Shale Directories Seminars
Upstream PA 2019
April 17, 2019
Penn Stater Conference Center
State College, PA
Appalachian Storage Hub Conference
June 6, 2019
Hilton Garden Inn
Southpointe, Canonsburg, PA
Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, and Bakken Shale Plays
Appalachian Basin Ideal for Petrochemical/Chemical Manufacturing. Prospects for a wide variety of chemical manufacturing in the Appalachian Basin are robust as methane, propane and butane production is expected to continue increasing in the Marcellus and Utica shales in the coming years, according to a study released last week by IHS Markit. Low feedstock and product delivery expenses make the basin an ideal location for the production of ammonia, urea, methanol and polypropylene, among other derivatives. Much of the market for those products is near the shales, which makes the region especially competitive with other North American petrochemical centers in Canada and along the Gulf Coast, the study said. IHS forecasts that the Appalachian Basin will supply 45% of the nation’s natural gas production by 2040, with volumes projected to grow from 28 Bcf/d in 2018 to 51 Bcf/d in 2040. Natural gas liquids production is also expected to nearly double over that time, with IHS forecasting volumes will reach 1.17 million b/d in 2040. As production swells while propane and butane supply outstrip demand, prices are forecast to drop and “present promising economics for petrochemical assets in the region.” Prices in other basins outside of Appalachia, IHS said, would remain influenced by associated gas production and pipeline constraints.
South Koreans Invest in Blue Racer Midstream. First Reserve, a leading global private equity investment firm exclusively focused on energy, today announced an agreement with SK Holdings Co., Ltd. (“SK”), a top two conglomerate in South Korea, for an investment of $300 million into a fully integrated midstream company in the Utica and Marcellus Shale plays.
Blue Racer Midstream, LLC (“Blue Racer” or “the Company”) is a portfolio holding of First Reserve Fund XIII, funded in part by equity from First Reserve Fund XIII and investment funds affiliated with First Reserve, following the acquisition of a 50% interest in December 2018. The Blue Racer investment represents a sizeable addition to SK’s North American midstream platform as well as the formation of a strategic relationship with energy investor First Reserve.
SK’s diverse global portfolio of investments focus on driving competitive, long-term shareholder value in key growth industries such as the energy sector. As a strategic investor, SK will work alongside First Reserve and company management in supporting Blue Racer’s growth and initiatives to expand the Company’s regional footprint.
Blue Racer owns, operates, and develops midstream assets in the Utica and Marcellus Shale plays of the United States. The Company provides interconnected midstream functionalities with more than 700 miles of gathering pipeline and 1 billion cubic feet per day of cryogenic processing capacity. Blue Racer believes its strategically located assets and contractual relationships with material customers will allow it to retain and grow its position as a leading midstream company serving customers in the Appalachian basin.
Alex Krueger, President & CEO of First Reserve, stated, “With over 35 years’ experience as energy-focused investors, First Reserve has developed what is in our view a deep understanding of the global energy value chain, energy operations, and the key centers of energy activity. We believe Blue Racer is a well-positioned business in a growing market, and we are excited to welcome SK as a strategic investor in the company. We believe this partnership will serve as a strong complement to our expertise, and we deeply value the experience that SK will bring to the Blue Racer investment. We look forward to a long-term relationship with the SK organization as we seek to drive growth on behalf of both Blue Racer and our stakeholders.”
Dong Hyun Jang, CEO of SK Holdings Co., Ltd. added, “SK has built a substantial platform of energy investments throughout North America, providing what we believe is a robust investment foothold in an energy epicenter. This investment in Blue Racer and the partnership with First Reserve, a leading global private energy investment firm, are a continuation of that investment thesis – and the opportunity to combine our strategic expertise with experienced energy players. We believe Blue Racer is a premier midstream operator, and we look forward to helping build value through our energy business capabilities and synergy with shale-related assets in the U.S.”
Shell’s Falcon Pipes Arrive. The M/V Clipper Kamoshio arrived at PhilaPort’s Tioga Marine Terminal last month carrying 10,996 pipes for the Shell Falcon Pipeline in western Pennsylvania, the Port of Philadelphia said recently.
It took 10 days to discharge the cargo, which weighed 8.804 metric tons. Each day, 23 trucks head west carrying the cargo.
The Falcon Ethane Pipeline System will begin in southwestern Pennsylvania and continue down to West Virginia and eastern Ohio. The pipeline will consist of 97 miles of pipe. It will connect Marcellus and Utica shale deposits to a petrochemical plant that “cracks” or breaks apart ethane molecules to create ethylene and polyethylene.
“We are pleased that Shell chose Tioga to import pipes for the Falcon Pipeline,” Jeff Theobald, PhilaPort executive director and CEO, said. “It shows the Port of Philadelphia can serve western Pennsylvania’s cargo need. Tioga being such a robust multi-use facility makes the whole operation work perfectly.”
Diversified Buy 107 Wells. Diversified Gas & Oil, the owner of about 24,000 natural gas wells in Pennsylvania, is continuing its buying spree, as promised.
This time, the Alabama-based firm is spending some $400 million to buy 56 wells in Washington County and 51 wells in West Virginia.
These are all horizontal, Marcellus Shale wells that Noble Energy Inc. unloaded to West Virginia-based HG Energy Appalachia II two years ago for $1.2 billion. That deal also included midstream infrastructure.
Over the past few years, Diversified has emerged as the largest owner of oil and gas wells in Appalachia, with about 60,000 total. Most are older, shallow and conventional wells.
Pennsylvania environmental regulators have issued violation notices to Diversified Gas & Oil for failing to plug dozens of abandoned wells across the state in 2018 and 2019.
Pa. strikes well-plugging deal with largest conventional oil and gas operator in Appalachia
The HG acquisition adds to a relatively small but growing pot of unconventional wells that Diversified is already operating, but will boost by 30 percent the company’s total gas production when the deal closes.
This is Diversified’s first acquisition focused entirely on shale wells, which decline rapidly in the first few years after they’re put into service. Diversified will be getting them, on average, five to six years after they began operating. This is considered mature for a shale well.
But while their best days are behind them, the company said in an investor presentation that it expects them to continue to produce for “50+ years.”
Given Diversified’s rapid accumulation of environmental liabilities, the company had spent the past year negotiating deals with state regulators who want to ensure the cost of plugging these wells when they’re no longer active doesn’t fall to taxpayers.
Earlier this month, Diversified struck a 15-year agreement with the Pennsylvania Department of Environmental Protection that governs the rate at which the company will have to plug or bring back into service some 1,400 non-producing wells in the state. It also requires Diversified to post a $7 million bond.
Marcellus wells, because of their depth, orientation and younger age, will have different plugging considerations and a higher price tag. Such wells are not addressed in the DEP’s agreement with Diversified.
No Pipelines. Bad News for the Northeast. The lack of pipeline infrastructure in the Northeast has resulted in some of the highest electricity rates in the nation for families and business—and it will only get worse, according to a report by the U.S. Chamber’s Institute for 21st Century Energy.
The installment is part of the Energy Institute’s “Energy Accountability Series” asks the question: “What if pipelines aren’t built into the Northeast?” In the states examined, the report finds that the lack of additional pipeline infrastructure would cost over 78,000 jobs and $7.6 billion in GDP by 2020.
“Environmental groups seeking to ‘keep it in the ground’ are fighting to block virtually every project that would bring additional natural gas into in the Northeast,” said Karen Harbert, president and CEO of the Energy Institute. “As a result, residents in the Northeast are paying the highest electricity rates in the continental United States, with no relief in sight if infrastructure is not built. High energy prices are costing the region jobs and income, so maintaining the status quo will be painful.”
According to the U.S. Energy Information Administration, Connecticut has the third highest electricity rates in the nation, while Massachusetts ranks fourth, Rhode Island is fifth, New Hampshire ranks sixth, New York is eighth, Vermont is ninth, New Jersey is tenth, and Maine comes in at eleventh.
Meanwhile, continued development of shale oil and gas in Pennsylvania, Ohio, West Virginia, and elsewhere has helped reduce U.S. dependence on foreign energy and brought back thousands of manufacturing jobs. However, the lack of access to markets in the Northeast will cost those states jobs and revenue, which is also covered in the report.
Energy Demand Sets Record in 2018. Energy demand grew by 2.3% in 2018, a record performance for the past decade, according to a note published Tuesday by the International Energy Agency (IEA), Kallanish Energy reports.
Demand was driven by a strong global economy and solutions to cope with climate change. Nearly a fifth of the increase was due to heating or cooling needs, as average winter and summer temperatures reached unusual levels.
Natural gas accounted for 45% of the energy consumption, with U.S.-led demand expanded at its fastest rate since 2010. Americans consumed 10% more gas than the previous year, the fastest increase the IEA has seen since its first report in 1971.
“The annual increase in U.S. demand last year was equivalent to the United Kingdom’s current gas consumption,” the note said.
Oil demand grew by 1.3% worldwide, the first time increase in 20 years. The U.S. was the main driver thanks to more usage in petrochemicals, the production industry and trucking services.
Global coal consumption increased by 0.7%, only in Asia, where most coal-fired generation capacity is located. China and Japan also drove global nuclear generation, which accounted for 3.3% of demand and reached pre-Fukushima disaster levels.
China was the second leader in gas demand, with an increase of 18%.
Similarly to 2017, fossil fuels made up for nearly 70% of the total demand. Solar grew by 31%, but the lack of availability of renewables was balanced by a higher consumption of coal. This meant a 1.7% increase of carbon dioxide emissions related to energy production.
“Despite major growth in renewables, global emissions are still rising, demonstrating once again that more urgent action is needed on all fronts,” said IEA executive director Fatih Birol.
The IEA said the industry needs to improve efficiency and promote investments to develop clean energy solutions and new technologies, such as turning carbon emissions into energy.
PennEast Pipeline Loses Appeal. A federal appeals court has granted New Jersey a stay, halting construction of the PennEast natural gas pipeline, Kallanish Energy reports.
The stoppage will remain in effect while the Third U.S. Circuit Court of Appeals resolves eminent domain questions that involve New Jersey. The decision by appeals court Judge Michael Chagres came last week.
Several New Jersey state agencies had challenged the federal court’s jurisdiction to hear eminent domain claims by a private company, the Morning Call newspaper in Allentown, Pennsylvania, reported.
The newspaper said the New Jersey agencies argued such matters should be heard in state court.
The order blocks construction in New Jersey only, but it allows PennEast Pipeline Co. to continue surveying and testing along the route of the 110-mile pipeline.
The line would run from northeast Pennsylvania to southern New Jersey to move Marcellus Shale natural gas to markets. The $1.2 billion pipeline would move 1.1 billion cubic feet per day.
The companies behind the pipeline are Spectra Energy Partners, PSEG Power, New Jersey Natural Gas, Elizabethtown Gas and South Jersey Gas. Construction is expected to begin in late 2019, and would take seven months.
The line is being fought by a strong grass-roots campaign in Pennsylvania and New Jersey.
Late last year, U.S. District Judge Brian Martinotti gave PennEast permission to use eminent domain to acquire land from landowners unwilling to sell to the company.
The project still needs approval from New Jersey and from the Delaware River Basin Commission. It has been approved by the Federal Energy Regulatory Commission and Pennsylvania regulators.
10 Coal-Fired Plants Retiring. Dominion Energy is planning to permanently retire 10 power plant units, most of which were originally coal-fired, by the end of the month.
A Dominion spokesman told the Richmond Times-Dispatch newspaper the units, all in Virginia, had been placed on reserve last year with the possibility of returning to service. Retiring the units, he said, cancels that possibility.
Ascent Becoming the Big Dog in the Utica. Ascent Resources, a major player in the Appalachian Basin, achieved record daily production of roughly 2.4 billion cubic feet-equivalent per day (Bcfe/d) gross and 1.9 Bcfe/d net in December 2018, Kallanish Energy reports.
The Oklahoma-based company and its subsidiaries also increased proved natural gas, oil and natural gas liquids reserves to roughly 7.6 trillion cubic feet equivalent (Tcfe) with a PV-10 value at Securities and Exchange Commission pricing of about $6 billion, at Jan. 31.
At the midpoint of its 2019 capital plan, Ascent expects to spud between 90 and 100 gross wells, complete 100 to 110 gross wells and bring online 120 to 130 gross operated wells in the Utica Shale in eastern Ohio.
An ‘exciting year’
The information was released last week by the privately-held company. It was founded by the late oil tycoon Aubrey McClendon, who founded Ascent after being forced out at Chesapeake Energy, which he co-founded. He died in a 2016 traffic accident.
“2018 was another exciting year for Ascent, with our team efficiently integrating several strategic acquisitions, delivering significant organic growth through the drill bit and achieving record financial and operational results,” said Ascent’s chairman and CEO Jeff Fisher, in a statement.
He added, “Ascent remains the largest producer in the Utica Shale, operating 29 of the top 40 natural gas wells and 21 of the top 40 oil wells in Ohio during 2018.”
Fisher said Ascent remains focused on maintaining a strong balance sheet and liquidity profile. The producer’s 2019 operational plans are supported by “substantial” operating cash flow, ample liquidity from a $2.0 billion revolving credit facility, and a “robust hedging portfolio.”
Ascent has hedged roughly 85% of its anticipated natural gas production in 2019, and about 75% of its anticipated oil production, Fisher said.
“We believe 2019 will be an inflection point for Ascent as we achieve a size and scale that should allow us, at current strip prices, to reach cash flow neutrality before the end of 2019, and generate significant free cash flow in 2020 and beyond,” he said.
In 2019, Ascent is projecting net production to average between 2.0 and 2.2 Bcfe/d with about 90% natural gas, 7% natural gas liquids and 3% crude oil, the company said.
D&C dominates capital spending
Capital expenditures in 2019 are estimated to be between $1.1 billion and $1.25 billion, with between $1.0 billion and $1.1 billion for drilling and completion (D&C), and between $130 million and $170 million in land expenditures.
Ascent reported increasing well estimated ultimate returns and capital efficiencies through longer laterals and optimized well completions.
It achieved record high fourth quarter 2018 and full-year adjusted EBITDAX of $318 million and $844 million, respectively.
Ascent has increased its acreage position in the Utica Shale to 311,000 net leasehold acres, with royalty interests in more than 71,000 fee mineral acres.
Shell Bets on U.S. LNG. Royal Dutch Shell PLC and Energy Transfer LP said they are pursuing plans to convert a liquefied-natural-gas import facility in Louisiana into an export terminal, a bet that the future of U.S. shale gas lies in selling it for higher prices in overseas markets. The Anglo-Dutch energy giant and U.S. pipeline operator said they are putting contracts out for bid to engineers and construction companies to reconfigure Energy Transfer’s existing import facility in Lake Charles, La. The proposed facility would have the capacity to ship 16.5 million tons of U.S. natural gas a year, the companies said Monday. “You can model and study it but the best way is to go out to tender and get a price that someone is willing to commit to,” Maarten Wetselaar, Shell’s director of integrated gas and new energies, said in an interview Monday in New York. “We are done theorizing on it; we just want to find out.” The move comes amid a prolonged period of low natural-gas prices in the U.S., where futures for April delivery settled Monday at $2.755 per million British thermal units. That is up 5% from a year ago but still low enough to put financial pressure on the producers that have flooded the domestic market with shale gas in recent years.
TX Needs 10,000 miles. Texas will need to add more than 10,000 miles of new, currently unplanned, pipeline infrastructure projects in the next 30-plus years to achieve its full potential for growth of oil and gas production, a new study finds. The study, by IHS Markit, predicts that gas production from three major Texas producing regions – the Permian Basin, the Eagle Ford Shale and the Barnett — will peak in the 2030 timeframe at just under 35 Bcf/d and begin to gradually decline to around 30 Bcf/d by 2150. However, this projected growth is contingent on the construction of sufficient pipeline infrastructure, including projects that are planned or currently under construction, as well as future projects not yet on the books. Without the construction of future incremental pipeline infrastructure the study’s authors estimate Texas’ production of natural gas will be 24% lower than in the infrastructure buildout scenario, while crude production would be 9% lower, and natural gas liquids production would be 8% lower than projected. In comparing historic production with its five-year production forecast, Platts Analytics found that in the last decade total Texas gas production grew by more than 1 Bcf/d from 18.6 Bcf/d in 2010 to 19.7 Bcf/d last year. Production over the next five years is expected to continue ramping up to 24 Bcf/d in 2024, according to Platts Analytics data.
Drilling on U.S. Steel Mill?? The state Department of Environmental Protection will hold a public meeting this week on a controversial proposal that eventually could result in a half-dozen Marcellus Shale gas wells being drilled and fracked on U.S. Steel Corp.’s Edgar Thomson steel mill site in the Monongahela Valley. At the meeting, scheduled from 6 to 8 p.m. Wednesday, DEP will present information and answer questions about the proposal to build the well pad and drill an initial shale gas well between Braddock Avenue and Turtle Creek, straddling the North Versailles-East Pittsburgh border. The well-drilling operation, which could include as many as five additional wells, was proposed by Merrion Oil & Gas Corp., which has leased the land from U.S. Steel. The shale gas well would be the first “unconventional” horizontal shale well drilled by the company, and the first well of any kind it has drilled in Pennsylvania.
NY Pipelines Face a Long Battle. Opponents are once again lining up to challenge long-pending natural gas pipelines in New York after the projects scored recent victories at both FERC and in the courts, signaling that an uphill battle is still ahead to get the infrastructure in service after years of delays. Constitution Pipeline finally got a second chance in February when the Federal Energy Regulatory Commission indicated it would reconsider a decision made last year about whether New York took too long to issue a water quality certification (WQC). Environmental groups in the Northeast have looked beyond WQC reviews. They’ve successfully targeted various federal and state approvals for both the Atlantic Coast and Mountain Valley pipelines, which has repeatedly forced costly work stoppages and delayed those projects. Energy In Depth’s Dan Alfaro said similar tactics are likely to continue for the projects in New York. He noted too that the delays have so far been costly, pointing to a recent report from the U.S. Chamber of Commerce’s Global Energy Institute. The study found that the years Northern Access and Constitution’s backers have spent fighting the state instead of bringing the lines into service have cost more than $5 billion in gross domestic product.
NatGas Industry Gives Eastern Ohio $45.8 Million in Taxes. Over the past nine years, the oil and gas industry has brought jobs, better roads and increased tax revenues to counties and school districts throughout eastern Ohio. That was the message that Mike Chadsey, director of public relations for the Ohio Oil and Gas Association, brought to members of the New Philadelphia Rotary on Tuesday. Between 2010 and 2015, the industry has paid $45.8 million in taxes in six Ohio counties — Belmont, Carroll, Guernsey, Harrison Monroe and Noble, he said. During that time, it paid $14 million in property taxes in Carroll County and $11 million in Harrison County. In addition, the industry has spent $302.6 million to improve 639 miles of highway in eastern Ohio. That includes $44.7 million in Carroll County for 99.33 miles of roads and $31.4 million in Harrison County for 54.75 miles of roads. Energy companies have invested $8.1 billion on five pipeline projects. Kinder Morgan spent $500 million to build the 215-mile-long Utopia Pipeline and Energy Transfer spent $4.3 billion to build the 570-mile-long Rover Pipeline. Both pipelines run through Harrison, Carroll and Tuscarawas counties. Tax dollars generated by the industry have benefited local school districts.
PA Permits March 21, to March 28, 2019
County Township E&P Companies
- No new permits this past week.
OH Permits for week of March 23, 2019
County Township E&P Companies
- Columbiana Elk Run Hilcorp
- Columbiana Elk Run Hilcorp
- Jefferson Salem EAP OHIO LLC
- Jefferson Salem EAP OHIO LLC
- Jefferson Salem EAP OHIO LLC