Marcellus & Utica Shale Story Links: Thu, Mar 27, 2014
The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading:
Keeping Ohio competitive with other shale states
Gov. John Kasich’s plan to drill into Ohio’s gas and oil industry for new revenue remains controversial. His budget analysts and those working for the General Assembly differ substantially on how much money could be raised. But whichever estimate is accepted, the amount is enormous. Legislative analysts say the 2.25 percent severance tax the state House of Representatives favors would bring in $231 million over three years. The state budget office, using the 2.75 percent rate favored by the governor, expects $874 million during the same amount of time. Gas and oil drilling interests object to any increase, of course. Clearly, East Ohio has become a mecca for drillers and gas processors. The region appears to be rich in the “wet” gas that is more lucrative because it contains valuable chemicals. But gas-bearing shale deposits such as the Utica and Marcellus formations lie underneath several states. Buckeye State officials need to be careful to avoid taxes that could make this area of the state less attractive to drillers.
‘Fractivist’ looks to toss out court order
Susquehanna Independent Weekender
Natural gas opponent Vera Scroggins returned to court Monday, looking to throw out a preliminary injunction that bars her from entering onto lands owned or leased by a Houston-based natural gas drilling company. Cabot Oil & Gas Corporation sought the injunction order in October 2013, alleging that Scroggins’ repeatedly came onto the company’s active drill sites and completed pads, sometimes bringing other people with her, including bus loads of people on one of Scroggins’ “citizen tours.” But the scope of the court order was called into question by Scroggins and her attorneys, Gerald Kinchy, of Sayre, and Scott Michelman, of Public Citizen, a Washington D.C.-based advocacy group. Both appeared with the Silver Lake Twp. resident in court on Monday. Witold Walczak, legal director of the ACLU of Pennsylvania, was not present on Monday. Cabot filed a brief with the court opposing the motion by Scroggins’ legal team to throw out the preliminary injunction.
Residents urge council to revise drilling regulations
A group of Murrysville residents want local officials to reconsider how and where Marcellus shale drilling can occur before the industry sets up shop in the municipality. Members of the Citizens for the Preservation of Rural Murrysville asked council last week to postpone any decisions about drilling — including whether to solicit offers to drill under Murrysville Community Park — until municipal drilling regulations have been revisited. Board member Linda Marts said the group’s board of directors wants council to establish a task force to revisit the municipal ordinance. That is in the works, chief administrator Jim Morrison said. Murrysville resident Alyson Holt — who, along with the preservation group, plans to circulate a referendum petition to help council determine if the park’s gas rights will be leased — agreed that revisions are needed.
Unlocking the Marcellus Shale: Operator Highlights
The Marcellus Shale in the Appalachian basin is an area of focus for several operators. The northern part is typically wet gas acreage and the southern, dry gas. This post will provide end of year 2013 results and 2014 estimations for Marcellus activity from the most active (permit-wise) of these companies. A few key data points we will review are CapEx, rig count, proved reserves, EURs, and net acreage.
Record-Setting Storage Pulls Likely to Intensify Appalachian Drilling, Magnum CEO Says
NGI’s Shale Daily
This year’s record-setting gas storage withdrawals, combined with developing acreage positions, superb reservoir quality and the momentum it’s driven at his own company, has Magnum Hunter Resources Corp. CEO Gary Evans predicting at least five years of sustained and heavy drilling in the Appalachian Basin. Evans, whose company is headquartered in Houston, made a quick stop in Pittsburgh on Thursday to address a crowd gathered there for the inaugural Northeast Oil and Gas Awards Conference for Excellence. After selling its assets in the Eagle Ford Shale last year (see Shale Daily, April 4, 2013), it’s been no secret that Magnum’s focus has since narrowed on the potential of the Utica and Marcellus shales. On Thursday, though, Evans provided insight on how an ever-improving learning curve and the burgeoning Appalachian Basin has managed to slowly lift the fortunes of his young company and other independents that have hitched their futures to the prolific gas plays unfolding there. He also underlined some of the more obscure challenges that face the region as it grows at an astonishing rate.
Greenfield Projects Seen as Key to Relieving Appalachian Bottleneck
NGI’s Shale Daily
The midstream industry is quickly running out of options to meet demand from growing production in the Appalachian Basin, and volumes could be sharply curtailed as a result, said a top executive speaking at Thursday’s Northeast Oil and Gas Awards Conference for Excellence in Pittsburgh. “What we’re doing today is trying to take that existing infrastructure and, in large part, leverage what we can by optimizing existing assets and installing bolt-ons to existing infrastructure. As an industry, we’re quickly running out of the ability to do that,” said Chad Zamarin, COO of midstream services for the Columbia Pipeline Group. “If you look at industry projections over the next 10 years, you see these stair steps that often times are tied to pipeline takeaway capacity. Rationally, we’re going to get to a point where production is constrained.”
DCNR to release drilling impact report next month
A state conservation agency plans to release a voluminous report next month about its efforts to monitor the environmental impact of natural gas drilling in the state forests. The monitoring of gas drilling will continue after the report comes out, Ellen Ferretti, secretary of the Department of Conservation and Natural Resources, told an advisory council Wednesday. DCNR started the drilling monitoring program in 2011, after the agency leased thousands of acres of state forest land for deep Marcellus Shale drilling in separate auctions in 2008 and 2010. The forthcoming report has been a topic of debate since Gov. Tom Corbett proposed additional gas drilling in state forests and in state parks as part of his 2014-15 state budget.
Utica’s Next Frontier Moving to West Virginia, Pennsylvania
NGI’s Shale Daily
With the Utica Shale making a reputation for itself in Ohio after a series of eye-opening well results, and with technology pushing drilling efficiencies to new heights, the formation is poised to become the next horizon of development in West Virginia and Pennsylvania. Last year, operators in the Appalachian Basin began to more aggressively target multiple pay zones (see Shale Daily, Oct. 2, 2013). The pad drilling that has evolved to characterize much of the country’s onshore oil and gas drilling has set the stage for multi-well units targeting not just the Utica or Marcellus shales, but the thinner, shallower Upper Devonian formations too (see Shale Daily, July 23, 2013). Now, the basin’s long-awaited trifecta of three pay zones appears to be within reach (see Shale Daily, Oct. 4, 2012), as operators are drilling deeper, going longer on the lateral and reducing the cost of their wells at the same time.
Robust Northeast Petrochemical Industry Still In The Offing, Execs Say
NGI’s Shale Daily
Even as business leaders and local officials throughout the Appalachian Basin dream of the role shale gas could play in a petrochemical revolution for the region’s manufacturing industry, it could be decades, if ever at all, before that happens, according to remarks from top executives in the midstream industry. The vision continues to gain momentum across Ohio, Pennsylvania and West Virginia. And as the critical building blocks of industrial plastics and various chemicals, such as ethane, propane and butane continue to be pulled from the Marcellus and Utica shales in increasing volumes, many in Appalachia are hoping the liquids will stay in the region to help shake the rust off some of its manufacturers. “I feel that here in Pittsburgh we do have a healthy competition going with the Gulf Coast to keep these liquids here,” said Michael Krancer, former secretary of the Pennsylvania Department of Environmental Protection, as he moderated a midstream panel during the Northeast Oil and Gas Awards Conference for Excellence last week. “But every time I see a single molecule being contracted to go to the Gulf Coast I cringe.”
Marcellus Slows Dramatically: U.S. LNG Investments Could Suffer, Coal Producers Could Gain
The Marcellus shale gas field, which has been the main source of continued total US NG production growth last year, is showing signs of slowing down significantly. LNG export terminals being planned or under construction will either be scrapped or will end up disappointing investing companies due to higher US natural gas price and lack of supply. The obvious winner in the overall trend is coal, because it is the main substitute for natural gas. Increased demand and increased prices should benefit coal producers for the long term.
Note to GOP: Use energy as an electoral weapon
The Daily Caller
Any sane analysis of Russia’s recent behavior toward the United States and the West ends with the conclusion that the oligarchs in Moscow see no reason to fear reprisals for their aggression. Their operating premise is that they are big and strong enough to withstand the obtuse semi-threats from President Obama and the EU. One reason for this hubris is energy. Even with an economy in shambles Russia is still a leading exporter of energy. They provide the lion’s share of the natural gas needs of Europe. Russia’s aggression is not limited to Soviet era annexation and intimidation of their former Soviet Republics. Invoking unpleasant memories of OPEC in the 1970’s when the cartel used oil as a political weapon against the West, Russia has been known to use natural gas a political weapon. Clearview Energy Partners of Washington DC notes in a report “three times in the last decade Russia has cut off its natural supply to Ukraine.” They also note “about two-thirds of Russian gas exports traverse Ukraine.”
Chesapeake Energy again cuts funding in the Pennsylvania Marcellus
Yesterday in New Orleans Chesapeake Energy presented its 2014 operations outlook at the Howard Weil Energy Conference. The company presented a projected 2014 capital spending budget of $5.4 billion down from $6.7 billion in 2013. Of this amount nationally, the company will spend only 20% of its total budget in its U.S. dry gas operations. It further announced it will spend less than 5% of its total operating budget, under $275 million, on the Pennsylvania Marcellus. The company estimates it will have just 6 to 7 rigs operating in Pennsylvania this year as it looks at plays closer to its Oklahoma home. Mark Holder, CIO and founder of Oklahoma based Stone Fox Capital Associates commented on Chesapeake Energy’s new focus in the Louisiana Haynesville Shale stating, “Combined with sufficient pipeline and takeaway capacity already in place, the shale might finally have some advantages over the more prolific Marcellus shale.” For Chesapeake Energy, challenged with stubbornly high debt levels, it continues its year over year trend in retreating from the Pennsylvania shale formation.
Noble Eyes $20B in Shale Plays by 2018
NGI’s Shale Daily
Houston-based Noble Energy plans to spend up to $20 billion during the next five years in the Niobrara and Marcellus shale plays, CFO Ken Fisher told an energy meeting in Houston hosted by Baker Hostetler on Monday night. The “Shale Symposium” looked at the global challenges and opportunities through presentations by Fisher and George Leis, head of Americas oil/gas for Bain & Company. Leis focused on the global implications of the North American natural gas “supply shock,” and Fisher looked at what Noble intends to do in Colorado and Pennsylvania to ride the upside of the shale revolution. “Unconventional [oil/gas development] is driving significant economic impact,” said Fisher, quantifying that impact in the United States as two million jobs and a nearly $300 billion of the U.S. gross national product. “It is also driving our economy in Houston and the Gulf [of Mexico] Coast in terms of the return of petrochemical activity here.”
U.S. Census Bureau: mining is fastest-growing sector of economy
Mining, quarrying, and oil and gas extraction are the fastest-growing sectors of the nation’s economy, according to a report released today by the U.S. Census Bureau. The federal agency publishes an economic census every five years. This report examines national data from the year 2012. The previous economic census looked at 2007– before the recession hit. “In that five year period, this sector grew by 26.4 percent,” says Census Bureau statistician Andrew Hait. “More than half of that big increase in that entire sector was in the oil and gas sub-sector.” The report also shows a 27 percent increase in the number of oil and gas jobs nationally– 191,580 for the year 2012. “There were about 41,000 more people working in the oil and gas industry in 2012 than there were in 2007,” says Hait.
Benefits of shale development are too great to sacrifice
Left-wing advocacy group MoveOn.org recently launched a new effort to oppose innovations that are propelling states like Pennsylvania toward a new abundance of locally produced energy. Not only is this helping to fuel America’s manufacturing renaissance, but it is also helping to make the United States more competitive in the international energy market, advancing our nation’s energy independence and keeping Pennsylvania residents warm in the recent harsh winter weather. Unfortunately, this anti-development group is pushing activists to work to ban fracking in their local communities, without regard for the benefits that this critical energy resource is doing to help consumers across Pennsylvania and the nation. What are the benefits that would be taken away if Marcellus shale production was threatened? Let’s start with the environment…
Rising Utility Costs Linger After Winter’s Chill Fades: Energy
U.S. consumers got a glimpse of rising future utility bills during the winter as coal- and nuclear-plant shutdowns boosted reliance on natural gas. Demand for gas, used to heat half of U.S. households and generate 27 percent of the nation’s power, reached records from New York to Los Angeles in January, sending regional prices to all-time highs. Costs surged as a polar vortex and waves of arctic air caused the coldest weather in 32 years. Prices may rise further next winter as 79 coal-fired power plants close because of stricter environmental rules, while Entergy Corp.’s Vermont Yankee nuclear plant was the fifth to announce a permanent shutdown over the past two years. “For those willing to write off nuclear and coal, this winter should raise a red flag,” said Stephen Schork, president of Schork Group Inc., a consulting group in Villanova, Pennsylvania. “We are setting ourselves up for a massive rally in natural gas.’” Households in the lower 48 states spent 5 percent more on electricity and 10 percent more for gas on average this past winter, the U.S. Energy Information Administration estimated in a March 12 report. Consolidated Edison Inc., which owns New York City’s utility, said the typical residential electric bill rose 22 percent to $118 in February from a year earlier.
Spectra Energy: Excellent Prospects for Future Growth
The Motley Fool
Spectra Energy began as a natural gas transportation and storage company. In 2013, the company transformed itself with $6 billion in acquisitions and investment in new projects. Today the company is a midstream gas distribution company as well as a diversified gas utility. It operates as a regulated utility and a general partner to two MLPs (master limited partnerships). 90% of the company’s revenues is fee-based, with 95% of revenue locked into contracts averaging nine years. This high predictability of cash flows allows the company to aggressively grow its asset base and its dividend. What makes Spectra Energy such an interesting energy dividend growth stock is management’s aggressive plans for future expansion. According to its last investor presentation the company is currently pursuing $7 billion in acquisitions and organic investment opportunities. Management wants to complete $10 billion-$20 billion in total expansion through 2020, but maybe up to $25 billion in expansion could be undertaken within the next 10 years. This massive investment would result in the company doubling its assets.
Seventy Seven Spinoff Could Have Chesapeake’s Investors Gushing
Chesapeake Energy plans to spin off its oilfield services business, and this could be a boon for investors. Spinning off this business allows Chesapeake to unload around $1 billion in debt and raise cash. Moreover, since Chesapeake won’t retain any interest in the unit after the spinoff, it will not be responsible for its capital expenditure. The unit will be converted into a new company called Seventy Seven Energy, which is currently valued at between $2.5 billion and $7 billion. It will be listed at the New York Stock Exchange under “SSE.” Chesapeake’s oilfield services unit, which has reported double-digit revenue growth, will have the fifth-largest land-based rig fleets in the United States, with operations in the leading shale plays including Eagle Ford, Utica, Permian Basin and Marcellus. Chesapeake’s shares have risen by 21.5% in the last 12 months and currently trade around $25. The company has outperformed the S&P 500, which has risen by 19.6% in the corresponding period. Chesapeake’s decision is in line with the company’s broader objectives to cut costs, reduce debt and increase the value of its assets.
The 1 Glimmer of Hope for Nuverra Environmental Solutions’ Investors
The Motley Fool
There are lots, I mean lots, of reasons to be down if you are a shareholder in Nuverra Environmental Solutions. I know, I’m one of them. The company has tried my patience on a number of occasions, and each day that passes there are more doubts that Nuverra will be able to execute its business plan to address what is one of the greatest issues facing the future of hydraulic fracturing in the U.S.: water use. Yet despite all of the bad news and underperformance, there is one thing that gives some promise that Nuverra can turn things around: Insider ownership has been on the upswing for the past several months. Let’s see what management has been up to and whether its moves are enough to put Nuverra back on the right track. For a company that has struggled as much as Nuverra has over the past year or so, it is rather encouraging to see management pick up as many shares at it has in the past several months. Since August 2013, CEO Mark Johnsrud has acquired an additional 126,000 shares on the open market valued today at $2.3 million. In total, he now has ownership of over 34% of common shares outstanding. Also, five members of the board and the executive management team have made open market acquisitions Nuverra’s shares over that same time period with no dispositions.
US manufacturing is coming back — Thank shale
The U.S. shale boom is beginning to ripple outward to American cities. The shale mining industry’s rising demand for materials and equipment along with the abundance of cheap fuel are fueling a modest renaissance in American manufacturing, according to a report prepared by IHS Global insight for the U.S. Conference of Mayors. The shale extraction industry is itself driving growth through its hunger for steel pipeline, extraction machinery and other materials needed at domestic shale deposits, including the Bakken in North Dakota and the Marcellus shale in Pennsylvania. The availability of cheap fuel has in turn allowed these energy intensive manufacturing industries to cut costs and compete better with foreign imports.
Shale Gas Development A Must for New Brunswick
Natural Gas Now/Lorne Amos
The Government of the Province of New Brunswick, in 2009, granted Natural Gas (Shale Gas in NB) Exploration Permits to three companies, Corridor Resources Inc., Contact Exploration and SWN Resources Canada Ltd to explore a major portion of the Province for shale gas reserves. SWN was given the biggest acreage, somewhere in the vicinity of 3 million acres. SWN conducted exploration in 2010 with both airborne equipment and seismic testing on the ground. A group of protesters got together and led by an American citizen, Mr. James Emberger, blocked roads, damaged equipment and hijacked meetings in which SWN was trying to explain to the citizens of NB what shale gas extraction assisted by hydraulic fracturing was all about. Many of the NB citizens objected to that form of protesting and groups were quickly formed to support the industry. We did a lot of research, to convince ourselves of the viable and safe extraction of shale gas from our Province. We are thoroughly satisfied that the industry can be developed in a safe and environmentally friendly fashion, and have chosen not to believe the half-truths and outright lies of the anti-movement.