MDN Takes on Seeking Alpha Blogger over Marcellus Decline Rate

inside baseballThis is an “inside baseball” kind of article. For those with a casual interest in Marcellus Shale drilling, you’re free to move along. For the rest of us, this is an important issue–and that issue is how fast do Marcellus Shale wells (really any/all shale wells) peter out? After you drill a well, how long does it take before the gas quits flowing in economic volumes? It’s certainly important for drillers investing millions and billions–and for landowners who receive royalties. It’s also important for companies that invest big money in processing plants and pipelines (the “midstream” sector) because those fixed costs take time to recoup and you want to be sure the gas flows long enough to make a profit.

Increasingly the debate is turning to decline or “depletion” rates–how fast wells peter out. The U.S. Energy Information Administration (EIA) introduced a new drilling productivity report in October (a report we LOVE) that tackles the issue of decline rates. EIA lumps “old” wells together in a single number that they track–they call it “legacy production” or gas production from older wells. A freshly drilled well is considered “new” for precisely one month! After that, it’s production is lumped in with all of the other legacy or “older” wells. Sooner or later drillers will quit drilling new wells and all that will be left are legacy wells, so the sport in the investing industry is to guess when that will happen, and how productive those older wells will be. Enter an article on Seeking Alpha that does a deep dive into this issue by an admitted shale gas pessimist…
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New NYC Mayor Comes Out Against Fracking Anywhere in NY

NYC Mayor Bill De BlasioThe new mayor of New York City, Bill De Blasio, is anti-drilling and proud of it. Yesterday he told reporters he doesn’t want to see fracking anywhere in the state. That De Blasio–wow, what a deep thinker he is! Know where he gets his facts and information from about fracking? Watching movies like Gasland. Such intellectual heft. Such gravitas. The man is clearly smarter than any of the rest of us. Thank God he’s the new mayor.

Of course, De Blasio apparently doesn’t realize that fracking (of conventional oil and gas wells) happens right now in New York State and has been for over 40 years. But hey, let’s not let something like the truth get in the way of spinning a good fiction for the hoi polloi–us ordinary folks. We’re just so in awe of self righteous jerks intellectual leaders like De Blasio, we simply feel unworthy to be in His presence…
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Northeast Propane Shortage – Andrew Cuomo Partially to Blame

Propane is one of the natural gas liquids (NGLs) that comes out of the ground along with methane (natural gas) in places like southwest PA and eastern OH–otherwise known as “wet gas” areas of the Marcellus and Utica Shale region. There’s been a number of stories recently in the national media about supply shortages of propane. The Pennsylvania Propane Gas Association issued a press release yesterday addressing those concerns–to layout the reasons why propane is in short supply and why prices for it have jumped.

When you read beyond the headlines, you’ll find there’s a pretty simple reason why propane prices have skyrocketed in the northeast and New England–it’s because of New York’s anti-fracking governor Andrew “the ditherer” Cuomo. He’s not only dithering about whether or not to allow fracking, he’s also dithering on whether or not to approve a new propane underground storage facility near Seneca Lake–what the industry terms a “critical” need to relieve propane supply issues in this part of the country. Here’s a good rundown on the current propane supply issues plaguing the U.S., including Cuomo’s hand in it…
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CONSOL Energy 4Q13 Update: Marcellus Production Up 56%

CONSOL Energy, the Pittsburgh-based coal mining company that’s transforming itself into a natural gas exploration company, issued an operational update this morning. According to the update, CONSOL’s fourth quarter Marcellus Shale gas production was up 56% over the same period a year ago. For all of 2013, CONSOL drilled 55 horizontal shale wells: 46 Marcellus Shale and nine Utica Shale wells. They completed 59 Marcellus Shale wells and 10 Utica Shale wells last year, and turned in line (switched on) 52 Marcellus Shale and two Utica Shale wells. And it’s full speed ahead for 2014.

Here’s the full update with details of where CONSOL is drilling and how they’re doing:
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WV Anti-Drillers Try to Tie Coal Chemical Spill to Fracking

MDN alerted you yesterday that some businesses on the periphery of the shale drilling industry in West Virginia may be affected by the recent coal-related chemical spill in that state that shut off water to some 300,000 residents (see Bumpy Ride for GreenHunter Because of WV Coal Chemical Spill?). Apparently anti-drilling Democrats in the state aren’t stopping at the periphery of the industry–why not use this unrelated chemical spill tragedy to falsely paint the entire shale drilling industry too? Yeah! What a great idea! (Rahm Emanuel: “You never let a serious crisis go to waste.”)

And so is born one of the most confusingly false and fact-challenged articles we’ve read in a long time–and that’s saying something. A Huntington News reporter was apparently so wowed by has-been WV politician Charlotte Pritt (who once ran for governor in WV and lost), that he accepted her spoon-fed pablum that the recent coal-related chemical spill “has ties” to the fracking industry. The reporter confusingly cites studies going back years from trustworthy sources like (*cough*) Politico, and sprinkles in liberal doses of liberal dogma like “Halliburton loophole,” and apparently expects you to understand what he and Queen Charlotte are trying to say: frackin’s bad for ya man…
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Rice Energy’s Debutante Ball Happens Today – More Yummy IPO Info

Today is IPO day for Rice Energy. MDN doesn’t keep mentioning the Rice IPO because we have any kind of financial interest–we don’t invest in any energy stocks, to avoid even the appearance of a conflict of interest. We keep mentioning the Rice IPO because we keep spotting really good information and articles about Rice–things we believe you would be interested in.

Yesterday we brought you an article from Seeking Alpha with good Rice info (see Rice Energy IPO Launches Tomorrow, Fri Jan 24). Today, we spotted an even better article about Rice on Seeking Alpha from a different author. This one tells us precisely where in the Marcellus and Utica Rice holds their acreage, how many rigs they’re currently running, how many wells they’ve drilled, and yes, who the biggest Rice stockholders are. All helpful information for landowners considering a lease with Rice, potential supply chain partners considering selling things to Rice, and other drillers sizing up a potential new (strong) competitor…
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Hess Goes All in for Shale Drilling in 2014, $550M on Utica Shale

Over the past couple of years, Hess Corporation–the company whose name you recognize because you probably have filled up your car at one of their gas stations–has been transforming itself from petroleum products marketer (like retail gas stations) to oil and gas driller. Hess still owns some of those gas stations–but not for long. They’re in the process of spinning off retail gas stations into their own company so they can sell it (see Hess Continues Transformation With Plans for Retail Spinoff). Early last year Hess’ plans to become an E&P company was challenged by one of their stockholders (see Corporate Raider Paul Singer Tries to Force Hess Out of Shale). He was obviously unsuccessful in trying to bully Hess into doing his bidding. (Note to Chesapeake: you should have followed Hess’ example.)

Yesterday Hess released their 2014 capital and exploration budget, and it shows Hess has gone “all in” for shale drilling. The Hess capex budget calls for a whopping $5.8 billion in spending–of that $2.85 billion (49%) will be spent on shale drilling. The lion’s share of Hess’ shale budget will go to drilling for oil in North Dakota’s Bakken Shale. However, they have allocated $550 million for drilling in the Utica Shale this year, with plans to sink 35 new Utica wells. Here’s the full Hess budget released yesterday…
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Oilfield Services Company Canary Buys Wellhead Competitor

Canary says it is the country’s largest “independent” wellhead services company. They rent equipment and personnel to help energy companies frack wells, and they install wellheads on those wells. Canary, now a $100 million company, announced yesterday that they’ve bought out a smaller competitor: American Wellhead. American has a strong operation in the Permian Shale basin (Texas) which Canary wanted.

So why is this news for MDN? Because Canary has extensive operations in both the Marcellus and Utica Shale, servicing drillers in the northeast. And because when a company like Canary expands the way they have been expanding, it may mean opportunity for other businesses that work with, or sell to, companies like Canary. And because drillers in the northeast may be interested in knowing what their vendor is up to. For a variety of reasons, we thought this press release from Canary might be interesting for our readers…
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