast for both years would surpass the previous record of 9.6 MMBPD set in 1970, Kallanish Energy reports.

Crude oil production at these forecast levels would probably make the U.S. the world’s leading crude oil producer in both years, according to EIA's just-published July edition of its Short-Term Energy Outlook.

Increased production from tight rock formations within the Permian Basin in West Texas and southeast New Mexico accounts for 0.6 MMBPD of the expected 1.2 MMBPD of crude oil production growth from June 2018 to December 2019.

The remaining increase comes from the Bakken, Eagle Ford, other basins and plays in the Lower 48 U.S. states, and the Federal Gulf of Mexico (GOM), which are collectively expected to account for production growth of roughly 0.6 MMBPD.

EIA expects the Permian Basin to produce 4.0 MMBPD by the end of 2019, which is roughly 0.6 MMBPD more than estimated June 2018 levels and would represent about one-third of total U.S. crude oil production at the end of 2019.

Favorable geology, along with technological and operational improvements, has allowed the Permian to become one of the most economic regions for oil production.

However, the forecast annual average growth in 2019 is 0.4 MMBPD lower than in 2018. The slower growth reflects increasing pipeline capacity constraints in the Permian, which are expected to lower wellhead prices for the region’s oil producers and to have a dampening effect on Permian’s full production potential in the near term.

The widening spread between WTI-Cushing and WTI-Midland crude oil prices signals the expectation for reduced drilling activity growth through the forecast period, which in turn is expected to slow the rate of crude oil production growth through 2019.

Production in the Eagle Ford Shale play is expected to increase by roughly 0.2 MMBPD, to 1.4 MMBPD in 2018, and then to increase to 1.5 MMBPD in 2019.

“The Eagle Ford Shale region covers a significantly smaller geographic area with fewer prolific formations and fewer opportunities to drill compared with the Permian region,” according to EIA.

“However, the Eagle Ford region does not have the same pipeline capacity constraints as the Permian. Some producers could potentially target the Eagle Ford and move away from the Permian in 2018 and in 2019, because the Permian region continues to experience constraints.”

EIA expects the Bakken, contained mostly in North Dakota, to produce 1.2 MMBPD in 2018, and 1.4 MMBPD in 2019, surpassing the previous record of 1.2 MMBPD set in 2015.

Management Changes at Range.  Range Resources Monday announced an agreement with its largest institutional investor to separate the positions of chairman and CEO, plus add two independent directors to the company's board.

Greg G. Maxwell, former CEO of Phillips 66 and a Range board member since 2015, has been named independent chairman of the Range board. That position had been held by Jeff Ventura, who is also president and CEO, since January 2015.

The agreement with San Francisco-based investment advisor SailingStone Capital Partners, which owns 16.70% of Range's shares outstanding, also includes the search for an executive vice president outside the company "to supplement and strengthen the company's management team."

The position had been vacant since the retirement of Ray Walker earlier this year.

The agreement calls for two board members to be appointed to Range's board immediately, as well as the reduction of the company's board to nine members at its annual meeting next spring. Two incumbent board members will not be asked to return, one each in 2019 and 2020, according to a Securities and Exchange Commission filing by SailingStone, reviewed by Kallanish Energy.

"We thank the Range board for their engagement on these issues, and look forward to working with the company to add two new directors to the board," said SailingStone managing partner Ken Settles, in a statement.

Maxwell said Range will work with SailingStone in picking the new directors.

A Very Important Case for PA Drillers.   'Rule of capture' case could go to Pa. Supreme Court.  A Marcellus Shale gas producer is asking Pennsylvania's highest court to take up a case with potentially far-ranging consequences for hydraulic fracturing operations. In April, two judges on a lower state court found that the "rule of capture," a long-standing principle in oil and gas operations, does not apply to fracking. The rule stipulates that oil and gas captured from underground reservoirs belong to whichever party extracts it from its property first, even if the reservoirs lie beneath neighboring lands.

Jim Willis at our Upstream PA 2018 Seminar identified this ruling as his #1 concern for drilling in PA.  If the lower state court ruling stands the fracking in PA will change radically.

OH 1st Qtr. NatGas and Oil Production Numbers.  During the first quarter of 2018, Ohio’s horizontal shale wells produced 3,942,251 barrels of oil and 531,291,017 Mcf (531 billion cubic feet) of natural gas, according to the figures released July 11 by the Ohio Department of Natural Resources. Natural gas production from the first quarter of 2018 showed a 42.85 percent increase over the first quarter of 2017, while Utica shale oil production decreased by 3.6 percent for the same period.

Latest on Cabot in OH.  A Houston-based energy company with oil and gas drilling experience in Pennsylvania’s Marcellus shale is moving west — this time hoping to find oil or natural gas in north-central Ohio. Cabot is drilling five wells that will explore formations below the Utica shale — approximately 6,000 feet deep. To do so, the company is seeking an amendment to existing leases with Columbia Gas Transmission — now part of TransCanada — to allow for horizontal drilling.

More Oil Deals Coming in 2018.  U.S. oil and gas acquisitions should surge in the second half of the year following a spring lull, with upwards of $50 billion in new deals anticipated as more companies aim to grow in Texas shale, according to a new report. With most of the land in the booming Permian Basin already snapped up and oil hovering just below $75 a barrel, companies that want to expand in the West Texas oil field will have to make deals to acquire other companies, the report said. International oil companies looking to grow in the U.S. and private equity firms hoping to cash in on rising crude have billions to spend, said Austin-based Drillinginfo, a leading oil and gas research and analytics firm. Note: Houston Public Media also reports.

Permian Becoming #3 Globally.  The Permian basin, that straddles west Texas and southeast New Mexico, is currently the biggest shale oil producing region in the USA. However now, thanks to ramped-up activity by drillers, the Permian’s global status could soon have it join the ranks of Russia and Saudi Arabia as one of the Top 3 regions oil producing regions in the world. According to a recent estimate from IHS Markit, output from the Permian is forecast to more than double between 2017 and 2023—taking the region’s production up to 5.4 million barrels per day (bpd).

Buckeye Pipeline Cannot Reverse Flow.  Pennsylvania utility regulators are rejecting an application by a Houston-based pipeline operator to reverse the flow of refined fuels on a portion of the Laurel Pipeline. The Public Utility Commission voted 5-0 Thursday to uphold an administrative law judge’s recommendation that it reject Buckeye Partners’ application to reverse the flow to go west to east on the Altoona-to-Pittsburgh section of the 350-mile pipeline. Buckeye had sought permission to reverse the flow on that section to bring fuels from Midwest refiners to customers farther east in Pennsylvania. “While we are waiting to review the commission’s formal order, we respectfully disagree with the decision regarding our market-driven proposal aimed at providing Pennsylvania consumers with expanded access to more affordable fuels, but we will abide by the decision and continue to move forward with our current plans to provide bi-directional service on Laurel PipeLine,” the company said in an emailed statement.

There will be no newsletter next week, July 21, 2018.  I’m on vacation.

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PA Permits July 5, to July 12 2018

County                                   Township                                          E&P Companies

  1. Lycoming                                     Hepburn                                            Inflection
  2. McKean                                       Sergeant                                            Seneca
  3. McKean                                       Sergeant                                            Seneca
  4. McKean                                       Sergeant                                            Seneca
  5. McKean                                       Sergeant                                            Seneca
  6. McKean                                       Sergeant                                            Seneca
  7. McKean                                       Sergeant                                            Seneca

OH Permits for week ending July 7, 2018

County                                   Township                                          E&P Companies

  1. Belmont                                       Wheeling                                           Ascent
  2. Belmont                                       Wheeling                                           Ascent
  3. Belmont                                       Wheeling                                           Ascent
  4. Harrison                                       Moorefield                                         Ascent

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

Northeast Supply Enhancement