Marcellus & Utica Shale Story Links: Tue, Feb 18, 2014

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

New York

Borderland: Where Natural Gas Determines Futures
Natural Gas Now/Tom Shepstone
The “Borderland” between Pennsylvania and New York illustrates just what a difference natural gas, combined with a political border, can make. We recently became aware of a video titled Borderland, which has been put out by a group called the Job Creators Network. It’s a comparison of the economic fortunes of Bradford County, Pennsylvania with its neighbor to the north; Tioga County, New York. The video is a great eye-opener about the stark difference natural gas development has meant for one and the lack of it has meant for the other. The Borderland video can be watched in its entirety here, which is what we encourage you to do before you read the rest of this post:


Operators Continue to Increase Investment in the Utica Shale
Energy in Depth
Companies investing and developing the Utica Shale continue to expand operational allocations as production ramps up. While 2013 was known as the year of the midstream, companies are now focused on developing this promising resource as some of the midstream constraints are removed. Announcements by companies like Chesapeake, Hess, XTO and Antero all suggest that 2014 is going to be a big year for the Utica Shale.

Prosecutor seems sure that fracking ban will have to wait
Athens News
With the Athens County Board of Elections slated to certify spring primary ballot petitions on Tuesday, county Prosecutor Keller Blackburn is poised to recommend that an anti-fracking measure be approved for the November election. The group behind the measure, the Athens Bill of Rights Committee, has sent a letter to the elections board and Blackburn through its attorney requesting the measure be approved for a vote on May 6. This was after Blackburn was informed by the elections board office, and subsequently notified the group, that Ohio Revised Code stipulates that ordinance petitions must be put before voters only on a general election ballot.

Energy projects provide fuel on the road to recovery
Millbury (OH) The Press
Energy is fueling a $1.94 billion fire that could ignite our economy this year and in the near future. That gaudy number reflects the upcoming investments in our community from four energy companies: First Energy, BP-Husky Refinery, PBF Refinery and Clean Energy. Those investments are: First Energy announced two weeks ago it would invest $600 million to upgrade the Davis Besse nuclear power plant near Oak Harbor; PBF Energy, owner of the former Sunoco Refinery, announced in December it would invest $140 million in the next 15 months to upgrade its 282-acre refinery on the Toledo-Oregon border; BP-Husky Refinery in the spring announced it would soon start its $400 million project to enable it to refine sour crude from the Husky oil sands in Alberta, Canada; The $800 million Oregon Clean Energy natural gas plant in Oregon is clearing environmental hurdles and is expected to break ground this spring. Some 4,000 contractors will work at these sites this year and next and will not only give the local economy a boost, but position our area for potential growth in manufacturing.

How to Invest in the Explosive Growth of the Utica Shale
The Motley Fool
Oil and gas production out of Ohio’s Utica Shale more than doubled last year. That’s despite the fact that the play’s top driller Chesapeake Energy Corporation still had 208 of the 377 wells it drilled still waiting to be completed as of the end of last quarter. It’s also despite the fact that some of the play’s emerging drillers like Halcon Resources Corp. and Magnum Hunter Resources are just beginning to drill. Because we’re so early in the development of the Utica Shale, there is a real opportunity for investors to profit from the play’s explosive growth potential. The choice investors need to make is how to best invest in the emergence of the Utica Shale. Chesapeake Energy might one of the largest leaseholders, but only about 15% of its 2014 capital budget will be spent on the play. Meanwhile, Magnum Hunter Resources has only completed one well so far. However, it is the second most levered to the Utica Shale when comparing its net Utica acreage to its enterprise value.

Wayne County businessman troubled by Ohio propane shortage
Akron Beacon Journal
Wayne County’s Matt Kilbourne is frustrated and troubled by Ohio’s easing statewide propane crisis. Kilbourne, part owner of the Pine Tree Barn and Farms off state Route 226 in Wooster Township, has seen his annual propane heating bill jump from $30,000 to $80,000. The price paid for propane in bulk has jumped from $1.58 a gallon in January 2013 to $2.89 a gallon on his last bill, and that’s an 83 percent increase that has hurt his business, he said. “That’s $50,000 that’s going up my chimney instead of going to pay for other things like hiring new employees or repairs or capital improvements,” he said. But his supplier has been able to deliver make monthly propane shipments, unlike in some areas where rural Ohioans have found themselves with no heating fuel in the middle of an ultra-cold winter.

Fairmont Supply opening location in Tuscarawas County
Akron Beacon Journal
Fairmont Supply, a nation-wide leader in materials management strategies and maintenance, repair and operating (MRO) supplies, announces the opening of a new location in Uhrichsville, Ohio. Jeff Robinson, General Manager – Oil and Gas comments, “We are excited to announce the opening of a new location for Fairmont Supply Oil and Gas at 305 E. McCauley Drive in Uhrichsville, Ohio. As a full line distributor of products to support the Oil and Gas, Mining, and Manufacturing industries; Fairmont Supply looks forward to serving our customers in eastern Ohio. The 25,000 sq. ft. Uhrichsville branch is strategically located in the heart of the emerging Utica Shale play, and includes a retail showroom, warehouse, yard, and company owned delivery fleet. We are excited to add the Uhrichsville distribution center to our Oil and Gas division. This location will enable us to provide a wide range of products and services to customers in the Utica Shale play as well as Mining and Industrial customers in that area.” – President Van Compagni. The Uhrichsville location is open for business and will announce a Grand Opening in early Spring 2014.


With fire out, crews move toward capping wells at Greene County explosion site
StateImpact Pennsylvania
The fire at a Greene County natural gas well pad extinguished itself on Saturday afternoon and is expected to stay out, allowing crews to move forward with plans to shut down the wells that were damaged by an explosion and fire last week, officials said today. Chevron said in a statement Sunday evening that it couldn’t say what caused the flames to go out at the two wells that had been burning since February 11, but it noted that the wells are not releasing enough fuel to sustain a fire and a charred crane near the wells has cooled enough to keep the gas from reigniting. The wells are now venting any gas they release, but they are flowing at a reduced rate because Chevron put a well at a separate pad nearby into production, decreasing some of the pressure underground, Scott Perry, the Department of Environmental Protection’s deputy secretary for oil and gas management, said.

WPX Energy: Analyzing The $1.4 Billion Write-Off
Seeking Alpha/Richard Zeits
Executive summary: WPX Energy’s (WPX) $1.4 billion impairment charge indicates that the company’s Marcellus assets require $4.50+/MMBtu gas to be viable. While the write-off is non-cash, it reveals low economic value of one of the company’s core assets. Yesterday’s 10% stock price move appears to adequately reflect the recognition of the low economic value of the Marcellus acreage. The impairment also highlights the high price that WPX had paid to build its position in the Marcellus. Assuming that the impairment impacted primarily the value of undeveloped reserves and acreage, the write-off equates to over $10,000 per acre.

Methane Emissions Claims Don’t Pass the Smell Test
Natural Gas Now/Donald Roessler
Methane emissions are now being misused by headline writers to trash bus and truck fleet conversions to natural gas, but common sense tells us that isn’t correct. Well, here we go with another study filled with “could happens.” There is yet another of those “on the one hand, on the other hand” reports cherry-picked by agenda-driven media to show only half the hands, and, predictably, those opposed to fracking. The New York Times, is out with a story suggesting the switching of bus and truck fleets from diesel to natural gas can cause more harm to the atmosphere because of methane emissions and leaks associated with the extraction and transportation of this energy source. The study, by Stanford University, the Massachusetts Institute of Technology and the Department of Energy’s National Renewable Energy Laboratory includes a lot of positive news regarding natural gas contributions to lowering emissions but the Times naturally highlighted and headlined the authors’ speculative conclusions about the switching of bus and trucks fleets to natural gas. Others saw it quite differently.

Natural Gas and CNG Heating Up Things in Education
Natural Gas Now/George Stark
Natural gas development has been improving the quality of life in Northeastern Pennsylvania since it began a little over a half-decade ago. Now, things are moving into high gear with CNG as well, especially in education. There has been significant support for higher education institutions across Pennsylvania since development of the Marcellus Shale. Cabot Oil & Gas, for example, is partnering with Lackawanna College and Johnson College to share industry know-how and needed leadership to help their programs provide job-ready natural gas and compressed natural gas (CNG) education to northeastern Pennsylvania students. It’s a great story and one that’s not being told nearly enough.


Will Icahn Finally Push For A Takeover Of Chesapeake?
Seeking Alpha
Carl Icahn, renowned corporate raider who struck it big in the 1980s with activist investing, had a remarkable comeback lately due to his successful investments in Herbalife (HLF), Netflix (NFLX) and Apple (AAPL). Icahn sold more than half of his stake in Netflix in the fourth quarter of 2013 booking a cool profit of $800 million on his polarizing Netflix stake. Savvy profit-taking after the gigantic surge of Netflix’s share price has only added to Icahn’s reputation as a successful investor. He also initiated a substantial long position in Herbalife, the nutritional supplements maker, which was heavily shorted at the time by Bill Ackman, founder and Chief Executive Officer of hedge fund Pershing Square Capital. More hedge fund investors finally joined in on Icahn’s side including George Soros, Daniel Loeb from Third Point and William Stiritz, Chief Executive Officer of Post Holdings (POST). Herbalife shares ultimately soared: The stock is up 80% over the last twelve months. In addition to his investments in Herbalife and Netflix, Icahn flexed his activist muscle once again when pushing Apple (AAPL) CEO Tim Cook for a better utilization of Apple’s gigantic cash stack and higher share repurchases. Not all activist initiatives pay off and it just has been reported that Icahn dropped his plan for higher share repurchases as proxy advisory firm Institutional Shareholder Services voted against his proposal.

New Methane Study Confirms Environmental Benefits of Natural Gas
Energy in Depth
Last week, a new paper was released that suggested the Environmental Protection Agency (EPA) underestimates methane leakage rates in the broader economy. Last year the EPA downwardly revised its estimates of methane emissions from natural gas systems based on new technologies, a finding that was more or less confirmed by a study later published by the Proceedings of the National Academy of Sciences. Nonetheless, the new study is very clear that even if methane leaks are 50 percent higher than what EPA estimates, natural gas still retains its environmental advantage when used for power generation. The paper itself does not look at any new data – it assesses data from studies that have already been completed, running it through its own modeling. As EID has covered nearly every methane paper extensively, there’s not much “new” to report here — but it is worth pointing out a few key facts about this latest contribution to methane research. Even with 50 percent higher leakage rates natural gas retains environmental benefits.

Fracking vs. fracing – what’s correct?
Let’s set the record straight on this topic. Fracing seems to be the most logical way to to write it, but the mainstream media has decided to add a “k” (there is no k in hydraulic fracturing), and the general population has followed suit. I’ve seen fracing, fraccing, frac’ing, and fracking used by different people to abbreviate the same thing: fracturing. What’s actually right here – what is the industry standard abbreviation when writing about fracturing?

MarkWest Energy Partners’ Explosive Growth Vs. Boardwalk Pipeline Partners’ Demise
Seeking Alpha
There are certain companies that have a propensity and capacity to exist by developing strong principles by surviving by growth. Companies need to differentiate themselves from other companies with varying conditions that however slightly have a manner of profitability to itself and to investors that believe in them. MLPs are rather unique in their behavior where there is a need to reconcile differences and achieve co-operation to generate growth by building infrastructure that requires capital to do so. That alone will ensure a collective survival in the long term. Both MarkWest Energy Partners, LP and Boardwalk Pipeline Partners, LP are midstream limited partnerships that provide transportation, storage, gathering, and transportation of natural gas. After listening to Boardwalk Pipeline Partners’ earnings call, their president and CEO Stanley Horton provided some insight to the demise of the business and future growth potential. What stood out was Stanley Horton’s lack of confidence, he sounded quite nervous and concerned. He indicated that the market fundamentals of natural gas transportation on their pipeline system continued to put pressure on contract renewals.

The Weekly Oil & Gas Follies
Our Mindnumbingly False Piece of the Week, from our friends at the Center for American Progress: Big Oil Demands to Keep Tax Breaks – The companies’ higher oil production yet lower profits indicate that it is becoming more expensive to produce oil as the number of newer, easier, and cheaper fields shrink. This is why, despite their outsized earnings, the oil companies are not only fighting to keep their tax breaks but also lobbying to lift the crude oil export ban. But doing so could hurt working families, our economy, and our energy security. Instead, we need to invest in cleaner transportation alternatives.

To Make Natural Gas a Good Fuel, Find the “Super-Emitters”
Scientific American
Gas likes to escape. That’s bad news for the atmosphere when the gas in question is methane, the primary component in natural gas that is a much stronger greenhouse gas than carbon dioxide. But burning natural gas results in half the greenhouse gas pollution than coal, making it appealing as fuel in an era of combating climate change. Thanks to a bonanza of natural gas liberated from deep shales by new techniques, the U.S. is burning more and more of the fuel—and considering using more natural gas in more places, such as fuel for trucking. But if the amount of methane escaping is too high, such widespread use might prove a disaster for climate change. And that’s why a group of scientists set out to better estimate how much methane is escaping in the U.S. To do that, they surveyed more than 200 sets of field measurements and scientific papers from the past 20 years to learn whether increasing use of natural gas could prove a climate boon or bane.


The Fracking Decept-A-Greens
Natural Gas Now/Nick Grealy
The fracking opposition and much of the green movement, unfortunately, practices deception, particularly with images. Nick Grealy exposes these decept-a-greens (our term, not his). The very first thing that pops into the popular mind about gas or oil drilling is that it’s ugly. With very little to go on in the UK, it’s hard for anyone to state how big a problem it would be, and especially important, how long would it last. That hasn’t stopped some people, using either photoshop or pictures of vertical wells in Colorado or Australia presenting their picture of what actual disruption might be. One example is this from the UK Green Party, using a picture of Australia: