Expo/Industry events for the next few months
Shale Insight
October 23-25, 2018
For other events visit
http://www.shaledirectories.com/site/oil-and-gas-expo-information.html
Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, Bakken and Niobrara Shale Plays
SWN Moving Rigs. We have heard that SWN is moving 4 rigs from northern PA to WV
(RUMOR)
Ascent Rig Count. I received an email from one of our readers that told me that Ascent has 8 rigs in Ohio. (2 Guernsey, 3 Harrison, 3 Jefferson)
Cabot, Seneca take capacity on Transco’s Leidy South expansion. Williams this morning announced its Transco interstate pipeline has executed binding, 15-year commitments with Seneca Resources and Cabot Oil & Gas for 100% of the 580 million cubic feet per day (Mmcf/d) transportation capacity under its proposed Leidy South expansion project.
The project expands energy infrastructure that will further connect natural gas in the Marcellus and Utica Shale plays in Pennsylvania with growing demand along the Atlantic Seaboard as early as the fourth quarter of 2021.
Cabot is taking 250 Mmcf/d of capacity on Leidy South, Kallanish Energy reports. The independent producer’s capacity will deliver natural gas from the Zick interconnect in Susquehanna County, Pennsylvania, to the River Road interconnect in Transco’s Zone 6.
The company will also be participating as an equity owner through its ownership in the Meade Pipeline Co.
"Cabot is pleased to announce its participation as a shipper and owner on the Leidy South expansion project, which provides further visibility into the company's ability to deliver longer-term growth at attractive netbacks," said Dan Dinges, Cabot chairman, president and CEO.
“Since 2013, the Transco pipeline’s design capacity has grown by 62%, while its Marcellus takeaway capacity has increased by approximately 3 billion cubic feet per day,” said Frank Ferazzi, senior vice president of Williams’ Atlantic-Gulf Operating Area.
“The Leidy South project allows Williams to continue to grow our strategic footprint in the gas-rich Marcellus region, creating a unique opportunity to expand Transco by leveraging recent expansions on Williams’ Northeast Gathering & Processing assets in Pennsylvania.”
The Leidy South project will consist of compression and looping of existing Transco facilities in Pennsylvania. The project will also include two lease agreements; one with National Fuel Gas Supply Corp. from Leidy Hub to Clermont, Pennsylvania; and a second with Meade Pipeline from Zick to River Road on the Central Penn Line.
Transco is the nation’s largest-volume interstate natural gas pipeline system. It delivers natural gas to customers through its roughly 10,000-mile pipeline network whose mainline extends nearly 1,800 miles between South Texas and New York City.
Permitting Drops in PA. Half as many natural gas drilling permits were issued during September in Pennsylvania compared with a year ago, indicating a producer response to high production levels and operators' desire to live within their cash flow. This could be in response to continuing robust gas production in the region, which threatens to drive prices down, as well as an effort to live within cash flow. Pennsylvania only issued 134 permits to drill gas wells in September 2018, a big drop compared with September 2017, when 264 permits were issued, according to state Department of Environmental Protection data. The year-on-year decline in Pennsylvania permits issued reflects a general decline in permitting activity across the US Northeast, which could indicate that the years-long Appalachian drilling boom is on the verge of slowing. Gas drilling in Pennsylvania is focused largely in two opposite corners of the state -- the northeast, which overlies the dry-gas window of the Marcellus Shale, and the southwest, which is situated in the wet-gas segment of the play. Among the counties in the state with the most permitting activity in September were two in the southwestern corner -- Washington, with 24 permits; and Greene, which snagged 17 drilling permits for gas wells. Seven permits were issued for wells in nearby Allegheny County.
Permian Pipeline Conversion. The developer of the private equity-backed EPIC natural gas liquids pipeline will temporarily convert the conduit to carry crude oil as bottlenecks in America’s hottest shale play threaten to curtail production. Oil service on the third and final phase of EPIC Midstream Holdings LP’s NGL pipeline is expected to start in the third quarter of next year, the company said in a statement Friday. That would offer interim relief to producers in the prolific Permian Basin of West Texas and New Mexico, a region facing a dearth of pipeline capacity until late 2019, when new projects are expected to enter service. The pipeline crunch is forcing Permian producers to sell crude locally at a steep discount to prices on the Gulf Coast. Oil sold in Midland, in the heart of the play, for $15.60 a barrel less than in Houston on Friday, after starting the year at a $3.40 discount. That comes as output in the basin soars, with researcher IHS Markit predicting supply will reach 5.4 million barrels a day by 2023 -- more than every OPEC country except Saudi Arabia. With the conversion, EPIC should be “the first of the five-pipeline ‘wall of capacity’ that will come on-stream in 2019 and 2020,” Paul Sankey, a managing director at Mizuho Securities USA LLC, said in a note to clients. The surge of pipeline space will result in about 1.5 million barrels a day of excess capacity, he said, which will take two to three years of production growth to fill.
29 Appalachia NatGas Power Plants. One of the biggest untold stories in the Utica Shale is the still-growing development of natural gas-fired power plants. That assessment came from Jackie Stewart, a spokeswoman for Energy In Depth. “It’s the most exciting thing happening on Ohio … and it’s the greatest story in Ohio,” she said. She touted the shale boom in a talk on Wednesday at Utica Summit VI at Walsh University in North Canton, Ohio. The downstream-focused conference drew roughly 100 people, and was presented by Shaledirectories.com and the Canton Regional Chamber of Commerce. Ohio has 10 gas-fired power plants in operation, under construction or planned, offering a total of 9,294 megawatts of capacity, Stewart said. The 10 plants together have a price tag of $9.1 billion. They will produce roughly 7,200 construction jobs.
Senate Moves for Quick FERC Approval. Some kind of record is being set with the scheduled confirmation hearing next Tuesday for Bernard McNamee to fill the open seat on the Federal Energy Regulatory Commission. It will be less than two weeks between the day McNamee was nominated by President Trump and when he sits before senators to answer questions about a number of topics, not the least of which will be his views on subsidies for failing coal and nuclear plants (Energywire, Oct. 4). "In my experience, that is light speed for the nomination of a FERC commissioner; can't think of one that moved anywhere near this fast," said Jeffery Dennis, general counsel for Advanced Energy Economy.
It’s Now the Bakken not the Permian. The Bakken formation, which stretches from Montana to North Dakota, had long been considered by some in the energy industry to be played out. Now the region is experiencing a comeback, luring investors as crude prices have surged. Oil production in North Dakota has climbed to records this year, hitting 1.27 million barrels a day in July. Whiting Petroleum Corp., which has operations in North Dakota, Colorado and Texas, is up 72% for the year so far. Continental Resources Inc. and Oasis Petroleum Inc. are up 24% and 57%, respectively. “It’s interesting times in North Dakota,” said Pablo Prudencio, an analyst at energy consultancy Wood Mackenzie. “The Bakken has a story of its own right now.” Several factors account for the Bakken’s recent rise, Mr. Prudencio said. U.S. oil futures surpassing $70 a barrel have spurred more drilling across the country. Additionally, cheaper acreage and improved crude transportation have made the area more attractive than some other major shale fields. Namely, the Dakota Access Pipeline has made it cheaper to send crude to other parts of the country. Previously, much of the oil produced was transported by rail. Drilling efficiency has also picked up, analysts said, meaning more crude comes out of each well.
Nexus Granted FERC Approval. Nexus Gas Transmission on Wednesday was granted Federal Energy Regulatory Commission approval to begin flowing natural gas on the 255-mile Nexus line, which crosses northern Ohio bound for southern Michigan.
FERC granted Nexus’ Sept. 17 request for permission to start using the 36-inch line, a related compressor station and metering facilities.
In a letter, FERC said recent construction reports and third-party monitoring showed Nexus “has adequately stabilized the areas disturbed by construction and that restoration is now proceeding satisfactorily.”
Nexus has committed to completing restoration as close to Oct. 31 as possible, according to the FERC letter, reviewed by Kallanish Energy.
FERC’s decision means Nexus can ship roughly 1 billion cubic feet per day (Bcf/d) of natural gas, representing nearly two-thirds of the pipeline’s 1.5 Bcf/d capacity.
Nexus has said it would submit separate requests to operate other parts of the pipeline.
Detroit, Michigan-based DTE Energy and Canadian pipeline giant Enbridge are partners in the $2.1 billion pipeline.
Central Land Consulting, a firm that has filed complaints on behalf of numerous Ohio landowners who blame Nexus for damaging their property or otherwise violating its agreements with them, told the Canton Repository newspaper it’s filed complaints on behalf of more than 80 landowners.
The complaints state Nexus construction was keeping them from the normal use of their land, including harvesting crops.
1st. U.S. Menthol Plant. Natural gas-to-methanol producer Primus Green Energy has announced final plans to develop and deliver a modular, 160,000 tons per day methanol plant near New Martinsville, West Virginia.
Primus plans to partner with China’s Jereh Oil and Gas Engineering Corp., an international, integrated oil and gas company specializing in oil and gas engineering, procurement and construction (EPC) services, oilfield technology services, and equipment manufacturing, to build the project. Production from the plant is slated to begin in 2020, Kallanish Energy reports.
"Primus has long-envisioned development of a methanol plant in the Marcellus region, but it is our relationship with Jereh and other strategic partners that has resulted in substantially improved economics and will allow us to move the project forward," said Steven Murray, CEO of Primus.
"With gas supply and methanol offtake agreements from an (unnamed) integrated oil & gas company, assistance from Sumitomo Mitsui Banking Corp. to arrange project debt financing, and design work by Koch Modular Process Systems, the project economics are very strong."
The pre-engineered modular units will be fabricated offsite by Jereh and Koch Modular Process Systems, then transported to the project site for final assembly, allowing rapid delivery and expedited construction time, according to Murray.
NatGas Inventories at 10-year lows. Natural gas prices have spiked over the last few weeks as U.S. inventories run low ahead of the peak winter heating season.
Nymex natural gas prices have jumped nearly 15 percent over the past month, rising to roughly $3.30 per million Btu (MMBtu). The market has clearly grown a little concerned about adequate supplies heading into the winter and that is reflected in natural gas prices rising to their highest point since the beginning of the year.
For the week ending on September 28, natural gas inventories stood at 2,866 billion cubic feet (Bcf), or 636 Bcf lower than at the same point a year earlier, as well as 607 Bcf below the five-year average.
Inventories dropped to extraordinarily low levels last winter as much of North America became enveloped in exceptionally cold weather. As tens of millions of people cranked up the heat, the U.S. burned through record levels of natural gas. That stood in stark contrast to the year earlier, when a much milder winter led to above-average levels of gas in storage.
Natural gas markets are cyclical, with a buildup in storage between April and November – the so-called “injection season” – and steep drawdowns during the winter. The stockpiling during injection season is necessary to provide enough supply to consumers for winter heating needs.
But the problem is that the U.S. is currently on track to finish up the injection season with the lowest level of gas sitting in storage in 13 years. Even though demand sees seasonal peaks and valleys, consumption is rising on a structural basis as more coal plants shut down and more gas is exported in the form of LNG.
TX September Permits. The Railroad Commission of Texas issued a total of 974 original drilling permits in September 2018, up from 903 permits issued in September 2017, the state agency reported.
The September 2018 total included 857 permits to drill new oil or gas wells, 11 to re-enter plugged well bores and 106 for re-completions of existing well bores. The permits included 271 for oil, 55 for gas, 576 for oil or gas, 62 for injection and 10 for other permits.
In addition, the agency processed 553 oil, 129 gas, 60 injection and two other completions in September 2018. That compares to 318 oil, 101 gas, 40 injection and four other completions in September 2017.
Total well completions in 2018 are 8,041, up from 5,408 recorded in the same time period in 2017, a 48.7% increase.
The Midland area got the most permits to drill oil/gas wells, with 469. Second was the San Antonio area with 102 permits and third was the San Angelo area with 77 permits.
For oil completions, the Midland area was No. 1 with 262 permits. Second was the San Antonio area with 75 and third was the San Angelo area with 64.
For gas completions, the Midland area was No. 1 with 35, followed by East Texas with 21 and the Refugio area with 20.
Cabot 3rd Qtr. Update. Cabot Oil & Gas says it expects third-quarter production to increase by 7% from second quarter results, Kallanish Energy reports.
The company said it expects production to total about 2.03 trillion cubic feet-equivalent (Tcfe), based on preliminary production data. That is a 19% increase from Q3 2017, based on a divestiture-adjusted basis, the company said.
The production figures were affected by a delay in service beginning on the Atlantic Sunrise pipeline project from late August to Oct. 6, Cabot said.
In addition, the company also made a “modest change” in the timing of the company’s Q3 pads being placed into production, it said.
“We are excited to finally see the Atlantic Sunrise project placed in service almost five years after the project was initially announced,” said chairman, president and CEO Dan Dinges, in a statement.
“This project will help alleviate the infrastructure bottlenecks that we have been operating through in Northeast Pennsylvania since the summer of 2013, resulting in an improvement in basis differentials and providing a significant opportunity to deliver a combination of returns-focused growth and free cash flow generation from our Marcellus Shale assets,” he said.
The company reported its current gross operated production volumes are in excess of 2.6 billion cubic feet per day (Bcf/d). That represents an increase of more than 400 million cubic feet per day (Mmcf/d), or a 19% increase compared to Q2 2018.
In a Tuesday release, the company said it expects its Q4 2018 net production guidance to be between 2.23 to 2.28 Tcfe/d.
It also lowered its projected 2018 daily production growth guidance range from 10% to 12%, to 7% to 8%, to reflect third-quarter actuals and the impact of “modest changes” in Q4 2018 completions, it said.
Due to the revised timing of completions, Cabot has reduced its full-year capital budget by $20 million, to $940 million.
It said natural gas price realizations in Q3 are expected to be $2.36 per thousand cubic feet (Mcf), both including and excluding the effect of hedges.
That represents a discount of 54 cents to NYMEX settlement prices. That compares to a discount of 99 cents in Q3 2017.
Dinges said, “Our realized prices for the third quarter came in higher than forecasted due to narrower basis differentials as fundamentals in the Northeast continued to improve. We anticipate a further strengthening of realized prices during this coming winter heating season driven by the in-service of Atlantic Sunrise, current storage level expectations and seasonal demand.”
Eagle Ford Activity Up. Despite the decrease in rigs this week, the Eagle Ford has gained rigs in recent months as activity in the Permian, which is facing a crunch in available pipeline takeaway capacity, has slowed. That has allowed some operators with existing Eagle Ford leases to temporarily transfer capital there. The play's 95 rigs this week compares to 80 the first week of 2018.
And even though rigs fell this week in the Williston - home to the giant Bakken Shale oil reservoir - the basin has become more active this year from the roughly 50 rigs at the start in 2018, as oil prices have risen to around the mid-$70s/b. That is up nearly 50% from a year ago.
Also, rigs drilling for gas were largely stable this week. The Marcellus Shale basin, centered mostly in Pennsylvania, inched up by one rig to 55, while the Utica Shale chiefly in Ohio and the Haynesville Shale in East Texas/Louisiana were both flat week-on-week at 17 (for the fourth consecutive week) and 56, respectively.
While rigs have been fairly stable in the Marcellus over the past year, their number in the Haynesville has ramped up from the high 40s a year ago as drilling has become more economic there. Internal return rates were about 9% in September 2017, but are currently about 21%, according to Platts' Well Economics Analyzer.
The other two gas plays have higher current IRRs also, as drilling efficiencies have continued to evolve in well completions and costs, although the increase is not as dramatic as the Haynesville.
Drilling permits also increased by 8% this week to 1,135. That is up from 997 during the same week in 2017, as oily basins across the US have gained traction with higher crude prices.
The S&P Global Platts Rig Count is an independent benchmark assessing domestic onshore and offshore drilling activity on a weekly basis. The data is based on key factors: time, rig activity, well type, permit type, spud date and a rig's release date. Enhancements guard against double counting, fill previous gaps in public reporting and allow for more exact data on correct well type and orientation of wells.
The Platts Rig Count's key determinant of tallying data is identifying if a rig is active in the seven-day period before publication deadline. Only rigs on location and working during that window are included in the count. A rig is counted as active if it is post-spud and pre-release.
Another NatGas Powered Plant in OH. The 940-MW Lordstown Energy Center announced this week it had begun commercial operation. The facility, which cost nearly $900 million to build, uses locally sourced natural gas to generate electricity serving about 850,000 households, according to the release.
The prolific Utica Shale lies beneath much of Ohio and other states, The nearby Marcellus Shale is the nation’s most productive shale gas play, but the Utica delivers close to 9 million cubic feet per day, according to reports.
“We are excited to serve customers with this state-of-the-art, environmentally friendly facility,” said Robert Haley, LEC operations director. “Our team is well-equipped and highly trained, and I’m pleased that we have begun 24/7 operations.
“We’re very grateful for the support we’ve received from our investors, employees, suppliers, local and state government leaders and the residents of our community, including hundreds of construction workers,” Haley added. “Their cooperation and hard work were critical to our ability to achieve today’s milestone.”
James Dignan, president and CEO of Youngstown Warren Regional Chamber, added, “We are happy to have helped bring this nearly $1 billion investment to the Mahoning Valley. The Lordstown Energy Center has already proven itself to be a good corporate citizen. We look forward to having the company be a part of our community for decades to come.”
O&G Tech Survey. Despite the rapid spread of technology and innovation pressuring the industry, oil and gas chief executives see technological disruption as more of an opportunity than a threat -- but acknowledge more work must be done.
Eighty-five percent of oil and gas CEOs report they're piloting artificial intelligence or have already implemented AI for some processes, according to KPMG’s 2018 Global CEO Outlook.
However, only 59% feel their organization is an active disruptor in their own sector, and 57% feel the lead times to achieve significant progress on transformation can be overwhelming, Kallanish Energy learns.
"Technology is disrupting the status quo in the oil and gas industry. AI and robotic solutions can help us create models that will predict behavior or outcomes more accurately, like improving rig safety, dispatching crews faster, and identifying systems failures even before they arise. This level of predictability can have a profound impact on our industry, said Regina Mayor, global sector head, Energy and Natural Resources, KPMG.
When asked about the biggest long-term benefits of AI, 46% of CEOs indicate acceleration of revenue growth, 39% indicate increased agility as an organization, and 39% point to improved risk management, all within a three-year time frame.
Further, they indicate high levels of confidence in their organizations' digital transformation programs, AI systems and robotic process automation.
As oil prices remain elevated, industry confidence is up and CEOs are setting their sights on growth, the KPMG survey found. Some 85% of CEOs are very confident or confident on industry growth, and 88% very confident or confident on company growth prospects.
As part of their growth strategies, 83% of O&G CEOs anticipate a moderate to high appetite for merger and acquisition activity over the next three years, largely driven by the need to reduce costs through synergies/economies of scale, a speedy transformation of business models, increased market share, and low interest rates.
"The higher price of oil is playing a significant role in driving a more positive sentiment across the industry," said Mayor. "Executives are really honing in on ways they can improve internal efficiencies through strategic M&A moves and the use of robotics, AI and other means of digitalization across the industry."
Despite a rosy outlook, there are still concerns and threats to achieving growth. Among the biggest threats, 23% of CEOs point to emerging/disruptive technology risk, 20% say environmental and climate change risks and 18% point to a return to territorialism.
Coal Plant Closes in OH. American Electric Power has announced it will close its coal-fired 1,590-megawatt Conesville power plant in Ohio by May 2020, Kallanish Energy reports.
The company had planned to close Units 5 and 6 in 2022, but has moved that closing up to May 2019.
Unit 4 will remain operational through May 2020 when the Conesville plant, in Coshocton, Ohio, would be permanently closed.
The company told the Coshocton Tribune newspaper the decision to shutter Conesville was based on costs to keep the plant operating and the outcomes of recent competitive generation auctions.
The plant did not clear the PJM Energy Market capacity auction for 2021-2022 and only partially cleared the auction for 2020-2021.
Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149https://www.shaledirectories.com/blog/facts-rumors-308/
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