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The Weekly Oil and Gas Update

The Weekly USA Oil & Gas Update: 09th September 2014

Contributor: Todd Erickson
Posted: 09/08/2014
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The Oil & Gas Weekly is compiled by Todd Erickson. Todd is a veteran executive manager in the North American E&P market.

He has management experience in high-growth oil & gas service organizations performing a leadership role in operations, strategy, and corporate development with a track record of identifying opportunities and best-practices, creating execution plans, then developing effective teams and leaders to execute them.

Learn more about Todd here

Rig Counts - select states with key plays

Select states

This Week

Change from last week

3 months ago

One year ago

Alaska

7

0

10

14

Arkansas

12

+1

11

13

California onshore

44

0

47

33

Colorado

74

-1

65

68

Kansas

23

-2

31

27

Mississippi

13

0

10

14

N. Louisiana

29

0

29

27

New Mexico

96

+2

86

74

North Dakota

183

0

169

168

Ohio

41

0

39

34

Oklahoma

213

+1

198

170

Pennsylvania

57

+2

57

51

Texas

907

+7

896

838

Utah

23

0

27

30

West Virginia

29

0

25

36

Wyoming

57

+1

48

49

Total US

1925

+11

1860

1767

Total Canada land

412

+7

212

384

Oil & Gas Prices - Bloomberg/EIA

This Morning

12 weeks ago

1 year ago

Crude Oil - USD/bbl

WTI

92.47

107.52

109.62

Brent

100.09

113.42

115.49

Natural Gas-USD/mmbtu

NYMEX Henry Hub

3.82

4.71

3.66

General News

CHS to build $3 billion fertilizer plant in North Dakota

The nitrogen-based fertilizer plant is slated to begin construction next spring in Spiritwood, ND, 85 miles west of Fargo. Economics for the investment have recently become very favorable; North Dakota offers an ample supply of inexpensive natural gas, the primary feedstock for nitrogen fertilizer, and demand is growing as corn increases its share in the country's grain mix. CHS's biggest challenge will be finding the workers to get the plant built. According to CHS CEO Carl Casale, "[t]here is just not enough resident capability and talent. We will have to bring in a lot of outside contractors." Most of the workers with the proper skills come from the Gulf Coast petrochemical region. "You have to relocate an entire labor force to construct the plant." Article here

Unconventional Oil & Gas News

West Texas' Wolfcamp could pass Bakken in capital spend by 2017

According to Wood Mackenzie, in 2014 $12 billion will be spent in the Wolfcamp on capital expenditures, a figure 80% of that spent in the US's #2 play the Bakken. By 2017, Wood Mac believes the Wolfcamp may well pass the Bakken in total capital spend. Production will also rise dramatically over this period, from an estimated 200,000 bpd in 2014 to an estimated 700,000 in 2017. Article here

Shell hits two big wells in the far eastern part of the Utica

The Gee well had an IP of 11.2 mmcf/d and the Neal an IP of 26.5 mmcf/d, both located on Shell's 430,000 acres in central Pennsylvania. These two high-pressure wells extend the Utica's reach beyond Ohio and western PA into central PA, which will overlap it with the prolific Marcellus formation. Good news for Shell, and possibly other large acreage holders in PA who have been targeting just the Marcellus so far. Article here

Environment and Safety News

Five things to know about Pennsylvania's DEP report on water contamination due to drilling operations

Last week in this section I provided an overview entitled Pennsylvania DEP releases spreadsheet tallying incidents of water contamination by oil & gas drilling operations. The linked article showed tables from the agency's spreadsheet that tallied all its recorded incidents where the industry was determined responsible for water contamination. This week's link takes you to an article from Pittsburgh's Action News 4 that provides more context, via five 'things to know' about the DEP report:

1. Conventional wells cause as many problems as unconventional "fracked" wells - The AP analyzed 170 of these contamination cases and determined that 97 were attributable to conventional wells, and 73 to unconventional.

2. 20,000 wells were drilled over the time frame in question, with 243 problems, and the number of new determinations of contamination is on a steep downward trend--a small number considering the sample size.

3. Methane migrates--In half the cases, methane was found in the water wells as the contaminant--stricter well construction standards by the state likely have a role in the reduction of these incidences.

4. The other half not attributable to methane involved wastewater, sediment, and drilling compounds--some water cleared on its own and some drillers had to replace those that didn't.

5. The DEP attributes the cause to the driller if it can't prove the situation was pre-existing--early on, few water wells were tested prior to drilling and it is likely that some contamination was indeed pre-existing, but attributed to the drilling process because of no pre-test.

Read the entire article Here.

Mergers and Acquisitions News

Boardwalk buys Chevron Petrochemical Pipeline

The $295 million deal will provide Boardwalk with Chevron's 176-mile Evangeline ethylene pipeline which runs from Port Neches, TX to Baton Rouge, LA. Article here

Buckeye Partners to buy Corpus Christ terminal for $860 million

The assets include a high-volume marine terminal on the Corpus Christi Ship Channel; a condensate splitter and LPG storage complex in Corpus Christi; and three crude oil and condensate gathering facilities in the Eagle Ford shale. Article here

Contributor: Todd Erickson