Monday, June 30, 2014

None Injured in Large Fire at Monroe County Well Pad

From The Columbus Dispatch:
A Monroe County shale-well site still was smoldering last night, and some residents were sheltered at a nearby high school, after an explosive fire yesterday morning. 
Officials said yesterday that the fire at the Eisenbarth well pad was caused by a mechanical malfunction in hydraulic tubing and that it was limited to the equipment on the surface of the well pad, which is the area that surrounds the natural-gas wells. 
Flames spread from the tubing to 20 trucks that were lined up on the well pad, causing explosions and thick, black smoke that stayed for hours. 
None of the 45 workers on site was hurt, state and oil-company officials said yesterday. One firefighter was treated for smoke inhalation.
Read many more details in the rest of that article by clicking here.

Thank goodness that no one was injured.  This is yet another reminder that whatever side of the fracking debate you fall on, there is always a risk of accidents that can create hazardous situations in oil and gas operations.

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New York High Court Says Home Rule Fracking Bans Are Legal - What Effect Could it Have in Ohio?

New York ruling is a painful
loss for the oil & gas industry
From Village Voice:
Huge news this morning for shale-gas drilling skeptics: the highest court in New York state ruled that towns have the authority to ban oil and gas companies from operating within city limits.

Deborah Goldberg, the lawyer who argued on behalf of the town of Dryden, New York, tells the Voice, will have a "huge impact here in New York state and may very well influence similar efforts around the country." 
In 2011, residents of Dryden passed a zoning ordinance prohibiting oil and gas drilling; Six weekes later Anschutz Exploration Corporation sued the town, arguing that only the state had the authority to make a decision like that.

Dryden, one of two respondents in this case, was the first town in New York to ban fracking. More than 170 towns and cities in New York have since joined them, in absence of any significant action to regulate fracking at the state level. There has been a moratorium on the practice since the New York State Department of Environmental Conservation initiated a review of high-volume hydraulic fracturing in 2008; the New York State Department of Health began its own review in 2012. Governor Andrew Cuomo has said he will wait for the Department of Health to rule on the practice before acting.
You can read the whole article by clicking here.

The Ohio Supreme Court has yet to rule in a similar case in this state.  Will the New York ruling have an effect on the decision in Beck Energy vs. Munroe Falls?  We will have to wait and see.

Here is the full decision in the New York case, if you are inclined to read it...

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Chesapeake Facing Another Class Action Suit Over Underpaid Royalties

From the Courthouse News Service:
HARRISBURG, Pa. (CN) - Chesapeake Energy Corp. and its subsidiary Access Midstream Partners cheated Pennsylvania landowners of more than $5 billion in gas and oil royalties through inflated and unreasonable fees, a RICO class action claims in Federal Court. 
Lead plaintiff, the Suessenbach Family Limited Partnership, seeks damages for racketeering, unjust enrichment, mail fraud, wire fraud, honest services fraud, conversion and civil conspiracy. 
Chesapeake is the nation's second-largest producer of natural gas. 
The complaint states: "Since at least 2010 Chesapeake engaged in unlawful conduct to improperly extract billions of dollars in royalties owed to plaintiffs and other lessors by artificially manipulating and deducting from royalty payments the cost of 'marketing,' 'gathering,' and 'transporting' natural gas. The marketing, gathering and transportation deductions at issue in this action were both unreasonable and inflated."
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Magnum Hunter Resources Announces Dismissal of Consolidated Securities Class Action Lawsuit in the United States District Court for the Southern District of New York

HOUSTON, TX--(Marketwired - Jun 24, 2014) - Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) (NYSE MKT: MHR.PRE) ("Magnum Hunter" or the "Company") announced today that the consolidated securities class action lawsuit filed against the Company last year has now been dismissed in its entirety by the judge overseeing the case in the United States District Court for the Southern District of New York.

With the dismissal of this consolidated securities class action lawsuit on June 23, 2014, the Company has been successful in securing dismissals of a total of five separate securities class action and shareholder derivative lawsuits filed in four different judicial courts without any monies paid to any plaintiffs or their respective legal counsel. Three of the lawsuits were dismissed on motions by the defendants, while the other two were voluntarily dismissed by the plaintiffs. The Company is currently working to obtain dismissal of the last remaining shareholder derivative lawsuit. The plaintiffs in the consolidated securities class action lawsuit can appeal yesterday's dismissal to the U.S. Court of Appeals for the Second Circuit.

A Form 8-K, including a copy of the opinion and order of the United States District Court for the Southern District of New York dismissing the consolidated securities class action lawsuit, is being filed with the Securities and Exchange Commission.

Magnum Hunter Management Comments

Mr. Paul M. Johnston, Senior Vice President and General Counsel, commented, "It is very gratifying that we have been successful in securing the dismissal of such a large number of lawsuits against our Company and certain directors and officers. Fortunately, courts throughout the country are taking a much tougher stance on these types of complaints against companies and their directors and officers. We would like to also express our appreciation to the litigation team at Norton Rose Fulbright in Houston who led our efforts in all of these dismissals."

About Magnum Hunter Resources Corporation

Despite Early Disappointment, Northern Utica is Not Dead Yet

From NGI's Shale Daily:
Despite poor results and the unabashed early decisions of some unconventional operators to abandon altogether what was once thought to be the core of Ohio's Utica Shale, neither the oil and gas industry nor the communities waiting for economic opportunity have written off the play's northern tier.

Even as operators push farther south into West Virginia to replicate the dry gas success of southeast Ohio and as a similar pattern slowly unfolds nearby in southwest Pennsylvania (see Shale Daily, March 26; June 5), optimism for the future of the Utica Shale in the northwestern part of the keystone state has not subsided. 
In nearly a dozen interviews with oil and gas professionals, local landowners and community leaders in Ohio and Pennsylvania, and through the analysis of both state production data and the plans of some of the Appalachian Basin's leading operators, there appears to remain significant enthusiasm about the Utica's black and volatile oil windows. It's only a matter of time, sources say, before operators learn how to move those molecules through the small pores of shale rock underneath a five-county region in northeast Ohio and a larger area to the west, while some acreage in northwest Pennsylvania is believed to hold the same potential.
In the last four months alone the Utica's northern tier in Ohio, which today is generally perceived to consist of Mahoning, Trumbull, Stark and Portage counties, and to a lesser extent Tuscarawas County, received a series of signals that spelled trouble for the oil and gas industry's future in the region (see Shale Daily, June 3; March 12; March 11)

Among the biggest announcements was BP plc’s $521million impairment. The company said in April that it would market its roughly 100,000 acres in Trumbull County and the surrounding area, saying only that the acreage did not match the needs of the "company's portfolio" (see Shale Daily, April 29; Nov. 18, 2013
Around the same time, Halcon Resources Corp., citing poor results and inconclusive data, decided to suspend its drilling program in northeast Ohio and northwest Pennsylvania (see Shale Daily, March 5). 
Those events, among others, prompted local news media to question the Utica Shale's long-term role in what has recently been a regional economic rebound. They set off local discussions and stirred further speculation about what the industry and investors have for some time accepted about the uneconomic results in the northern tier (see Shale Daily, Jan. 2). 
"I don't think any of us familiar with oil and gas in the state of Ohio have written-off areas that have thus far proven disappointing in the north," said the Ohio Oil and Gas Association's Executive Vice President Thomas Stewart. "You can't have a boom if the geology doesn't exist under current technology, and it's just not there yet in some of the areas north of Carroll County."
You can read much more by clicking here.

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Sunday, June 29, 2014

Athens County Commissioners Impressed by Injection Well Site Tour; Permit Appeal Dismissed by State

Protesters engaged in criminal activity at an
injection well in March of this year
From Ohio Gas & Oil:
"From all the complaints and issues I've heard, it wasn't what I expected to see," Commissioner Lenny Eliason said. "It looks like a very clean operation." 
Eliason toured the wells last week at the invitation of the owners. 
"They seem to be a concerned organization, to run things in a proper manner," Eliason said. 
Eliason said he was told the company went beyond the requirements of the law in terms of containment. There is a concrete pad with drains, surrounded by a concrete wall, to capture a spill if one occurs at the storage tanks. Eliason said he was told that setup exceeds legal requirements. 
Eliason said he did not detect any odors at the sites. 
"From my layman's view, it seems to be operating well," Eliason said.
You can read that whole article by clicking here.

In further related news, from The Athens Messenger:
An appeal of a drilling permit for a K&H Partners injection well was dismissed Thursday by the Ohio Oil & Gas Commission. 
“I’m disappointed, but not surprised,” said Andrea Reik of the Athens County Fracking Action Network, which appealed a permit issued last December to K&H Partners for a well near Torch in Troy Twp.

Both the Ohio Department of Natural Resources and K&H Partners filed motions seeking dismissal of the appeal.

In its decision Thursday, the Ohio Oil & Gas Commission said that under Ohio law and an Ohio Supreme Court ruling it lacks jurisdiction to hear the appeal. The commission agreed with ODNR’s argument that the permit that was appealed is a drilling permit, not an injection permit.
Read the rest of that article here. 

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Anti-Drilling Group Says Ohio Severance Tax Passed by House is Too Low

From anti-drilling group Policy Matters Ohio:
House Bill 375, passed by the House in May, has a rate so low and a base so narrowed by deductions that revenues would not cover the needs of the state and impacted communities. 
That is the key conclusion of a report on the bill that Policy Matters Ohio issued today. While conventional, vertical wells would retain the current volume-based severance tax structure and see a 50 percent cut in severance tax rates under the bill, horizontal wells would be taxed differently, with a 2.5 percent tax based on the value of production. 
“As passed, the bill contains millions of dollars in new deductions, exemptions and other tax breaks,” said Wendy Patton, report author and senior director of Policy Matters Ohio’s State Fiscal Project. “As a result of these tax breaks and a very low rate, even the highest forecasts show that funding will fall short of needs.” 
Legislators pushed the share of revenues for impacted local governments from 15 percent to 17.5 percent of collections as they passed the bill. However, forecasts of the Legislative Service Commission (LSC) show that depending on production levels, local governments might get nothing by fiscal year 2019, or they might get up to $30.4 million, primarily for infrastructure needs. From a need for expanded water and sewer capacity to widened roads and strengthened bridges, infrastructure needed in the oil and gas region of southeastern Ohio is substantial. The bill provides no funding for social services, housing and safety needs of impacted communities.

Most of the revenues raised by HB 375 are supposed to fund income-tax cuts. The benefits to middle-income families would be negligible, perhaps $10 per year on average in 2019, under the highest production estimates. Meanwhile, compared to a prior version of the bill, new deductions and tax breaks would reduce annual collections by at least $23 million a year by FY 2019. 
The Policy Matters Ohio report analyzes the tax breaks in the bill and makes recommendations for improving it.
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Seismic Testing Coming in Washington County

From Shale Play:
An oil and gas exploration company in July could begin seismic testing in Fearing Township, officials said. 
Protege III Energy of Tulsa, Okla., in the process to begin the seismic mapping and held a meeting at the community building in Fearing Township this month. 
Protege was "very forthcoming," Washington County Commissioner David White said. "They said (the company and landowners) were all in partnership and they wanted landowners to know (what would be happening)." 
Morris Hall, vice president of Protege Energy and vice president of Geosciences, said work will start in early July. 
"(Residents will) see plainly marked survey crews," he said. "It'll be a six-week effort when we start. If we start the first of July, it'll be the middle to end of August before we're done."
Read the whole article here.

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Thursday, June 26, 2014

Are You Ready to Capitalize on Emerging World Growth and U.S. Oil Independence?

Source: JT Long of The Energy Report (6/26/14)
With 400 million more people set to get on the grid in India alone, smart investors will profit from new demand for all kinds of energy. In this interview with The Energy Report, Frank Holmes and Brian Hicks of U.S. Global Investors share some of their favorite ways to build a diversified portfolio that takes advantage of opportunities large and small, domestic and international.
The Energy Report: India's new prime minister, Narendra Modi, has pledged to bring electricity to the 400 million (400M) Indians currently without power. How is he going to do this, and how can investors get exposure to this massive infrastructure investment?
Brian Hicks: One of our investing tenets is to follow government policy, because that is a precursor to change. Infrastructure investment in India is a long-term theme, and is going to require a lot of raw materials and fuel sources. The power could come from coal and nuclear. It's one thing to generate power; it's another thing to actually distribute that power and get it out to the rural areas. That means a lot of copper to build out the infrastructure grid.
In the end, this will be a massive investment, and there will be a number of ways to play it. I would consider investing in the engineering and construction firms like Fluor Corp. (FLR:NYSE), which could win infrastructure contracts.
TER: China is in the midst of a similar infrastructure build-out. Is that a coal and nuclear approach as well?
BH: Absolutely, and the Chinese are further along than India. China has invested heavily in the power grid. That has resulted in a tremendous ramp-up in production of steel, cement and iron ore, as well as an upswing in copper usage. All go into generating power. Obviously, coal has been fueling much of China's power generation, and will probably continue to do so. The government is trying to pull back on the margin because of pollution concerns, but it will probably be part of the equation for many years to come.
Frank Holmes: The global real gross domestic product (GDP) annual growth rate has declined from a peak 5.4% in 2010 to 3% last year. With the U.S. economy turning up, constructive news out of China and new leadership in India, the global GDP could rise to 3.5%. This is very positive for commodities from energy to copper to gold. Modi's goal of 400 million people having access to electricity would mean a lot of copper demand and energy consumption.
TER: Aside from China and India, what energy resource areas are poised to do better in the second half of 2014?
BH: We are very constructive across the spectrum for energy. Oil prices are moving above $100/barrel ($100/bbl), whether it's West Texas Intermediate (WTI) or Brent crude, and that's going to be very positive for North American energy companies. We are seeing more signs of instability in key producing areas in the Middle East, including Libya and Iraq. That is going to weigh on global supply and keep oil prices well supported. Companies with production in geopolitically safe areas should do quite well in this environment.
We are very positive on natural gas. There has been some complacency about refilling storage after the extremely cold winter, and that should support natural gas prices for the near future. As we get into the summer months, cooling demand could strengthen gas prices again.
TER: We recently published an interview with T. Boone Pickens, and he is very optimistic about the shale oil space and the possibility of oil independence for America. Do you share his optimism?
BH: We sure do. I'm not quite sure about energy independence, but we are certainly making inroads in that direction. Within our portfolio, we are investing heavily in the shales through upstream oil and gas companies, oil services companies and equipment companies. Shale is transformational; it is really changing the energy landscape. Almost overnight, companies are developing resources that are long-lived and repeatable. Remember, only five years ago we were talking about peak oil. Now, we're producing roughly 8.4 million barrels per day (8.4 MMbbl/d). That's the highest we've seen since the mid-'80s. It is a trend that is going to continue.
At present, the Permian Basin is developing just as the Bakken and the Eagle Ford did a few years ago. The Delaware Basin, in particular, could be larger than what we've seen in the Bakken and Eagle Ford combined. It looks like we will be able to unlock millions of barrels of reserves, and increase production from that historic base. The Delaware is a very exciting example of how technology, innovation and investment have changed the conversation over the last five or six years.
TER: With all that oil and gas coming out of the shales, do you see an opportunity for money to be made in refiners?

Ownership for Gas-to-Liquids Plant in Ashtabula Changes Hands

Velocys plc (VLS.L), the technology innovator for smaller scale gas-to-liquids (GTL), is pleased to announce the acquisition of Pinto Energy LLC ("Pinto Energy") and the Ashtabula GTL project.

Pinto Energy is one of the leading project developers of smaller scale GTL in North America. As its first facility, Pinto Energy is developing an approximately 2,800 barrels per day (bpd) plant at an 80 acre industrial site that it owns near the Port of Ashtabula, Ohio, USA. The project will have access to abundant low-cost natural gas from the Marcellus shale region, as well as benefitting from substantial existing infrastructure. Initial engineering for the facility is complete and the air permit has been issued. Final investment decision is expected within six to nine months. Future expansions could see installed capacity of 10,000 bpd or more at the site. In addition to Ashtabula, Pinto Energy has a pipeline of smaller scale GTL projects it is seeking to develop throughout North America.

The acquisition of Pinto Energy will allow Velocys to further stimulate early market adoption of its technology in North America by accelerating the development of "shovel ready" GTL projects. It also provides complementary skills and business synergies from which to improve both the breadth and quality of the Company's service offerings to customers.

Velocys technology remains fully available for license to new customers. Furthermore, Velocys is also open to partner with project developers to bring promising smaller scale GTL opportunities to market.

Roy Lipski, CEO of Velocys, said:
"The acquisition of Pinto Energy, one of North America's leading smaller scale GTL project developers, provides Velocys a key stepping stone for commercial growth. It will strengthen our route to market, accelerate early adoption, and deepen our ties with suppliers, partners, investors and customers across the entire GTL value chain.

"Our primary mandate remains technology leadership in smaller scale GTL; Velocys continues to work with and welcome customers seeking to take advantage of the historic opportunity presented by smaller scale GTL."

Susan Robertson, CFO of Velocys, said:

"The acquisition of Pinto Energy affords Velocys the means to further advance smaller scale GTL projects in North America in a fiscally prudent manner. When fully established, this added capability should not only allow Velocys to better serve its customers and accelerate success in its core technology business, but could also generate income in its own right."

John Baardson, CEO of Pinto Energy, said:

"The entire Pinto Energy team is excited to be joining Velocys. Combining its technology leadership with Pinto's project development capabilities makes for a formidable business. Together we are set to accelerate development of smaller scale GTL assets in North America, the time for which has never been better."

Velocys has acquired 100% of Pinto Energy and its wholly owned subsidiaries, including Ashtabula Energy LLC, for an initial consideration of 955,977 ordinary shares in Velocys plc ("Shares") (201,089 of which shall be held in escrow pending claims by Velocys under the sale and purchase documentation), and a further sum of 1,072,476 Shares at successful financial close of the Ashtabula GTL project (subject to certain conditions), as well as five year warrants over up to $750,000 worth of Shares that will be granted for each additional project in the Pinto Energy pipeline (up to a maximum of two projects) that achieves financial close by the end of 2015, struck at a price equivalent to the greater of £2.192 per Share and 200 per cent of the share price at financial close of the project in question.

The consideration Shares will rank pari-passu with all existing ordinary shares of Velocys plc. Application has been made for a portion of the initial consideration Shares (being 754,887 Shares) to be admitted to trading on AIM; it is expected that such admission will be effective as at 8 am on 1 July 2014. The Company's total issued share capital after admission of these Shares will be 117,806,277 ordinary shares. The Company does not currently hold any shares in treasury. This figure of 117,806,277 ordinary shares may be used by shareholders in the Company as the denominator for the calculations by which they will determine if they are required to notify their interest in, or a change in their interest in, the share capital of the Company under the FSA's Disclosure and Transparency Rules.

The Company expects that application will be made for the remaining portion of the initial consideration Shares (being 201,089 Shares) to be admitted to trading on AIM once the escrow arrangements described above have been finalised. A further announcement will be made in relation to admission of these Shares in due course.
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Independent Producers Are at Forefront of U.S. Oil & Gas Reserve Growth

From Fuel Fix:
U.S. oil and gas reserves increased 9 percent last year, according to a newly released analysis, and almost all of it was due to independent producers — not major, integrated oil companies. 
The report by audit firm EY analyzed data reported by the 50 largest publicly traded companies based on their 2013 end-of-year reserve estimates. It analyzed proved reserves which, according to federal finance standards, are reserves that companies plan to drill within five years. 
U.S. oil reserves increased by 2.1 billion barrels last year to nearly 25.4 billion, according to the report. That figure marks a 52 percent increase since 2009.
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Obama Administration Cracks Door Open Slightly For U.S. Oil Exports

From Bloomberg:
The U.S. Commerce Department opened the door to more U.S. oil exports as long as the crude is lightly processed, tempering the impact of a law that’s banned most overseas petroleum shipments for the past four decades. 
The department widened its definition of what’s traditionally been considered a refined product eligible for shipping to customers abroad. That means more of the oil being pumped from U.S. shale formations may be eligible for export after being run through small-scale processing units. 
The Commerce Department issued its ruling after Pioneer Natural Resources Co. petitioned for approval to export a type of ultra-light oil that had been stripped of lighter gases to make it less volatile for transport -- a minimal level of processing known as stabilization. The ultra-light oil, known as condensate, has been abundant in shale formations during the drilling boom, leading to oversupplies on the Gulf Coast
“It’s a crack in the door which has otherwise been shut for 40 years,” Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas SA in London, said by phone. “If approvals for condensate exports are extended to more companies, it’ll benefit U.S. producers and processors in Asia, particularly in Singapore and South Korea.”
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Article Looks at How Shale is Helping Ohio Industry

Energy From Shale has taken a look at some stories and numbers that demonstrate the positive effects that shale development has had on Ohio's economy.  Here are a few of the items that are featured:

Drilling pipe awaits use on a Hess drilling site.  As shale energy production
has picked up in Ohio and across the Pennsylvania state line, demand for
materials to support the energy industry has grown in tandem.  According to
a recent study, shale development has brought $18.7 billion in investments
to Ohio, which has included the construction of several new steel mills.
A drilling rig hums in the early morning on a farm outside of Carrollton, Ohio.
"[Energy development has] been so good for the farmers because it got a lot
of farmers out of debt... Even though we've got farmers who are millionaires,
most of them stay on the farm and keep turning the soil.  They just love farming."
- Ralph Lucas, retired sheriff of Carroll County, Ohio
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Tuesday, June 24, 2014

Links for 6/24/14: Fracking Planned at Morgan County Spill Site, Regulators Watching Utica Shale, and More

Energy in Depth:  Ohio Water Use, Fracking, and the Utica Shale   -   "Activist groups committed to banning fracking have frequently claimed that water withdrawals from oil and gas development would lead to severe droughts in eastern Ohio. In reality, actual data show the amount of water in Ohio and specifically eastern Ohio is quite plentiful, and..."

The Columbus Dispatch:  Fracking planned at Morgan County spill site as cleanup ends   -   "Tanker trucks and vacuums are still whirring on a piece of Morgan County land, trying to clean up thousands of gallons of oil and chemicals that spewed eight weeks ago from a not-yet-completed..."

Marietta Times:  Study links crime rates to influx of temporary oil & gas workers   -   "The narrow dining room at RJ's Cafe was awash in a sea of neon-clad diners Friday afternoon as busy waitresses scurried about bringing heaping piles of fries to the wall-to-wall lunchtime..."

Press release:  Carrizo Oil & Gas Reports Initial Multiple-Bench Niobrara Downspacing Results and Provides Utica Update   -   "The spudder rig has arrived on the location of Carrizo's second Utica Shale well, the Brown 1H in Guernsey County, OH, and drilling is expected to begin shortly. The Company currently plans to drill the top hole with the spudder rig and bring in a larger rig to drill..."

Press release:  Magnum Hunter Resources Announces Joint Development Venture in Washington County, Ohio   -   "Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT: MHR.PRD) (NYSE MKT: MHR.PRE) ("Magnum Hunter" or the "Company") announced today the formation of a new Joint Venture under a Joint Operating Agreement ("Agreement") with EM Energy Ohio, LLC ("EdgeMarc"), a privately-held company headquartered in Canonsburg, Pennsylvania. The contract area covers an existing mineral leasehold position currently owned by both companies which includes collectively approximately 1,080 net acres in the Marcellus Shale and Utica Shale Formations located in..."

Columbus Business First:  Regulators on guard at Utica energy play for overzealous lending   -   "The state Department of Natural Resources isn’t the only regulator keeping tabs on the Utica shale play in eastern Ohio. Financial regulators, including the Federal Reserve Bank of Cleveland and the U.S. Office of the Comptroller of the Currency, are watching the burgeoning oil-and-gas development play for signs of overzealous lending and unhealthy..."

Pittsburgh Business Times:  Environmental Service Laboratories opens Ohio location to support Utica   -   "Indiana, Pa.-based Environmental Service Laboratories Inc. announced it has recently opened a new satellite location in St. Clairsville, Ohio. The company said the location will initially operate as a service center to support its existing Ohio natural gas clients and..."

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Chesapeake CEO Doesn't Believe in the "Core of the Core" in Shale Plays

From Natural Gas Intelligence:
Onshore explorers that boast about holding and developing the "core of the core" won't find a fan in Chesapeake Energy Corp. CEO Doug Lawler. He doesn't think there's any such thing. 
Limiting the focus only limits the options, he said Wednesday at Tudor, Pickering, Holt & Co.'s 11th annual Hotter 'N Hell energy conference in Houston. 
"I am an anti-core guy," Lawler said. "When I hear the 'core of the core,' when...companies talk about all the great stuff around the core, all that means to me is they've set a finite limit on their technical ingenuity, their innovation and their drive for continuous improvement." 
A few months after he took over in June 2013, Lawler told analysts the company would no longer be driven by capturing land and holding it by production (see Shale Daily, Nov. 6, 2013). The new mantra is to test and develop selectively the quality assets and monetize some of the others. Those tests have determined that while some assets will be sold, others may be expanded.
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New Ohio Seismic Regulations Good For Oil and Gas Industry and Insurance Companies, Says Geologist

From Insurance Journal:
In its announcement, the ODNR said that if a seismic event in excess of 1.0 magnitude is detected, “activities would pause while the cause is investigated. If the investigation reveals a probable connection to the hydraulic fracturing process, all well completion operations will be suspended.” 
“ODNR’s directives are a sensible response to a serious issue that regulators across the country are closely examining,” said Gerry Baker, associate execu­tive director of the Interstate Oil and Gas Compact Commission, which works with Ohio and other states to share scientific data in order understand the relationship between seismic activity and oil and gas drilling. 
The new regulations in Ohio, which has seen an uptick in drilling activity in the Marcellus and Utica shale regions, make sense for regulators, oil and gas operators, and insurers, according to Bolz, a geologist who worked in the oil and gas industry before he entered the insurance business.
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Pennsylvania State Employees Say They Were Ordered to Keep Silent About Shale Drilling

PA state employees ordered
to a code of silence on drilling?
From StateImpact Pennsylvania:
Two retirees from the Pennsylvania Department of Health say its employees were silenced on the issue of Marcellus Shale drilling. 
One veteran employee says she was instructed not to return phone calls from residents who expressed health concerns about natural gas development. 
“We were absolutely not allowed to talk to them,” said Tammi Stuck, who worked as a community health nurse in Fayette County for nearly 36 years. 
Another retired employee, Marshall P. Deasy III, confirmed that. 
Deasy, a former program specialist with the Bureau of Epidemiology, said the department also began requiring field staff to get permission to attend any meetings outside the department. This happened, he said, after an agency consultant made comments about drilling at a community meeting.
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Study Says Abandoned Oil and Gas Wells Leak Large Amounts of Methane

From The Guardian:
A study of abandoned oil and gas wells in Pennsylvania finds that the hundreds of thousands of such wells in the state may be leaking methane, suggesting that abandoned wells across the country could be a bigger source of climate changing greenhouse gases than previously thought. 
The study by Mary Kang, a Princeton University scientist, looked at 19 wells and found that these oft-forgotten wells are leaking various amounts of methane. There are hundreds of thousands of such oil and gas wells, long abandoned and plugged, in Pennsylvania alone, and countless more in oil and gas fields across the country. These wells go mostly unmonitored, and rarely, if ever, checked for such leaks. 
A growing list of studies conducted over the past three years has suggested that crude oil and natural gas development, particularly in shale formations, are significant sources of methane leaks — emissions not fully included in US Environmental Protection Agency greenhouse gas inventories because they are rarely monitored. Scientists say there is inadequate data available for them to know where all the leaks are and how much methane is leaking.
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Gastar Exploration Updates Initial Utica/Point Pleasant Well

HOUSTON, June 16, 2014 /PRNewswire/ -- Gastar Exploration Inc. (NYSE MKT: GST) ("Gastar") reported today that it has reached total depth on the vertical pilot hole for its first Utica/Point Pleasant well in Marshall County, West Virginia. The Simms 5-UH well was drilled to a total depth of 11,410 feet and encountered approximately 92 net feet of pay in the Point Pleasant formation with measured porosities up to 17%. Gastar expects estimated formation pressures to be approximately 9,400 psi upon completion of the well.

Gastar is currently plugging back the well in order to drill a 4,200 foot horizontal section in the Point Pleasant formation. After drilling the lateral, a 23-stage completion is planned followed by a three week "soaking" of the well with first production expected in late August 2014.

Gastar's President and CEO, J. Russell Porter, commented, "These results have confirmed our expectations regarding the Utica/Point Pleasant formation. As a result of this information, and the Utica/Point Pleasant results reported by other nearby operators, we are planning to move forward with a program that should rapidly de-risk this asset and add substantial net asset value to Gastar."

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Another Active Week of Permitting in Utica Shale

The Ohio Department of Natural Resources has released its weekly permitting update for the Utica shale, and it was another busy week.

32 new permits were issued last week.  Harrison County was leading the way, with 8 permits - all issued to Chesapeake Energy.  Those 8 new permits bring Harrison County's cumulative total to 243.

7 new permits were issued for Monroe County sites, marking 103 permits there and making Monroe the 7th county in Ohio to pass 100 Utica shale permits.

6 permits were issued for Belmont County, 4 for Guernsey County, 3 each for Carroll and Noble counties, and 1 permits was issued to Halcon Resources for a Trumbull County well.

All of that activity means that there have now been 1,364 permits issued for horizontal drilling in Ohio's Utica shale.  925 wells have been drilled and 470 are producing.  The Utica rig count is 45.

You can view the whole report by clicking here.

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American Energy Partners Starts Midstream Company

From Reuters:
American Energy Partners LP, founded by former Chesapeake Energy Corp chief executive, Aubrey McClendon, and private equity firm Energy & Minerals Group, have formed a company to invest in oil and gas pipeline and processing assets.

American Energy Midstream will invest in shale formations where the firms are operating, including the Marcellus and Utica shales in Pennsylvania and Ohio, the Permian Basin in West Texas and the Woodford in Oklahoma, the companies said on Wednesday.
Read a little bit more by clicking here.

It's interesting to watch McClendon continue to expand and grow American Energy Partners as Chesapeake Energy continues to fire sale assets and streamline their operations.  Is he directing the ship at this new company towards the same rocky waters that Chesapeake has had to navigate over these past couple of years, or will McClendon be vindicated?  Only time will tell.

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Judge: Range Resources Must Disclose List of All Chemicals Used at Drilling Site

From the Observer-Reporter:
Range Resources will be held responsible for disclosing a full list of products and chemicals it used at a Marcellus Shale gas-drilling site in Amwell Township, according to a pair of recent rulings.

Both a state Environmental Hearing Board judge and Washington County President Judge Debbie O’Dell Seneca ruled last week Range Resources is in the best position to obtain the list of chemicals, including proprietary substances, from its manufacturers. A Washington County Court order in November 2013 required Range Resources’ suppliers – about 40 contractors and subcontractors – to provide that list. According to O’Dell Seneca, the suppliers could not or would not comply.

Range Resources is the defendant in a lawsuit filed by three Amwell Township families who claimed they suffered health problems attributed to drilling activity and an impoundment at the company’s Yeager well site on McAdams Road.

O’Dell Seneca waited to give her opinion until a related decision was filed by Judge Thomas W. Renwand through the Environmental Hearing Board.
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Friday, June 20, 2014

Nato Says Russia is Covertly Funding Anti-Fracking Efforts

Russian President Vladimir Putin
Russian intelligence agencies are covertly funding and working with European environmental groups to campaign against fracking and maintain EU dependence on Russian gas, the head of Nato has claimed. 
Answering questions after a speech in London, Anders Fogh Rasmussen, Nato secretary-general, said improving European energy security was of the “utmost importance” and accused Moscow of “blackmail” in its dealings with Europe. 
“I have met allies who can report that Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called non-governmental organisations – environmental organisations working against shale gas – to maintain European dependence on imported Russian gas,” Mr Rasmussen, former Danish prime minister, told an audience at Chatham House, the international affairs think-tank.
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Thursday, June 19, 2014

Planning Continues for $500 Million Energy Plant in Middletown

From the Dayton Business Journal:
The new $500 million energy plant proposed in Middletown is moving forward.
St. Augustine, Fla.-based NTE Solutions has filed for permits with the Ohio Power Sitting Board for the new natural-gas fired power plant to be built on a 45-acre campus off Cincinnati Dayton Road, which will be called The Middletown Energy Center. The company has created a new subsidiary for Ohio, NTE Ohio LLC, which has hired the Columbus office of Bricker & Eckler LLP as legal counsel.
It’s estimated the construction of the project will create 300 to 400 jobs, and the plant will be run by a 25 to 30-worker crew.
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PA Survey: Only Josh Fox is Trusted Less Than the Industry Itself When it Comes to Fracking

From StateImpact Pennsylvania:
A new study shows the public views both the natural gas industry and the anti-fracking film, Gasland, as among the least trustworthy sources of information when it comes to hydraulic fracturing.

According to a paper published last month in Energy Research and Social Science, people are more likely to trust information from university professors, environmental groups, newspapers, and landowner groups.

Regulatory agencies ranked fifth in trustworthiness among the eight possible choices. They were followed by cooperative extensions and the natural gas industry.

The 2010 film, Gasland, came in last place.
Read more about this survey by clicking here.

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Wednesday, June 18, 2014

Belmont County Strikes Lease Deal With Rice Energy on 424 Acres

WTRF 7 News Sports Weather - Wheeling Steubenville

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Geology Holds Key to Why Southern Utica Shale Has Emerged as the Place to Be

From Business Journal Daily:
The geological makeup of the southern Utica shale play in eastern Ohio explains why energy companies drilling there are experiencing higher rates of production than in the northern sections of the play. 
Much of it has to do with geological pressure and the porosity of two rock formations -- the Point Pleasant and the Utica -- often collectively referred to as the Utica shale, explains Jeff Ventura, president and CEO of Range Resources.
"The reservoir quality is much better in the Point Pleasant than it is in the Utica," Ventura told the Hart Energy DUG East conference June 4. "The northern third of the play is more about the Utica than it is the Point Pleasant." 
The hydrocarbons in the Utica shale are less prolific as those found in the Point Pleasant, a stratum of rock that rests just below the Utica, Ventura said, as he pointed to a map that details a cross section of the play as one moves north.
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Williams Agrees to Acquire Global Infrastructure Partners’ GP and LP Interests in Access Midstream Partners for $5.995 Billion

  • Increasing Access Midstream Partners Ownership to 100% of GP and 50% of LP via Acquisition
  • Planning Williams 3Q 2014 Dividend Up 32% to $0.56, or $2.24 on an Annualized Basis; $2.46 for 2015, With Follow-on Annual Dividend Growth of Approximately 15% through 2017
  • Accelerating Transformation of Williams to Pure-Play GP Holding-Company Structure
  • Proposing Subsequent Merger of Williams Partners and Access Midstream Partners; If Consummated, Creates Industry-Leading MLP With Expected 2015 Adjusted EBITDA of Approximately $5 Billion, Strong Coverage, and 10%-12% Annual LP Distribution Growth Rate Through 2017
  • Expecting 2015 Distributions for Merged MLP to Be at Least 25% Above Access Midstream Partners’ Current 2015 Distribution Guidance; Up More Than 40% vs. Current 2014 Distribution Guidance
  • Acquiring Access Midstream GP, LP Interests Not Contingent on Merger of the Two Partnerships
  • Providing Update on Geismar and Williams Partners Segment Guidance for 2014
  • Holding Investor Call at 10 a.m. EDT Monday to Discuss Acquisition, Business Plans
TULSA, Okla.--(BUSINESS WIRE)--Williams (NYSE:WMB) today announced that it has agreed to acquire the 50 percent general partner interest and 55.1 million limited partner units in Oklahoma City-based Access Midstream Partners L.P. (NYSE:ACMP) held by Global Infrastructure Partners II (“GIP”) for $5.995 billion in cash. At the close of trading on Friday, June 13, the 55.1 million LP units had a market value of $3.6 billion. Upon closing, Williams will own 100 percent of the general partner and 50 percent of the limited partner interests in Access Midstream Partners. This transaction follows Williams’ acquisition of its 50 percent GP interest and 23 percent LP interest in Access Midstream Partners in December 2012. Williams expects the acquisition to close in the third quarter of 2014. Following the closing of the acquisition, Williams plans to increase its third-quarter 2014 dividend by 32 percent to $0.56 per share.
“We are lowering the 2014 guidance primarily as a result of delays and cost increases specific to work to bring the expanded, rebuilt Geismar facility back into service. We are now targeting late July for initiation of the startup process.”
Williams also today announced a proposal to merge Williams Partners L.P. (NYSE:WPZ) with and into Access Midstream Partners.
“Today, we’re announcing a series of steps designed to amplify the benefits of our existing relationship with Access Midstream Partners, an increase in our dividend and the acceleration of Williams’ move to a pure-play GP holding company of two leading master limited partnerships,” said Alan Armstrong, Williams’ chief executive officer.
“The proposed merger of Williams Partners and Access Midstream Partners, if consummated, would create an industry-leading, large-scale MLP with substantial positions across the midstream business – spanning natural gas gathering and processing, natural gas transmission pipelines, and NGL and petchem services. Our positions in these businesses provide clearly identified growth for the foreseeable future,” Armstrong said.
The Acquisition of Access Midstream Partners
The acquisition of the additional interests in Access Midstream Partners is expected to increase Williams’ cash flow per share as a result of rapid growth in Access Midstream Partners’ business, which drives attractive growth in its GP/IDR (incentive distribution rights) and LP cash-distributions. Williams expects the acquisition to increase fee-based revenues to more than 80 percent of its gross margin as a result of Access Midstream Partners’ fee-based revenues.
Access Midstream Partners’ business growth is driven by expected production increases in its portfolio of more than 8.3 million acres under dedication in major shale and unconventional producing areas, including the Marcellus, Utica, Eagle Ford, Haynesville, Barnett, Mid-continent and Niobrara.
Williams expects to close the acquisition of GIP’s Access Midstream Partners interests in the third quarter this year. The closing of the acquisition is not conditioned upon the consummation of Williams’ proposed merger of Williams Partners and Access Midstream Partners. Closing of the acquisition is subject only to the receipt of regulatory approvals under provisions of the Hart-Scott-Rodino Act.
“Our acquisition of the additional GP and LP interests in Access Midstream Partners represents a unique, strategic opportunity for investors, customers and the employees of both Access Midstream Partners and Williams,” Armstrong continued. “We expect the acquisition to deliver immediate and future dividend growth for Williams’ shareholders and to further enhance our presence in attractive growth basins. In addition, we expect the acquisition of Access Midstream Partners will fortify Williams’ stable, fee-based business model and support our industry-leading dividend growth strategy.”
Williams plans to fund approximately half of the $5.995 billion acquisition with equity and the remainder with a combination of long-term debt, revolver borrowings and cash on hand. The company expects to repay revolver borrowings with proceeds from the planned drop-down of its remaining NGL & Petchem Services assets and projects. In addition, Williams has entered into a backup financing commitment with respect to a $5.995 billion interim-liquidity facility with UBS Investment Bank, Barclays and Citigroup that would be available to fund the acquisition.
Williams expects to retain its investment-grade credit ratings at two of the three ratings agencies. The company expects the third agency to reduce Williams’ credit rating one notch to sub-investment-grade as a result of the agency’s recently announced proposed change in ratings methodology for general partners, along with Williams’ plans to accelerate its move to a GP holding company and the acquisition announced today. The company expects Williams Partners to retain its current strong BBB investment-grade credit ratings.
Dividend Increases
Williams plans to increase its third-quarter 2014 dividend 32 percent to $0.56, or $2.24 on an annualized basis. In addition to the third-quarter 2014 dividend increase, Williams also is providing new dividend-growth guidance of approximately 15 percent annually – from the higher third-quarter 2014 base – through 2017 with planned dividends of approximately $1.96 in 2014, $2.46 in 2015, $2.82 in 2016, and $3.25 in 2017. The expected quarterly increases in Williams’ dividend are subject to quarterly approval of the company’s board of directors.
Accelerated Transformation to Pure-Play GP Holding Company
To complete Williams’ transition to a pure-play GP holding company, Williams plans to accelerate the drop-down of its remaining NGL & Petchem Services assets and projects to late 2014 or early 2015. Williams expects to have invested approximately $600 million in the drop-down assets by year-end 2014. This drop-down transaction will be subject to MLP board conflicts-committee approval.
Proposed Merger of Access Midstream Partners and Williams Partners
Williams is proposing the merger of Williams Partners with and into Access Midstream Partners following the completion of its acquisition of GIP’s interests in Access Midstream Partners.
Williams proposes Williams Partners merge in a unit-for-unit exchange at a ratio of 0.85 Access Midstream Partners units per Williams Partners unit. The proposal also includes an option for Williams Partners unitholders to take either a one-time special payment of $0.81 per unit, or an equivalent value of additional common units of Access Midstream Partners, to compensate for a lower expected per-unit LP cash distribution in 2015.
The proposed merger terms will be subject to negotiation, review and approval by conflicts committees of each partnership’s board of directors. The conflicts committees, comprised solely of independent board members, are expected to retain legal and financial advisors. Williams expects the proposed merger to be subject to approval by Williams Partners unitholders.
If consummated, the merged MLP would be named Williams Partners L.P. and would become one of the largest and fastest-growing MLPs – with expected 2015 adjusted EBITDA of approximately $5 billion.
Williams expects the merged partnership will be a synergistic combination that is well-positioned to benefit from the ongoing energy infrastructure super-cycle. The company’s operations represent a strategic, expanding footprint that connects the best supplies with the best markets.
The merged MLP would feature large-scale positions across three key components of the midstream sector, including:
  • Natural Gas Pipelines – Transco, Northwest and Gulfstream represent the nation’s premier interstate pipeline network. Transco is the nation’s largest and fastest-growing pipeline system.
  • Gathering and Processing – Large-scale positions in growing natural-gas supply areas in major shale and unconventional producing areas, including the Marcellus, Utica, Piceance, Four Corners, Wyoming, Eagle Ford, Haynesville, Barnett, Mid-continent and Niobrara. Additionally, the business would include oil and natural gas gathering services in the deepwater Gulf of Mexico.
  • Natural Gas Liquids and Petrochemical Services – Unique downstream presence on the Gulf Coast and in western Canada provides differentiated long-term growth.
If the merger is completed, it is anticipated that the merged partnership will be based in Tulsa, Oklahoma. Oklahoma City would become one of the partnership’s major offices, which would also include Houston, Pittsburgh, Salt Lake City and Calgary.
Assuming the merger is consummated in 2014, the merged MLP is expected to have a 2015 distribution increase of at least 25 percent above Access Midstream Partners’ current guidance of $2.79 per unit, with a best-in-class distribution growth rate of 10 to 12 percent through 2017 and strong coverage. Distribution coverage is estimated to be approximately 1.2x in 2015 and at or above 1.1x through 2017.
Expected Benefits of Proposed Merger to Access Midstream Partners Unitholders