MDN Goes to NAPE East in Pittsburgh (Pictures!)

Sooner or later, all energy roads in the Marcellus and Utica Shale lead to Pittsburgh. In many ways, because of the huge impact of the Marcellus (and now Utica) Shale, Pittsburgh has become the new Houston–the center of the energy universe. At least in the northeast. Last week the North American Prospect Expo (NAPE) brought its franchise event to Pittsburgh. NAPE usually runs twice a year–in Houston. This year they’ve added Pittsburgh to the lineup, calling it NAPE East.

MDN editor Jim Willis attended and hung out at the NGI Shale Daily booth for most of the event, chatting with passersby. We already brought you links to stories about the event from several Pittsburgh media outlets (see Marcellus & Utica Shale Story Links: Fri, Apr 12, 2013). Below, Jim provides his thoughts on the event, and the comments (gossip!) he heard at the event. More importantly, he took pictures! We’ve created a “virtual tour” of the event, so you get a feel for what such an event looks like, and what happens…

The NAPE East event is all about landowner groups (or organizations that own large tracts of land) “shopping” their land for a deal–in hopes of finding a driller or party interested in acquiring the lease rights to drill–or in acquiring royalty rights–or both. It is a bit like an open bazaar market where people are meeting to swap, trade, buy and sell. All done within the context of a trade show with rows and rows of booths.

NAPE East was held at the David L. Lawrence Convention Center, a massive building that spans several city blocks sitting along the Allegheny River. When Jim arrived at the registration area, he was greeted with a spectacular view of the Allegheny (see the pics below). Pittsburgh is a beautiful city, known as the city of “three rivers” (the Allegheny, Monongahela and Ohio). Lots of rivers and lots of bridges in Pitt.

After getting the Shale Daily booth set up on Wednesday (Jim was there to help “man the booth”), he attended the afternoon sessions of the Business Conference hosted by research company IHS. Jim snuck in part-way through a session called “A Discussion of Present and Future Geologic Exploration Trends in the Appalachian Basin,” moderated by Andy Burne, a senior director with IHS, featuring two very sharp panelists: Bill Zagorski, VP of exploration for Range Resources and Pete Sullivan, VP of ECA. Lots of maps of the Marcellus and Utica–very interesting maps showing things like IP Breakdown vs Thermal Maturity, drilling locations, the ubiquitous Total Organic Carbon maps and more. (Jim would have gladly given his eye teeth for copies of those maps!)

Some of the interesting statements heard during the session…

  • Industry has not yet come to grips with how to develop both the Utica and Marcellus layers in the same well and well pad. Industry is still climbing the learning curve on this one.
  • Pete Sullivan said Marcellus decline curves–the speed with which production from a Marcellus well “tappers off” over time–is a lot like the decline curves for other Appalachian wells, except “on steroids.” We’re not exactly sure what he meant, but thought he was saying that Marcellus wells become much less productive much quicker than conventionally drilled wells in the same geography.
  • Sullivan also said the industry needs more and better seismic data, and they need to “judiciously use” micro-seismic data to better know where to aim the frack–to where the gas is located. (As a side note, MDN heard an astonishing factoid while at dinner with friends: seismic data costs around $100,000 per square mile. Wow! Maybe we’re in the wrong business!)
  • Bill Zagorski from Range was asked a question about the viability of restimulating early Marcellus wells for more production. He responded that they have only restimulated “a few” early wells and they are generally happy with the results. According to Zagorski, restimulating has great potential, but its success depends on the geography where it’s done. Sullivan chimed in that the political reality is that investors demand their money be used for drilling new wells as opposed to restimulating (redrilling) existing wells.

After a short break, the final session of the day began, titled “Prospect Presentations.” The best way we can describe it is a combination of speed dating and beauty contest for landowner groups. Pete Stark, senior research director and advisor at IHS, moderated this session in which a series of 10 landowner groups/organizations took 10-15 minutes each to present their deals–the properties they came to the show to “shop” to see if they can sell the mineral rights for drilling.

As an example, CX Energy kicked things off with the example that they recently went from zero acres in an area to 27,000 acres signed in a 3-day mass signing–all in under six weeks’ time. CX has done deals for 135,000 acres in the past 22 months, and they have another 439,000 acres available that spans the entire Marcellus and Utica plays–mostly in northwest PA and southern NY. Many of the groups presenting were landowner groups (non-profit) there to get the best possible deal for their members, touting how the groups formed, their cohesiveness and willingness to work with industry, etc. Each group presented the benefits of leasing with them.

Moving to the show floor on Thursday and Friday…

Many, many conversations. Among those of note: Jim stopped by the Green Hunter booth to ask about any potential news with the Coast Guard approving shipments of frack wastewater by barge. The GH rep confirmed what we already know: A proposal is with the Office of Management and Budget (OMB), i.e. The White House, and awaiting approval as part of the budget process. So, nothing new. We wait and hope the proposal from the Coast Guard (which presumably is that it is safe to go forward) will be adopted by Obama.

Jim stopped by the Carrizo Oil & Gas booth to see what’s new and newsworthy. The Carrizo rep said that this year, in 2013, Carrizo will drill their very first Utica Shale well. Cool.

When Jim disclosed that he is from the Binghamton, NY area to passersby and people he ran into (at lunch, on the show floor, wherever), the inevitable question he got was, “When in the world is New York going to allow fracking?” Unfortunately, there isn’t a good response. Jim also heard from several sources that any kind of deals for New York properties at the NAPE event were non-existent. No one is interested (right now) in purchasing lease rights in New York–not until the state moves forward. In fact, New York was (embarrassingly) a joke at NAPE East. Several speakers Jim heard said things like “we don’t have people like Yoko Ono living in our state to make trouble.” We don’t believe Gov. Cuomo and other politicians in New York understand the damage to their own reputations they’ve already done–lasting damage. People in other states are watching. More than one person said, “He thinks he can run for president?” with an incredulous voice.

It is Jim’s sincere hope that next year’s NAPE East event (already scheduled for April 9-11, 2014), will be focused on New York land deals–that by that time fracking will have been approved and perhaps even the first well or two drilled. We know, we’re dreaming! So we’ll leave you with the words of John Lennon’s “Imagine”…

I’m a dreamer, but I’m not the only one
I hope some day you’ll join us
And the world will be as one

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