Top 20 Marcellus Drillers – Ranked by Environmental Impact

top 20Last Friday MDN brought you the news about a professor who devised a clever formula for evaluating the overall environmental impact of 20 Marcellus drillers (see Mirror Mirror on the Wall, Who’s the Best Driller of Them All?). At the time we only knew who the top and bottom companies are in the list. CONSOL Energy took top honors, while ExxonMobil was last or “least” environmentally friendly as compared with the others. We now have the entire list (below). Where does your favorite driller fall in the list?…
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Which Marcellus/Utica Drillers are Part of the “Thousand Club”?

It’s difficult to compare apples with apples when it comes to evaluating how productive, or profitable, a hydrocarbon-producing well is. We typically think of wells as “oil wells” or “natural gas wells” or perhaps “wet gas (NGL) wells.” While there are some wells that produce almost all natgas or almost all oil, etc., most wells produce multiple hydrocarbons. Oil wells in the Permian Basin or Eagle Ford Shale (in TX) produce natural gas along with the oil coming out of the well. Many Marcellus and Utica wells in southwestern PA and eastern OH produce very profitable quantities of natural gas liquids, a mish mash of ethane, propane, butane, isobutane, and pentane. And don’t forget condensate (natural gasoline). So how do you compare the relative output/profitability/production for different “types” of wells? One way is to convert all of those hydrocarbons into one hydrocarbon–oil. Specifically, barrels of oil. Once you convert all hydrocarbons into barrels of oil, you have a way to compare apples to apples–comparing wells located in the same shale play or comparing wells from one play with wells from another. Recently the sharp analysts at investment firm Sanford C. Bernstein & Co. ran the numbers to convert and compare wells across different plays. They issued a report showing wells that belong to the “Thousand Club”–wells producing at least 1,000 barrels of oil equivalent per day. Where are the most such wells located? The Eagle Ford Shale, the Bakken Shale, and yes, the Marcellus and Utica Shale. Which drillers are in the club?…
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More on NY AG Schneiderman’s Bullying of Anadarko & EOG Resources

If a mafia boss walks into a business owner’s store and “informs” that owner that the owner will start doing things the good fellas way (pay money, say 10% of all revenue) in return for “protection” from the “bad guys” that otherwise may make a visit to that place of business, it’s called a shake down. If we substitute “New York Attorney General Eric Schneiderman” for mafia boss and “oil/gas company” for business owner, you’d have what’s just happened in New York State–and it’s called “good government.” Schneiderman isn’t personally getting rich from the deal he’s just forced down the throats of two major o&g companies (we don’t think, anyway). But make no mistake–the businesses Schneiderman targets would lose massive amounts of money in lower stock valuations if they don’t agree to Schneiderman’s “offer.” Schneiderman held the gun of his office to the collective heads of Anadarko Petroleum and EOG Resouces over the issue of fracking (something not even happening in NY), and they agreed to dance and sing his tune. They’ve just been shaken down. Here are the details…
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NY AG Schneiderman Shakes Down Anadarko & EOG Resources

The ShakedownNew York State’s out-of-control Attorney General, Eric “the anti-driller” Schneiderman, continues his out-of-control ways vis a vis shale drilling. It makes no difference that there is no shale drilling in New York State. Schneiderman continues to go after shale drilling in other states–abusing his office’s power to investigate the world of Wall Street. In what appears to us to be nothing more than smoke and mirrors, AG Schneiderman’s office on Friday announced he has reached an “agreement” with both Anadarko Petroleum and EOG Resources to disclose more information on the financial effects of regulation, litigation, and environmental impacts related to hydraulic fracturing. That is, Anadarko and EOG have volunteered to provide information about fracking that may cause their respective companies’ stock to take a hit. In other words, they’ve agreed to provide information to the public that they already provide to the public…
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Seneca Resources Says Sayonara to EOG Resources

Seneca Resources, a subsidiary of National Fuel Gas focused on drilling in the Marcellus Shale, issued an update yesterday on its Marcellus drilling operations. Sometimes these press releases are just fluff without much information. Not so with this one. It contains a lot of very interesting information.

First the statement by Seneca/National Fuel Gas, then MDN’s analysis of it.

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Gas Well Blowout in Clearfield County, PA Causes “Modest” Environmental Damage

What do we know about the gas well blowout that occurred on June 3rd? EOG Resources had almost completed drilling and fracking a gas well in Clearfield County, Pennsylvania when a blowout (too much pressure too fast) occurred. Here is the chronology of events:

The month long drilling operation [in Clearfield County] ended on March 3. Contractors returned in May to hydraulically fracture the well over 12 days. The process involves the injection of water, sand and chemicals under high pressure to shatter the gas-bearing rock so that the fuel can be recovered.

The frack job ended on May 28. The operator [EOG Resources] had begun well-completion operations on June 1. The blowout occurred two days later.

High pressure in an oil or gas well is both desired and essential – the pressure is what brings the fuel to the surface. Blowouts occur when the pressure surges and overwhelms control mechanisms.

A device known as a blowout preventer is attached to the wellhead at the surface. It is designed to be triggered by operators to control pressure surges.*

And this from the Pennsylvania Department of Environmental Protection (DEP) official press release on the matter:

The leak began at approximately 8 p.m. on Thursday, June 3, when the well’s operators lost control of it while preparing to extract gas after fracking the shale. As a result, natural gas and flowback frack fluid was released uncontrollably onto the ground and 75 feet into the air. The well was capped at around noon on June 4.

The EOG well pad is located in a rural area near the Penfield/Route 153 exit of Interstate 80 in northwestern Clearfield County, near Moshannon State Forest.

The department’s [DEP] Emergency Response and Oil and Gas programs responded to the incident, along with the Pennsylvania State Police, the Pennsylvania Emergency Management Agency, and local fire and police departments.**

The DEP believes the blowout preventer failed—but they don’t yet know why. Investigations continue. Since the blowout, the DEP has stopped all new drilling by EOG Resources until a cause is found:

The Department of Environmental Protection today [June 7] ordered EOG Resources Inc. to suspend its natural gas well drilling activities in Pennsylvania after a June 3 blowout at one of the company’s Clearfield County wells sent natural gas and at least 35,000 gallons of drilling wastewater into the sky and over the ground for 16 hours.

DEP Secretary John Hanger said that while the order bans all drilling and hydrofracturing, or fracking, operations for specified periods of time, the suspension will remain in effect until DEP has completed a comprehensive investigation into the leak and the company has implemented any needed changes.**

Here’s what else we know: No one was hurt. About 35,000 gallons of drilling fluid (mostly water) was spilled. The well did not explode. According to DEP Secretary John Hanger:

“Fortunately, the well did not ignite and explode, and there were no injuries to the well crew or emergency responders. Our preliminary assessment is that the environmental damage was modest as the frack fluid was contained and did not appear to reach any streams.”**

Since the accident, anti-drillers (and mainstream media) have had a field day referring to the “tragedy” and “disaster” in Clearfield County. While MDN does not excuse or minimize the accident and encourages a full investigation, a little perspective is in order: According to the Federal Highway Administration (as of 2005), an average of 115 people die every day in automobile accidents. The average number of people who die every day from gas well accidents? Zero.

*Philadelphia Inquirer (June 7) – Pa. suspends gas drilling at Marcellus rupture site
**PR Newswire (June 7) – DEP Orders EOG Resources to Halt All Natural Gas Drilling Activities in PA

Drilling Activity is Linked to the Price of Natural Gas

I suppose the headline of this post may have you saying, “It doesn’t take a genius to figure that out.” But how, exactly, does the spot price for natural gas relate to drilling activity? Can we quantify it? Let’s try.

In a recent article on an investment blog called Energy & Capital, author Keith Kohl offers some excellent insights into the natural gas marketplace from the perspective of those interested in investing in it. And along the way, he makes some observations well worth reading for landowners in the Marcellus. I encourage you to read the entire article.

Here are just a few insights from his article:

[N]atural gas has been treading water. After deteriorating more than 70% since July records, prices have fallen below $4/Mcf this week. That’s a level many people thought they’d never see. And to make matters worse, I’ve been hearing more and more people calling for natural gas to plummet below $2/Mcf and stay in that range for several months.

Developing…shale sources will be extremely difficult (or even nonexistent) if natural gas prices fall below $2/Mcf for a sustained period. The depreciation of natural gas prices since July has already caused companies across the board to slash exploration and production spending.

Much like the oil industry, not a week passes that I don’t see another project being delayed or canceled. Furthermore, the number of active drilling rigs has been in serious decline. The latest numbers from Baker Hughes Inc. reported that the number of exploration rigs has dropped nearly 45%. And if prices continue to remain this low, you can bet we’ll see even more rigs going silent.

That means production is headed one way—much lower.

But his longer term prediction is not gloomy. He believes prices and production will start to improve in 2010 when an improving economy, more demand and less supply kick in. In the article he also offers his opinion on liquefied natural gas (LNG) imports, and his thoughts on which companies to invest in (EOG Resources is one of them). Read the whole article! It’s well worth it.

Based on Mr. Kohl’s views and other sources, this is Marcellus Drilling News’ take: If natural gas prices stay at or above $4/Mcf ($4 per thousand cubic feet), drilling will continue and slowly expand. That price level is just above break even for energy companies. If the price goes higher at $5-$6/Mcf, happy days are here again. If the price drops to $2/Mcf and stays there, production all but stops because energy companies will lose money.

Read the full article: The Inevitable Crunch in Natural Gas Supply… and How to Prepare Your Portfolio

Three Jay Township Supervisors Reject Access to Water for EOG Resources

Three Jay Township supervisors have voted to deny access to water to EOG Resources for drilling in Elk County, Pennsylvania. EOG had requested access to the Bennetts Branch of the Sinnemahoning Creek by driving across township-owned land, specifically near a ball field.

According to the Courier-Express/Tri-County Sunday (DuBois) newspaper:

During Thursday’s Jay Township Supervisors meeting, the supervisors said they would not give EOG permission to use township land to access the stream because they still have a lot of unanswered questions.

EOG wants to withdraw the water for gas drilling in the Marcellus Shale, Supervisor Murray Lilley said.

Since October or November 8, the township has received three requests to withdraw water from various streams in the township, Supervisor Bob Coppolo said.

In each case, a letter was written by the supervisors to the Susquehanna River Basin Commission and copied to elected officials and the Department of Environmental Protection expressing concern.

The township is concerned about having water trucks going in and out of a recreation area where youth gather and play.

There are also questions of if the township would be liable if anything happens since it would be on township property.

And this interesting comment:

Asked by a resident if the township had to allow the company access to the stream, Coppolo said, “It’s our property.”

Although it is a favorable time economically to have this type of work, it is also important to preserve the community and the beauty of the area, he said.

Marcellus Drilling News thoughts: Hopefully Supervisor Coppolo means “our” as in the people of the township and not the private fifedom of he and his fellow supervisors. We encourage Supervisor Coppolo to talk with ALL of the people in the township, including landowners who have leased their property for drilling.

Read the full article: Township denies request to access water