Marcellus & Utica Shale Story Links: Wed, Sep 18, 2013

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading:

New York

What Natural Gas Has Done for Pennsylvania [Lessons for NY]
Natural Gas Now
Natural gas is lifting Pennsylvania’s rural areas, and especially its Northern Tier, out of poverty and Governor Cuomo, who wants to be President, would do well to look across the border for clues on how to improve his poll numbers outside the city.


Only 5 New Permits Issued for Utica Shale Drilling Last Week
The Daily Digger
Last week was another slow one for Utica shale permitting, according to the latest report from the Ohio Department of Natural Resources. Only 5 new permits for horizontal drilling in the Utica shale were issued. 4 of those permits were for Monroe County, while the other one was for Guernsey County. The activity last week brings the total number of permits to 887. The number of wells drilled is 557, and 153 are producing. The Utica rig count is down to 30.

Buy a CNG car and get a state tax credit, say two Ohio lawmakers preparing legislation
Cleveland Plain Dealer
Ohio is the Saudi Arabia of natural gas, yet there are only a dozen or so natural gas fueling stations in the state. Now two lawmakers want to change that. State Representatives Sean J. O’Brien, a Democrat from Trumbull County, and David Hall, a Republican from Holmes County, are preparing legislation to give state tax credits to people and companies who buy or convert trucks and cars to burn both natural gas and gasoline. The proposal, conceived with the assistance of an industry group, would also create a multimillion-dollar loan program to help companies converting fleets of vehicles buy and install the refueling equipment. The tax credit would pay for up to 50 percent of the cost of the conversion, which is $5,000 to $10,000 for cars and light duty trucks and up to $40,000 for large trucks.

Utica, Marcellus shales are ripe with natural gas to benefit Ohio, Pennsylvania
Akron Beacon Journal
Bentek Energy, the Colorado-based energy market analytics company, says continued development of Utica and Marcellus natural gas and a rapidly growing infrastructure to transport the gas will result in “substantial opportunity” for natural gas users in Ohio, Pennsylvania and the Northeast United States, said spokesman Justin Carlson. He added that more than 16 billion cubic feet per day of pipeline capacity is under construction or planned in the two states. The two shales are capable of producing enough natural gas to power electric-producing power plants now fueled with coal and other large customers, he told 250 people on Tuesday at the Think About Energy Summit sponsored by America’s Natural Gas Alliance, a national trade group.

B.G. council unanimously passes ban on fracking
Toledo Blade
By a 7-0 vote, the Bowling Green City Council on Monday night approved an ordinance that bans fracking and disposal of fracking waste fluids in the city limits. Now the question becomes how strong the action would be if it is ever challenged in court. The Ohio Department of Natural Resources claims it maintains legal authority to issue all drilling permits throughout the state, even in cities that pass ordinances to ban the activity.


BB&T Capital: Alpha Natural has ‘potential cash gem’ in Marcellus acreage
SNL Financial
BB&T Capital Markets analyst Mark Levin said coal producer Alpha Natural Resources Inc. is sitting on a “potential cash gem” of 20,000 acres in the sweet spot of the Marcellus Shale that it could sell for cash amid weak global coal markets. In 2010, Alpha entered into a 50/50 joint venture with driller Rice Energy LP to develop a portion of 20,000 acres of property in the Marcellus Shale of southwestern Pennsylvania. The property is near Alpha’s Emerald coal mine, one of the most productive coal mines in Northern Appalachia.

Shale Gas Regions Deserve Better Health Reporting
Natural Gas Now
A story came across the wire yesterday “Fracking Health Project Puts Numbers to the Debate.” The story raises more questions than answers and feeds into the fear already gripping a portion of the population. Out of the population of 200,000 residents of Washington County, Pennsylvania, who live around 700 drilled wells, the project focuses its outcome on 27 self-reported symptom sufferers from one clinic. Were they clustered around one well? One compression station? Several wells? Were their symptoms confirmed through medical examinations? Or, is this another rush to release information because of the said data’s importance (Cornell’s Elaine Hill’s PhD thesis comes to mind).


Bill Powers: Give Up The Shale Gas Fantasy And Profit When The Bubble Bursts
Seeking Alpha
More data points have come in supporting my views and making it very clear that the Fayetteville and Haynesville shales are now in decline and the Barnett had a very steep, 17% decline in H1/13 on a year-over-year [YOY] basis. It is now producing about 4.6 billion cubic feet a day [Bcf/day], which is substantially down from its peak of near 6 Bcf/day. The facts are starting to show that declines for the older shale plays such as the Barnett, Haynesville, Fayetteville and Woodford are very serious. More important, once production growth from the Marcellus slows down, it will no longer be able to offset declining production from shale plays as well as conventional, offshore, CBM and tight sands production, which are all in terminal decline.

Shale Math Coming Into Play Sooner Than Expected For Gastar Exploration
Seeking Alpha
I recently wrote an article referencing a valuation approach that is being used by sell side researchers and investors to analyze small cap e&p stocks, and that seems to have driven stock prices of certain small e&ps to high valuations on other metrics like EV/EBITDA. That approach is “shale math”, where the NPV of acreage on a development basis is calculated and then discounted heavily to come up with a risk-adjusted value of undeveloped or partially developed unconventional assets. That math has driven small cap stocks like Goodrich Petroleum, Rex Energy and Synergy Resources to multiples higher than 10x 2013 EV/EBITDA (in Synergy’s case, well over 20x!).

New Fracking Emissions Study Brings Out The Usual Suspects
The latest study on shale gas emissions has caused a bit of a stir, noting that the wells do not appear to be emitting significant amounts of methane, which is an important finding. There are however a number of other relevant points that have emerged. First, the researchers did find significant leakage, but at other points than the wells, most notably in the gas-water separation process. This highlights the fact that methane leakage is important and needs to be addressed, but independently of the question of hydraulic fracturing.

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