Tuesday, June 30, 2015

06/30/15 Links of the Day: OPEC Oil Production Surges, Pennsylvania Dumps FracFocus, and More

Washington Times:  In a shift, fracking’s foes face a losing streak   -   "After scoring a statewide ban last year on hydraulic fracturing in New York, anti-fracking activists talked excitedly about following up in a major fossil fuel-producing state — Colorado, maybe, or California. Instead, the next state to prohibit the use of fracking..."

Gas & Oil:  Skywatch Monitors Existing Gas, Energy Pipelines   -   "For a pipeline inspection pilot, flying an aircraft low to the ground and doing several things at once comes with the job. It’s a position that isn’t for everyone who has earned their wings, but according to Steve Bechtol, president of Skywatch, it’s a job for a pilot who can safely manually fly..."

Sober Look:  Have the Saudis miscalculated the impact of lower crude prices on US production?   -   "In 2014 the Saudis could no longer accept the loss of crude oil market share as the North American production levels shot up sharply over a three-year period. The Saudi response was quite rational. Rather than cutting production to support crude oil prices, the Saudis announced that output will remain the same. In private they were planning to actually increase production in order..."

PBS News:  Oil & Gas Workers Create Boom in Market for Flame Resistant Clothing   -   "The massive expansion of domestic oil and gas production over the last five or so years is rippling across the economies where that drilling is taking place. More oil workers need more welders, more restaurants, and ... more clothes..."

Dallas Morning News:  Supreme Court strikes down EPA power plant regulations, says costs must be considered   -   "Its impact on Texas businesses is not yet clear, but the Supreme Court ruled Monday that the EPA’s 2012 rule subjecting the nation’s power plants to new restrictions on emission of pollutants, especially mercury, was illegal. The 5-4 majority held that the Clean Air Act requires the EPA to take into account the cost of regulations when determining whether..."

Farm & Dairy:  Thirteen states sue EPA, Army Corps of Engineers over definition of waterways   -   "Thirteen states filed a lawsuit June 29 against the Environmental Protection Agency and the Army Corps of Engineers over the agencies’ rule defining “waters of the United States.” The states joining the lawsuit are Alaska, Arizona, Arkansas, Colorado, Idaho, Missouri, Montana, Nebraska, Nevada, New Mexico, North Dakota, South Dakota and Wyoming. The lawsuit claims..."

Syracuse.com:  New York state officially bans fracking   -   "It's official: New York has banned fracking. After more than seven years of study, the state Department of Environmental Conservation today issued the final document needed to ban the controversial drilling practice, known formally as high-volume hydraulic fracturing. "Prohibiting high-volume hydraulic fracturing is the..."

Huffington Post:  Public Reaction to EPA Report on Fracking Reveals a Fractured Society   -   "It keeps happening. A science-based report on hydraulic fracturing (fracking) has been released, and public reaction is polarized. In this case it's the EPA report on the impact of fracking on drinking water released earlier this month. Based on an exhaustive and objective assessment of existing studies, the report concluded that fracking has not caused widespread contamination..."

TribLIVE:  Drillers to submit electronic records on fracking chemicals to Pa. DEP   -   "Pennsylvania will require shale gas companies to disclose electronically the chemicals they use in hydraulic fracturing in a new state-run database by next summer. Department of Environmental Protection Secretary John Quigley said the department will end its partnership with FracFocus, an..."

Gas & Oil:  Individuals Own Mineral Rights, Not the State   -   "An argument often made by proponents for increasing taxes on oil and gas production is that the crude oil and natural gas reserves beneath the state are natural resources owned by all Ohioans and that they should benefit from their development. But this is simply not true. In the United States, individual landowners own the mineral rights associated with their property, not the state. The private ownership of..."

Energy in Depth:  MarkWest Lays Roots and Keeps Its Promise to Ohio with New Cadiz Office   -   "In August 2012, MarkWest hosted a meet and greet with the residents and officials of Harrison County, announcing their plans for Utica Shale development in eastern Ohio. This week, the company continues to keep the promise it made three years ago, and as they cut the ribbon of a 20,000 square foot corporate office in Cadiz, Ohio. The event also served as a reminder..."

Rigzone:  OPEC Crude Production Surges as Iraq Pumps at Record Pace   -   "Iraqi crude production climbed to a record this month, helping send OPEC output to the highest level since August 2012.  Output by the Organization of Petroleum Exporting Countries climbed 744,000 barrels to 32.134 million a day this month, according to a Bloomberg survey of oil companies, producers and analysts. Last month’s total was revised..." 

Wall Street Journal:  Remember All That Oil in Storage? Here It Comes   -   "Refineries around the world are using more crude oil. To get the cheapest supplies around, they don’t have to look any further than their own storage tanks. When a global glut of crude oil sent prices plunging to near-six-year lows in the first quarter of the year, refineries started stocking up. The market gave them an incentive to do so: Oil prices for later in 2015 were higher than immediate prices, making refiners..."

FrackFeed:  10 Priceless Responses to EPA's Study Finding No Widespread Water Pollution From Fracking

Columbus Business First:  Texas company sees Utica rebound, will build 5th gas processing plant   -   "A Dallas company is planning a fifth cryogenic processing plant in the Utica shale region as drillers prepare to ramp up activity again. Blue Racer Midstream LLC's fourth plant came online just this month. The fifth was delayed..."

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Federal Report: 35,000 Oil and Gas Jobs Lost From October 2014 to April 2015

From the U.S. Energy Information Administration (EIA):
Employment in oil and natural gas extraction and support activities in the United States reached nearly 538,000 in October 2014, but then it declined by about 35,000 jobs, or 6.5%, over the following six months, through April 2015, according to data from the U.S. Bureau of Labor Statistics (BLS). 
Declines in oil and natural gas extraction and support employment tend to lag declines in crude oil prices. As prices of North Sea Brent crude oil fell from their June 2014 level of $112 per barrel, firms reduced the number of new wells drilled and the associated workforce. The count of drilling rigs in the United States, as measured by Baker Hughes, totaled 857 for the week ending June 19, 54% below the same point a year ago and the lowest level in nearly six years. 
Declines in production jobs lag oil price declines. In July 2008, Brent crude oil reached a record-high monthly spot price of $133 per barrel, before falling to $43 per barrel by February 2009. Oil and gas production jobs reached a high of 391,000 in September 2008, two months after the oil prices had started declining. Employment in drilling, extraction, and support activities then continued to decline for 13 months, when the number of production jobs dropped by more than 51,000. Most (82%) of the decline in these jobs occurred after oil prices reached the lowest monthly level and were on the rise.
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Trumbull County Officials Request Moratorium on New Injection Wells

From NGI:
Elected officials in Trumbull County, OH, voted unanimously Wednesday in favor of a resolution asking Gov. John Kasich to declare a moratorium on drilling any new wastewater injection wells in the county. 
According to an audio recording of the Trumbull County Commissioners meeting, an earlier version of the resolution called for a three-year moratorium, but the language was changed before the 3-0 vote. 
Commissioner Daniel Polivka said Trumbull County is already home to 19 injection wells, making it one of the top counties in the state for hosting them. 
"I think the biggest crime of this now is that we've lost local government money," Polivka said. "These injection wells are being drilled ... and we're getting a big zero on funding back. That definitely needs to be changed because we have [road use maintenance] agreements with oil and gas wells, [but] no agreements with these injection wells, and there's more truck activity and whatnot.
"We really requested that the formula be changed too at the state so some of that money comes back to our local communities."
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Rice Energy Pursuing Pennsylvania Utica Shale Wells, Looking to Reduce Costs

From the Pittsburgh Business Times:
The Marcellus Shale remains Rice Energy Inc.'s workhorse, but the Utica Shale is a growth area for the company, Executive Vice President of Exploration Derek Rice said Wednesday. 
Delivering the day's final address at the Hart Energy DUG East conference in Pittsburgh, Rice said the company (NYSE:RICE) is well positioned in the Utica, sitting on 60,000 acres in what the company believes to be the Utica's best portion. Being in that area is important -- the company believes that three or four Utica counties will, in the next five to 10 years, account for 90 percent of what is produced from the play.

Up until now, the company's Utica exploration has been focused on Belmont County, Ohio, one of the three counties that it is operating in. However, earlier this year, the company decided to test the deep Pennsylvania Utica in Greene County and has been working on developing a well there.
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FirstEnergy Confirms Site of Potential Ohio Ethane Cracker Plant

From Columbus Business First:
The communications team at Akron power company FirstEnergy Corp. has played coy about an open secret in the energy sector. 
Publicly, the company tells reporters its plans to sell the riverside R.E. Burger power plant are premature. But industry sources have said from the beginning that the land will house a proposed ethane cracker plant in Belmont County.

Now, an executive for the company has confirmed the site will house the plant if Thailand's PTT Global Chemical Public Co. and Japan's Marubeni Corp. decide to go through with the facility.
James Lash, president of FirstEnergy Generation, said the company is moving a machine shop from the Burger site to a spot in Canonsburg, Pennsylvania, in part because the cracker could soon take over the site, the Pittsburgh Business Times reports. Lash was in the state to open FirstEnergy's relocated machine shop.
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Blue Racer Midstream Provides Update On Operations In the Utica and Marcellus Shale

  • Blue Racer’s total nameplate processing capacity reaches 800 million cubic feet per day.
  • Fractionation capacity stands at 123,000 barrels per day.
  • Gathering system totals approximately 650 miles of pipeline spanning 13 Ohio counties with another 200 miles under construction.
DALLAS – June 24 , 2015 – Blue Racer Midstream, LLC (“Blue Racer”) announced today that it has commissioned a second cryogenic processing plant at its Berne Natural Gas Processing Complex (“Berne”) in Monroe County, Ohio. Known as Berne II, the new facility has 200 million cubic feet per day (MMcf/d) of nameplate capacity, bringing Blue Racer’s total processing capacity in the Utica and Marcellus shale plays to 800 MMcf/d. Two 200 MMcf/d plants are now in service at the Berne Complex, and two additional 200 MMcf/d plants are in service at Blue Racer’s Natrium Natural Gas Processing and Fractionation Complex (“Natrium”) in Marshall County, West Virginia. A 30-mile, Y-Grade pipeline connects the Berne Complex to Natrium. Fractionation capacity at Natrium has been expanded to 123,000 barrels per day, enough to serve at least six 200 MMcf/d cryogenic plants. Blue Racer expects to install and commission a fifth processing plant in the first half of 2016 to meet growing customer demand for additional capacity.
Over the course of the past year, Blue Racer’s processed volumes have more than tripled to their current level of 650 MMcf/d, while total gathered volumes, including lean gas, have more than doubled to over 825 MMcf/d.
Customer Dedications
Blue Racer has long-term service agreements with 14 of the leading natural gas producers in the Utica and Marcellus shales. Acreage dedications to Blue Racer’s Super System total approximately 200,000 acres, and volumetric commitments total approximately 380 MMcf/d. Services include natural gas gathering, compression and processing; condensate handling; and the fractionation, storage, transportation and marketing of natural gas liquids.

8 New Utica Shale Permits Issued Last Week as Rig Count Inches Up

After two very slow weeks of permitting in Ohio's Utica shale, the latest weekly update from the Ohio Department of Natural Resources shows that activity picked up just a hair last week.

Eight new permits were issued in the week ending Saturday the 27th.  While that level of activity is still much lower than when the play was peaking several months ago, it represents a slight uptick from the previous two weeks, which saw only 9 total permits issued.  The activity was mostly focused in Harrison County, which continues to be the most active spot for permitting over the past month or so.  Six of the eight permits last week were for Harrison County wells, with four of those going to Hess for their Cadiz D Unit.  The remaining two permits on the report were issued to Chesapeake Energy for a unit in Carroll County's Orange Township.

The number of total permits issued continues to slowly move towards the next big milestone marker, 2,000.  There are now 1,943 permits issued.  In addition, 1,520 wells have been drilled and 909 are producing.  The Utica rig count nudged up by one for the second straight week, and now stands at 20.

View the report below.

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Anti-Drilling Group Pushing for Vote to Block Nexus Pipeline in Medina County

The following is a press release from the group "Sustainable Medina County:"
Yesterday, after seven weeks of collecting petition signatures, Medina County landowners from the group Sustainable Medina County dropped off 214 petitions with over 5,600 signatures to the Medina County Board of Elections in the hopes of placing a County Charter with a Bill of Rights on the ballot in November for a direct vote from the residents. The Director of the Medina County Board of Elections said that the Board will review the signatures and they should have a decision by Thursday, July 2nd as to whether there are sufficient signatures to place the proposed charter on the ballot for a vote.

The counties of Athens, Meigs and Fulton also followed suit and dropped off signatures to their Boards of Election. 
Many residents of the County who signed the petition voiced their concerns about the effect the NEXUS high pressure natural gas pipeline (36” or 42”) would have on their property values and they also voiced their concerns about the compressor station that is to be built in Guilford township and how it could affect the health of the residents of Medina County. 
“Sustainable Medina County advocates for all residents of Medina County to have a direct voice and vote on matters affecting families, Medina County communities and the environment,” noted Kathie Jones, the group’s convenor. “All of our residents deserve protection from dangerous and unwise energy projects like the NEXUS pipeline. Re-routing NEXUS from some property owners onto other residents will not protect the environment of Medina County. We’re already seeing how in some communities it has begun to pit neighbor against neighbor. Our campaign is everyone’s campaign.” 
If enacted, the County Charter would not alter any current county orders and regulations or laws relating to or affecting the County or its officers, agencies, departments or employees. The Charter contains a Bill of Rights, including rights of initiative and referendum on the county level, which will untie the hands of our county officials by securing for the county the same level of authority as a municipality. 
To protect the residents of Medina County, we feel the vast majority of voters will again speak for the charter form of county government this November. 
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Thursday, June 25, 2015

Analyst Appeals to Carl Icahn to Make Takeover Bid for Chesapeake in Open Letter

From Seeking Alpha:
Dear Mr. Icahn: 
A few years back, I had the opportunity to meet you at an investor conference in New York. You specifically told me never to ask you for money, but if I had a good idea to call. It was quite a few years ago, and I sincerely doubt you would remember me besides. So, I thought the easiest, most resourceful way to get word to you was to post an open letter on a widely read investor site like Seeking Alpha. That said, I have an idea for you in a name you know extremely well - Chesapeake Energy. 
Like you, I've been invested in Chesapeake for some years. It is been a frustrating investment for sure, down more than 50% in the past six months. While I think CEO Doug Lawler and his team have done an excellent job under the circumstances; the stock has been a disaster. The Company is not buying their stock back at these depressed levels, and they are in no position to raise the dividend. Truthfully, I believe that management is more concerned with appeasing Wall Street analysts than trusting their good business judgment. Moreover, the stock does not trade on CHK's company fundamentals; it is more or less a liquid proxy for natural gas, both long and short, which has not helped Chesapeake's situation. That said, the biggest problem with Chesapeake's stock is there is little urgency to invest, and no foreseeable catalyst. The stock needs a real push - something that will create urgency and get both financial and strategic buyers interested again. Frankly, I think the most efficient way to create value in CHK's situation is to break the company up into smaller, more manageable pieces. As investors, we got a little taste of this potential when CHK sold their Southern Marcellus assets for an enormous valuation in December. 
That brings me to the point of my letter - have you considered making a bid for Chesapeake?
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Would Williams Partners Benefit by Accepting Energy Transfer's Takeover Bid?

From Reuters:
Energy Transfer Equity's unsolicited $48 billion offer for Williams Companies Inc through a corporate structure with tax advantages may be the U.S. pipeline company's best option as potential bids from rivals are complicated by possible antitrust issues and the deal's rich price, investors and analysts said on Monday. 
Energy's proposed all-equity offer of $64 per share for Williams was rejected by Williams' board who said in a statement on Sunday that it significantly undervalued the company which controls a master limited partnership, or MLP. 
Deals in the energy sector, especially oil and gas pipeline and processing companies, are turning to a more traditional corporate structure as MLP advantages wane over time. Energy Transfer would be the latest MLP to propose using a c-corporation as a way to maximize tax advantages, increase cash flows and broaden institutional interest. 
The sector embraces the MLP structure because the tax burden is passed through to investors who receive fat yields. Because the partnership pays no taxes, it has a lower cost of capital.

Kinder Morgan Inc last year put all of its publicly traded partnerships into one corporate parent to quell concerns that it had grown too large and complicated.
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Bloomberg: Large Amount of Debt Looms as Serious Threat for Shale Industry

From Bloomberg:
The debt that fueled the U.S. shale boom now threatens to be its undoing. 
Drillers are devoting more revenue than ever to interest payments. In one example, Continental Resources Inc., the company credited with making North Dakota’s Bakken Shale one of the biggest oil-producing regions in the world, spent almost as much as Exxon Mobil Corp., a company 20 times its size. 
The burden is becoming heavier after oil prices fell 43 percent in the past year. Interest payments are eating up more than 10 percent of revenue for 27 of the 62 drillers in the Bloomberg Intelligence North America Independent Exploration and Production Index, up from a dozen a year ago. Drillers’ debt ballooned to $235 billion at the end of the first quarter, a 16 percent increase in the past year, even as revenue shrank.

“The question is, how long do they have that they can get away with this,” said Thomas Watters, an oil and gas credit analyst at Standard & Poor’s in New York. The companies with the lowest credit ratings “are in survival mode,” he said. 
The problem for shale drillers is that they’ve consistently spent money faster than they’ve made it, even when oil was $100 a barrel. The companies in the Bloomberg index spent $4.15 for every dollar earned selling oil and gas in the first quarter, up from $2.25 a year earlier, while pushing U.S. oil production to the highest in more than 30 years. 
“There’s a liquidity issue, and you start looking at the cash burn,” Watters said.
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American Energy Continues to Shake Things Up; Another Company Breaking Off and Taking New Name

From an American Energy Partners press release:
American Energy – Midstream, LLC (AE-MidCo), announced today that it is changing its name to Traverse Midstream Partners LLC (Traverse Midstream) and is transitioning to a standalone company, fully independent of the broader American Energy Partners, LP (AELP) platform, a process that has been contemplated since the company’s founding in June 2014 and that will be effective on July 1, 2015. Traverse Midstream has been capitalized by a $500 million equity commitment provided by The Energy & Minerals Group (EMG), and additional equity provided by Aubrey. K. McClendon and other members of AELP management and affiliated parties of Mr. McClendon. 
Traverse Midstream has two significant investments in critical midstream infrastructure designed to serve the Appalachian shale basins.  The Company has a 35% non-operating equity interest in Rover Pipeline, LLC (Rover Pipeline), a 710 mile interstate natural gas pipeline company majority owned and operated by Energy Transfer Partners, L.P. (ETP).  The Rover Pipeline project will allow for seamless natural gas pipeline service to its shippers from the Marcellus and Utica production areas to markets in the Midwest, Great Lakes and Gulf Coast regions of the U.S., and to the Union Gas Dawn Hub in Ontario, Canada, through its connection to Vector Pipeline. The Rover Pipeline is supported by 15 and 20 year fee-based contracts to transport over 3.0 billion cubic feet per day (Bcf/d) of natural gas.  Transportation from the supply regions to the Midwest Hub near Defiance, Ohio is expected to begin by the end of 2016 to serve the Gulf Coast and Midwest markets. The remaining service to other markets including Michigan and the Union Gas Dawn Hub will be in service by mid-2017. 
Traverse Midstream also has a 25% non-operating equity interest in the Ohio River System, which includes construction of a 52-mile, 36-inch gas gathering trunkline that will be capable of delivering up to 2.1 Bcf/d to Rockies Express Pipeline and Texas Eastern Transmission on the southern end of the line and an additional 1.4 Bcf/d through a 12-mile, 30-inch lateral to the interstate grid on the northern end of the line which will bring overall system deliverability to 3.5 Bcf/d.  The Ohio River System will access Monroe, Belmont, Jefferson and Harrison counties in eastern Ohio with an expected in service date of Q3 2015.  This project is also majority owned and operated by ETP. 
“We are very proud to announce our move to a standalone company and our name change to Traverse Midstream Partners,” said Dave Shiels, Traverse Midstream CEO.  “We currently have investments in two of the most important natural gas pipeline projects for the Utica and Marcellus regions, both of which will be operated by one of the premiere pipeline operators in the industry, Energy Transfer Partners.  We are excited to be part of these efforts and look forward to delivering our contribution to their success and to other projects in the future as a standalone company.” 
Aubrey K. McClendon, Chairman and CEO of AELP and Chairman of Traverse Midstream, commented, “I am very pleased today to see our second platform company announce its transition to becoming a fully independent standalone company.  Along with Ascent Resources Corporation’s announced separation two weeks ago, today’s Traverse Midstream announcement serves as a reminder of the successful collaboration between EMG and AELP in starting, funding and developing first-class companies dedicated to a particular play, basin or strategy. I’ve worked with Dave Shiels over the last five years and have 100% confidence in his executive abilities and I look forward to his leadership making Traverse Midstream one of the industry’s most successful midstream companies.”  

Tuesday, June 23, 2015

Nexus Gas Transmission Says Proposed Pipeline Reroute is Not Reasonable

From the Akron Beacon Journal:
The company behind a proposed natural gas pipeline across northern Ohio is against rerouting the $2 billion Nexus Pipeline around the Akron-Canton area. 
In a report filed with a federal agency, Texas-based Nexus Gas Transmission LLC said the proposal by the city of Green to move about 103 miles of the pipeline further south into less-crowded rural areas of Stark and Wayne counties was not preferred. 
The Green proposal is “not considered to be a reasonable alternative to the proposed route,” the company said in a 94-page preliminary report filed with the Federal Energy Regulatory Commission. 
The company said the Green plan would create “environmental, engineering, schedule and cost disadvantages.” 
It said the Green alternative would take the pipeline farther away from potential customers in northern Ohio, would cause a a one-year delay in getting the pipeline built, would cost an additional $28 million and would require more construction with more environmental impacts. That’s because lengthy laterals would have to be built off the pipeline to serve customers and because the rerouted line would be 10 miles longer, the company said.
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Driller EdgeMarc Partners with ODOT to Remove Railroad Bridge in Washington County

ODOT advances first-of-its-kind public-private
partnership in Washington County

MARIETTA (Thursday, June 18, 2015) – The Ohio Department of Transportation (ODOT) and local oil and gas company EdgeMarc Energy have teamed up to advance removal of the State Route 821 Whipple railroad bridge. EdgeMarc will fund the $180,000 project and ODOT will oversee the removal of the outdated railroad bridge.

“Removing this old structure not only improves safety on the state route, but helps open up the corridor to more oil and gas exploration,” said ODOT District 10 Deputy Director T. Steve Williams. “This is truly a win-win for the community, the state and private industry.”

Not only will ODOT construction engineers oversee removal of the bridge, but ODOT county forces will also assist by completing all slope work as well as seeding and mulching.

“EdgeMarc Energy is proud to join ODOT today in announcing the State Route 821 Whipple railroad bridge project,” said Callum Streeter, Drilling and Completions Director, EdgeMarc Energy.” Social responsibility and safety are integral to our core values, and this public-private partnership is just one example of our commitment to being good neighbors with the Washington County community.”

The project is expected to begin summer 2015.
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Energy Transfer's Kelcy Warren Attempting Hostile Takeover of Midstream Giant Williams

From Bloomberg Business:
Williams Cos. rejected a takeover offer from pipeline magnate Kelcy Warren that aims to derail a consolidation of the North American natural gas and oil hauler, according to people familiar with the deal. 
Williams hired banks to explore alternatives to the $48 billion offer, according to a statement on Sunday that didn’t identify the bidder. The approach was from Warren’s Energy Transfer Equity LP, according to the people, who asked not to be named because the information is private. 
The $64-a-share bid “significantly undervalues Williams and would not deliver value commensurate with what Williams expects to achieve on a standalone basis,” according to a statement from the company. A spokesman from Williams declined to comment, while a representative of Energy Transfer didn’t return calls seeking comment.

Should a deal be done it would rank near the largest in the pipeline industry. The biggest so far is Kinder Morgan Inc.’s consolidation of its partnership assets last year that was valued at $48.9 billion when announced, according to data compiled by Bloomberg.
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Magnum Hunter Resources Announces Senior Bank Loan Extension

Magnum Hunter Resources Corporation (NYSE: MHR) (NYSE MKT: MHR.PRC) (NYSE MKT:MHR.PRD) (NYSE MKT: MHR.PRE) (the "Company" or "Magnum Hunter") announced today that it has received an extension from the Company's existing lending group under its senior secured revolving credit facility with respect to the Company's previously disclosed minimum capital raising obligation. The timeline for satisfying the capital raising obligation has now been extended from June 19, 2015 to July 10, 2015. The capital raising obligation, which requires the Company to raise $65 million of aggregate net cash proceeds from certain specified transactions, arose pursuant to a previous amendment to the Company's senior secured revolving credit facility.

Yesterday, Magnum Hunter announced that Triad Hunter, LLC, a wholly owned subsidiary of the Company, had closed on the previously announced definitive agreement to sell certain non-core undeveloped and unproven leasehold acreage located in Tyler County, West Virginia. At that closing, the Company received consideration of approximately $33.6 million in cash. The ultimate consideration to be received is subject to post-closing adjustments for any title defects and for remediation of asserted title defects, which adjustments are anticipated to increase the ultimate cash sales price to $35.0 to $40.0 million on or before July 15, 2015. Additionally, Magnum Hunter has already completed approximately $22.0 million of other capital transactions. Therefore, to date, a total of $55.6 million has already been raised. Magnum Hunter continues to work on other potential liquidity enhancing transactions in order to satisfy these capital raising obligations and to increase the Company's overall liquidity position. The Company refers investors to its recent public filings with the Securities and Exchange Commission for a more complete description of these potential liquidity enhancing transactions that total in excess of $200 million.

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Permitting Remains Slow in Utica Shale on Latest Weekly Report

The trend for Utica shale permitting in Ohio continued last week, according to the latest report from the Ohio Department of Natural Resources (ODNR).

After just five new permits were issued in the week ending June 13 and the rig count declined all the way to 18, only four new permits were issued last week.  Carroll County was the spot for three of those four, with two going to Chesapeake Energy and one to Rex Energy.  The only other permit was issued to American Energy Utica for a well in Harrison County.

The cumulative permit count now stands at 1,936 permits issued, 1,512 wells drilled, and 906 wells producing.  The rig count increased by one, to 19.

View the report below.  And remember, you can always view the latest weekly and cumulative permitting reports, as well as production data, in The Daily Digger mobile app, which is available now in the Apple App Store and Google Play Store.

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Monday, June 22, 2015

Severance Tax Won't Be in State Budget, But Negotiations are Continuing

From The Canton Repository:
A proposed tax hike on Ohio oil-and-gas drillers that’s been intensely negotiated for weeks — and debated for years — won’t be included in the two-year state budget, legislative leaders said Tuesday. 
Senate President Keith Faber and House Speaker Cliff Rosenberger, both Republicans, said that negotiations on a longstanding priority of Gov. John Kasich have been fruitful but need more time. 
“Unfortunately, time is never an ally in the budget process as you get toward the end,” Faber said. “So, today we have a choice: Halt that dialogue, move forward with an unfinished policy in the budget, and fight it out in conference committee; or to continue the progress outside of the budget and work toward a meaningful compromise during the next three months.” 
The tax hike’s omission from the two-year, $71 billion state operating budget that’s nearing a final vote comes as a political blow to Kasich, a likely 2016 presidential contender who has spent considerable political capital pushing the increase as a way to pay for income-tax reductions.
From Gas & Oil:
The Republican leaders of the House and Senate said Tuesday that an increase in tax rates on oil and gas produced via horizontal hydraulic fracturing would not be included in the $71 billion-plus biennial budget, as sought by Gov. John Kasich. 
Instead, Senate President Keith Faber (R-Celina) and House Speaker Cliff Rosenberger (R-Clarksville) said a task force of the two chambers would continue negotiations over the summer, with an eye toward a compromise package later in the year. 
The move would place the severance tax before a new Ohio 2020 Tax Policy Study Commission, with a deadline of Oct. 1 for submitting its recommendations to the general assembly. 
Faber had voiced optimism that a severance tax increase could be part of the biennial budget, but Rosenberger told reporters last week that his chamber would not support the inclusion in the spending plan for the next two fiscal years.

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Thursday, June 18, 2015

Links of the Day 06/18/15: Another Look at EPA Fracking Report, OPEC Revenue Slumps, and More

Energy in Depth:  Ten Important Things to Know from EPA’s 1,000-page Groundwater Study   -   "Last week, the Environmental Protection Agency (EPA) released its long-awaited study on the relationship between groundwater and hydraulic fracturing, finding that fracturing technology has “not led to widespread, systematic impacts to drinking water resources,” as routinely claimed by..."

Gas & Oil:  Lisbon Gives Final Go-Ahead for Gas Aggregation Program   -   "Legislation giving residents the option of signing up with a natural gas supplier through a village-sanctioned program was approved on third and final reading during this week's council meeting. The legislation followed council's decision to hire Aspen Energy to negotiate..."

Gas & Oil:  Rice Energy's Bigfoot 9H Well Top Producer in Ohio   -   "Landowners seem to be very happy with Rice Energy. Early last year Rice paid landowners in Belmont County a signing bonus and $7,500 per acre with a 20 percent royalty. According to an article on the "Seeking Alpha" website, Rice has said they plan to choke..."

Rigzone:  OPEC Revenue Slumps Below $1 Trillion First Time Since 2010   -   "OPEC nations’ revenue from petroleum exports plunged below $1 trillion last year for the first time since 2010, highlighting how slumping crude prices hurt countries reliant on oil sales to fund their economies. The group’s 12 members earned $993.3 billion in 2014, a decrease of 11 percent from..."

Forbes:  Probably The Biggest Macroeconomic Change Of Our Times: Fracking For Tight Oil   -   "We would normally think of something like fracking as being the sort of technological change that is a residual when we’re talking about microeconomics. But there are times when such microeconomic changes lead to us reconsidering the macroeconomy. And I think this is one of those times. The implications of this..."

Phys.org:  New study of Barnett Shale area well water finds elevated levels of water contaminants   -   "A team led by Kevin Schug, UT Arlington's Shimadzu Distinguished Professor of Analytical Chemistry, has published a comprehensive study of potential groundwater contamination in areas of unconventional oil and gas drilling. The peer-reviewed study, "A Comprehensive Analysis of Groundwater Quality in the Barnett Shale Region," was published in the American Chemical Society journal Environmental Science & Technology. The Barnett Shale lies below the Trinity and Woodbine aquifers and is home to more than 20,000 unconventional..."

Gas & Oil:  19 Gas and Oil Companies Still Operating in Ohio   -   "Ohio's shale natural gas production continues to increase, most of it in Belmont, Guernsey and Monroe counties, although at a slightly slower pace. People are asking just how many gas and oil companies are still operating in Ohio. The answer, not as many as three years ago, but the companies that made..."

Wall Street Journal:  Natural Gas: A Halloween Horror Story   -   "With prices down by almost half in the past year, it seems impolite to raise the subject of oil in Texan country clubs. But changing the subject to natural gas wouldn’t win friends, either. Amid oil’s collapse, it is easy to forget the U.S. gas market has been struggling with shale-derived excess for..."

Plastics News:  Is the US shale boom starting to fizzle?   -   "Reversing a trend that has lasted more than half a century, the federal government predicts the U.S. will become a net energy exporter within 15 years, as the shale boom increases the production of..."

The Columbus Dispatch:  Cardinal Energy moving HQ from Dublin to Texas   -   "Cardinal Energy is moving its headquarters from Dublin to Texas, a shift that reflects the company’s decision last year to focus on its Texas assets. The oil and gas developer is moving this week to Abilene, Texas. “We decided that since we have sold all of our California and Ohio oil and gas assets, our administration..."

Akron Beacon Journal:  FERC accepting comments on revised Ohio Valley Connector   -   "The Federal Energy Regulatory Commission is seeking comment on environmental issues through June 29 tied to the revised Ohio Valley Connector Project, a natural gas pipeline from northwest West Virginia to southeast Ohio. It would be built by Equitrans LP, a subsidiary of Pittsburgh-based..."

Yahoo Finance:  Global Oil Production Substantially Lower Than Believed   -    "Even the paper of record for the oil industry, Oil & Gas Journal, got it wrong. With the release of the latest BP Statistical Review of World Energy, media outlets appeared to be taking dictation rather than asking questions about which countries produced the most oil in..."

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Wednesday, June 17, 2015

Analyst: Shale Drillers May Produce More Oil, But More Debt Will Come With It

From Seeking Alpha:
The Organization of Petroleum Exporting Countries (OPEC) met on June 5, and it's clear that the current trends in the global oil market will remain steady. 
First, OPEC - led by Saudi Arabia - will continue to pump out as much oil as possible. The cartel's production target of 30 million barrels, with an excess of 31 million barrels actually being pumped, remains. 
OPEC did say they would be open to reducing their quota, but only if Russia, the world's largest producer, cuts back… 
Fat chance of that! Russia has never agreed to production cuts, and isn't showing any flexibility now. U.S. shale oil producers are also continuing to pump out oil with no sign of stopping. In fact, they stand at the ready to add even more output. 
Over the spring, this strategy separated the weak from the strong as supply flourished and prices dropped. 
These days, the companies that survived, like EOG Resources (NYSE:EOG) and Pioneer Natural Resources (NYSE:PXD), have already given strong indications that they'll pump more oil if prices hold around $60 per barrel. 
Tom Pugh, a Commodities Economist at Capital Economics, told The Wall Street Journal that "U.S. supply could quickly rebound in response to the recent recovery in prices." 
Yes, shale firms will be able to turn the taps on again, thanks to the seemingly unending flow of capital from Wall Street - banks, institutional investors, and private equity are all lending. 
But, another word for at least some of this capital is debt, which may soon catch up with the domestic shale oil producers.
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State Board Approves NRG Pipeline to Avon Lake Power Plant; Eminent Domain Battles Continue

From Gas & Oil:
Plans to construct a 20-mile pipeline to carry natural gas from rural Lorain County to a power plant in Avon Lake have been approved by the Ohio Power Siting Board. 
The board’s unanimous approval was the final step necessary for the project to move forward. The pipeline will start in southern Lorain County at a tap-in point on a gas line operated by Dominion East Ohio, just south of Grafton, before heading north to the lakefront. 
NRG is still involved in multiple eminent domain lawsuits with landowners that it needs easements from to construct the pipeline. Some of those landowners had tried to argue before the board, which temporarily delayed a decision on the project, that NRG hadn’t considered all possible routes and that it was being given an accelerated approval process in violation of state law. 
The board rejected those claims, saying NRG fully examined other routes, chose the one with the least environmental impact and met all criteria necessary for construction of a pipeline that will serve the public interest. 
The board said the pipeline will allow the power plant to remain operational and fulfill capacity obligations while contributing to the electric system.
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Poll: Increased Understanding of Fracking Leads to Increased Support

From TribLive:
Support for the use of fracking by the natural gas industry is growing with awareness despite concerns about potential damage to the environment, a new poll by Robert Morris University shows. 
About 56 percent of 1,003 people polled nationwide said they support hydraulic fracturing from shale, up from 42 percent in November 2013. The increase tracked overall knowledge of the process, which grew to nearly 71 percent from 45 percent nationwide, and was up to nearly 74 percent among 529 Pennsylvania residents polled last month. 
“It appears most of the awareness is driven from industry awareness,” said mechanical engineering professor Tony Kerzmann, who serves on the advisory board of the Robert Morris University Polling Institute. 
The online poll, which was sponsored by Trib Total Media, has a margin of error of plus or minus 4.5 percentage points for Pennsylvania results and plus or minus 3 percentage points for the national numbers. 
More than 73 percent of national respondents (74 percent in Pennsylvania) said pulling gas from shale has the potential to help the economy, and 69 percent nationally said fracking will help the country move to energy independence.
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Tuesday, June 16, 2015

Rig Count Slips Farther, Permitting Slows More in Utica Shale Last Week

Utica shale permitting had been picking up recently, but the latest Ohio Department weekly report reveals that it was on the decline again last week.

Only five new permits were issued during the week ending June 13.  4 of those permits went to Chesapeake for wells in Harrison County.  The only other permit was issued to Halcon for a well in Trumbull County.

The slow week brings the cumulative totals to 1,932 wells permitted, 1,504 wells drilled, and 904 wells producing.  The Utica rig count slipped as low as it has been in a very long time, all the way down to 18.

View the report below.

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Recent Studies Popular Among Anti-Drillers Have Hidden Conflicts of Interest

From the Casper Star-Tribune:
Recently, the Star-Tribune ran an article that suggests toxic air emissions are being released from shale gas wells on the basis of a research paper involving a Wyoming resident, Deb Thomas. 
To the Star-Tribune’s credit, the article does explain that Thomas is as a “longtime activist,” but there’s so much more to the story. In fact, all six of that particular research paper’s authors were activists who failed to disclose their bias to the public and the scientific community, which goes against at least four codes of scientific ethics. 
For instance, Thomas declared in the report that she worked for the Powder River Basin Resource Council, but she did not disclose her role as the executive director of an anti-fracking group called ShaleTest, of which Josh Fox, the director of Gasland, is an “adviser.” The Star-Tribune also quotes David Carpenter, another one of the paper’s authors, who declared he had no competing interests. But Carpenter never mentioned that he worked for Concerned Health Professionals of New York, a group that has aggressively lobbied for a ban on fracking in New York, even signing a letter to Gov. Andrew Cuomo (D-NY) demanding a moratorium on fracking. 
The results of the study itself rest on a number of samples gathered by volunteers “trained” by Thomas and other activists in buckets lined with plastic. This is a method that Colorado regulators have said has “some serious technical deficiencies,” to say the least. 
One would expect those “technical deficiencies” to be pointed out in the report’s peer review process -- except that the peer reviewers were also anti-fracking activists who didn’t disclose their bias. In fact, one of them, Sandra Steingraber (who declared definitively, “I have no competing interests”), is the co-founder of New Yorkers Against Fracking.
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Former EPA Employee and Current Anti-Drilling Activist Attempts to Discredit Agency's Fracking Study

Weston Wilson is an environmental engineer and anti-drilling activist who worked for the EPA until January 2010.  He has compared oil and gas extraction to slavery in the past.  Now, he has written an op-ed taking aim at the overarching conclusion of the EPA's extensive four-year study of fracking's effects on groundwater, declaring that there is "widespread and systemic contamination...at the EPA."

Here is a portion of what Wilson wrote:
In 2010, Congress told EPA to study these claims. In 2011, EPA responded, announcing it would do a widespread investigation of the entire industry including the systemic release of toxic gases during fracking. 
Under pressure from the industry, the EPA began severely limiting the scope of its investigation. 
In 2012, EPA withdrew from any investigation of the air pathways of toxic gas release during fracking, despite hundreds of citizens living near wells reporting air pollution and a robust set of scientists confirming ill health consequences. 
In 2013, EPA dropped its study of a marquee ground water contamination case in Dimock, Pennsylvania. 
In 2013, EPA dropped its study of ground water contamination in Pavilion, Wyoming and Weatherford, Texas. 
After retreating on measuring contamination in already fracked areas, EPA announced it would still conduct ‘prospective studies’ of new sites where baseline ground water data would be collected before fracking occurred. In 2014, EPA dropped all prospective studies. 
Having systematically turned its back on groundwater data gathering and analysis, including the groundwater data it had already collected in Pennsylvania, Wyoming, and Texas which confirmed water contamination, EPA shamelessly released a draft report this month with the deeply deceptive headline, “no widespread systemic ground water contamination found.”
Wilson goes on to conclude that the right thing to do is stop using fossil fuels for energy and immediately switch over to renewables, which he says can power the world right now.

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Monday, June 15, 2015

Chesapeake Energy Says Non-Profit Organizations Can't Prove Company Stole Oil and Gas from Their Properties

From The Intelligencer/Wheeling News-Register:
Attorneys representing Chesapeake Energy said even if the company used property owned jointly by six Wheeling non-profit groups in pooled drilling units, this does not prove the fracker took oil and natural gas from the land in question. 
However, Tim Greene, a former West Virginia Department of Environmental Protection inspector and the owner of Land and Mineral Management of Appalachia, said he does not understand why a driller would include someone's acreage in a pooled unit without intending to take the oil and gas from it. 
"Normally, if your property is included in a unit, they will be affecting your property," Greene said. "The whole reason for building a unit is to get as much gas out of the ground as possible. If they're not using your property, I don't know why they would put you in a unit." 
Officials representing the Parks System Trust Fund of Wheeling - an organization closely related to the Wheeling Park Commission, which oversees Oglebay Park and Wheeling Park - along with those representing Ohio Valley Medical Center and four other plaintiffs, believe Chesapeake cost them "hundreds of thousands of dollars" by taking oil and natural gas from their land without permission or payment. 
However, in a response to the lawsuit filed in U.S. District Court in the Northern District of West Virginia, Chesapeake attorneys Nicolle Snyder Bagnell and Kevin Abbott said there is no way for the plaintiffs to prove the driller produced oil and natural gas from the property.
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Friday, June 12, 2015

06/12/15 Links of the Day: Carrollton Schools Building CNG Fuel Station, Williams Partners Takes Controlling Interest in UEO Midstream, and More

Bloomberg:  Why This Shale CEO Isn’t Afraid of OPEC or Low Oil Prices   -   "Apache Corp. CEO John Christmann didn’t just get a new job when he took charge of one of the world’s biggest shale producers in the dark days of the oil market crash in January, he signed on to a corporate makeover. In the past six months Christmann has focused on transforming Apache from a high-flying global explorer into a ruthlessly efficient..."

Gas & Oil:  CARROLLTON SCHOOLS BREAKS GROUND ON COMPRESSED NATURAL GAS FUELING STATION   -   "Carrollton school administrators joined Carroll County officials, state agencies and businesses for a May 8 open house and ground-breaking ceremony to celebrate the Carrollton Exempted Village School District’s future compressed natural gas fueling station and new POWER education center..."

Natural Gas Now:  New York’s Love for Fracked Gas, Produced Elsewhere   -   "New York is in love with fracked gas, believe it or not; they just want it produced elsewhere, an intellectually dishonest and unsustainable position. There are few things more certain than the certainty of certain New Yorkers they’re the smartest, best looking and most righteous folks around. That’s why they won’t be caught dead on the west side of the Hudson without a New Yorker magazine..."

BBNA Convergence:  Company, counties fight over pipeline tax   -   "The company operating a cross-country underground pipeline running beneath 13 Ohio counties said it should not have to pay millions of dollars in taxes to local governments. The ATEX Express travels through 265 miles in Ohio, including Greene, Warren and Butler counties, and runs 1,200 miles..."

Williams Companies:  Williams Partners Completes Acquisition of Additional Interest in Utica East Ohio Midstream Partnership   -   "Williams Partners L.P. (NYSE: WPZ) today announced that its subsidiary Utica Gas Services has successfully completed the previously announced acquisition of approximately 13 percent of additional equity interest in Utica East Ohio Midstream LLC (UEO) from a subsidiary of EV Energy Partners, L.P. (NASDAQ: EVEP) for..."

Gas & Oil:  OHIO OIL & GAS ASSOCIATION CHIEF GIVES UPDATE ON GAS AND OIL INDUSTRY   -   "Shawn Bennett shared his insight and vast knowledge of the oil and gas industry as a guest speaker at the 25th anniversary banquet in April of the East Ohio Development Alliance at Carlisle Village Inn in Walnut Creek. Bennett is the CEO of the Ohio Oil & Gas Association, and also serves as..."

StateImpact PA:  Bradford County considers royalties lawsuit against Chesapeake Energy   -   "Pennsylvania’s most drilled-on county is exploring the possibility of joining one of the many lawsuits that have been filed recently against Chesapeake Energy. The Oklahoma City-based company has been widely accused of cheating landowners out of royalty..."

Washington Post:  After plunge in oil prices, hope fades for group of long-beleaguered workers   -   "Other men bought big houses or new pickups with their oil money. Mike Gillham bought his favorite bar. He heads there most nights, to lug in more beer, to throw darts with his regulars, to smoke Camels and sit with his wife and wonder how to keep getting by, now that his oil job is gone..."

Harvard Business School:  Innovative Strategy Would Allow U.S. to Capitalize on America’s New Energy Advantage While Protecting the Environment and Speeding the Transition to a Lower-Carbon Energy Future   -   "In a new report released today, experts at Harvard Business School (HBS) and The Boston Consulting Group (BCG) have put forward a comprehensive plan to overcome the false trade-offs between reaping the enormous economic benefits of developing unconventional gas and oil, minimizing environmental impacts, and making major progress toward reduced greenhouse-gas emissions..."

View the Harvard report by clicking below on Read More.