Marcellus & Utica Shale Story Links: Tue, Sep 22, 2015

best of the restThe “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: OH landowners ask FERC to delay Rover; DEP continues listening sessions in Pittsburgh; fossil fuels not going away; another natgas boom on the way; rig counts continue to slide; tortoises win over hares in unconventional; producers’ margins razor thin; throwing out the lending rulebook; and more!

MARCELLUS/UTICA REGION

Ohio

Landowners’ law firm asks FERC to delay Rover Pipeline
NGI’s Shale Daily
A law firm representing more than 200 landowners who could be impacted by the proposed Rover Pipeline has asked FERC to delay issuing a draft environmental impact statement (DEIS) for the project on the grounds that, among other things, Rover has filed insufficient details about the project’s environmental impacts. On Tuesday, Columbus, OH-based Emens & Wolper (E&W) filed a motion for a stay over the Federal Energy Regulatory Commission issuing a DEIS for the 711-mile Rover Pipeline [CP15-93]. The firm argues that Rover, a unit of Energy Transfer Partners LP (ETP), hasn’t provided regulators with sufficient information on how drainage systems in Ohio would be managed, or the impacts to the Black Swamp in northwest Ohio.

Utica dry gas wells headline third quarter production spurt
RBN Energy
U.S. Lower 48 natural gas production is averaging a record 74.2 Bcf/d in September to date, according to PointLogic Energy. Meanwhile, CME’s Henry Hub natural gas futures contract has languished at an average of $2.68/MMBtu this month to date, the lowest for any September since 2001. Much of the recent gain in natural gas production has come from new Utica Shale output. In today’s blog, we drill down into the region’s pipeline flow data to see where exactly the growth is coming from, what’s driving it and what it could mean for natural gas supply.

Pennsylvania

DEP hears differing views on EPA climate plan
Harrisburg & Philadelphia (PA) StateImpact Pennsylvania
State regulators heard comments on how quickly it should address the EPA’s plan to curb carbon emissions Monday night in Pittsburgh. Around 100 people came to a DEP listening session where more than three dozen speakers discussed the economic benefits of energy efficiency, the health effects of air pollution, and whether cutting carbon will hurt the economy and raise energy costs. DEP Secretary John Quigley and several DEP staffers attended the session, one of 14 planned for around the state to address the EPA’s Clean Power Plan. The plan sets a target of lowering carbon dioxide emissions from the power sector by 32 percent of 2005 levels by 2030.

NATIONAL

Hydrocarbons will be around for a long time
Farmington (NM) Daily Times
[This is a transcript of a speech given by former U.S. Sen. Pete Domenici, R-N.M., on Thursday during the Domenici Public Policy Conference at New Mexico State University in Las Cruces. It was edited for length.] My premise is that hydrocarbons are (1) a blessing, and (2) will be around for a long time.

Natural gas production is slowing, but another boom could be on the way
Houston (TX) Chronicle – Fuel Fix Blog
U.S. natural gas production has been holding steady in 2015, but stalled growth this year won’t erase the huge supply of gas driving down prices, according to the latest analysis by financial services firm Raymond James. Instead, similar to what’s happening in the oil patch, more efficient drilling and prolific shale wells will keep any 2016 cutbacks minor, while positioning the fuel for another production boom in 2017 and 2018. The resulting tide of natural gas means prices are likely to stay low despite this year and next’s flat production growth.

Rig count declines again, but at slower pace
NGI’s Shale Daily
The combined North American oil and natural gas rig tally was down again in the count issued by Baker Hughes Inc. on Friday (Sept. 18), but the drop was less steep than in the previous week. A net of nine rigs gave up the hunt in North America, representing a net loss of six in the United States and three in Canada. The U.S. rig count landed at 842, which is down from 1,931 one year ago. The Canadian count ended at 182, down from 377 one year ago. The United States gave up eight oil rigs but added two natural gas-directed units. In Canada, three gas rigs were lost while oil held steady. In the previous count, a net of 16 U.S. rigs were lost while Canada was down a net of two (see Shale Daily, Sept. 11).

U.S. shale oil: Wells will get bigger
Seeking Alpha/Richard Zeits
With oil prices below $50 per barrel, shale operators have “high-graded” their drilling programs focusing almost exclusively on sweet spots. While costs appear to have been cut to the bone, E&P companies still appear to find ways to improve efficiencies and squeeze additional dimes from service providers and equipment suppliers. However, there is no weapon that is more powerful against low oil prices than… drilling better wells.

When investing in U.S. unconventional oil and gas drillers, consider the tortoises
Forbes/Clint Barefoot
The tortoise and the hare may be the most famous folk tale in the western world. The confident hare blasts out of the starting block leaving the tortoise in the dust. Slowly and steadily, the tortoise passes the napping hare. With domestic unconventional production, most of the performance so far has been judged via short term results. We may have failed to recognize that unconventional production is a marathon, and the “winners” proclaimed in the press are those ahead after a quarter mile. Sprinters, really. Choking back production or opening it up? There are very good reasons to be fast sprinters. Trading some estimated ultimate recovery (EUR) for faster early production (or, in financial parlance, trading ROI for IRR) at $100 per barrel looks pretty smart today as oil wallows around $45 per barrel. High “headline” initial production rates translate into faster payouts and leverage into better enterprise value for public players. We have recognized for some time that slower initial rates will often result in higher EUR… trading IRR for ROI. With the price of oil less than $50 per barrel, it might pay off for investors to consider the best long distance runners.

Oil, gas producers’ margins sputter to 2%
Forbes/Mary Ellen Biery
Gas prices are at their lowest levels since the recession, helping to pad the pockets of American consumers. Meanwhile, however, oil and gas producers have seen their profit margins take a dive in the 12 months ended Aug. 31, according to data from Sageworks, a financial information company. Net profit margin, on average, for privately held oil and gas extraction companies – which handle all aspects of exploration, development and production until the oil or gas leaves the producing property — has dropped to 2% from nearly 15% in the previous 12-month period, Sageworks’ financial statement analysis found. Margins for oil and gas companies also dropped sharply several years ago after a precipitous drop in oil prices, leaving companies scrambling to slash spending in exploration and production.

Banks implore feds to relax energy lending rulebook
Forbes/Debtwire
Regulated banks that extend loans to oil and gas companies not only face the prospect of failing to recoup their investments in the sector – they also operate under the watchful eyes of numerous regulatory agencies. Indeed, under the heat of regulatory pressure over the leveraged loans they provided to energy companies, a group of banks recently met with the Office for the Comptroller of the Currency (OCC) to request a helping hand, multiple sources told Debtwire. The meeting, held in early September, comes as the OCC, the Federal Deposit Insurance Corp (FDIC), and the Federal Reserve Board finish their annual Shared National Credit review program, which yielded tougher standards and increased scrutiny on a bank’s leverage and the amount of capital set aside to back energy loans in the event that the borrowers are unable to pay back the loan.

Why is Chesapeake boosting production despite low oil prices?
Forbes/Trefis Team
At a time when most of the oil and gas companies are restricting their operations due to the slump in the commodity prices, Chesapeake Energy Corporation has plans to expand its 2015 production by close to 4%, beating its original production estimate of a 1-3% increase for the year. The company, which presented at the Barclays Energy-Power Conference last week, attributed this growth to the drastic reduction in its operational costs and superior drilling results from its high quality assets across the US. Doug Lawler, the Chief Executive Officer of Chesapeake Energy, who represented the company at the event, also elaborated on the recently signed gas gathering agreements with Williams Companies, in the Haynesville and dry gas Utica shale region, to enhance its volumes as well as margins. In this article, we discuss why the company will be able to sustain a production growth even in a weak oil price environment and what impact this will have on the dynamics of the overall commodity market.

U.S. natural gas slumps to 5-month low amid weak seasonal demand
Investing.com
U.S. natural gas prices tumbled to the lowest level in almost five months on Monday, as demand for the fuel was likely to remain limited after meteorologists predicted mild fall weather in much of the U.S. in the week ahead. Natural gas for delivery in October on the New York Mercantile Exchange hit an intraday low of $2.562 per million British thermal units, a level not seen since April 30, before trading at $2.569 during U.S. morning hours, down 3.6 cents, or 1.36%. Demand for natural gas is expected to be moderate this week as cooler weather moves across the eastern part of the U.S. Meanwhile, weather in the west will be warmer before cooling off as the week progresses.

5 Myths about building natural gas pipelines
Mondaq
Worldwide, the energy industry is going through a sea change. In the U.S., this change is driven by the politics of climate change, especially the U.S. Environmental Protection Agency’s recently released Clean Power Plan, the centerpiece of President Obama’s policy to reduce greenhouse gas emissions. Regardless of the debate over the EPA’s rulemaking, which received over 4 million comments, one impact is clear: Despite the Clean Power Plan’s surprising de-emphasis on a large-scale buildup of new natural gas capacity (as predicted under the draft plan), U.S. electric power generation will continue to shift from coal to natural gas as the most cost-effective approach to achieving new clean power targets — provided that gas can be delivered on time. However, the coal-to-gas shift will require the nation to expand and strengthen its infrastructure in order to find, produce and store natural gas. It will also require U.S. operators to transport natural gas, and especially to site and build new gas pipelines.

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