Ohio Utica Production 4Q16 – Oil Down, NatGas Up

The Ohio Dept. of Natural Resources (ODNR) has just issued production numbers for the fourth quarter of 2016. The bad news is that oil production continued to slide in 4Q16, down 44% from the same quarter in 2015. The good news continues to be natural gas production, which was up 14% over the same period in 2015. The even better news: Natural gas production in Ohio for all of 2016 was 1.37 trillion cubic feet, vs. 955.61 billion cubic feet in 2015. Awesome! Ascent Resources (formerly Aubrey McClendon’s American Energy) continued to dominate in natural gas production. Ascent had the top producing well in 4Q16, as they did in 3Q16. In fact, Ascent had 9 of the top 10 producing natural gas wells in Ohio during 4Q16. Gulfport Energy was the only other producer to break the top 10, with one well. Over on the oil side of the isle, Eclipse Resources once again had the top producing oil well with their Purple Hayes well–currently the longest horizontal well drilled in the United States at 3.5 miles long (located in Guernsey County). Purple Hayes is the gift that keeps on giving, quarter after quarter! Below we have the ODNR’s high level overview of the numbers, along with MDN’s own exclusive analysis showing: the top 25 producing gas wells, the top 25 producing oil wells, and then the top 25 gas and oil wells as ranked by average production per day. There is a difference…
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Thai Company Banpu Invests Another $16M in PA Marcellus Wells

Last May, Range Resources sold its portion of a joint venture in northeast Pennsylvania (see Thai Company Buys Out Range Resources’ JV in NEPA for $112M). Banpu Pcl, Thailand’s largest coal producer, invested $112 million to purchase Range’s Marcellus non-operated JV operations in Bradford County, PA. The “Chaffee Corners Joint Exploration Agreement” gave Banpu an ownership share in 62 producing wells and another 14 wells waiting on completion, and a share in 170+ more drilling locations. Talisman is the operator of the wells and the company that does the drilling (Banpu is just an investor). Banpu liked it so much, they did it again in January of this year (see Thai Company Banpu Makes 2nd Investment in Northeast Marcellus). The January deal gave Banpu a 10.24% stake in 10,000 acres of Marcellus leases, once again in northeastern PA, for $63 million. Chief Oil & Gas is the driller on the acreage in the second deal. We have a three-peat. Banpu, via its American agent Kalnin Ventures, has just signed an agreement to invest $16 million into a venture with Tug Hill Marcellus. The new deal does not identify the exact counties, but does say the acreage is located in northeastern PA. Once the deal closes, when you add all three deals together, Banpu says it will own partial interests in 215 operating wells producing 40 million cubic feet of gas per day. And Banpu says it’s not over yet. They plan to invest more in the Marcellus in 2017…
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OH Lawmakers Propose Their Own Version of a PA Impact Fee

We find it kind of amusing. Anti-drillers and Democrats (usually one and the same) in Pennsylvania bellyache and moan and groan that PA is “the only oil and gas state without a severance tax” and how life would be SO much better if only PA had a severance…blah blah blah. They point out that Ohio has a severance tax. West Virginia has a severance tax. EVERYBODY has a severance tax. Of course they conveniently ignore (or lie about) the fact that PA has an impact fee, or an impact tax, if you will. The impact fee levies a charge on new wells for a number a years on a sliding scale. Think of the impact fee like a property tax, and a severance tax like a sales tax on goods sold. The beauty of the impact fee is that 60% of it stays in the communities where drilling actually happens. Impact fee revenue goes to local municipalities to offset the “impacts” of drilling in those communities, money used for things like fire departments, police, roads, etc. An impact fee is superior to a severance tax in many ways. While OH and WV’s severance tax revenue went over a cliff when the price of natural gas went over a cliff, PA’s impact fee was far less affected. But the point of this post is not in the relative merits in the type of taxation. The point is that legislators in Ohio want to reallocate some of their severance tax revenue to be used in communities where Utica drilling happens. That is, they want to convert some of the OH severance tax into, essentially, an impact fee. So while PA bellyaches about having an impact fee and not a severance tax, states (like OH) that actually have a severance tax, would rather have an impact fee!…
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Why TransCanada’s Lowball Pipeline Price is Not a Panacea

TransCanada, one of Canada’s leading midstream/pipeline companies, cooked up a deal last year to pipe natural gas from Canada’s West Coast to the East Coast in order to fend off cheap supplies of Marcellus/Utica gas that will flow into Canada when/if the NEXUS and Rover pipelines get built (see TransCanada Pipe Drops Price 42% to Compete with Marcellus/Utica). TransCanada dropped their pipeline price to lure drillers by (theoretically) making it less expensive to get gas from Western Canada, some 2,400 miles away, than from the Marcellus, just 400 miles away. In October, TransCanada launched an open season to lock up customers for the new, lower-priced option. The open season was a bust because TransCanada insists on a 10-year commitment (see TransCanada Plan to Lowball M-U Gas Using Canada Pipeline a Bust). TransCanada rejiggered the terms being offered and reopened the open season. This time it worked (see TransCanada Says Plan to Lowball M-U Gas Worked, Shippers Sign Up). Even though natural gas from western Canada will soon flow to Ontario to compete with Marcellus/Utica gas coming from the Rover Pipeline (and perhaps NEXUS, if FERC approves it), analysts are warning that TransCanada’s plan is not a panacea for Canadian producers. Why? Because that gas will have to compete with a flood of Marcellus/Utica gas, and that means the prices will drop like a rock. Although western producers will be locked in for at least five years by signing with TransCanada, analysts are predicting that LNG exports will lure many of them away to sell gas for higher prices to overseas markets. And when that happens (in the next 5-10 years), gas flowing along TransCanada’s mainline will once again slow down to a trickle…
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Empire Energy Owns 300K Marcellus/Utica Acres – Sitting in NY

A press release announcing fourth quarter and full year 2016 results for Empire Energy Group caught our eye. The release talks about assets owned by Empire in the Marcellus/Utica region–specifically in Pennsylvania and New York. When we got digging, we found some interesting information. First off, Empire has operations in both Australia and (primarily) here in the U.S. One interesting observation is that Empire sold some of its considerable leases in Australia to Aubrey McClendon back in 2015 (see McClendon Nearly Triples Australian Shale Deal – 55M Acres!). Here in the U.S., Empire owns leases and wells in both the Midcontinent (Kansas) and in Appalachia (PA & NY). The website for Empire says this on the home page: “Empire Energy Group Limited is an oil and gas exploration and production (E&P) Company focused on onshore long-life oil and gas fields, primarily in the USA. The Company targets producing oil and gas assets with attaching low cost, low risk development acreage. The business strategy is to operate all assets. USA oil and gas operations are managed by an experienced and qualified technical team based in the USA. In addition to production assets, the Company is undertaking an exploration and development program of its extensive oil and gas shale opportunities in New York and Pennsylvania in the USA and The Northern Territory, Australia.” We went nosing some more and found that Empire owns 6,500 acres in NW PA, and 303,000 acres of leases in western NY. Yes, you can see the problem right away. There is no shale drilling in NY. Empire owns land on the wrong side of the border. So while they do have some conventional wells in NY, they don’t have (and won’t have) any shale wells in the Empire State any time soon. So although they advertise they have a presence in the Marcellus–it’s not much of one right now…
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American Shale Gas Selling for Over $7/Mcf to Overseas Buyers

A Bloomberg article caught our eye. It says natural gas being exported by Cheniere Energy (in southern Louisiana) is being sold to counties like Mexico, Japan and Jordan for over $7 per thousand cubic feet (Mcf). Why is that significant and how is it related to the Marcellus/Utica? It’s significant because gas right now is selling in the U.S. for an average of around $3/Mcf. In some places, like the Marcellus/Utica region, it sells for much less. Yesterday gas sold at the Tennessee Gas Pipeline Zone 4 Marcellus trading hub sold for $2.61/Mcf. If producers can sell their gas overseas at double the price–happy days are here again! How does that relate to the Marcellus/Utica? Some of the gas being sold by Cheniere comes from the Marcellus/Utica. And later this year, Dominion will have finished and will power up their massive LNG export facility in Cove Point, Maryland. When that happens, 100% of the gas exported will go to two countries: Japan and India. And it will likely be sold for prices like Cheniere is seeing–around $7/Mcf. That is really good news for the producers who have signed contracts with Cove Point…
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Update on Trump’s FERC Appointments – “Fixing FERC”

It sure seems like it’s taking a long time for President Trump and his team to announce and put forward his nominees for the Federal Energy Regulatory Commission (FERC). Shortly after taking office, Trump elevated one of the three sitting, Democrat Commissioners, Cheryl LaFleur to be Acting Chairman of the agency. That ticked off the then-current Chairman, Norman “crybaby” Bay, who promptly resigned (see FERC Commissioner Resigns Threatening Major M-U Pipeline Projects). Perhaps he saw the writing on the wall. The sitting President gets to appoint three of the five members of the Commission from his own party–so one of the Dems would have to go. Bay probably figured it would be him, so he jumped ship early, causing some damage to Marcellus/Utica projects because there is currently no quorum for important votes (see FERC Commissioner Norm Bay Targets M-U on Way Out the Door). Bay’s last day was Feb. 3–and still we’ve not heard an official peep from the White House about Trump’s planned three nominees. We’ve heard leaks about who Trump’s picks will be (see Breaking: Kevin McIntyre, Neil Chatterjee are Trump Picks for FERC and Names Mentioned for 3rd FERC Post, Incl. PA’s Powelson). But we’ve not had confirmation of those names, nor a timetable for when they will be proffered to the Senate for a vote, which is required. Frankly, it’s frustrating. We spotted an article about “fixing FERC” that includes a full rundown/bio for each of the three leading candidates that are rumored to in line for an appointment…
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Marcellus & Utica Shale Story Links: Tue, Mar 21, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Harrison County, OH begins collecting ad valoreum tax on Utica wells for 2016; wacky enviro groups want Duke U to drop plans for clean-burning natgas plant; fuel pipeline from Chicago to Detroit goes online; Texas AG sues to block PHMSA natgas storage regs; Moody’s upgrades o&g sector in 2017; drillers, service firms may see surge of new IPOs in 2017; US crude oil production dropped last year; OPEC needs to restrain itself in 2018 like it is in 2017; low oil prices prove Obama wrong again; virtual gas pipelines; and more!
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