Energy Transfer: Rover & ME2 Pipelines Both Online by End 2Q18
Earlier this week Energy Transfer Partners (ET), one of the country’s largest midstream (pipeline) companies, released an update covering fourth quarter and full year 2017 results. As part of that update, the muckety-mucks from ET held an analyst conference call (yesterday). On that call they not only discussed what happened in 2017, but what is happening and will happen in 2018. ET, in case you didn’t know, is builder of both the monster Rover Pipeline project (from PA, WV and eastern OH through OH and into Michigan), as well as the Mariner East 2 (ME2) pipeline (NGL pipeline from eastern OH across the entire length of PA to the Marcus Hook facility near Philadelphia). We learned some important information from yesterday’s update. While the good news for both the Rover and ME2 is that they will both soon be fully operational, the truth is, both are delayed from their originally intended “in-service” dates. In the case of Rover, the new news delivered on yesterday’s conference call is that full operation of the entire length of Rover Pipeline, which will be capable of flowing up to 3.25 billion cubic feet per day (Bcf/d) of natural gas along its entire length, won’t happen until sometime in the second quarter 2018–that is, by the end of June. This is the first time ET has admitted full operation of the Rover pipeline will not be ready by end of March. However, to put this news in perspective, much of the pipeline is already done and currently flowing 2 Bcf/d–even as you read this. As for ME2, following an already-admitted delay until end of 2Q18, ET yesterday said it is keeping their estimate that the pipeline will be up and running by end of June, even though the project just came through a one-month construction shut down imposed by the PA Dept. of Environmental Protection. After ET (i.e. Sunoco Logistics Partners) paid a $12.6 million ransom (“fine”), the DEP relented and allowed it to restart construction. The one-month construction hiatus has not, according to officials, delayed the in-service date for ME2. Cool! Below is ET’s 4Q & full 2017 update. First up are ET comments about Rover and ME2…
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Cabot Oil & Gas, one of the biggest and best drillers in the Marcellus Shale, released its fourth quarter and full year 2017 update today. Cabot continues to be the low cost leader. Cabot’s cost to find and develop shale gas in northeastern PA is an amazingly low $0.22 per thousand cubic feet (Mcf). Breakeven price for Cabot in the Marcellus in 2017 was ~$1.05/Mcf, meaning any sales above that amount is profit. Cabot sold its gas for an average of $2.31/Mcf in 2017, a 36% increase over 2016. You can see why they’re profitable, even with low gas prices in NEPA. Cabot produced 685.3 billion cubic feet equivalent (or 1.9 Bcfe/d) in 2017. Most of that came from a single county, Susquehanna County, PA. Like many shale companies, Cabot lost money in 2016 ($417 million), but they turned it around last year by making a $100 million profit. Cabot has now drilled in NEPA for the past 10 years. Have they run out of places to drill? Nope. Looking at a chart in Cabot’s most recent slide deck, they still have around 3,000 locations left where they can drill on existing leased acreage. At the end of last year Cabot owned 561 producing Marcellus wells. There’s plenty more to come! In this update Cabot indicates that 2018 will be “an inflection year” for the company. Why? Several large projects will come online in PA this year that will sop up a considerable amount of Cabot’s gas: (1) Moxie Freedom Power Plant, (2) Lackawanna Energy Center Power Plant, and (3) Atlantic Sunrise Pipeline. You can likely add a fourth to the list–the startup of the PennEast Pipeline. Take all of those together, and Cabot will get new demand to sell an additional 1.5 Bcf/d of gas they don’t sell now. In other words, Cabot will just about have to double their production to meet the new demand–which they are quite capable of doing. All eyes are on Cabot in 2018 as they hit an inflection point…
Yesterday the country’s second largest natural gas producer, Chesapeake Energy, issued its fourth quarter and full year 2017 update. Chessy CEO Doug Lawler began his comments during an analyst phone call this way: “2017 was another foundational year for Chesapeake as we continued to transform all aspects of our company.” Even though Chesapeake sold a number of assets and reduced headcount in 2017, production still rose 3% for the year. Lawler said he expects production to rise another 3% in 2018, even with a planned $2-$3 billion in sales of even more assets (what’s left to sell?). Lawler also said the company will reduce spending 12% this year. The news of production increases on the way using less money sent the company’s stock price soaring 22 higher%. But all is not peaches and cream. The company is still saddled with almost $10 billion worth of debt, which tends to remove the oxygen from a company’s lungs. Still, the Chesapeake doggedly soldiers on. Disappointingly, nothing was said during the conference call about either the Marcellus or the Utica. There’s only two brief references to our region in the official update–even though the Marcellus and Utica combined provided the lion’s share of Chesapeake’s production in 4Q17 (50% of all their production came from the M-U). Chessy says they will drill 55 wells in the Marcellus in 2018 (more than the 43 drilled in 2017), and they will drill 40 wells in the Utica in 2018 (less than the 67 wells drilled in 2017). Below is the full update, the latest slide deck, and a good overview of yesterday’s news from Reuters…
Gulfport Energy is among a number of companies we’re highlighting today that, earlier this week, delivered their 4Q17/full 2017 update. Gulfport is an “independent” oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. Gulfport also owns acreage along the Louisiana Gulf Coast. Although Gulfport drills (we’d call it “dabbles”) elsewhere, make no mistake–the Utica Shale is the company’s main focus. During 2017, Gulfport spud (drilled or began to drill) 94 Utica wells. Gulfport turned-to-sales 68 Utica wells in 2017. The Utica wells drilled last year had an average lateral length of approximately 8,150 feet. It took Gulfport an average of 19.2 days to drill a well, a decrease of 16% over the time it took to drill wells in 2016. Gulfport currently runs three drilling rigs in the Ohio Utica, with plans to decrease that number down to two in March, when the contract expires for one of the rigs. So what about 2018? As you can imagine, running one less rig means drilling less wells in 2018. Gulfport is budgeted to drill 36 to 40 Utica wells with an average lateral length of 11,200 feet this year. They plan to turn-to-sales 33 to 37 wells with an average lateral length of 8,000 feet. Gulfport made a profit of $435.2 million last year, versus losing $979.7 million in 2016 (a $1.5 billion swing into the black). According to CEO Michael Moore, “Our Utica asset provided reliable, repeatable growth throughout the year.” Here’s the full reliable, repeatable Gulfport update…
Earlier this week MDN told you that West Virginia royalty owners are pushing Senate Bill (SB) 360 to fix the issue of post-production deductions drillers take from royalty checks (see 
Shell wants to build a 97-mile ethane pipeline to feed the mighty $6 billion cracker plant its building in Beaver County, PA. Shell chose not use eminent domain but instead negotiated with (paid big bucks for) rights of way along the pipeline’s path. Earlier this month additional details came out about the proposed project when the Pennsylvania Dept. of Environmental Protection (DEP) published an application from Shell for stream crossing permits. When the details became known, the Ambridge Water Authority (in Beaver County), an organization that oversees a reservoir that provides drinking water for ~30,000 people, expressed “strong opposition” to the route of the pipeline (see 
Some new details have emerged with respect to the Mountaineer NGL Storage facility proposed for Monroe County, OH, located just across the river (and border) from West Virginia. What did we know about the proposed project? The Colorado company behind the project plans to spend up to $500 million to build it; some 20 drillers have expressed interest in contracting with the facility to store ethane; and the nearby PTT Global cracker plant project (if it gets built) and the under-construction Shell cracker plant are both interested in connections to the facility. Last November, we learned there is a construction delay until mid-this year (see 
In September, MDN told you that the obsequious members of the Delaware River Basin Commission (DRBC) had slavishly obeyed their radical environmental masters by voting to move forward with a permanent ban on fracking in the Delaware River Basin (see 
The “best of the rest”–stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: DCNR to release PA state forest drilling report by early summer; 2017 was a good year for Washington County’s economy, thx to shale; what Ohioans need to know about PA serial protester; Marcellus/Utica fighting strong Gulf of Mexico bias; oil price jumps; shale remains leading source of U.S. crude; a downside for midstreamers in new tax law; Shell backing both deepwater and shale; and more!