Marcellus & Utica Shale Story Links: Tue, Jan 21, 2014

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

New York

Media Sleep at the Wheel as Cuomo’s “Energy Highway” Plan Gets Ready for its Closeup
NY Shale Gas Now!
Anybody still remember the New York Regional Interconnect (NYRI)? Or its predecessor — Marcy South (which was, in fact, eventually built after a fashion)? Well, this is a new electric powerline plan that’s been strategically crafted so as to fall beneath the radar of most media and citizens in New York, for as long as possible. In a nutshell, this is the story, which is an old story: Greater NYC needs more electrical power (especially if Cuomo makes good on his promise to close the nukes at Indian Point). Turns out, Upstate and Canada have at least some of that power. But both the private and public sectors have struggled in the past to deliver the juice south, due to very predictable local opposition. Sure, everybody wants the juice, just not so much of it in their backyards. What do to? Re-brand and re-launch — AC Transmission Upgrade, 1,000 Megawatts, Energy Highway. It’s not a new powerline; it’s an initiative. The plan so far is nicely obtuse. Most people can read every word, and still not know what the hell any of it means, which is most of what the authors hoped for.


Carrizo Oil & Gas: Off To The Races In Utica
Seeking Alpha/Richard Zeits
Carrizo Oil & Gas’ first Utica well, the Rector 1H in Guernsey County of Ohio, came on strong and oily: ~2,800 Boe/d, 60% condensate. The long anticipated test result was announced this morning. A strong well is not a particular surprise given the favorable location of the drill site in the condensate window. The IP rate is in line with a number of other impressive wells drilled in the vicinity and “on trend” by PDC Energy (PDCE), Antero Resources (AR) and Gulfport Energy (GPOR). However, the positive outcome is important from Carrizo stock’s perspective as it validates the company’s ability to execute in a play were it still has to prove itself as operator. Carrizo has a total of 21,700 net acres in the Utica, most of which are located in the prime section of the condensate fairway. While the position may appear relatively small, the acreage’s high quality makes it significant nonetheless and meaningful from the stock’s valuation perspective.

Lehman Recruit Trades I-Banking for Shale Wildcatting
The Street
As the son of a United Nations diplomat to Haiti, Ivory Coast, Chad and Madagascar, and a Lehman Brothers recruit, Farid Guindo, 26, knows he can’t take anything for granted. Because of his father’s U.N. dispatches, Guindo spent much of his childhood moving from country to country amid regime change and unrest. He’d lived in about a dozen countries by the time he was ready for college. Those travels amid instability may have also prepared Guindo for a career in finance that began with an investment banking internship at Lehman Brothers in the summer of 2008. After a few years as an investment banking analyst in the natural resources group at Barclays Capital and a stint as an energy analyst at commodities hedge fund Ospraie Management, Guindo struck out on his own in August 2012 to found Drill Capital, a fledgling money manager focused on energy investments. Drill Capital is currently in the process of completing its first investment — a $5.2 million project to build an 83-room Wyndham-branded hotel in Carrollton, Ohio. The hotel, which serves a 3,200 community tucked midway between Cleveland and Pittsburgh wouldn’t appear to be an auspicious start, except that it sits on the fringe of Utica Shale basins in Carroll County that are increasingly in the gaze of drillers as large as Chesapeake Energy. Guindo expects that his small Wyndham could serve what may become a burgeoning shale drilling hub, and could lay the foundation for Drill Capital as an energy investor.

Can Hess Have Its Cake and Eat It Too?
The Motley Fool
In Hess’ upcoming earnings call look to see if management sees well completion costs still trending lower, because this would easily justify spending less on the area to bring down the debt load. The Utica shale will also provide onshore gains for Hess. By joining hands with CONSOL Energy, Hess plans on further developing the wet gas window of the Utica which offers plenty of upside over the next few years due to a relatively small base to grow off of. Don’t just look at the upstream assets, Hess plans on adding significantly to its midstream operations as well. Hess has the ability to expand the capacity of its Tioga gas plant from 100 MMcf/d to 250 MMcf/d, which processes NGL. Part of the expansion plan could also include expanding Tioga rail capacity to 120,000 bpd from 54,000 bpd.


America’s energy boom
Pittsburgh Post-Gazette
America is on course to become an energy superpower. Once our greatest economic vulnerability, we have transformed energy into a source of immense strength. The surge in natural gas production in the Marcellus Shale is evidence of this transformation. We can be the world’s energy leader if we get energy policy right. Today, we have before us a once in a lifetime opportunity to reshape our energy future and significantly improve our economy. Taking full advantage of our vast energy potential means crafting policies that encourage new production and reflect this new era of energy abundance.

Here’s how to keep Pa’s energy industry healthy: Lowman Henry
Harrisburg Patriot-News
But there are political storm clouds. There are those in the General Assembly who propose to solve every funding problem by adding taxes on Marcellus shale drilling. With the state facing a budget deficit of over one billion dollars, calls for taxing the industry will increase. Candidates in the crowded Democratic primary for governor are tripping all over themselves to propose new social welfare spending programs, usually to be paid for by an extraction tax on Marcellus Shale. All of this, of course, would kill the goose that is laying the golden eggs. The Marcellus shale industry currently pays every tax that every other industry in the state must pay. Let us not forget that Pennsylvania is one of the most highly taxed states in the nation. In fact we are alone among the 50 states in double-taxing corporations with both a corporate net income tax and a soon-to-be phased out capital stock & franchise tax. Atop all that, the Marcellus shale industry pays the previously mentioned impact fee. Add in an extraction tax, and the wide range of new environmental regulations being called for by most of the Democratic gubernatorial candidates, and Pennsylvania’s current friendly environment for development of Marcellus shale gas and related industries becomes not just unfriendly, but uncompetitive.

Shell issues profit warning: bad news for Pa. ethane cracker?
StateImpact Pennsylvania
Royal Dutch Shell warned its investors Friday that the oil giant made “significantly” less money than expected in the last quarter of 2013. It’s the first time Shell has issued a profit warning in a decade and comes at a time when the company is being choosey about where to invest capital. Last month, Shell abandoned plans for a gas-to-liquids plant in Louisiana. A proposal for a multi-billion ethane cracker in Beaver County, Pennsylvania, which stands to receive the largest tax break in state history, is still on the table. So, is today’s profit warning bad news for the future of the ethane cracker? It’s no news, according to Cindy Giglio, an analyst with the firm IHS Herold. “This is a long-term project,” Giglio said. “The decision is going to be a long-term, strategic decision and these results are not going to impact that long-term outlook for regional ethylene demand and supplies from the Marcellus.”

West Virginia

W.Va. Lawmakers Begin Consideration Of Stricter Storage Tank Regulations
West Virginia Natural Gas Blog
The West Virginia Legislature has begun consideration of a legislative proposal in response to last week’s chemical spill emergency in Charleston. The new legislation, the Water Resources Protection and Management Act (SB 373), would amend and establish new storage tank regulations. The bill, as drafted, contains several provisions that should be noted by horizontal producers: 1. Applies to ALL aboveground storage tanks that hold ANY fluid except water. This technically includes your gas grill’s propane tank and would apply to the vehicle LNG and Propane filling stations if the storage tanks are maintained aboveground – i.e. there is no size restriction. 2. No specific provision regarding oil and gas operators but statute would most definitely apply to tanks installed on well pads to collect and separate the constituents of wet gas as well as your old-school condensate tanks. 3. Although the connotation of aboveground storage tank envisages a fixed tank at one location, there is no separation between a tank fixed in one location or a mobile tank. This could have enormous implications for hydraulic fracturing tankers delivering fracturing fluids to the well site. 4. No specific amount of civil penalty is mentioned and leaves administrative penalty amounts up to WVDEP. Fees are left up to WVDEP as well. 5. In addition to leaving administrative penalty amounts and fees up to WVDEP, most of the statute intends to pass along the substance of the regulatory program to WVDEP to develop via rulemaking.


Marcellus Shale: A 20 Bcf Per Day Natural Gas Tsunami
Seeking Alpha/Richard Zeits
The Marcellus Shale does not cease to amaze with the sheer scale of its resource and unstoppable growth momentum. Three months ago, in its quarterly Drilling Productivity Report, EIA estimated November 2013 natural gas production from the Marcellus Region at ~12 Bcf/d (the estimate includes legacy conventional production of ~2.0 Bcf/d). Just few years back, the figure would be almost unthinkable even to an optimistic forecaster. This week, the Report’s newly released January 2014 update shows the current production from the region at ~14 Bcf/d, a staggering 2 Bcf/d increase in just three months.

3 U.S. IPOs Planned For The Week Of Jan. 20
Seeking Alpha
Rice Energy (RICE), a natural gas E&P operating in the Marcellus and Utica Shale, plans to raise $800 million by offering 40.0 million shares at a price range of $19.00 to $21.00. At the midpoint of the proposed range, Rice Energy would command a market value of $2.6 billion. Rice Energy, which was founded in 2008, booked $72 million in sales over the last 12 months. The Canonsburg, PA-based company plans to list on the NYSE under the symbol RICE. Barclays, Citi, Goldman Sachs and Wells Fargo Securities are the joint bookrunners on the deal.

Renewables Won’t Get It Done Without Natural Gas
Natural Gas Now/Nick Grealy
Earlier this week I did over a dozen radio interviews in the UK as well as on Sky News and BBC World Television. Among various misconceptions, the strongest was one that fracking is dangerous and there is a history of damage in the US. I use misconception as no one appeared to know of any specific case, although the old liar, liar, taps on fire scenario from Gasland is still widely out there. One irrational, almost religious as the Prime Minister might put it, widely held popular belief is that renewables present a currently obtainable physically deliverable alternative to carbon fuel. The only thing stopping it is a lack of funding and belief: we can have a carbon free future very shortly if we believe in it strongly enough. There are degrees of course and although some have the notion that 100% green power is here today, many more people appear to believe that we can operate a modern industrial society on various percentages of renewables today. The idea that Germany for example is getting over 50% of it’s power from renewables is widely held, even if as the EEX platform demonstrates, the reality on a winter’s day is far less and the UK is no different.


Report: Energy, Regulatory Work Driving Expansion
The Legal Intelligencer
From Western Pennsylvania to Seattle and South Africa to Dubai, the legal community is focusing its expansion on a select few markets for a host of different reasons, according to the 25th annual What’s Hot and What’s Not in the Legal Profession report from consulting firm Robert Denney Associates. Some of the geographic markets Denney identified were to be expected and others have emerged more recently. Asia and Latin America were both cited as hot markets for the increasing demand for legal services spawned by their growing national and regional economies.