Research

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    EIA Feb DPR: Utica NatGas Output Continues to Increase

    Earlier this week our favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report, the Drilling Productivity Report (DPR). The February 2016 report shows what the EIA predicts oil and natural gas production will be in March from the seven largest commercial shale plays in the U.S. What does the report (full copy below) show? Very broadly, it shows that the decline in natural gas production is picking up speed, while the decline in oil slowed (reversed, actually). In January’s report, the EIA said for February the combined output of natgas would decline by 405 million cubic feet per day (MMcf/d). In this report, forecasting March production, the EIA says the decline will go down another 451 MMcf/d over the February number. That is, the rate of decline is increasing. There’s only one shale play of the seven with an increase in natgas output from the previous month. Can you guess which one? That’s right–the Utica…
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    Antis Not Happy with Results of OH Fracking Study They Funded

    Researchers from the University of Cincinnati have been studying fracking and its potential affects on water wells in five Ohio counties for the past three years. The lead researcher, Dr. Amy Townsend-Small, shared the results at a recent meeting of the anti-drilling Carroll Concerned Citizens. She said, “The good news is that our study did not document that fracking was directly linked to water contamination.” Oh oh. That’s NOT good news for antis–and frankly, they didn’t like her telling them the truth of what her study found. Townsend-Small also said this, “I’m really sad to say this but some of our funders, the groups that had given us funding in the past, were a little disappointed in our results.” You can be sure that any future funding for studies Townsend-Small wants to make, at least from radical environmentalists, will be nonexistent. She had the temerity to tell the truth–to the people who hired her to not tell the truth. That takes courage…
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    IHS Says Drillers Need to Cut Spending 50% *This Year*

    Yesterday MDN highlighted a couple of “bad news for the Marcellus” stories: The Dismal Outlook for Marcellus/Utica Drilling in 2016 and Rig Counts for World, US & Marcellus/Utica Continue to Tumble. We’re aware that at least one anti group picked up and repeated our stories to their email list–no doubt as a twisted celebration of some sort. So be it. At MDN we don’t sugarcoat the truth. It is bad out there and will continue to be most likely for this year and into next year. We’re not the only ones who don’t sugarcoat the truth. IHS, a highly respected oil and gas research firm, is out with more analysis of their IHS Energy Comparative Peer Group Analysis of North American E&Ps. In this latest analysis, IHS uses words like “gloomy outlook” and says drillers (E&Ps), in order to stay afloat, will need to spend about 50% less in 2016 than they did in 2015…
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    EPA Science Advisory Board Engaging in Fraud re Fracking Study

    Last December we asked a very important question: Will EPA Whore Itself to Antis and Change Fracking Water Study?. We now know the answer: Yes. The EPA is engaging in political prostitution, having sold itself to the Democrat kook left fringe base of the party. As we stated in December, the one great, huge, towering problem that anti-drillers have is that there is no scientific evidence that supports their wild claims that fracking contaminates water–which is their favorite lie to spread. When the Environmental Protection Agency arrived at the same conclusion, that fracking doesn’t pollute water, after four years of studying it, that really took the wind out of the sails of rabid fossil fuel haters (see EPA Draft Report Says Fracking Doesn’t Pollute Groundwater Supplies). So now the EPA has set about to “fix” it by changing the results of their original findings. It’s like the experiments you used to do in chemistry lab in high school. You add 5 grams of chemical compound A to 10 grams of chemical compound B and the observable result should be that the new mixture/compound turns blue. But for whatever reason it turns orange. So on your lab paper you record the result as (yes) turning blue! You receive a “100” on your lab report. The EPA, using a small group of bought-and-paid-for “scientists” called the Science Advisory Board is reviewing the earlier finding that took the EPA four years of research to produce–so the EPA has cover to say “it’s blue” and not orange. That’s what is now happening. It’s called scientific fraud…
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    5 New Pipelines Now Give Northeast Drillers Access to New Markets

    Our favorite government agency, the U.S. Energy Information Administration, continues to pump out the hits. Yesterday we highlighted a story from the EIA about the price of natural gas in the Marcellus/Utica gradually rising because new pipelines have provided new markets for northeast drillers (see EIA: New Pipelines Continue to Boost Marcellus/Utica Gas Prices). Today we bring you another great EIA story. This one does a deep dive into five pipelines that have come online in late 2015/early 2016 and that are now providing drillers with access to new markets that pay more for gas than they can get here at home…
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    EIA: New Pipelines Continue to Boost Marcellus/Utica Gas Prices

    It’s a pretty simple case of cause and effect, and economics 101. If you build more natural gas pipelines from the northeast to other regions, drillers can sell their gas to new markets. New demand = higher prices. And that’s just what’s happening in the Marcellus/Utica. The U.S. Energy Information Administration (EIA) pointed out in a recent Natural Gas Weekly Update that prices being paid in the Marcellus/Utica have gone UP because of new pipelines (see New Pipelines in the Marcellus Dramatically Improved Prices in 2H15). The great researchers at EIA have now expanded on that theme and have posted a new article on their Today in Energy which expands on that theme…
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    New Report Says O&G Industry Repeating Mistakes from Last Downturn

    According to a new report published Monday by DNV GL, a Norway-based technical advisory firm for the oil and gas industry, a majority of oil and gas professionals believe the industry is repeating the mistakes they made during the last serious downturn in the industry. Namely, companies are laying off too many workers and cutting budgets too much. The report is titled “A New Reality: the outlook for the oil and gas industry in 2016” (grab a copy below). According to DNV GL Vice President Graham Bennett, “The operators can weather the low oil price storm for some time, but the supply chain will suffer far more, and there is a risk of a permanent loss of capacity in the supply chain if low prices persist.” Rather than being too quick to cut bodies and budgets, survey respondents believe now is the time to cut complexity, increase collaboration and work on standardization…
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    ExxonMobil: Fossil Fuels Will Produce 80% of World Energy Thru 2040

    Understanding the global energy picture is helpful so we know where the shale energy piece “fits” in that picture. Each year ExxonMobil prepares an annual energy outlook. On Monday they released the 2016 ExxonMobil Outlook for Energy: A View to 2040 report (full copy embedded below). Some interesting tidbits from the report: “In 2040, oil and natural gas are expected to make up nearly 60 percent of global supplies, while nuclear and renewables will be approaching 25 percent. Oil will provide one third of the world’s energy in 2040, remaining the No. 1 source of fuel, and natural gas will move into second place.” Perhaps most astonishing (for wacko environmentalists) is this: Fossil fules–oil, natural gas and coal– will continue to meet almost 80 percent of the world’s energy needs through 2040. It is intellectual suicide to pretend so-called renewables will be able to shoulder the energy burden in our lifetime. Ain’t gonna happen. We live in a world powered by fossil energy–and THERE’S NOTHING WRONG WITH IT…
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    LNG May Not be a Panacea for Marcellus/Utica NatGas Producers

    Last November MDN editor Jim Willis attended a Genscape/Bloomberg joint event in New York City (at Bloomberg’s offices) called “Gas and Power Winter Outlook 2015.” It was part advertisement for the Bloomberg terminal and the many fantastic resources available on their terminal, part advertisement for Genscape and the truly unique and innovative services they provide, along with a healthy sprinkling of predictions about where the natural gas market will head over the winter months. Jim enjoyed it a great deal because it provided perspective on the larger worldwide market and how it drives our markets here at home. One very interesting thing Jim learned was this: Asian countries in general, and Japan in particular, are reducing their need for LNG (liquefied natural gas) because, in the case of Japan, the country is starting up its nuclear energy program again, and because solar energy is coming online and providing a greater share of the country’s electric needs. With more nuclear and solar, Japan needs less LNG. Here in the U.S., particularly in the Marcellus/Utica region, we have pegged a lot of our hopes on a robust export market for our natural gas. But what if that market is disappearing right before our eyes? That’s kind of the upshot of a new report just released by economists at global consulting firm The Brattle Group. The report, called “LNG and Renewable Power: Risk and Opportunity in a Changing World” (full copy below), takes a close look at the competition playing out between renewable energy like solar and wind and natural gas-fired electric from LNG…
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    Fourth Quarter 2015 U.S. Well Completions Down 51%

    Just how bad is it in the oil and gas patch? One measure of activity is called well completions–how many new wells are fully drilled, fracked and ready to be brought online into production. According to the American Petroleum Institute’s “2015 Quarterly Well Completion Report, Fourth Quarter” report, well completions in the fourth quarter of 2015 were down 51% from the fourth quarter of 2014. Ouch. If you compare full year figures, 2015 well completions were down 35% over 2014 rates…
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    Energy M&A Deals Hardest Hit in 2015, 6.8% Fewer Deals than 2014

    Mergermarket, a company that provides intelligence and news to people involved in big mergers and acquisitions (M&A) deals recently released its Energy, Mining & Utilities (EMU) Trend Report for 2015. It is a recap of M&A deals in the energy sector for last year. Among the findings: the energy sector was the hardest hit sector for M&A deals. There were 957 deals worth $547.7 billion last year, a 6.8% decrease from 2014. The report (full copy below) contains a lot of interesting information about the biggest M&A deals from last year, along with identifying the companies that worked on putting those deals together…
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    Wood Mackenzie Says Cuts in Drilling Projects “Brutal”

    Global research firm Wood Mackenzie has just released an update to their July analysis on the continuing impact of low oil and gas prices on upstream (drilling) projects. The new analysis finds that in the last six months of 2015 an additional 22 major projects and seven billion barrels of oil equivalent (boe) of commercial reserves have been put on hold, on top of the 46 developments and 20 billion boe of reserves identified previously. The “good news,” if you can call it that, is that deepwater projects have been hit the hardest, more so than shale projects. One Wood analyst calls the impact of lower oil prices “brutal” for new projects. He says, “What began in late-2014 as a haircut to discretionary spend on exploration and pre-development projects has become a full surgical operation to cut out all non-essential operational and capital expenditure”…
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    EIA’s STEO Predicts NatGas Price Constant This Year, Up Next Year

    Yesterday the U.S. Energy Information Administration (EIA) released their monthly Short-Term Energy Outlook (STEO) report. It contains some interesting predictions. Among them: EIA predicts the average Henry Hub price for natural gas in 2016, when the year is completed, will end up being $2.65 per million British thermal units (MMBtu). The average price for 2015 at the Henry Hub was $2.63/MMBtu–so the EIA believes this year will be virtually unchanged from last year, when the final chapter is written. The EIA goes on to predict the average HH price in 2017 will be $3.22/MMBtu. Another interesting prediction in this month’s STEO: EIA says natural gas’ share of the electric generation pie will actually fall–with natgas generating 33% of all electricity in 2015 to 31% in 2017. Why? More renewable sources coming online…
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    EIA Jan DPR: Marcellus Production Way Down Again, Utica Up

    EIAYesterday our favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite report, the Drilling Productivity Report (DPR). The January 2016 report shows what the EIA predicts oil and natural gas production will be in February from the seven largest commercial shale plays in the U.S. What does the report (full copy below) show? The biggest drop in production will once again be the biggest natgas producer in the country–the Mighty Marcellus. The EIA predicts the Marcellus will produce 15.222 billion cubic feet per day (Bcf/d) in February, vs. 15.447 Bcf/d in January, a decrease of 225 million cubic feet per day (MMcf/d). Meanwhile the Utica Shale will continue to show an INCREASE in production month over month–from 3.206 Bcf/d in January to 3.249 Bcf/d in February, a 43 MMcf/d increase month over month. The Utica, for a second month in a row, shows the largest increase in natgas production of all seven plays covered in the DPR. Overall the DPR shows that oil production month over month will decrease in February, the seventh month in a row, and natural gas will decrease for the eighth month in a row…
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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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    EPA Takes First Step to Renounce its Own Fracking/Water Research

    junk-science.jpgAs we pointed out just last month, the so-called “scientists” who belong to the federal Environmental Protection Agency’s (EPA) Science Advisory Board have begun the long process of getting the EPA to change the outcome of its 4-year study of fracking that concludes fracking doesn’t pollute groundwater (see Will EPA Whore Itself to Antis and Change Fracking Water Study?). The EPA originally launched a 2-year study, that later turned into a 4-year study, in which they analyzed 950 studies related to fracking. The EPA also designed and completed 9 of their own studies. At the end of this arduous and scientifically rigorous process, the EPA concluded, in a published report in June 2015, that fracking does not pollute water (see EPA Draft Report Says Fracking Doesn’t Pollute Groundwater Supplies). Ever since the EPA report was issued anti-drilling radicals have demanded the EPA change the outcome of its science (see Anti Groups Try to Convince EPA They Got it Wrong with Water Study). True science doesn’t change nor cave to political pressure. A few dozen members of what is called the EPA Science Advisory Board (SAB) released a draft a letter (copy below) yesterday. The letter calls into question the conclusion that fracking doesn’t pollute water. Voila. Another example of “science” being corrupted by political philosophy…
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