Wednesday, August 31, 2016

Ohio Changes Taxation of Oil and Gas Reserves

From Vorys:
The Ohio Tax Commissioner recently issued a memorandum to county auditors regarding significant changes to the taxation of oil and gas reserves starting in tax year 2016.  These significant changes include:
  • Elimination of filing forms 6 and 6A. 
  • Values will now be based upon production volumes reported to the Ohio Department of Natural Resources (ODNR).  After hearing from industry representatives, the Ohio Tax Commissioner acknowledged that this approach may lead to higher values than statutorily permitted in some circumstances.  Accordingly, the Ohio Tax Commissioner announced a temporary fix to address this circumstance. 
  • The new approach will overvalue oil and gas reserves in some circumstances because amounts reported to ODNR are produced amounts, whereas O.R.C. 5713.051 requires that values be based on volumes “produced and sold.”  The temporary fix is re-instatement of DTE form 6A for the limited purpose of ensuring that producers will be permitted to challenge any overassessment based on the difference between “produced” and “produced and sold.”  If producers wish, they can file a DTE form 6A with each county auditor where there is a difference between “produced” and “produced and sold.” 
  • Tax bills will be issued only to producers; royalty interest holders will no longer receive tax bills.  As a result, producers will be responsible for collecting taxes owed by royalty interest holders.
  • The memorandum confirms that minerals bartered as a form of payment are considered sold and should be reported as taxable production.
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Tuesday, August 30, 2016

FERC Listens to Ohio Residents Rail Against the NEXUS Pipeline

Residents of the cities of New Franklin and Green had the opportunity to provide comments concerning the proposed NEXUS gas transmission pipeline project that would impact the two communities if the planned route remains. 
Staff for the Federal Energy Regulatory Commission (FERC), the federal agency responsible for evaluating applications to construct and operate interstate gas pipeline facilities, was on hand at Green High School Aug. 18 from 5 to 10 p.m. to record verbal remarks regarding the project, specifically why local residents want the route of the project to take a more southern path. 
The NEXUS pipeline, a 36-inch, 250-mile line to be developed by Nexus Gas Transmission LLC, along with Detroit-based DTE Energy Co. and Texas-based Spectra Energy Corp., is projected to transport up to 1.5 billion cubic feet of natural gas per day and would run from Kensington to Ontario, Canada, according to pipeline officials. Locally, the proposed route would go through New Franklin and Green. Construction on the project is estimated to begin in early 2017, after FERC approves the route. 
“It is going to impact our ecosystem here. No one wants this coming through Green. I am here to fight this for my neighbors and the whole community,” said Green resident Shana Musser-Coburn. “It would affect our parks and wetlands. I see it hurting our economy here.”
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Duke University Files $9.9 Million Claim Against Aubrey McClendon's Estate, Then Withdraws It

From the Wall Street Journal:
Duke University said it has withdrawn a claim for about $10 million it made against the estate of oil man Aubrey McClendon, who died before he could make good on pledges the North Carolina college said he made to his alma mater.
A spokesman for the university said paperwork asking to withdraw the claim was filed on Friday in the Oklahoma City district court where the Chesapeake Energy Corp. co-founder’s estate is being wound down. Records in that case show the claim was filed Aug. 12, but it was only made public last week and first reported by The Wall Street Journal.
“While submitting such claims is generally a routine procedure, in this case our action was misperceived as adversarial to the McClendon family, which was never the intention,” a Duke spokesman said in an email. “Aubrey was one of our most passionate and loyal graduates, always willing to support Duke when asked. We are deeply sorry for any pain this has caused the McClendon family.”
There certainly are a lot of vultures circling McClendon's estate.  Duke looks better for withdrawing the claim than it did by filing it.  Read the rest of the article by clicking here.

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Study Finds Pollution from Fracking is Negligible When Proper Methods Are Used

From Forbes:
When Governor Andrew Cuomo announced last year that hydraulic fracturing would be banned in the State of New York, he cited the lack of scientific data on public health effects. He also said more study needed to be done to determine where emissions were coming in the fracking and extraction cycle. 
That study has now been done. Chemists at the University of Texas at Arlington published a study that indicates contamination from fracking wells are highly variable but result more from operational inefficiencies than from the extraction process itself. 
In other words, it’s sloppy drilling methods that are the worst part of fracking. 
The study, “Point source attribution of ambient contamination events near unconventional oil and gas development”, was published on Friday in the Science of the Total Environment. The researchers found highly variable levels of benzene, toluene, ethyl benzene, and xylene compounds (BTEX) in and around fracking sites in the Eagle Ford shale region in South Texas. BTEX compounds in high concentrations can have harmful health effects in humans.
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Is Ascent Resources Headed for Pre-Packaged Bankruptcy?

From Bloomberg:
A group of Ascent Resources-Marcellus LLC creditors is in talks with the company, a legacy of Aubrey McClendon’s American Energy Partners LP, to restructure $1.2 billion of debt, people with knowledge of the matter said. 
Holders of the company’s term loans hired Moelis & Co. to advise on restructuring options, according to the people, who asked not to be identified because the talks are confidential. Cortland Capital Market Services stepped in as the new agent on the first- and second-lien loans after Citigroup Inc. resigned, the people said. 
Ascent Resources-Marcellus managers told investors during a Thursday conference call that they had discussed a debt overhaul with a select group of lenders, but hadn’t hired advisers, the people said. Moelis sent a memorandum to creditors in June outlining proposals for the energy exploration and production company, but no definitive agreement has been reached, the people said.
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Donald Trump Set to Headline Shale Insight Conference in Pittsburgh

From The Intelligencer:
Republican presidential candidate Donald Trump headlines the list of scheduled speakers for the 2016 Shale Insight Conference, set for Sept. 21-22 at the David L. Lawrence Convention Center in downtown Pittsburgh.

Although drilling and fracking activity remains relatively low amid the global price slowdown, the level of activity inside the convention center will be high with Trump taking stage. The businessman from New York City is tentatively scheduled to speak at approximately 11 a.m. Sept. 22. 
Trump is an outspoken advocate of fossil fuels such as coal, oil and natural gas, while he accuses Democrat Hillary Clinton of working to end their use. 
“It is a great opportunity to have presidential candidate Donald Trump share his perspectives on the oil and gas industry at this year’s Shale Insight Conference. The oil and natural gas industry is a driving force of the American economy and will be an impactful topic this election,” said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association, one of the event sponsors.
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Focus in Utica Shale Shifts Towards Dry Gas

From NGI:
The buildout of gathering infrastructure in the Utica Shale's dry natural gas window of Southeast Ohio has remained robust over the last year as the midstream has worked to stay ahead of, and in some cases fallen behind, operators that have flooded a three-county region. 
Natural gas production in the Appalachian Basin has remained resilient to the commodities downturn, continuing to grow at a time when volumes across the rest of the country have bottomed out. Unlike their counterparts, the Northeast shale plays are once again poised for year/year growth. 
While a wholesale shift to dry gas production hasn't occurred across the basin, many of its leading operators have been more focused on it, particularly in Monroe, Belmont and Jefferson counties, OH. Lower breakevens, better local markets for some and a shallower Utica target compared to other locations in the basin have increasingly attracted more companies to Ohio's dry Utica (see Shale Daily, April 7). 
Development in the play is also relatively new, compared to the Marcellus Shale. And while the cancellation and delays of long-haul transportation projects continue in some ways to temper the Northeast's production outlook, gas has also been trapped on a lack of gathering capacity. A buildout is still under way in Southeast Ohio that will help add to the region's incremental gas supply.
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New Study Attempts to Link Fracking to Health Problems

A new study has been released which concludes that shale drilling activity can be linked to increased occurrences of migraines, fatigue and chronic sinus symptoms.  

Not surprisingly, pro-drilling and anti-drilling media outlets have resulted in very different reporting on this study.

Here is how the study was reported on by StateImpact Pennsylvania, a consistently anti-drilling outlet which receives funding from anti-drilling organizations:
A new study published today in the peer-reviewed journal Environmental Health Perspectives shows an association between living near heavy gas drilling activity and common ailments like chronic nasal and sinus symptoms, severe fatigue, and migraines. The report is part of an ongoing collaboration between the Geisinger Health System and Johns Hopkins Bloomberg School of Public Health. 
“These three health conditions can have debilitating impacts on people’s lives,” says Aaron W. Tustin, MD, MPH, a resident physician in the Department of Environmental Health Sciences at the Bloomberg School. “In addition, they cost the health care system a lot of money. Our data suggest these symptoms are associated with proximity to the fracking industry.” 
The researchers used health surveys gathered from almost 8,000 patients of Geisinger Health System from 40 counties in north and central Pennsylvania and divided the results into two groups. One group reported no symptoms, while the other reported two or more. This data was then matched with the proximity of respondents to heavy gas drilling activity. The researchers used gas drilling locations and intensity of shale gas production provided by the Pennsylvania Department of Environmental Protection, the Department of Conservation and Natural Resources, and satellite imagery from the group SkyTruth.
The article later notes these remarks from Sara Rasmussen, one of the study's authors:
Sara Rasmussen, a Ph.D. candidate at the Bloomberg School and an author on the paper, says the three health symptoms were selected because they are common, can result in large economic costs, and are potentially linked to environmental factors such as chemical toxicity, odors and stress. The report suggests an association, but the data does not reveal a direct cause.

“We’re not able to point a finger at a specific pathway,” said Rasmussen.
Pro-drilling site Natural Gas Now had this to say about the study after noting the anti-drilling connections of one of it's authors, Brian S. Schwartz:
Schwartz’s latest junk science attack on fracking, in fact, is one of those pseudo-academic reports intended to obscure the lack of evidence for the headline. It does so with scientific sleight of hand that’s not too hard to catch if you’re paying attention: 
  1. Although 39 Pennsylvania counties were sampled for the study, there were relatively few participants from the major drilling areas of the Commonwealth. There were only 12 participants from Bradford County, for example, the most heavily drilled among those sampled. That’s out of 7,785 total participants. And, here is the map of “Cases in 4th quartile of UNGD activity” compared with shale well drilled. “UNGD” stands for unconventional gas development. The 4th quartile of activity supposedly represents the top one-fourth of those impacted, where there is a correlation between development and the symptoms of sinus, migraine and fatigue issues.
Post Carbon Institute
Look really closely at the map. When you do, you’ll see the bulk of the cases are outside the area of drilling. They are mostly found in Columbia, Lackawanna, and Luzerne Counties or the gas-less areas of Lycoming, Sullivan and Wyoming Counties. We are never told anywhere in the study just how far a person with a migraine can be from a well and be considered to have been affected by it, but we can see from this map at least three-quarters of the cases supposedly most affected are located in Berwick, Carbondale, Scranton, Wilkes-Barre and other urban centers. They parallel the interstate routes through the region. What Schwartz and company appear to have done is deliberately include such areas by uses of obtuse formulas that suggest it is gas drilling, fracking and the like that are producing what is really the impact of highway traffic and urban development.
2. The way answers to surveys were counted also ensures cases were generated. The authors say, for example, they “dichotomized the three responses. Responses of ‘never’ or ‘rarely’ were scored as no and responses of ‘less than half the time’ or ‘half the time or more’ were scored as yes.” Hmmm. A glass that is less than half-full is full. Even a glass that is three-quarters empty is apparently full. Only a glass that is almost empty is empty. Junk science is taken to a whole new level.
3. The authors also admit “Compared to the reference group, individuals with each single outcome were more likely to be younger and current smokers (Table 2).” Indeed, only 9.7% of the members of the reference group were current smokers, compared to 13.6% to 26.2% for those with symptoms. The study states “Exposure to allergens, toxicants, and secondhand smoke may trigger nasal and sinus symptoms,” but otherwise ignores smoking as the likely cause of many the problems identified.
4. The study also includes several disclaimers (emphasis added):
“This study had several limitations. In general, cross-sectional surveys such as ours cannot assess temporal relations between exposures and outcomes, and we did not ascertain the onset dates of some symptoms… Our ascertainment of self-reported outcomes was susceptible to various types of information bias. For example, despite the fact that our questionnaire did not mention UNGD,individuals residing near UNGD may have over-reported symptoms. There was some evidence of selection bias, as survey participants had poorer health (measured by the Charlson comorbidity index) than non-responders… Another limitation is that our estimates of well development phase durations, although based on published average values, may have been incorrect for individual wells. Further exposure misclassification could have occurred because our UNGD activity metric was based on residential addresses. Participants’ exposure to UNGD activity could have been affected by unmeasured factors such as occupation, travel, and time spent outdoorsAdditionally, our UNGD activity metric did not allow identification of specific exposures or exposure pathways.
The last one, of course, is the one that really matters and the one likely to be ignored by fractivist media outlets and sympathizers. Correlation says nothing about causation. This study offers nothing whatsoever as to show how drilling and fracking in Susquehanna County might have caused someone in Scranton to get have a sinus problem.

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Monday, August 29, 2016

Obama Energy Secretary Sings Praises of Fracking's Effect on Environment

From the Federalist:
Hydraulic fracturing, a process more commonly referred to as fracking, is actually good for the environment, Energy Secretary Ernest Moniz said at a field hearing in Seattle last week, according to the Washington Examiner
“The increased production of oil and natural gas in the United States has, obviously, been a major story in terms of our economy, and also our environment,” said Moniz, who previously served as the head of the Physics department at the Massachusetts Institute for Technology, earned a doctorate degree in physics from Stanford University. 
“The natural gas boom, in particular, has led to the displacement of high-carbon coal with low-carbon natural gas producing fewer emissions,” Moniz reportedly said during the Seattle field hearing.
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Three Technological Developments Are Changing the Oil and Gas Sector

From KPMGVoice:
Energy prices may be low, but that hasn’t stopped new technologies from shaking up the oil and gas business. 
Three developments in particular are starting to have an impact on the industry: the “internet of things,” digital labor and platform companies. 
Here’s a look at what they are and how they are changing the energy business. 
Internet of Things 
Despite its cosmic-sounding name, this simply describes how machines, devices and software interact, or “talk” to each other, without human involvement.
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Study: Utopia East Pipeline Would Generate $237 Million for Local Economy Over First 5 Years

From The Toledo Blade:
A Kent State University report being released Tuesday will show that the proposed $500 million, 240-mile Utopia East pipeline will generate $237.3 million over its first five years for Ohio’s economy. 
Results of the study were announced by Allen Fore, Kinder Morgan vice president of public affairs, during a noon luncheon speech hosted by the Rotary Club of Toledo. Held downtown at the Park Inn, the event was attended by about 200 people. 
Mr. Fore told The Blade after his presentation that Kinder Morgan, North America’s largest pipeline company and the one behind the Utopia East project, hired two Kent State economics researchers to do the economic-impact study. 
The breakdown includes a projected $144.9 million in new jobs, income, and local spending; $87.5 million in Ohio residents’ earnings, and $4.9 million in tax revenues. The project is expected to create 2,132 new and indirect jobs, about 900 of which would be construction jobs in 2017.
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Op-Ed Makes Case For Fracking as a Key to Fight Against ISIS

From News & Observer:
Over the past half century, groups bent on ideological domination have intentionally murdered unarmed civilians, including pregnant woman and children, using among other things suicide bombers. Those are true acts of terrorism. 
I find it distasteful and dishonest when environmental extremists attack energy technologies by referring to them as “terrorism.” Such is the case with hydraulic fracturing or fracking. What I find truly repugnant are the politicians whose periodic security and economic briefings inform them of the benefits of fracking yet who remain silent or encourage the branding of an energy technology, equating it with the slaughter of innocents. 
Fracking is helping to defeat terrorism. Our politicians have been told that fracking is reducing the price of oil. By making global oil prices lower, fracking is hurting ISIS and other terrorist groups that are known to sell the oil they have captured on the black market to fund their activities, or receive funding from oil exporting nations. 
Congress and the president know when the supply of oil is high, outstripping demand, the price falls. Such is the case today. In the past few months, the U.S. benchmark price of crude oil has fallen from above $50 a barrel to below $40. When oil prices were high at $100 a barrel or more and supply was lower, governments desperate for oil were incentivized to purchase it from terrorists. 
Today’s low oil price puts less money in the hands of terrorists to fund their goal of fear and destruction. One can only imagine how much worse terrorism would be if oil still exceeded $100 a barrel. Clearly fracking is an economic weapon making America more secure.
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Big Investors Are Getting Back Behind Oil Producers

From Business Insider:
Wall Street's smart money is falling back in favor with the beaten-down energy sector.
Large private-equity investors moved to the sidelines of energy-related corporate debt as the price of crude oil fell. 
These days, however, they are doing the due diligence that precedes making big deals on the sector's continued recovery, according to Thomas McNulty, a Houston-based director in the valuations and financial risk management practice at Navigant. 
These players are observing what may be a bottoming in the oil crash. 
Oil-field services companies, which were hardest hit by the oil downturn, are a good indicator for how the broader industry is turning, according to McNulty.
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Harold Hamm Warns Hillary Clinton Would Kill the Oil and Gas Industry as President

From NGI:
Continental Resources Inc. founder Harold Hamm, an unabashed supporter of GOP presidential nominee Donald Trump, on Tuesday warned a Denver audience in a provocative speech that Democrat Hillary Clinton, if elected in November, would doom the U.S. oil and natural gas industry. 
Hamm, who was Mitt Romney's energy adviser in his failed presidential bid in 2012, was named to Trump's economic advisory panel earlier this month (see Shale Daily, Aug. 5). Trump last month surprisingly embraced local control over fracturing (fracking) in horizontal drilling during an exchange with a television reporter -- even though his energy agenda calls for more U.S. production. The hot button issue, which could be on the ballot in Colorado in November, is roundly opposed by the oil and gas industry (see Shale Daily, Aug. 23). 
"I'm in favor of fracking, but I think that voters should have a big say in it," Trump said in July. "I mean, there's some areas, maybe, that don't want to have fracking, and I think if the voters are voting for it that's up to them." 
In his luncheon keynote to the COGA audience, Hamm interpreted Trump's remarks and said the billionaire businessman would not support local control measures to restrict development. 
"That kind of sounds Republican, local control," Hamm said of Trump's remarks. "Let me tell you, Donald Trump is pro-business. He is pro-energy, and he is not going to shut down fracking or drilling or anything else."
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Friday, August 26, 2016

Analyst: Oil Prices Poised for Strong Rebound in 2017

August 11, 2016 may be the point in this oil price cycle that will mark the start of a sustained increase in crude oil prices. That’s the date that the International Energy Agency (IEA) published their forecast that demand for oil would exceed supply in the 3rd quarter. Shortly after the IEA’s Oil Market Report came out, the Saudi Energy Minister Khalid al-Falih said the kingdom would work with other producers to stabilize the market. Tighter supply and OPEC willing to curb production growth is a recipe for higher oil prices. 
When you step back and look at a longer time frame, it is clear that this oil price cycle which started in mid-2014 bottomed in February, 2016. The most recent pullback that started late in June and continued through early August was just the speculators overplaying their hand on the short side. The brief dip below $40/bbl did not get close to the double-bottom in February.

Remember what oil prices have never moved up or down for an extended period of time. There are going to be many pullbacks along the way to a more sustainable price level for oil. I believe that oil will settle in the $60-$70 range sometime in 2017. 
During the first week of August, 2016, speculative NYMEX short crude oil positions reached the highest level in at least the past ten years. Since the IEA report came out on August 11th the shorts have been scrambling to cover their positions.
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Report: Earthquakes Linked to Less than One Percent of All U.S. Injection Wells

by Katie Brown, Energy in Depth

Fewer than one percent of wastewater injection wells across the United States have been potentially linked to induced seismicity, according to a new report by Energy In Depth. The report, entitled “Injection Wells and Earthquakes: Quantifying the Risk,” consults data from the U.S. Geological Survey (USGS) and several peer-reviewed studies to examine the number of injection wells that have been suspected as causing earthquakes, compared against the total number of operating injection wells. The report includes breakout statistics for several states as well, including OklahomaTexasColoradoNew MexicoOhioKansas, and Arkansas.
Below are the key findings, by the numbers:
  • Total number of U.S. disposal wells – 40,000 (approx.)
  • Number of U.S. disposal wells potentially linked to seismicity – 218
  • Percentage of U.S. disposal wells potentially linked to seismicity – 0.55%
  • Percentage of disposal wells operating without seismicity – 99.45%
  • Total number of Class II injection wells in the United States – 150,000 (approx.)
  • Percentage of Class II injection wells potentially linked to seismicity – 0.15%
  • Percentage of Class II injection wells operating without seismicity – 99.85%
The report helps to quantify the risk of induced seismicity from underground wastewater disposal, demonstrating that despite prevalent media coverage of each seismic event, the number of wells even potentially linked to earthquakes is comparatively small across the United States. Even in the individual states where most of the attention on induced seismicity has been focused, the vast majority of injection wells are operating aseismically.
In recent years, scientists, regulators, and industry have come together to implement a number of measures to mitigate the risk of induced seismicity, including resource and data sharing to empower states to adopt best practices. Many states have also updated their rules and guidelines for injection well permitting, and companies have spent tens of millions of dollars in mitigation procedures – many of which were voluntary – in order to further reduce risks.
To access the full report, and the state specific fact sheets, click the links below.

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Ashtabula Refinery Plans Put on Hold

From the Star Beacon:
Plans for the proposed Ashtabula Energy refinery on Lake Road have been put on hold to defer cost, according to company officials. 
The proposed $200 million industrial processing plant in Ashtabula would have converted Marcellus and Utica shale natural gas to diesel fuel, lubricants, solvents and waxes and created about 40 permanent, full-time jobs, company officials have previously said. Ashtabula Energy is a division of Velocys, whose officials had said the project would mean 400 temporary jobs to build the plant. 
"Our recent analysis has confirmed that the wax market in North America and the projected plant economics remain attractive, but given the challenges in raising equity for capital projects of this nature at present and in order to defer costs, it was prudent to hold the project, pending reassessment," CEO David Pummell said in a statement.

Velocys officials could not be reached for further comment Friday.
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Wednesday, August 24, 2016

Utica Rig Count at 14 as 5 New Permits Are Issued Last Week

The latest permitting update from the Ohio Department of Natural Resources show that five new permits were issued across four different counties last week.  Two were for wells in Jefferson County, while Belmont, Guernsey and Monroe each saw one new permit.

The cumulative totals now stand at 2217 wells permitted, 1776 drilled, and 1390 producing.  The Utica rig count is at 14.

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Tuesday, August 23, 2016

OPEC on Course For Output Freeze, Former Chief Says

From Fuel Fix:
OPEC is on course to strike an output-freeze deal with fellow oil producers in Algiers next month because its biggest members are already pumping flat-out, the group’s former president said. 
While a similar initiative failed in April, an agreement can now be reached as Saudi Arabia, Iran, Iraq and non-member Russia are producing at, or close to, maximum capacity, Chakib Khelil said in a Bloomberg Television interview. Khelil steered OPEC in 2008, the last time it implemented an output cut, which was announced in Algeria in December of that year. In a separate interview, former Qatari Energy Minister Abdullah bin Hamad al-Attiyah was convinced there is a need for an accord. 
“All the conditions are set for an agreement,” Khelil said from Washington. “Probably this is the time because most of the big countries like Russia, Iran, Iraq and Saudi Arabia are reaching their top production level. They have gained all the market share they could gain.”
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Monday, August 22, 2016

The Buy Signal for Oil Is In

Source: Jack Chan  (8/20/16)

Technical analyst Jack Chan documents a major new buy signal for oil stocks and ETFs that will enable investors to hold for the long term.

$OSX has confirmed a new major buy signal, which can last for months and years.

Speculation has now confirmed a pullback bottom; expect new recovery highs in coming weeks and months.

The bottoming process continues with a breakout imminent.

For the OIH, the upside price target is 55.

For the XLE, the upside price target is 95.

For the, the upside price target is 20.

Subscribers were advised to diversify into USD beginning in 2011, as the loonie topped. The Canadian dollar is now a buy, and investors can scale in for the long term.


With a new major buy signal in place and the cycle having bottomed, investors can cost average in on oil stocks and/or ETFs, and hold for the long term.

Jack Chan is the editor of simply profits at, established in 2006. Jack bought his first mining stock, Hoko exploration in 1979, and has been active in the markets for the past thirty seven years. Technical analysis has helped him filtering out the noise and focusing on the when, and leave the why to the fundamental analysts. His proprietary trading models have enabled him to identify the NASDAQ top in 2000, the new gold bull market in 2001, the stock market top in 2007, and the US dollar bottom in 2011.

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Analysts: Oil Industry is on a Bumpy Road to Recovery

From NGI:
While it seems the natural gas and oil industry is convinced that the worst is over and markets are on their way to a comeback, the only certainty is that the road to recovery is going to be a long, bumpy one. 
“The main reason natural gas producers, in particular, think the market has hit a bottom is that all the reduction in rig activity is finally catching up to the market,” said NGI’s Patrick Rau, director of strategy and research. 
High-grading, drilling longer laterals and reducing the drilled but uncompleted (DUC) inventory will only go so far. Eventually, the impact from the severe decline in drilling will become evident, especially when so many of the rigs that have been laid down are horizontal, Rau said. 
“Horizontal wells tend to have hyperbolic decline, meaning so much production occurs in the first few years of the well. If you don't keep drilling those, the industry misses out on that initial surge of production, which is starting to be reflected in production numbers,” he said.
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Methane "Hot Spot" Linked to Natural Gas Leaks by NASA

From EcoWatch:
The National Aeronautics and Space Administration (NASA) released a new study Monday examining what caused a methane "hot spot" to form in New Mexico. This new study of methane emissions generated by the oil and gas industry in the state's San Juan Basin is a major step forward in understanding the causes of New Mexico's methane "hot spot." It follows up on a 2014 satellite-based study that initially found the "hot spot" and sought to identify its specific causes. 
The NASA study found that roughly 50 percent of basin-wide methane emissions come from more than 250 very large polluters that were detected by intensive NASA aerial surveys and ground crews. According to the authors, this finding confirms researchers' earlier speculation that most of the basin's methane emissions are related to natural gas extraction and coal mining. 
But this is only half of the story as the study did not determine the source of the remaining 50 percent of emissions. Given the more than 20,000 (mainly older) gas wells, myriad storage tanks, thousands of miles of pipelines and several gas processing plants in the area, NASA's finding that the oil and gas industry is primarily responsible for the "hot spot" is not surprising. In fact, the researchers found only one large source of methane not related to oil and gas operations: venting from the San Juan coal mine. This discovery renders attempts to point the finger at other potential emissions sources, like coal outcrops and landfills, definitively refuted.
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Stark State College to Receive Over $500,000 From State for Shale Education

From Crain's Cleveland:
There is still some life in the shale gas boom down in Canton — at least for Stark State College. 
The school, which has been training workers for the oil and gas industry for several years and opened a well-site training center in 2014, has received $506,483 in state education funds to provide its “ShaleNET” education and training to students at Eastern Gateway Community College and Hocking College. 
“The Ohio Department of Higher Education selected the ShaleNET Share project for funding because it meets Gov. John Kasich’s higher education strategy of promoting educational excellence and economic efficiency and stabilizing or reducing student tuition rates at colleges and universities,” Stark State said in a news release.
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Saturday, August 20, 2016

Analyst Lists Chesapeake Energy as Top Company on List of Those Dominating the Utica Shale

From The Motley Fool:
The late Chesapeake Energy (NYSE:CHK) co-founder and CEO Aubrey McClendon once said that the Utica shale would be the "biggest thing economically to hit Ohio, since maybe the plow." While it has not turned out to be that big, it is the second largest shale-gas play in the country by production. That is remarkable, considering that Chesapeake didn't drill the first well in the Utica until 2011. 
The Utica shale 101 
While Ohio is the center of the Utica drilling boom, the shale itself underlies not just eastern Ohio, but also most of West Virginia and Pennsylvania, as well as parts of New York, Virginia, and Maryland: 
Given the sheer size of the resource, McClendon once called the Utica a "half-trillion dollar" opportunity for Ohio. While it might never hit that level of economic output, it has fueled remarkable growth in the state's oil and gas production. Last year alone, oil production was up 99.9% to 22 million barrels, while the state's natural gas output surged 110% to 452.9 million cubic feet.  
Due to the energy market downturn, Ohio's production will not grow that rapidly in 2016. However, the Utica shale boom is far from over, because there's still a tremendous amount of oil and gas trapped within its rocks. Several producers are working to extract those hydrocarbons, though five companies stand above the rest as the dominant players in the Utica.
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Thursday, August 18, 2016

Science Advisors Uphold EPA’s Topline Conclusion of “No Widespread, Systemic Impacts”

by Katie Brown, Energy in Depth

At long last, the Hydraulic Fracturing Panel of the Environmental Protection Agency’s (EPA) Science Advisory Board (SAB) has released its final recommendations on EPA’s landmark groundwater study, and anti-fracking activists hoping for a damning report on EPA’s primary conclusion are likely to be disappointed.
The panel does not ask EPA to modify or eliminate its topline finding of “no widespread, systemic impacts” to groundwater from fracking – it asks EPA to provide more details or a “quantitative analysis” of how the agency came to that conclusion. From the recommendations,
“EPA should provide quantitative analysis that supports its conclusion that hydraulic fracturing has not led to widespread, systemic impacts on drinking water resources. Twentysix of the 30 members of the SAB Panel concluded that the statement also requires clarification and additional explanation…” (emphasis added)
Here are the most important things to know as you read through the recommendations:
Fact #1: Quantitative analyses have clearly shown no widespread, systemic impacts
Studies that have looked at the numbers of well failures or water impacts that have occurred as oil and natural gas has skyrocketed across the country have shown that these instances are exceedingly rare.
In fact, the Pennsylvania Department of Environmental Protection (DEP) has just released its2015 Oil and Gas Annual Reportwhich found zero confirmed cases of stray gas migration into water resources in 2015.  Those numbers are even more impressive when you consider that Pennsylvania produced a record 4.6 trillion cubic feet of natural gas in 2015 alone, which is nearly five times what it produced in 2011. Not only that, but DEP more than doubled its well site inspections from over 14,650 in 2009 to more than 34,600 in 2015.
The latest data show negligible impacts, but even before states implemented new well casing regulations, the number of well integrity failures (which doesn’t necessarily mean water was impacted) comes out to only a fraction of one percent of all wells drilled in a given state.
In January 2014, the Associated Press completed an investigation using Pa. DEP data, which found a well failure rate in Pennsylvania of only about one-third of one percent (0.33 percent) of all the oil and natural gas wells drilled in the state from 2005 to 2013.
In 2011, the Ground Water Protection Council looked at more than 34,000 wells drilled in Ohio from 1983 to 2007 and more than 187,000 wells drilled in Texas between 1993 and 2008.  The GWPC found a well failure rate of just 0.03 percent in Ohio and only about 0.01 percent in Texas.
In other words, quantitative studies have shown that impacts are not widespread or systemic.
Fact #2: Several panel members expressed strong support for an opinion that EPA’s topline finding is “accurate, unambiguous”
As EID has noted before, the SAB recommendations include an opinion authored by panel member Walt Hufford, who is joined by three other panel colleagues: Dr. Stephen W. Almond, Dr. Shari Dunn-Norman, and John V. Fontana. The dissenting opinion clearly states,
“The statement by the EPA in the draft Assessment Report issued in June, 2015 is clear, unambiguous, concise, and does not need to be changed or modified….The major conclusion by EPA in their June 2015 draft Assessment Report stating “no widespread, systemic impacts on drinking water resources in the Unites States” is accurate, unambiguous, and supportable with the facts EPA has reviewed.”
During one of the teleconferences to discuss the recommendations, several members of the SABvoiced their support for the dissenting opinion and for EPA’s topline finding. As Dr. Shari Dunn-Norman explained,
“I’ve been giving this a lot of thought […] of Walt’s opinion and I would like to support his opinion completely…in my experience we did massive hydraulic fracturing back in the 1970s and 1980s and we just didn’t see major problems.  And if there were really some very big issues with this, we would probably have seen them by now.”
Dr. Stephen W. Almond agreed noting,
“I want to just join in with Shari. I don’t want to sound like we’re singing kumbaya but I’ve fractured all over the world been on literally thousands of frack jobs and I have to agree that I don’t see any widespread risk of any of the areas […]I’d just have to agree with that number one statement that Shari gave just from experience fracturing all over the world and not to say there’s not some cases that may need to be investigated like Dimock and Pavillion, etc., but overall I don’t see a widespread systemic issue here.”
During one of the teleconferences, Dr. Stephen Randtke and Dean Malouta said that they were considering joining the dissenting opinion. Although neither ended up doing so, Randtke said during the teleconference that he agrees with EPA’s topline finding as it stands in the draft groundwater report:
“As I said back in October when you read this entire three paragraph introduction on page ES-6 on the major findings I have really no trouble with it. And so I’m sympathetic to Walt’s statement […] I agree with kind of the whole statement as EPA has stated it. I think it’s a very good one.”  (emphasis added)
Fact #3: Study after study has come to EPA’s same conclusion that impacts are not widespread or systemic  
EPA’s findings are right in line with what scientists have repeatedly concluded in peer-reviewed research. Studies by the University of CincinnatiU.S. Department of Energy, the U.S. Geological Survey, the Government Accountability Office, the Groundwater Protection CouncilCalifornia Council on Science and Technology, and the Wyoming Department of Environmental Quality, as well as studies by numerous universities, such as MITUniversity of Texas at Austin,  and Yale (just to name a few) have come to exactly the same conclusion.
Not once, in at least four drafts of recommendations, has the SAB Panel pointed to any evidence that would contradict EPA’s topline finding of “no widespread, systemic impacts” to drinking water resources. Without that evidence, SAB can only conclude that EPA’s topline finding is sound.

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