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Friday, June 23, 2017

Shale Efficiency May Have Hit Its Peak For Now

Learning takes time and effort. But a good education pays off. 
North America’s oil industry has been in school for the past three years, studying how to become more productive in a fragile $50-a-barrel world. Many companies in the class of 2017 have graduated and are now competing hard for a greater share of global barrels.

Having said that, North America’s education on how to make oilfields more productive appears to be stalling. After a breathtaking uphill sprint, productivity data from the U.S. Energy Information Agency (EIA) shows that the last few thousand oil wells in top-class American plays may have hit a limit—at least for now.

Our Figure this week shows a classic S-curve learning pattern in the mother lode of all oil plays: the Permian Basin. Slow improvements to rig productivity (2012 to 2015) were followed by a steep period of rapid learning (2015 to 2017). Eventually limitations set in and advancement quickly stalled upon mastering new processes (2017 to the present).
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Thursday, June 22, 2017

Utica Rig Count Drops One on Latest ODNR Report

New permits issued last week: 6  (Previous week: 8-2
Total horizontal permits issued: 2533  (Previous week: 2526+7
Total horizontal wells drilled: 2026  (Previous week: 2018+8
Total horizontal wells producing: 1574  (Previous week: 1575-1
Utica rig count: 24  (Previous week: 25)  -1

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Wednesday, June 21, 2017

Eclipse Resources Goes Long Again with Third "Super-Lateral" Well

From an Eclipse Resources press release:
The Company has recently turned its seven well Moser pad to sales, located in the Company’s Utica Shale dry gas window acreage in eastern Monroe County, Ohio. The Moser pad wells are currently producing approximately 100 MMcf per day collectively as the Company continues to implement its “engineered” flowback procedure designed to bring the wells up to target production rates while preserving fracture conductivity and minimizing formation damage. These wells were completed using a number of new completions techniques, which may form the basis of future completion designs beyond the Company’s “Generation-3” design that resulted in the Company increasing all of its Utica Shale type well expectations over the course of the year. 
The Company also announced today that it has successfully drilled its third and newest “Super-Lateral” well, the Outlaw C 11H, with a total measured depth of approximately 27,750 feet and a lateral extension of approximately 19,500 feet in 17 days from spud to TD in the Company’s Utica Shale Condensate area, setting a new lateral length record for the Company. 
Commenting on the operational activity, Benjamin W. Hulburt, Eclipse Resources Chairman, President and CEO, said the following, “I remain extremely pleased with our team’s operational cadence, and look forward to assessing the results from the seven well Moser pad. This pad, which contains 7 gross (7.0 net) wells with an average lateral length of approximately 7,200 feet, has recently been turned to sales slightly ahead of schedule, with starting pressures ranging up to approximately 7,500 pounds (psi). Building upon our Gen-3 frack design, this pad includes wells which are designed to test higher proppant volumes, engineered stage lengths and the use of diversion chemicals. Although extremely early in the life of these new exciting wells, we are initially very intrigued with what we are seeing. Based on the results of these wells so far, the continued performance of our Gen-3 wells, and the team’s ability to shorten our cycle times, I expect our production in the third quarter 2017 to be at least 350 MMcfe per day. 
I am also pleased to announce that we have drilled our third “Super-Lateral” well, with a record setting lateral length of approximately 19,500 feet in 17 days. This well, located in the Utica Condensate area, along with the recently drilled 19,300 foot Great Scott 3H well are expected to begin completions in the third quarter of this year. Additionally, we have completed the drilling of our second Marcellus Condensate well and are excited to begin applying our innovative completion techniques to this portion of our acreage during the third quarter of 2017. These Marcellus wells should allow us to further prove-up this area of our acreage that includes over 70 risked 10,000 foot lateral locations that can be developed in conjunction with our Dry Gas Utica position in this area of southeastern Ohio.”
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EQT to Acquire Rice Energy, Become Largest Gas Producer in U.S.

From the Pittsburgh Post-Gazette:
The largest natural gas basin in the U.S. will be home to the largest natural gas producer when two of southwestern Pennsylvania’s biggest oil and gas drillers become one in a $6.7 billion acquisition. 
EQT Corp., a Downtown-based firm, is buying Canonsburg-based Rice Energy Inc. in a deal that will put EQT ahead of ExxonMobil in gas production. It will also draw EQT’s focus even more to Washington and Greene counties, where much of Rice’s acreage zigzags EQT’s. 
The deal includes all of Rice’s exploration and production assets, as well as its interest in midstream master limited partnerships, which operate natural gas gathering and compression assets and water pipelines. 
It’s not clear yet what will happen to Rice’s 500 full-time employees, although layoffs are expected.
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Tuesday, June 20, 2017

Ohio Laborers Report More Than 4 Million Work Hours Over 16 Months — Thanks to Shale

by Jackie Stewart, Energy in Depth

The Ohio Laborers District Council (OLDC) recently reported that it surpassed 2016 expectations by more than a million work hours and totaled 4.2 million work hours over a 16-month period from January 2016 to April 2017, thanks to the numerous shale-related pipeline and natural gas power plant projects taking place in the Buckeye state.
Today, there are 3,000 Ohio laborers working on various stages of oil and gas development. And not only has Ohio’s flurry of shale-related activity resulted in thousands of jobs for skilled laborers from the OLDC — which represents a large share of Laborers International Union of North America-member (LiUNA) workers — the laborers are anticipating work for years to come, as Ohio Laborers Training Center executive director Robert Chatterson recently stated,
“The distribution work in gas pipelines is a 25-year project. Conceivably a young person can go into distribution work and work their whole career and retire with a great pension.”
Laborers’ work craft covers four main areas of shale-related construction: processing facilities, pipelines, road work and well pad construction. The skills for these jobs are taught at the 56,000 square foot Drexel J. Thrash Training Centerlocated 12 miles east of Mt. Vernon in Howard, Ohio. LIUNA has been preparing for the shale renaissance for years by ramping up their apprenticeship programs and recruiting Ohio men and women to work on pipelines and natural gas power plants. Just a few months ago, members of the Ohio State Senate discussed the pipeline workforce development training going on and how there is broad support for training the “jobs of the future.”
The laborers have been working for almost all the major oil and gas companies operating in Ohio, debunking a common myth perpetrated by anti-fracking activists that jobs are not coming to local communities. Remember this recent Columbus Dispatch headline?
The Dispatch claimed in that January 2014 article that, “there has been little change in the underlying labor market… transient workers are among the most tangible signs of the shale ‘boom’.” If that’s actually true, then why are union halls currently being reported as at maximum capacity.
Rocky DiGennaro, president of the Western Reserve Construction and Building Trades Council recently said,
“Building work is really good and most of the crafts are at maximum capacity.”
Also, according to Ray Hipsher, Pipeline Specialist at the Ohio Laborers District Council, the laborers in Ohio have worked on projects for: American Energy Partners, Antero Resources, Chesapeake Energy, Columbia Gas, Dominion East Ohio, Duke Energy, East Ohio Gas, Eclipse Resources, Gulfport Energy, Kinder Morgan, MarkWest Energy Partners, Rice Energy, Williams, Clean Energy Future, Energy Transfer Partners, TransCanada and Advanced Power, just to name a few. LiUNA has 17,000 members statewide and they would like to continue this work and expand their operations into other projects as well. But don’t take our word for it, as Hipsher also recently said,
The shale industry is hiring local workforce. That’s going to keep the money in the community and the laborers doing the work are going to take pride and care of the quality of their work, because we are your neighbors. We care about doing this pipeline work right and environmentally sound.”
Anti-fracking groups also try to perpetuate the myth that all jobs created by shale are only temporary. In 2011, ThinkProgress put out a blog entitled “Oil Industry Report Outlines How to Create Temporary Jobs While Permanently Destroying the Climate” that said, “They are all temporary jobs, since they aren’t sustainable.”
Statements like these prove how incredibly out of touch groups like ThinkProgress are with what’s really happening in states like Ohio.
As Chatterson stated earlier, distribution work on pipelines requires long-term maintenance. The same is true for natural gas power plants, and Ohio happens to have $10 billion worth of natural gas power plant development in progress at the moment, activity that is slated to create over 6,700 jobs. Each one of these plants requires millions in maintenance and labor needs per year, and each plant is slated to be operation for 40 years.
Another curious example of misinformation campaign is the New Republic’s recent article entitled, “Fracking Isn’t the Job Creator You Think It Is.” The article posed these questions:
“Where do the workers extracting gas in Pennsylvania or Ohio live and spend their money? Where are the best jobs located? While the fracking industry may support the national economy as a whole, some places are winners and others are losers.”
Those are easy questions to answer: It’s clear that the workers there are 3,000 laborers working in Ohio and spending their money in Ohio. Where are the best jobs located? Ohio it appears, thanks to over $50.4 billion invested by the oil and gas industry. When it comes to creating millions of work hours and local jobs, it’s clear that Ohio is a “winner” — and it’s all thanks to fracking.

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Fallout From Rover Pipeline Spills Includes Construction Delays for Energy Transfer

From TheStreet:
After blitzing through Ohio's wetlands, Energy Transfer Equity (ETE) is once again facing a problem of its own making: pipeline construction delays.

Until recently, the company's subsidiary Energy Transfer Partners (ETP) has defied long odds and analyst expectations in its rush to complete its new giant, Rover, a $4 billion, 713-mile natural gas pipeline designed to deliver natural gas from the Marcellus Shale to markets in the northeast.

But the storyline shifted in April after the company spilled 2 million gallons of drilling fluid near the Tuscarawas River. Following the spill, the Federal Energy Regulatory Commission halted new horizontal drilling on the project. FERC then opened an investigation into the spill in June after diesel was detected in samples collected from the spill site.

The halt in horizontal drilling, a type of drilling that is necessary for the project to be completed, turns into a near-impossibility the longshot bid to complete the project on time and raises questions about whether Energy Transfer's checkered environmental record should be of concern to the company's shareholders.
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EPA Puts Methane Rule on Hold to Conduct a Review

From The Hill:
The Environmental Protection Agency (EPA) has proposed pausing an Obama administration oil and gas pollution rule for two years while it reconsiders the regulation. 
EPA officials on Tuesday formally proposed a two-year pause on implementation of the rule, which would limit methane leaks at drilling sites and set standards for equipment and employee certification within the oil and gas drilling sector. 
Obama officials finalized the rule last May as part of a federal effort to cut pollution of methane, a greenhouse gas with 25 times the warming potential of carbon dioxide.

Drillers contend the rule would be costly and duplicative and have urged Trump administration regulators to reconsider the measure. The EPA, under Administrator Scott Pruitt — who sued against the rule while Oklahoma attorney general — said in April that it would formally review the rule, a lengthy process that could take years to complete. Such a measure is subject to lawsuits as well.
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Monday, June 19, 2017

Are Conditions Ripe for Oil and Gas Mergers?

From Forbes:
The sell-off of oil and gas exploration and production stocks has been brutal. Exchange-traded funds that specialize in the sector have fallen around 10% to 20% this year, versus an 8% uptick in the market overall. Blame oil prices, which have slid despite members of the Organization of the Petroleum Exporting Countries agreeing last month to keep production cuts in place for another nine months. 
In a note last week, analysts at Tudor, Pickering, Holt & Co. said prices of exploration and production stocks sat at 55% of their expected targets versus 58% just a month ago. Raymond James said both the Bollinger Band and Relative Strength Index signals within its proprietary timing model breached oversold levels last week for the first time in five weeks, "indicating a strong potential buy signal." 
With stock prices down so much, it might be a good time for the long-term investor to jump in. Could it also be a good time for some corporate mergers? 
There are already early indications that it is. Penn Virginia Corp., which focuses on South Texas' Eagle Ford shale, has hired investment bank Jefferies LLC to advise it on strategic alternatives to enhance shareholder value, including a possible sale, Reuters reported Monday. Stone Energy Corp., which explores for oil in the Gulf of Mexico, is also looking for a buyer with Petrie Partners LLC assisting it. Both companies emerged from bankruptcy in the last eight months and are owned by hedge funds that invest in distressed debt.
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