Facts & Rumors # 368
February 15, 2020
Shale Directories Conferences
8th Annual Utica Midstream
March 19, 2020
North Canton, OH
8th Annual Upstream PA 2020
April 16, 2020
State College, PA
4th Annual Appalachian Storage Hub Conference
June 4, 2020
Hilton Garden Inn
Southpointe, Canonsburg, PA
8th Annual Utica Downstream
October 15, 2020
North Canton, OH
8th Annual Midstream PA 2020
November 12, 2020
State College, PA
2nd Annual Appalachian Basin Real Estate Conference
December 10, 2020
Latest facts and a rumor from the Marcellus, Utica, and Permian, Eagle Ford Plays
Bechtel Is Looking for 100 acres for the PTTDLM Cracker. Bechtel met with six realtors this week in St. Clairsville. Bechtel is looking for 100 acres and asked these realtors to find a property this size.
How to Be Vendor for Bechtel. Bechtel is beginning to ask certain types of services companies to register on its web to be vendor. I strongly recommend that you register your company on the Bechtel web site if you want to work on the PTTDLM cracker plant.
JobsOhio Invests $20 in PTTDLM Cracker. Ohio has announced it will provide an additional $20 million for “critical” site engineering and site preparation work at the location of a planned ethane cracker plant in eastern Ohio, Kallanish Energy reports.
That announcement came Friday from JobsOhio, the state’s private non-profit development agency. The state grant will benefit PTT Global Chemical America and its partner, Daelim Chemical USA.
The revitalization grant goes directly to the engineering firm, Bechtel Corp., that has been selected to construct the $6 billion petrochemical facility, if the project proceeds. The project has languished for months with no final investment decision by PTT and Daelim.
The partnership “continues to work toward a final investment decision” in the first half of 2020, project spokesman Dan Williamson told the Columbus Dispatch newspaper.
Ohio Gov. Mike DeWine said last week he believes the plant will be built at Dilles Bottom on the Ohio River in Belmont County, the newspaper reported. “That’s the indication I get,” he said. “I don’t have a crystal ball, but I’m optimistic.”
Site preparation began last year. Last July, JobsOhio provided $30 million for site preparation work that Bechtel had initiated on the 500-acre site. The two chemical companies invested another $35 million in that work.
The cracker would be located on the site of an old coal-fired power plant that has been razed. JobsOhio provided about $17 million for removing the power plant and remediating the site.
PTT had first proposed the project in 2015. The plant, if built, annually will produce 1.5 million tons ethylene and other materials from ethane produced by shale drilling.
The plant would use six ethane cracking furnaces and manufacture ethylene, high-quality polyethylene and linear low-density polyethylene.
PTT Global Chemical America is a subsidiary of PTT Global Chemical, Thailand’s largest integrated petrochemical company. Daelim is based in South Korea.
Royal Dutch Shell is building a similar ethane cracker in Beaver County, Pennsylvania, northwest of Pittsburgh.
Marcellus Write Downs. (Thanks, MDN). A Reuters article warns that U.S. shale gas investors are “bracing” for write-downs by major drillers, particularly in the Marcellus/Utica region. The article chronicles the write-downs we already know about (EQT, CNX, Shell and Chevron) and speculates that others (like Antero and Cabot) may make announcements in the coming days. And then, in a bit of a twist, the article ends with information about BKV (Banpu Kalnin Ventures), to say (a) Banpu’s American shale assets have already been written down before they purchased them, and (b) Banpu will not do any new drilling until the price of gas recovers to at least $3.50/Mcf. They may wait a long time.
Chevron Hires Barclays to Sell Marcellus Utica Assets. (Thanks, MDN) December Chevron announced it was writing down over $10 billion worth of its U.S. onshore shale assets, with $6.5 billion of that number coming from their Marcellus/Utica assets. In addition, the company announced it is putting all of its M-U assets up for sale. Just sticking a “for sale by owner” sign on more than a half-million acres of leases and over 500 wells doesn’t appear to be working. So Chevron has hired investment bank Barclays to help shop their M-U assets.
PA Unions Support Legislation to Attract Petrochemical Plants to PA. The Pennsylvania Building Trades Unions on Monday intensified efforts to pass a hefty tax break for future petrochemical and fertilizer manufacturers using state natural gas. The Pennsylvania General Assembly last week approved House Bill 1100 with overwhelming bipartisan support as western Pennsylvania, in particular, continues to debate the natural gas industry’s impact on climate and business. HB 1100 would establish multi-million-dollar tax breaks for companies investing at least $450 million to build a manufacturing plant that creates a minimum of 800 combined temporary and permanent jobs. The incentive is similar to what Shell Chemicals received years ago to build its petrochemical complex in Potter Township. The company agreed to invest at least $1 billion in Pennsylvania’s economy and create thousands of construction jobs in exchange for $1.6 billion in state subsidies over the course of 25 years. The Pennsylvania Department of Revenue estimates the new program would cost $22 million annually per plant in missed taxes until the strategy ends in 2050. It encourages the use of natural gas across the board, roping in fertilizer manufacturers.
Good News! Fed Study Found No Environmental Problems with Fracking. A new federal study failed to find evidence that oil and gas production in northern Pennsylvania has contaminated the commonwealth’s forest rivers and streams, providing a timely counterweight to the vows to ban fracking being made by some Democratic presidential candidates. The study, which was published Feb. 3 in the Proceedings of the National Academy of Sciences (PNAS), one of the world’s most prestigious scientific journals, concluded that there were no signs that chemicals or wastewater from fracking wells had entered more than two dozen streams running through the gas fields of the Marcellus Shale formation. There was also no evidence found that fracking had significantly altered the volume and makeup of the microscopic creatures in the water or had changed the chemical composition of the water itself. The study’s authors included experts from the Bureau of Forestry within the Pennsylvania Department of Conservation and Natural Resources and the Division of Water Quality at the Pennsylvania Department of Environmental Protection.
Supreme Court to Hear Atlantic Coast pipeline Arguments on Feb. 24. Lynn Cameron inspected the layers of mountain ridges from an overlook on the Appalachian Trail, and imagined how the scenery might change. Her gloved hand drew an imaginary line across the distant landscape to show the proposed path of the Atlantic Coast natural gas pipeline. Atlantic Coast project engineer Greg Supey doesn’t get the fuss. He sees the terrain as fertile ground for Dominion Energy Inc.’s painstakingly studied route that minimizes impacts to the trail and the environment. “In reality, this is the most scrutinized project that I’ve ever been on,” Supey said, studying the landscape from a nearby stretch of trail another January day. “It’s unbelievable what we have to go through for this one, and that’s good.” The Supreme Court hears oral arguments Feb. 24 in the high-stakes battle over the $7.8 billion Atlantic Coast pipeline.
Four Liquefied NatGas Export Projects Approved in TX. Four proposed liquefied natural gas export projects along the Texas Gulf coast secured federal permits to ship a combined 47 million metric tonnes of LNG annually to non-free trade agreement nations such as Japan and India, Kallanish Energy learns.
Monday, the U.S. Department of Energy authorized the Rio Grande LNG, Annova LNG and Texas LNG projects, all located at the Port of Brownsville on the U.S.-Mexico border in South Texas. Also securing DOE authorization was the so-called Stage III expansion project at Cheniere Energy’s Corpus Christi (Texas) LNG complex. A total of 6.75 billion cubic feet per day of natural gas can be exported with DOE approval from the four facilities.
“The export capacity of these four projects alone is enough LNG to supply over half of Europe’s LNG import demand,” said Secretary of Energy Dan Brouillette. “With today’s authorizations, we are paving the way for more U.S. natural gas exports to bring energy security and prosperity to our allies around the world.”
Authorizations come when Asian LNG prices at record lows
However, DOE authorization for the four projects comes when LNG prices in Asia are at record lows due to lower demand from a mild winter and a global supply glut caused by the coronavirus outbreak in China, which has basically shut down the Asian country.
Rio Grande LNG is proposed by Houston LNG company NextDecade, while Annova LNG is a project proposed by a Houston subsidiary of Chicago utility giant Exelon. Texas LNG’s developer, Texas LNG Brownsville LLC and LNG pioneer Cheniere Energy are also both headquartered in Houston.
“This is another significant milestone for our Rio Grande LNG project, which will play a critical role in linking natural gas from the Permian Basin and Eagle Ford Shale to the global LNG market, providing countries around the world access to cleaner energy,” NextDecade CEO Matt Schatzman said, in a statement.
Still project opposition in Rio Grande Valley
The trio of projects proposed for Brownsville continue to face stiff opposition from a coalition of Rio Grande River Valley (RGV) shrimpers, fishermen, environmentalists, neighbors and communities collectively working under the banner Save RGV from LNG.
Citing concerns about endangered species, climate and other issues, opponents of projects have asked the Federal Energy Regulatory Commission to reconsider permits issued for the projects.
FERC officials tabled the requests to reconsider the permits for Annova LNG and Texas LNG and denied the request to reconsider the permit for Rio Grande LNG, which is expected to goad opponents to file a federal lawsuit.
Kinder Expects Approval for Permian Pipeline Highway. Lawyers expect Feds to approve contested Texas pipeline within days. The U.S. Army Corps of Engineers is expected to give Houston-based pipeline giant Kinder Morgan the go-ahead to clear land for a hotly contested natural gas line through the Texas Hill Country within the next two days, attorneys for the company and the federal government said Wednesday. “The Corps expects to issue the verifications under the Clean Water Act that would permit this project to go forward no later than Friday,” Department of Justice lawyer Devon McCune said during a telephone hearing relating to a federal lawsuit challenging the project. Still, a lawyer for Kinder Morgan said during the hearing that the company would not move forward with construction on the planned Permian Highway Pipeline until another hearing in the case that is tentatively set for Friday, even if it does receive the Corps’ approval.
Permian Support to Eliminate Flaring. Permian support grows for plan to eliminate routine flaring. Most recently, the World Bank has launched its Zero Routine Flaring by 2030, an initiative, designed to bring together a broad consortium of governments, oil companies and development institutions to cooperate in eliminating routine flaring by 2030. Occidental Petroleum last week became the first U.S. oil and gas company to endorse the initiative. “It’s an honor to be the first U.S. oil and gas company to endorse the World Bank’s initiative to reduce routine flaring globally, as we amplify our commitment to eliminate routine flaring in our operations by 2030,” Vicki Hollub, Occidental president and chief executive officer, said in a statement provided to the Reporter-Telegram. “Support for this important World Bank program is part of our company’s broader commitment to reduce greenhouse gas emissions in our global operations and positions Occidental for success in a low-carbon economy.” Texans for Natural Gas also endorsed the initiative. “Programs like this affirm that flaring and methane emissions are being taken seriously in the Permian Basin,” said Elizabeth Caldwell, Texans for Natural Gas spokeswoman, in an email to the Reporter-Telegram.
Coronavirus Negatively Impacting Global LNG Market. The coronavirus outbreak couldn’t have happened at a worse time for the global liquefied natural gas (LNG) market, consulting firm Wood Mackenzie said earlier this week.
That’s because before the Chinese epidemic, LNG markets were already facing headwinds from weak demand due to a milder winter in Asia and Europe, as well as a supply glut due to new trains coming online, Kallanish Energy reports.
With the travel restrictions imposed to contain the spread of the virus, Chinese demand for gas and LNG have been hit – mostly due to lower industrial activity.
Robert Sims, a research director at Wood Mackenzie, estimates the downside impact to the Chinese LNG demand to be between 2.6 million tonnes and 6.3 Mt. The first forecast is a best-case scenario, with a recovery by April. The second is a more prolonged case scenario, with a slower return to normal activities.
“The coronavirus outbreak and its impact on Chinese gas demand could not have come at a worse time for the already oversupplied global LNG market,” he said, adding there’s roughly 27 Mt of new supply growth in 2020.
“With too much LNG, and nowhere left to place it, it looks like a supply correction is needed to balance the market,” Sims noted.
Companies using force majeure authority from government
However, before this happens, LNG buyers in China seem to be trying to sort out themselves. A number of companies, including CNOOC, CNPC and Sinopec, are reportedly using the force majeure certificates issued by Chinese authorities to run away from contractual offtake obligations.
“Entering force majeure is rare in LNG markets and will be contractually complex. Contract wording will need to explicitly include epidemics as force majeure events,” said Sims. “Demand reduction on its own or a notice by a relevant Chinese government authority will likely be insufficient.”
China is estimated to have some 54 million tonnes per annum (Mtpa) of contracted volume in 2020, the analyst said. “So, while major Chinese buyers may call for force majeure, suppliers may instead insist on trying to defer deliveries to later in the year once the demand impact of coronavirus has diminished.”
Either way, there’s strong commercial incentive for mutual resistance. That’s because of the wide spread between contracted LNG prices and spot market prices. The long-term prices are currently around $8.33 per million British thermal units (MmBtu), while spot prices are roughly $3.15/MmBtu.
CNX Has Proven Reserves Increase of 7%. CNX Resources said Monday today total proved reserves at Dec. 31, 2019, rose 7% from a year earlier, to 8.48 trillion cubic feet-equivalent (Tcfe), Kallanish Energy reports.
The Pittsburgh-based independent producer organically added 1.65 Tcfe of proved reserves through extensions and discoveries, which resulted in the company replacing over 300% of its 2019 net production of 539 billion cubic feet-equivalent (Bcfe). All the additions were a result of CNX’s continued development within the Marcellus and Utica Shale plays.
At the end of December, CNX has total proved, probable, and possible reserves (3P reserves) of 10.3 Tcfe, comprised of reserves expected to be developed in the company’s five-year plan. There are an additional 113 Tcfe of recoverable resources in the other resource potential the company expects to develop beyond the five-year plan.
In 2019, drilling and completion costs incurred directly attributable to extensions and discoveries totaled $630 million. When divided by the extensions and discoveries of 1.65 Tcfe, the drillbit F&D cost was $0.38 per thousand cubic feet-equivalent (Mcfe).
Future development costs for proved undeveloped reserves (PUDs) are estimated at roughly $942 million, or $0.26/Mcfe.
Occidental Developing Expertise to Remove CO2 the Air. Oil companies specialize in extracting carbon dioxide-laden hydrocarbons from the earth. But could they use their expertise to put that carbon back where they found it? The answer could decide the industry’s future — and have important implications for the planet. Occidental Petroleum Corp., the Texas shale titan, has emerged as an early test case of whether an oil company can make the shift to carbon management. Since the beginning of 2018, the Houston-based oil producer has invested in an array of enterprises aimed at cutting carbon from factories, power plants and the atmosphere itself. In some ways, the moves represent an extension of Occidental’s current business. It’s already the world’s largest handler of CO2 used for enhanced oil recovery, a process in which carbon dioxide is injected into flagging oil reservoirs to stimulate production. The pressing question is whether Occidental’s investments will turn the carbon producer into a carbon manager.
ND Oil Production May Peak in 5 Years. North Dakota’s oil production may peak within five years, as companies finish drilling the most prolific parts of the state, state and industry officials told lawmakers this week, Kallanish Energy finds.
Mineral Resources director Lynn Helms, the state’s top oil regulator, said roughly 20% of drilling activity is now outside the “core” areas of the western North Dakota’s oil producing region, The Associated Press reported.
“The end of (core area drilling) is on the horizon; we can see it from here,” Helms told the state Legislature’s interim Government Finance Committee.
Though a typical well can have a lifespan of roughly three decades, the amount of oil that comes from it decreases by roughly half in the first two years, officials say.
Helms said the outlook now is for oil production to “plateau” for roughly 12 years after peak, then slowly decline by the end of the century to 1980 and 1990 levels of less than 150,000 barrels daily, AP reported.
The state is producing a near-record average of 1.5 million barrels per day (Mmbpd) of crude. Helms and North Dakota Petroleum Council president Ron Ness estimated production would peak at about 1.8 Mmbpd if prices hold. Both men said technology to enhance oil recovery could help stem some production losses, AP reported.
Oil is a key contributor to North Dakota’s economy, as the No. 2 producer in the U.S., behind Texas. North Dakota’s oil production is primarily from the Bakken shale and the Three Forks play below it.
Ness, whose group represents roughly 700 companies working in the state’s oil patch, reminded lawmakers oil production was only about 214,000 Bpd a day a decade ago, AP reported.
Marathon Cuts 2020 CAPEX 11%. Marathon Oil is cutting its 2020 capital spending budget by roughly 11%, Kallanish Energy reports.
The company said it plans to spend $2.4 billion, including development capital spending of $2.2 billion (down 9% from 2019) and new lease spending of $200 million. The new leases will be sought in the Delaware Basin of West Texas and Louisiana’s Austin Chalk.
The E&P company spent $2.6 billion on capital spending in 2019.
The Texas-based company reported a fourth quarter 2019 net loss of $20 million, or 3 cents per share, on revenue of $1.2 billion. That compares to a $165 million profit, 21 cents per share, on $1.3 billion of revenue in Q4 2018.
For full-year 2019, the company reported a $480 million, 59 cents per share in profit, a 56% drop from the $1.1 billion, $1.29 a share, profit made in 2018.
Marathon’s 2019 full-year revenue was $5.2 billion, a 21% drop from the $6.6 billion produced in 2018. It generated $110 million of free cash flow in the quarter and $410 million in full-year 2019. It returned $510 million to shareholders in stock repurchases and dividends.
The company is projecting a 6% increase in U.S. oil production in 2020, at the midpoint of the company’s guidance. Its overall U.S. production averaged 328,00 barrels of oil-equivalent per day (Boe/d) in Q4 2019, up 7% from Q4 2018.
It reported its divestiture-adjusted U.S. oil production grew 13% in 2019, and its fourth-quarter U.S. oil production was 196,000 Boe/d, up 9% from the previous year. Its U.S. well expenses dropped 15% during 2019, the company said.
“2019 was another year of differentiated execution for Marathon Oil as we comprehensively delivered on our framework for success for the second year in a row,” said chairman, president and CEO Lee Tillman, in a statement.
Antero Cuts 2020 Drilling and Completions 10%. Antero Resources said it expects to spend $1.2 billion in 2020 on capital projects, Kallanish Energy reports.
That includes $1.15 billion for drilling and completions (D&C), a 10% drop from what was spent in 2019, plus an additional $50 million on leases.
The independent producer spent $1.27 billion in full-year 2019 on drilling and completions, a 16% drop from 2018 and 7% below Antero’s original 2019 guidance.
Full-year 2020 production to rise
The company, a major player in the Appalachian Basin, said it expects full-year 2020 net production to average 3.5 billion cubic feet-equivalent per day (Bcfe/d), a 9% increase over 2019 production. Liquids production is expected to average 187,500 barrels per day in 2020.
Net production averaged 3.19 Bcfe/ (30% liquids by volume) in Q4 2019, and 3.22 Bcfe/d for full-year 2019, a 19% increase over full-year 2018.
In the fourth quarter, the Colorado-based company reported a net loss of $482 million, or $1.61 per share, compared to a net loss of $122 million, or 39 cents per share, in the year-earlier quarter.
Major impairment charge taken
The quarter’s adjusted net loss was $6 million, or 2 cents per share, compared to net income of $175 million, or 56 cents per share, in Q4 2018. The adjusted net loss includes a $468 million impairment based on the value of the company’s equity interest in Antero Midstream at year-end 2019.
Adjusted EBITDAX in Q4 2019 was $295 million, a 38% decrease from the $475 million in Q4 2018 due to lower commodity pricing.
In Q4, the company placed 21 horizontal Marcellus Shale wells to sales with an average lateral length of 11,600 feet. Antero reported it set a company record last quarter by drilling an average of 7,000 lateral feet per day, a 38% increase from a year ago.
Drilled 2 Marcellus wells to more than 10,000 feet in 24 hours
It also drilled a company one-well record of 10,453 lateral feet in 24 hours. In 2019, Antero drilled 97wells that averaged over one mile per day drilling in the lateral and was the only known operator in the Marcellus to drill more than 10,000 lateral feet in a 24-hour period which the company did twice, it said.
The company also reported it cut D&C costs by 10% in 2019, which will help produce savings of up to $350 million between 2020 and 2023.
The company can benefit because it can export more than 50% of the ethane it produces in the Appalachian Basin from Marcus Hook, Pennsylvania, to high-paying international markets, said chairman and CEO Paul Rady, in a statement.
PA Permits February 6, to February 13, 2020
County Township E&P Companies
- No New Permits
OH Permits February 8, 2020
County Township E&P Companies
- Carroll Monroe EAP Ohio
- Carroll Monroe EAP Ohio