Canadian Enbridge Buying US Spectra Energy for $28B

CombinedInfrastructure_8col
Combined infrastructure – click for larger map

Another big hairy (midstream) deal with implications for the Marcellus/Utica. Yesterday Canadian pipeline operator Enbridge Inc. announced an all-stock deal to buy out pipeline operator Spectra Energy (based in Houston). Spectra has a number of critical pipeline infrastructure projects under way or planned in the Marcellus/Utica region, including the planned Access Northeast pipeline to New England, the mighty NEXUS pipeline planned to span Ohio, the currently under construction Algonquin Incremental Marketing (AIM) pipeline project, and three projects (Access South, Adair Southwest and Lebanon Express) under way to expand one of the largest natural gas pipelines in the U.S. (and in the northeast)–the Texas Eastern Transmission (Tetco) pipeline. Does a Canadian pipeline company heavily involved in shipping crude via pipelines buying a U.S. company that ships natural gas via pipelines sound familiar? It should. TransCanada bought out Columbia Pipeline Partners two months ago–another case of a Canadian company buying into the bountiful U.S. Marcellus/Utica shale midstream (see TransCanada and Columbia Pipeline Tie the Knot Today). Here’s the low down on Enbridge’s play to buy Spectra Energy, which would form another mega midstream company to rival Kinder Morgan and Williams…
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Righteous Royalty Anger: PA Town Votes to Block Gas Production

angerResidents in Wilmot Township (Bradford County), PA are mad as hell over shorted royalty checks–and they aren’t taking it anymore. Yesterday Wilmot Township’s three supervisors passed a resolution demanding, “production be discontinued from wells where landowners are having their royalty checks diminished to nothing or nearly nothing.” That is, they want to block natural gas production from existing shale wells drilled in a town smack in the middle of one of the most-drilled places in Pennsylvania. We’ve long chronicled the fight between landowners and some (certainly not all) drillers who are screwing them out of royalty payments by claiming inflated post-production costs. The issue first came to prominence with claims by landowners signed with Chesapeake Energy, who claimed Chessy had cut a sweetheart deal with its former midstream company (Access Midstream) whereby Access bumped up its charges for piping gas which Chesapeake claimed as an expense and deducted from royalty checks, and then Access turned around and invested big money into the old mothership company (see Chesapeake Shafting Landowners out of Royalties Mess Gets Messier). A group of Bradford County landowners were among the first to sue Chesapeake over the scheme (see Bradford County, PA Landowners Sue Chesapeake over Royalties). Several bills have been offered over the past few years to correct the situation by legislating that landowners get a minimum 12.5% royalty for any gas produced, regardless of post-production costs. The most recent effort, which has come the closest to passing, is House Bill (HB) 1391. However, the Marcellus industry has steadfastly lobbied against it (see PA Landowners, Drillers Fight over HB 1391 Minimum Royalty Bill). Exasperated landowners in Wilmot have had enough and have taken the symbolic (but likely unenforceable) step of telling drillers to turn off their spigots until they’re ready to conform to a 1979 PA law that guarantees landowners a 12.5% minimum royalty for oil and gas production…
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Dominion Locks Out Labor Union Workers in WV-PA-OH-NY-VA-MD

lockoutA labor union contract between Dominion Transmission Inc. (DTI) and Local 69 of the Utility Workers Union of America, United Gas Workers expired on April 1st. Since that time the two have come to the bargaining table many times, without success. So Dominion is now trying to bust up the union (our words) by locking out 915 union workers from their jobs across the northeast and mid-Atlantic: in West Virginia, Pennsylvania, Ohio, New York, Maryland and Virginia. Dominion’s top brass says they’ve had to take this step because of the upcoming heating season, about ready to begin. Dominion is concerned that customers not be left out in the cold, literally–so they’re replacing union workers with management workers and temps “trained to handle essential tasks.” Dominion is a large company that not only is an LDC (a local utility that distributes gas to customers), but also a big midstream pipeline company. Here’s what we wonder but haven’t seen addressed: What about Dominion’s Cove Point LNG export plant? Are any of these sidelined union workers off the job at Cove Point, and will that delay the project? Same for the upcoming Atlantic Coast Pipeline project. When it gets built, will it get built without union workers? What about Dominion compressor station upgrades coming to six plants, recently approved by FERC (see FERC OKs 6 Dominion Compressor Station Upgrades in PA, MD, VA)? Were any of these union workers working on the compressor projects?…
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Antero Feels Good, Increases Production Estimates for 2016

antero resourcesAntero Resources, one of the biggest drillers in the Marcellus, released their second quarter 2016 update in August (see Antero Resources Production Up 19% in 2Q16, but Loses $596M). As we noted at the time, Antero’s natgas production was up 19% over 2Q15. However, the company also reported production was essentially flat (the same as) production during the first quarter of 2016. So it was a mild surprise to see Antero increase it’s production “guidance” (estimate of how much production they will have) for 2016. The increase isn’t much–just 3%–but Wall Street analysts and regulators watch these kinds of statements very closely. A lot rides on the accuracy of predictions like production numbers. The reason for the optimistic increase in production guidance? Antero is using more sand in its fracking, drilling even longer horizontal (or “lateral”) wells, all while actually reducing the cost to drill each well. Result? Although Antero will still spend the same amount of money on drilling in 2016–$1.3 billion–they’ll drill more wells with that money and those wells will be a tad more productive than they thought at the beginning of the year when they made their original estimates…
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Turn Around! Patterson-UTI August Rig Count Up 3rd Mo in a Row

Patterson-UTI logoAs we do every month, MDN tracks how many rigs oilfield services company Patterson-UTI Energy reports operating–as a proxy for when/if the drop in rig counts for the Marcellus/Utica will turn around. Patterson operates a number of rigs in the northeast, as well as other areas of the continental United States (and Canada). Month by month Paterson’s rig count has declined over the past year plus–until June (see Tide has Turned: Patterson-UTI June Rig Count Ticks Up by 2). June was the first time in over a year that Patterson’s rig count reversed and began to climb once again. In July the count went up again (see Patterson-UTI July Rig Count Goes Up for 2nd Month in Row). And now, drum roll please! For a third month in a row the Patterson-UTI rig count in the U.S. increased, jumping from 56 rigs operating in July to 60 operating in August. We believe we can safely say we’ve now turned the corner with drilling in the Marcellus/Utica. We’re officially on the upswing!…
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Williams Considers Selling its Gulf Coast Ethane Cracker Plant

Williams Geismar Olefins facility
Williams Geismar Olefins facility – click for larger version

Williams, because of evil corporate raiders like Keith “Mini-Me” Meister, continues to be in a fight for its very existence (see Corvex Raider Launches Hostile Takeover Attempt of Williams). In an effort to shore up the company–make it stronger AND produce cash that can be used for various purposes–Williams announced in August they are selling their Canadian assets for $1 billion (see Bold Move – Williams Selling Canadian Assets). Yesterday the company announced another potential asset sale–the company’s 88.5% ownership interest in the Geismar, Louisiana olefins petrochemical plant…
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Magnum Hunter Finds New CEO to Replace Forced-Out Gary Evans

John K. Reinhart
John K. Reinhart

Magnum Hunter Resources Corporation (MHR), a driller 100% focused on the Marcellus/Utica emerged from bankruptcy in May, less than five months after filing (see Magnum Hunter Emerges from Bankruptcy with CEO Gary Evans Gone). As we observed at the time, we were surprised to read that MHR’s flamboyant CEO, Gary Evans, was gone from the company. In his place MHR named two of Evans’ lieutenants to serve as co-CEOs while the new board of directors looked for a permanent replacement for Evans. The search is over. MHR announced yesterday that John K. Reinhart has been named president and CEO of MHR. Reinhart has a good pedigree with 22 years of experience in the industry–most of it in the Marcellus/Utica region. Most recently Reinhart ran Ascent Resources–the company founded as American Energy Appalachia Holdings by Aubrey McClendon, later renamed to Ascent when it broke away from McClendon (see Big McClendon News: Sells 35K Utica Acres, Creates New Company). Reinhart has also worked for Chesapeake Energy and Schlumberger. Here’s the poop on MHR’s new leader…
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MSC to PA Legislators: Welcome Back, Don’t Screw Up Marcellus

welcome backWe scored a copy of a refreshingly honest (blunt) assessment of the Marcellus industry in Pennsylvania. The letter was written by the Marcellus Shale Coalition’s vice president of government affairs, James Welty. It’s dated August 29 and was written and sent to all Pennsylvania legislators in both the House and Senate. The legislators have been enjoying themselves on summer holiday break and are now returning to work, with just a couple of weeks left in the legislative session. The PA House is in session for 2 1/2 more weeks and the Senate for 1 1/2 weeks (final day is Nov. 15 for each). There’s not much time left to handle the people’s business in 2016. Welty’s letter to the legislators is a frank assessment of the current down market faced by PA’s shale drillers. Welty tells lawmakers that recently adopted Article 78a rules will mean drillers spend an additional $2 million per well to drill–a budget buster for many drillers. He also says PA has the highest effective tax rate on drilling in the country at 12.3%. Although PA doesn’t call it a severance tax, it essentially is a severance tax and costs more than any other oil and gas state, contrary to the lies by Democrats who lust for more money to give away. Give this frank assessment of our beloved industry a read–it’s worth your time to see how the industry characterizes the current landscape in PA…
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Marcellus & Utica Shale Story Links: Wed, Sep 7, 2016

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: MSC donates $1.1M to Junior Achievement; Gov Wolf donates $2M grant for Pitt-Johnstown engineering facilities; NH needs new pipelines; Rep Smith statement on Obama’s buried/sneaky climate agreement; Carnival adds 3 new LNG-powered cruise ships; Brazil kills shale with regulations; and more!
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