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  • Permit Activity.  
     
    • PA – 32 permits; Chesapeake leads the way in the Northern Tier; CONSOL will be drilling in Jefferson.
    • OH –17 permits; Eclipse active in Guernsey; Triad Hunter gets permits in Monroe County to drill in the Utica and Marcellus.
  • Expo/Industry events for the next few months:
     
    • Jobs Energy Rally May 6, Harrisburg, PA – this industry event will be the ultimate networking opportunity.  Representatives from the E&P companies and major oil field services will be at the event.  Come out and support the industry.  Register today.  http://unitedshaleadvocates.com/
    • Shal-Abration May 10, Cambridge, OH
    • PIOGA 2014 Eastern Oil and Gas Trade Show and Conference May 13-14, Heinz Field, Pittsburgh, PA
    • DUG East Conference and Exhibition June 3-5, Pittsburgh, PA
    • Midstream Ohio 2014 June 11, Canton, OH – this event will provide a good update of midstream activity in OH with speakers from
      • Blue Racer
      • Access Midstream
      • Momentum
      • EQT Midstream Partners
      • EnLink Midstream (merger of Crosstex and Devon Midstream)
    • Northern Tier Marcellus Shale Expo June 18, Mansfield, PA

      Learn more about these expos.  http://www.shaledirectories.com/site/oil-and-gas-expo-information.html

Latest facts and a rumor from the Marcellus and Utica Shale

  • BP is pulling out.  We have reported rumors that BP was leaving and then rumors that BP was negotiating a pipeline deal with Dominion.  After that deal was done, BP was supposedly going to start drilling.  It looks like our initial rumors were right.  

    BP is walking away from a $300 million invest for mineral rights for 80,000 acres.
     
  • Shell selling leases in the Eagle Ford.  Royal Dutch Shell’s CEO Ben van Beurden just presented his turnaround plan for Shell.  It’s noteworthy that Shell is selling is leases in the Eagle Ford.  Does that mean there will be great support for drilling in the Marcellus.  Based on Shell’s increase in permitting activity, it certainly looks like it.
     
  • Statoil quadruples profit.  Statoil in reporting its first quarter financials attributes its success to its operations in the Marcellus.
     
  • Rex Energy’s 1st quarter results.  Rex Energy’s oil and natural gas production exceeded its own estimates during the first quarter due to quick processing of gas from its Marcellus Shale wells in Pennsylvania and earlier than expected results from Utica Shale wells in Carroll County, the company reported Wednesday.

    Rex had revenue of $96.7 million, including a near doubling of revenue from the sale of oil, natural gas and NGLs, as cold weather increased demand and fuel prices. The company ended the quarter with net income of $8.9 million or 17 cents a share.

    In Carroll County, Rex drilled four Utica wells, fracked four wells and placed three wells into production. Six wells were awaiting completion as of March 31.

    The company completed its six-well Grunder pad in Carroll and expects to begin production mid-year. The Grunder wells have an average total measured depth of 12,905 feet, including an average lateral length of 4,800 feet. The wells will be testing the western edge of Rex’s acreage, where the company expects to find more liquids compared with the center of its acreage, said Patrick M. McKinney, president and operations chief.

    Rex also began producing from its three-well Ocel pad, which had a 30-day sales rate of 1,128 barrels of oil equivalent per day. The wells came online earlier than expected and produced more liquids than anticipated, McKinney said.

    The company also is drilling the three-well Jenkins pad with 5,200-foot average lateral lengths. The wells are in the center of Rex’s 17,100 gross acres in Carroll County.

    In Guernsey County, the company plans to begin drilling the six-well J. Hall pad in the second quarter, with completion slated for the fourth quarter and production near year’s end.

    By the end of 2014, Rex expects to have drilled 12 Utica wells, fracked 18 wells and have up to 18 wells producing.

    Rex strikes two deals to move gas.  Rex has secured firm transportation for 130,000 million cubic feet per day (MMcf/d) of natural gas for 20 years beginning in 2016. This project will allow Rex to move gas west from Butler County to access premium markets in both the Midwest and the Gulf Coast.

    In addition, Rex struck a deal with Texas Gas Transmission, an interstate pipeline that originates on the Gulf Coast and spans states in the South and Midwest. The agreement will allow for expanded capacity on 690 miles of existing pipeline, known as the Ohio-Louisiana Access Project, from Warren County, Ohio to Perryville, Louisiana.
     
  • Hess reducing presence in the Utica.  It expects to complete the sale of more Utica Shale assets later this year, bringing in about $334 million.

    It will be interesting to see if Aubrey McClendon’s AEP will be buying Hess’s leases.
     
  • Hilcorp last man standing in NE OH.  With BP and Halcon Energy Corp. pulling up stakes in the northern tier of the Utica shale, and Consol Energy and Chesapeake Energy tapering their oil and gas exploration activity here, one exploration company is actually increasing its presence in this part of the play.

    Hilcorp Energy Co.'s latest flurry of permit activity just across the Ohio state line in Lawrence County, Pa., demonstrates that despite the cold feet the big energy companies experienced in the north -- and a series of small earthquakes tied to one of Hilcorp's wells in Mahoning County -- the Houston-based company isn't leaving any time soon.

    According to the Pennsylvania Department of Environmental Protection, Hilcorp was issued 16 new horizontal permits in a single day, April 21, for wells in Pulaski and Mahoning townships.
     
  • Top 10 wells in OH. Gulfport Energy Corp. had 38 wells in Ohio during the final three months of 2013, and five of the top 10 wells, while Antero Resources had 19 overall and the rest of the best.  The top 10 wells are in Belmont, Harrison and Monroe counties.
     
  • Consol 1st quarter results.  Consol reported net income of 50 cents a share, in the three months ended March 31, compared with a loss of $1.6 million, or 1 cent a share, in the same period a year ago. Revenue in the first quarter was $969 up from $842.9 million a year ago.

    This quarter’s big story was natural gas, where revenue was $266.3 million, compared with $167.8 million a year ago. That added $46.9 million in profit. Gas revenue nearly doubled, and sales of natural gas liquids nearly quadrupled and condensate sales tripled. Sales volume in the Marcellus was up 88 percent, and natural gas liquid sales were up 300 percent.

    There were 35 wells drilled and 23 completed in the Marcellus during the quarter, and seven wells drilled and three completed in Consol’s holdings in the Utica Shale.
     
  • Range hits super well.  Marcellus super-rich well tested at 24-hour rate of 6,357 boe per day, or 38.1 Mmcfe per day (65% liquids), with a 7,065 foot lateral and 36 frac stages. This is the highest rate Marcellus well in the southwest portion of the play drilled to date by any operator.

    This lateral is much longer than their typical well. They seem to be experimenting with newer frac spacing, both in the lateral and between each.
     
  • Not all the Marcellus and Utica Nat Gas is going to the Gulf. Investments in a proposed pipeline to move natural gas liquids from the Utica and Marcellus shale plays to the Gulf Coast have been suspended because of a lack of interest.

    Williams Companies Inc. said it is halting capital investments in its Bluegrass Pipeline because of an “insufficient level of firm customer commitments,” according to a news release. The company still is talking with potential customers about the pipeline, however.
     
  • Triad Hunter getting permits in OH for both Utica and Marcellus.  Check out this week’s permitting report.  Triad Hunter received permits to drill Utica and Marcellus wells in Monroe County.      
     
  • Reuters Nat Gas outlook.  The United States faces a natural gas supply shortfall this year despite the country's fracking boom, threatening more price spikes as energy companies struggle to replenish stockpiles drained to critically low levels after a brutal winter.

    As the coldest winter in 30 years thaws across North America, some experts worry that stockpiles will not be refilled to levels high enough to meet demand next winter, causing supply disruptions and sudden price surges of the kind that have dented power company earnings and raised residential bills in recent months.

    The concerns center on a set of extraordinary circumstances: stocks are at 11-year lows; flat futures prices make it uneconomical for utilities to hold onto gas and burn it later, and a fractured network of pipelines means gas in big producing regions, including the country's biggest Marcellus Shale play centered in Pennsylvania, is stranded away from storage caverns.

    Forecasts of a hotter-than-average summer have raised worries that higher demand could add further strain on stockpiles ultimately raising residential summer electric prices.

    To be sure, utility companies still have months to restock and production is growing. In the long term, a number of pipelines scheduled to come online later this year will help ease some of the bottleneck around the Marcellus.

    But as the country continues to pump out record amounts of oil and gas from a fracking revolution that took off toward the end of the last decade, some experts say the industry should be more aware of the possibility of a worst-case scenario.
    "People are not taking it seriously. The market seems to have become complacent," said Anthony Yuen, Nat Gas analyst at Citigroup in New York.

RECORD DRAW

Utilities pulled a record 3.01 trillion cubic feet (tcf) of gas from storage this winter to meet heating needs, creating massive price volatility in some regions as stockpiles fell to 822 billion cubic feet, the lowest in more than a decade. Stock rebuilds in two of the past three weeks were lower than expected.
"Even after a normal summer, if by August there is only 2.6 trillion cubic feet of gas in storage, the market may start to get really worried," said Yuen.

Getting to 3.7 tcf by the start of the winter, a level considered more comfortable for winter, is "very unlikely", he said. Other analysts say stocks may only get to 3.4 tcf by October.

At the same time, U.S. natural gas futures prices are not rising enough to encourage putting gas in store for sale later in the year, or for drillers to increase output, analysts said.

Prices for October delivery are at $4.66 per million British thermal units, little changed from the May contract of $4.64. Yuen reckons gas prices would have to top $5.50 to entice more drilling.

SUMMER, THE WILD CARD

Much depends on the summer. An active hurricane season, potential drop in drilling activity if prices remain sluggish, coal plant retirements, a bigger-than-expected autumn nuclear refueling season and reduced imports from Canada would all tighten U.S. gas availability.

The gas-directed rig count fell to around 300 in April, the lowest in 21 years, potentially hampering efforts to raise production if needed. Gas rigs peaked at more than 1,600 in 2008 but have since fallen as producers search for more lucrative oil.

The U.S. National Weather Service expects above normal temperatures across most of the country for June, July and August, except for the upper Midwest which is forecast to have normal temperatures.

Utilities say they will get the gas needed, but as in the past winter they may have to pay huge amounts for it.

Rig Count

  • Baker Hughes Rigs count for the April 25 reporting week.  
     
    • PA Marcellus 60 rigs – up 2
    • PA Utica 1 rigs – unchanged    
    • Ohio Utica 35 – down 1
    • WV Marcellus 27 – up 4

PA Permits for April 17 to April 24 2014

       County                 Township             E&P Company
1.    Bradford                Athens                  Chesapeake
2.    Bradford                Franklin                 Chesapeake
3.    Bradford                Franklin                 Chesapeake
4.    Bradford                Overton                 Chesapeake
5.    Bradford                Ulster                    Chesapeake
6.    Bradford                North Towanda       Chesapeake
7.    Bradford                West Burlington     Chesapeake
8.    Bradford                Wysox                  Chesapeake
9.    Jefferson                Henderson            CONSOL
10.    Jefferson              Henderson            CONSOL
11.    Jefferson              Henderson            CONSOL
12.    Jefferson              Henderson            CONSOL
13.    Lycoming             Gamble               Atlas
14.    Sullivan                Elkland               Chesapeake
15.    Sullivan                Fox                    Chief
16.    Sullivan                Fox                    Chief
17.    Sullivan                Fox                    Chief
18.    Sullivan                Fox                    Chief
19.    Susquehanna       Auburn                Chesapeake
20.    Susquehanna       Auburn                Chesapeake
21.    Susquehanna       Auburn                Chesapeake
22.    Susquehanna       Auburn                Chesapeake
23.    Susquehanna       Auburn                Chesapeake
24.    Susquehanna       Auburn                Chesapeake
25.    Susquehanna       Franklin               WPX Energy
26.    Susquehanna       Gibson                Cabot
27.    Susquehanna       Gibson                Cabot
28.    Susquehanna       Gibson                Cabot
29.    Susquehanna       Gibson                Cabot
30.    Susquehanna       Rush                   Chesapeake
31.    Tioga                   Delmar                Seneca
32.    Tioga                   Delmar                Seneca    

OH Permits – week ending April 26, 2014

Utica

       County                 Township                E&P Companies

1.    Belmont                Somerset              Gulfport
2.    Belmont                Mead                    XTO
3.    Carroll                   Augusta                Chesapeake
4.    Guernsey              Oxford                   Eclipse
5.    Guernsey              Oxford                   Eclipse
6.    Guernsey              Oxford                   Eclipse
7.    Guernsey              Millwood                Eclipse
8.    Guernsey              Millwood                Eclipse
9.    Guernsey              Millwood                Eclipse
10.    Monroe                Lee                       Triad Hunter
11.    Monroe                Lee                       Triad Hunter
12.    Monroe                Lee                       Triad Hunter
13.    Monroe                Lee                       Triad Hunter

Marcellus
        
1.    Monroe                Lee                    Triad Hunter
2.    Monroe                Lee                    Triad Hunter
3.    Monroe                Lee                    Triad Hunter
4.    Monroe                Lee                    Triad Hunter


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Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149
Andrea Bagnell andrea@shaledirectories.com 610.256.1898

 

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