Marcellus & Utica Shale Story Links: Wed, Jan 29, 2014

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

New York

Don’t Worry About the Fracking Water
Natural Gas Now
I never read the New York Times unless someone points something out to me I must read for the sake of business. It’s little more than a “supermarket tabloid for the wealthy” and its condescending attitude toward anything west of the Hudson River is just too much for me. Plus, it has published dozens of heavily biased anti-fracking pieces, some of which couldn’t even pass the smell test of their own ombudsman. Last night, a friend, who does read the Times, called my attention to yet another of its hit pieces, this time in regard to supposed impacts on New York City’s water supply. It’s a virtual litany of accusations from another one of their “investigations.” Here are some of what we’re up against:


Ohio has 697 wells, of which 292 wells are in production
Akron Beacon Journal
Ohio has approved 1,061 Utica shale permits, as of Jan. 25. Of that total, 697 wells have been drilled and 292 wells are in production, reports the Ohio Department of Natural Resources. Forty drilling rigs are at work in Ohio, the ageny says. There are 13 new permits: three in Belmont County, three in Carroll County, five in Harrison County and two in Noble County.

Major players expect shale work to grow
Salem News
What’s’ going on in the Utica shale play in 2014? According to Hess Corp., it expects to increase its Utica shale play investment by almost $100 million by drilling 35 wells in Ohio for $550 million. Last year it spent $455 million in the Utica. Based in New York, the company has a presence in Ohio as Hess Ohio Developments and Hess Ohio Resources LLC with drilling activity mostly in Belmont, Guernsey, Jefferson counties with it biggest presence in Harrison County. It has no wells in Columbiana County. Consol Energy, which has an office in Leetonia, is expecting to pour some $24 million into Monroe County in Ohio while building its presence and at the Pittsburgh International Airport where it spent an estimated $500 million for leasing rights and plans to drill upwards of 47 Marcellus wells beginning in the fall. Consol will also use electric-powered rigs instead of diesel equipment. The company said it expects 2014 natural gas production to be between 215 – 235 Bcfe, of which 5 to 8 percent is expected to be NGLs/condensates/oil. Consol, like other drillers in the Marcellus/Utica plays, is pursuing the liquids (oil) and expects the gas-oil mix to increase to 10 to 15 percent in late 2016, with a 30 percent bump in combined totals.

Tuscarawas County Sees Bright Future Thanks To Shale Development
Energy in Depth
When preparing for the increased demands and economic benefits due to Utica Shale development, TuscarawasCounty is ahead of the curve. This is thanks in part to a chance meeting that Harry Eadon, President and Executive Director of the Economic Development and Finance Alliance of Tuscarawas County, had with an oil and gas supplier in the middle of 2011. Since then, Tuscarawas County has been busy planning meetings and working with the Eastern Ohio Development Alliance (EODA) to prepare for the positive changes Utica Shale development has had and will continue to have on the region.


Pennsylvania Court Rules Seneca Has Rights On Game Land
On January 27th, 2014, the Commonwealth Court of Pennsylvania overruled in part and sustained in part the preliminary objections of Seneca Resources Corporation (Seneca) to a complaint filed by the Pennsylvania Game Commission (Commission). The Commission requested injunctive and declaratory relief against Seneca relative to the development of oil and gas under State Game Lands 39 in Venango County, Pennsylvania. The controversy stemmed from the interpretation of two severance deeds. A 1928 deed to the Commission excepted and reserved “all the oil and gas in or under the herein[-]described lands, with the right to operator for same by ordinary means now in use” (emphasis added). A 1932 deed excepted and reserved “all petroleum and oil and natural gas together with the right to prospect for, drill and bore for, produce and remove the same.” Seneca is the owner of the oil and gas rights that were excepted and reserved from the two deeds. Although the Commission conceded that Seneca acquired the oil and gas, it maintained that it owns the development rights to extract the oil and gas by “modern means” since horizontal drilling and hydrofracturing were not available practices at the time of the severance, and therefore, the parties could not have contemplated such practices as “ordinary means now in use.” With regard to the 1932 deed, the Court held that there were no limitations on the manner of extraction. With regard to the 1928 deed, the Court stated that the language was ambiguous with regard to whether ”modern” extraction methods were prohibited and that the litigation would proceed to determine that claim.

Shale Development Is Already Sustainable
Natural Gas Now
Despite all the hype surrounding the Center for Shale Development, shale development is already sustainable and has been for some time. We’ve previously reported here on the subject of the Center for Sustainable Shale Development and all the politics surrounding it. When it was formed, to great fanfare, it was suggested the whole thing was a kumbaya moment; a coming together of the Marcellus Shale industry and its enemies. Most of the media hailed its incarnation as a mechanism for restoring trust in safe responsible natural gas development. That was before the chief sponsor, the Heinz Endowments, which had, theretofore, funded various fractivist initiatives, fired the Executive Director at the apparent order of Theresa Heinz Kerry.

MSC Statement on President Obama’s State of the Union Address
Marcellus Shale Coalition (MSC) president Dave Spigelmyer issued this statement following President Obama’s State of the Union Address: “Tonight, President Obama once again underscored the critical and increasing role that America’s abundant, clean-burning natural gas resources continue to play in boosting our economy and growing jobs, especially in the manufacturing sector. At the same time, and as the President and his Administration have stated, the clear environmental benefits tied to safe shale development and the expanded use of natural gas cannot be denied.

Opportunity: Southwestern Energy’s 2014 capex plans and guidance (Part 1, 8-part series)
Market Realist
On December 10, 2014, Southwestern Energy announced its 2014 capex plans and guidance. SWN noted that for 2014, assuming natural gas prices of $3.75 per mcf at Henry Hub, it estimates net income of $635 million to $645 million and net cash from operating activities (excluding changes in working capital) of $1,920 to $1,930 million. SWN forecasts 2014 EBITDA of $1,985 to $1,995 million. Southwestern also provided guidance for sensitivity to natural gas prices. Over 99% of SWN’s production is currently natural gas, so the company is very levered to changes in the commodity’s price.

West Virginia

More Plans At Blue Racer
The Intelligencer/Wheeling News-Register
High demand for Utica and Marcellus shale ethane, propane, butane and other natural gas liquids is driving Blue Racer Midstream to double the size of its Marshall County processing plant along the Ohio River. The facility, which recently reopened after it closed in the aftermath of a Sept. 21 fire, will grow its processing capacity from 200 million cubic feet per day to 400 million cubic feet per day. Blue Racer also plans to soon begin shipping NGL via river barge, which company officials said will supplement their current modes of rail, truck and pipeline transportation. With the expansion set for a spring completion, Blue Racer will process gas for Chesapeake Energy, Total North America, Eclipse Resources, Hess Corp., Consol Energy, EnerVest, Rex Energy and PDC Energy.

WesBanco Announces 29% Increase in Net Income for 2013
Paul M. Limbert, President and Chief Executive Officer of WesBanco, Inc., a Wheeling, West Virginia based multi-state bank holding company, today announced an increase in earnings per share and related net income for the three and twelve month periods ended December 31, 2013. Total assets at December 31, 2013 increased 1.1% or $66.1 million from December 31, 2012, primarily due to loan growth. Portfolio loans increased $207.2 million or 5.6% in 2013, with $58.4 million of growth coming in the fourth quarter. Loan growth was achieved through $1.6 billion in loan originations in 2013. This represents an increase of 31.5% in loan originations compared to 2012. Growth was centered in commercial real estate construction and C&I lending as a result of improved economic conditions, increased business activity in markets impacted by Marcellus and Utica shale gas drilling, expansion into the Pittsburgh market, additional lending personnel and continued improvement in loan origination processes. Deposits increased $118.2 million or 2.4% from December 31, 2012, some of which was the result of initial deposits from bonus and royalty payments for Marcellus and Utica shale gas payments from energy companies operating in our local markets. All deposit types increased except certificates of deposit, which decreased $138.1 million due to lower rate offerings on roll overs of maturities.

Fill ‘er up!
WV MetroNews
You can now travel the I-79 corridor in West Virginia driving a CNG or Compressed Natural Gas vehicle. IGS officially opened their CNG fueling station in Charleston Tuesday with a ribbon cutting. It’s located in the parking lot at the Spring Street Foodland just off Bigley Ave. It’s the third IGS station to open here in West Virginia. The company also has sites in Jane Lew and Bridgeport. Scott White, the president of IGS, likened the project to ‘Field of Dreams.’ “If you build it, they will come.” Already IGS has four corporate customers: Chesapeake Energy, Antero, EQT and the West Virginia Division of Highways. White said the project would not have been possible without their support. “At the same time that provides the local communities the ability to use CNG,” explained White. “I think it’s a good strategy. It seems to be paying off. West Virginia is already supportive.” Kanawha County has several CNG-powered vehicles and the City of Charleston has one too. At $2.19 a gallon CNG is much cheaper than filling up with regular unleaded.

WV State Univ Designs Energy Management Concentration to Support WV’s Growing Natural Gas Industry
West Virginia State University has developed a new academic program designed to educate the next generation of oil and gas employees, developers, and industrialists in the Appalachian region. WVSU now offers a Concentration in Energy Management associated with its Bachelor of Science degree in Business Administration. This new concentration is designed to expose student to several industry topics which may not typically be included in Business Administration curriculum, including emphasizing communication skills, studying energy financial markets, personnel management, and accounting. This partnership between industry heavy-weights and WVSU promises to offer a fruitful collaboration benefiting both the students and the State of West Virginia.


Emergency Shortage Affecting 7 Million Americans
The Motley Fool
One of the biggest frustrations each summer is running out of propane right in the middle of grilling a steak dinner. However, that frustration pales in comparison to the real risk that nearly 7 million Americans across 33 states are facing today. These Americans rely on that gas to heat their homes. Now, after a brutally cold winter has sapped U.S.propane supplies, these Americans are facing a real emergency situation, especially as another cold snap rolls through. Yet this is an emergency that no American should face. Here’s why they are.

A Perfect Storm – Polar Vortex Turns Propane and other NGL Markets Upside Down
RBN Energy
Last week the U.S. NGL markets entered uncharted territory. According to OPIS, cash propane prices in the Conway, KS market reached almost $5.00/gallon for a time, responding to a massive product shortage across the entire eastern half of the country. But at the same NGL hub, OPIS also reported that the price for ethane/propane mix (EP mix) dropped deep into negative territory at $(0.50)/gallon. That’s crazy. The seller is paying the buyer to take the product. Nothing like this has been seen before in these markets. Propane inventories continue to drop, transport trucks are moving product hundreds of miles to markets, terminals remain on allocation and a state of emergency has been declared by at least 20 state governors. The inventory graphs look so scary that the Black Swan is frozen stiff. Today we begin a series on the NGL markets of 2014, a year that this industry will be talking about for a long time.

Shortage of natural gas has propane prices in Northfield and the Midwest skyrocketing
Northfield News
If you’re heating with propane, it might be time to turn the thermostat down. Way down. The perfect storm of a wet fall followed by an immediate “turn on the furnace, honey” start of winter has combined with an intermittently working pipeline to squeeze the supply of propane to the upper Midwest. Adding to that misery was the rupture of a natural gas pipeline on Saturday in Canada that interrupted the main supply to some areas of the Upper Midwest. Shortly following the pipeline explosion, Xcel Energy — a Minneapolis-based company — asked customers in North Dakota, Minnesota and Wisconsin who use natural gas to heat their homes to turn their thermostats down to 60 and avoid using natural gas appliances. Businesses that use natural gas also were asked to conserve. Things started looking up on Monday, however, when Xcel Energy lifted its appeal for conservation, saying that progress continues on restoring normal natural gas transmission. Xcel said natural gas is once again flowing to the region in one of two pipelines that were shut down for inspection Saturday after a third pipeline was ruptured in an explosion south of Winnipeg, Manitoba.

Ahead Of Williams Partners’ Q4 2013 Results
Seeking Alpha
There is significant potential in the Northeast shale formations (Marcellus and Utica) where WMB and WPZ have invested heavily (~$3.3 billion by WPZ in 2013) and obtained very strong positions. WPZ is also about to greatly increase its Canadian exposure. The next major drop-down was slated to occur in January 2014 and will include WMB’s Canadian operations. These are expected to contribute ~$200 million of DCF to WPZ in 2014 and 2015. The ~7x cash flow price indication takes into consideration the commodity risk presented by these assets. Patient investors will be rewarded if the ~60% increase in DCF projected to materialize from 2013 to 2015 will be achieved. In the meantime, as shown above, they face significant headwinds.
This Natural Gas Company Wasn’t Kidding About Slashing Costs

Republican Bill to Block Obama on Climate Clears Panel
As President Barack Obama is set to highlight measures he can take without Congress, Republican lawmakers are already trying to unravel rules aimed at combating climate change before they are finalized. The House Energy and Commerce Committee approved legislation today that would prohibit the standard for new coal-fired power plants the U.S. Environmental Protection Agency proposed in September, and head off its plans for existing plants even before they are announced. The Republican-led committee voted 29-19 in favor of the measure. Republicans “are declaring defeat before the starting bell,” California Representative Henry Waxman, the committee’s top Democrat, said before the vote, referring to the EPA’s rules. In his State of the Union address tonight, Obama will say he’s prepared to act without Congress to advance parts of his agenda. The pledge comes months after he outlined a plan of executive actions to boost renewable energy, curb carbon-dioxide emissions from power plants and establish energy efficiency standards in order to combat climate change.


Leader says OPEC not threatened by U.S. shale production
Bloomberg/Akron Beacon Journal
U.S. shale oil production is no threat to OPEC and the group can absorb higher output from its members Iran, Libya and Iraq when supply outages are resolved, according to its Secretary-General Abdalla El-Badri. “I welcome the tight oil of the United States,” El-Badri said at the Chatham House Middle East and North Africa Energy conference in London today. “Demand will grow and this will not affect OPEC in any way.” Oil prices in a range of $100 to $110 a barrel are acceptable to both producers and consumers, El-Badri, 73, said. The market is balanced and comfortable, with stockpiles at healthy levels, he said. Production from the Organization of Petroleum Exporting Countries may rise this year if Libyan protests subside, sanctions against Iran are lifted and Iraq meets its goals to lift output. Those reasons, coupled with steadily rising U.S. oil supply, have led the majority of analysts tracked by Bloomberg to predict lower oil prices for this year.

OPEC producer UAE considers importing North American gas
The United Arab Emirates, a Gulf OPEC oil producer, said it was looking at the possibility of importing natural gas from North America, in what would be one of the most striking developments since the start of the U.S. shale boom. The United States and Canada are producing record amounts of gas from shale rock formations, pulling down North American prices to levels that have attracted the interest of foreign buyers. Around a dozen long-term deals, each worth billions of dollars, have recently been signed behind closed doors between U.S. producers and buyers in China, Japan, Taiwan, Spain, France and Chile as global demand for gas increases. “We may follow the same trend of considering investments in the United States and Canada to bring some of that gas back home,” UAE Oil Minister Suhail bin Mohammed al-Mazroui said on Monday at an energy conference in London.

China company reports shale success in Sichuan province
Bloomberg/Akron Beacon Journal
China Petrochemical Corp., Asia’s biggest refiner, made a “strategic breakthrough” in shale gas exploration in southwest China’s Sichuan province. The company also had a significant advance in shale gas exploration technologies, Chairman Fu Chengyu said in a statement on the company’s official microblog at amid its annual work conference in Beijing from Jan. 20 to 22. The new technologies have been applied in the Sichuan project, Fu said, without elaborating. China Petrochemical may produce as much as 550,000 cubic meters of shale gas a day from its fields in Sichuan’s Fuling, according to a Jan. 15 report from the research arm of China National Petroleum Corp., the country’s biggest oil and gas explorer. Southwest China, which includes Sichuan, and the Upper Yangtze River area account for 40 percent of the country’s estimated 25.08 trillion cubic meters of shale gas reserves, the world’s largest, according to the Ministry of Land and Resources. China aims to produce 6.5 billion cubic meters of shale gas by 2015 and as much as 100 billion cubic meters by 2020, from almost zero commercial output in 2013.