EIA: US Still #1 World Producer of Petroleum & Natural Gas
The United States remained the world’s top producer of petroleum and natural gas hydrocarbons in 2015, according to our favorite government agency, the U.S. Energy Information Administration (EIA). U.S. petroleum and natural gas production first surpassed Russia in 2012. The U.S. has been the world’s top producer of natural gas since 2011 and the world’s top producer of petroleum hydrocarbons since 2013. We’re not only the Saudi Arabia of natural gas, we’re the Saudi Arabia of oil too! We love gloating about the fact that we’re #1 in the world! Energy = freedom. Fossil fuels = energy. Therefore, fossil fuels = freedom. If there’s a single word that still (for now) describes the good old U.S. of A.–it’s freedom. Tell the anti-American, anti-drillers to put that in their bongs and smoke it! Here’s the great news from EIA that we’re still the one…
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Forget about a cracker plant in West Virginia. Well, not really–just put it on the back burner for the moment. A researcher from West Virginia University says what the Mountain State and indeed all of Appalachia really needs is ethane storage. Specifically, an ethane storage hub. According to Brian Anderson, director of West Virginia University’s Energy Institute, without ethane storage (and pipelines) the Marcellus/Utica region risks seeing its abundant ethane leave the area, mostly heading to the Gulf Coast. Why is that bad? Because if we can keep ethane in the area, we will attract manufacturers to the region who want to use the results of that ethane–ethylene, the raw material in plastics. Our region can realize a bonanza in manufacturing jobs and investments–if we can store and use the ethane here, at home…
We love it when we spot a company adopting a contrarian strategy. Received wisdom and prevailing thought says that the oil and gas industry–especially in the Marcellus/Utica–is contracting. Drillers aren’t drilling, and that affects the supply chain (those companies supplying goods and services to the industry) in a big and negative way. Yep–true enough. But the received wisdom also says companies should diversity–look for business outside of the oil and gas industry. What’s contrary is to take advantage of this downturn to expand capacity–to get ready for when the downturn turns again into an upturn. That’s just what Watco Transportation Services is doing with their Kanawha River Railroad short line subsidiary. Kanawha River Railroad has just cut a deal to lease 309 miles of rail lines from Norfolk Southern in Ohio and West Virginia. One of the customers on these short haul lines will be, yep, Marcellus and Utica drillers and sand suppliers and chemical suppliers and equipment suppliers. Nope, there’s not all that much shipping right now, which makes this a step of faith. But the company believes that the future will be here soon and things will turn and the Kanawha River Railroad will be ready to take full advantage of it. We love a railroad story, and we love a contrarian story. This is both…
In the past 12 months, some 27% of all E&Ps (exploration and production companies, what we call “drillers”) have defaulted on some of their bonds–the debt they owe. That’s huge. According to Fitch Ratings, before we turn the corner, they expect that number to grow to 30-35% of E&Ps. Defaulting on bonds doesn’t necessarily mean a company has filed for bankruptcy, but a plethora of bankruptcies have, according to Fitch, driven the bond default number way up. Here’s the latest on bond defaults and the sentiment that “it’s going to get worse before it gets better” from Fitch…
The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: NY trains to respond to oil fires; OH pipeline manufacturer loses $326M 1Q16; Range invested outside PA because of PA’s poor business climate; no contamination from Spectra pipeline blast; Shell cracker equals lots of PA jobs; Chesapeake settles royalty case in TX; US rig count hits new record low; and more!
In June 2015 then-Secretary of the Pennsylvania Dept. of Environmental Protection (DEP), John Quigley, slapped Range Resources with an $8.9 million fine–the largest such fine ever levied by the DEP (see 
As we commented in April, there’s no way to sugarcoat the fact that Stone Energy–an independent oil and natural gas exploration and production company (E&P) headquartered in Lafayette, Louisiana that drills mainly in the Gulf of Mexico but also has a presence in the Marcellus/Utica Shale with 75,000 acres of leases–is inching toward a bankruptcy filing (see 
Bloomberg analysts do a deep dive into pipeline projects in the northeast in a recent article. The article contains an update on 17 planned pipeline projects in the northeast (see the full list detailing each project below). The reporter interviews Marty Durbin, executive director of market development at the American Petroleum Institute (API), and MDN friend Scott Kurkoski, chair of the energy group at the Binghamton law firm Levene, Gouldin & Thompson. Here’s what they have to say about the future of pipeline projects in New York State…
It’s not all gloom and doom in the Marcellus/Utica industry–but there’s no doubt we’re in a downturn. Drillers (or energy companies or producers) are having a tough enough time–but they can just stop drilling for a while and hope that the cash holds out long enough to begin again. But what about those who depend on the drillers? The companies that supply goods and services to others in the industry? What we call, the supply chain. How are they doing? And what strategies are supply chain companies using to weather the current downturn? Let’s find out…