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Thursday, October 23, 2014

Ohio Courts Busy Ruling on Oil and Gas-Related Matters

From BakerHostetler's North America Shale Blog:
Due to increased drilling activity in the Utica shale formation, state and federal courts in Ohio and the 6th Circuit have recently issued decisions related to local drilling regulations, drilling permits, leasing, indemnity provisions, and whether a landowner can state a strict liability claim against a drilling company that survives a motion to dismiss. While separate, future blog entries will discuss in more detail Ohio’s Dormant Mineral Rights Act and strict liability claims against fracking operations, the following post summarizes some recent developments in Ohio law that are relevant to the oil and gas industry.
The post goes on to examine several decisions, categorized under the headings: Obstacles to Drilling, Lease Terms, and Potential Liability.  Click here to read the whole article.

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Magnum Hunter Resources Completes Production Test Results on Stewart Winland Pad in Tyler County, West Virginia

Combined Flow Tests of 97.4 MMCFE per Day

HOUSTON, TX--(Marketwired - Oct 22, 2014) - 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 the Company has completed test results on its 100% owned Stewart Winland Pad located in Tyler County, West Virginia. The Stewart Winland Pad has four 100% owned recently completed wells (3 Marcellus and 1 Utica).

The Stewart Winland 1301M was drilled and cased to a true vertical depth of 6,155 feet with a 5,762 foot horizontal lateral, and successfully fraced with 27 stages. The well tested at a peak rate of 17.0 MMCFE of natural gas per day (~23% Condensate and ~25% NGL) on an adjustable choke.

The Stewart Winland 1302M was drilled and cased to a true vertical depth of 6,147 feet with a 5,676 foot horizontal lateral, and successfully fraced with 29 stages. The well tested at a peak rate of 17.1 MMCFE of natural gas per day (~19% Condensate and ~26% NGL) on an adjustable choke.

The Stewart Winland 1303M was drilled and cased to a true vertical depth of 6,149 feet with a 5,762 foot horizontal lateral, and successfully fraced with 29 stages. The well tested at a peak rate of 16.8 MMCFE of natural gas per day (~20% Condensate and ~26% NGL) on an adjustable choke.

As previously reported on September 24, 2014, the Company's 100% owned Stewart Winland 1300U (Utica well) tested at a peak rate of 46.5 MMCF of natural gas per day (~7,750 BOE per day) on an adjustable rate choke with 7,810 psi FCP. The Stewart Winland 1300U well was drilled and cased to a true vertical depth of 10,825 feet with a 5,289 foot horizontal lateral, and successfully fraced with 22 stages.

Management Comments

Mr. Gary C. Evans, Chairman of the Board and Chief Executive Officer of Magnum Hunter, commented, "We are pleased to report our company's highest production test rates to-date on three recently completed Marcellus wells located in Tyler, County West Virginia. To have successfully completed four very high production rate wells (three Marcellus and one Utica) that have tested on a combined basis at 97.4 MMCFE per day on one single pad, is a testimony to both the quality of the rock underlying our Company's lease acreage as well as the knowledge and experience of our management team and field personnel and what they have learned over the past three years in drilling and completing over fifty wells in the region. Additionally, this type of production obviously has significant implications for our midstream subsidiary, Eureka Hunter Pipeline, LLC, where all of this new natural gas and liquids production is currently tied in."

About Magnum Hunter Resources Corporation

Wednesday, October 22, 2014

Editorial: Anti-Fracking Activists Are Arrogant and Community Bill of Rights is Ridiculous

From the Youngstown Vindicator:
To understand the mentality of the individuals who refuse to take “no” for an answer in their campaign to ban fracking and other related gas and oil activities in the city of Youngstown, consider this comment: 
“There’s no one protecting our air and property rights, so the community members have to do it.” 
Thus said Susie Beiersdorfer, one of the mainstays of the committee that has again placed the anti-fracking Community Bill of Rights charter amendment on the Nov. 4 general election ballot in Youngstown. 
On three previous occasions, city residents rejected the anti-fracking charter amendment and the arguments put forth by Beiersdorfer, and her husband, Ray, a public employee. 
But they and other self-styled protectors of the people of Youngstown who are thought of as environmental bumpkins refuse to give the voters the respect they deserve. 
Let Susie Beiersdorfer’s opinion of city residents be your guide as you attempt to understand what’s driving the anti-fracking proponents.
Read the whole editorial by clicking here.

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New Study Zeroes In On Major Pollution Sources from Oil and Gas Operations

From the University of Colorado Boulder:
Oil and natural gas production fields can emit large amounts of air pollutants that affect climate and air quality—but tackling the issue has been difficult because little is known about what aspects of complex production operations leak what kinds of pollutants, and how much. 
Now a study led by the Cooperative Institute for Research in Environmental Sciences (CIRES) the journal Atmospheric Chemistry and Physics sheds light on just that, pinpointing sources of airborne pollutants. 
CIRES is a joint institute of the University of Colorado Boulder and the National Oceanic and Atmospheric Administration.

The results have important implications for mitigation strategies in the nation’s oil and natural gas production. 
“Before you can stop a leak, you have to know where it is,” said lead author Carsten Warneke, an atmospheric chemist with NOAA’s Cooperative Institute for Research in Environmental Sciences (CIRES) at the University of Colorado Boulder. “This study tells us where the largest emissions are coming from, and that, in turn, helps industry identify what they can do to reduce emissions as cheaply and effectively as possible.”
Find out much more about this study by clicking here. 

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Company Behind Keystone XL Pipeline Receives Climate Leadership Award

From the Huffington Post:
The company that wants to build the Keystone XL pipeline was recognized this week for leadership on climate change -– to the shock of environmental activists. 
Alberta-based TransCanada, which has been seeking permission to build the 1,660-mile pipeline from Canada's oil sands to refineries in Texas, was included as a corporate climate leader on the Carbon Disclosure Project's Climate Performance Leadership Index 2014. The Carbon Disclosure Project, or CDP, is a United Kingdom-based nonprofit that works with companies to tally and report their greenhouse gas emissions. TransCanada was one of five energy sector companies included on the "A List" in this year's report. 
The report notes that the company has set targets for emission reductions, and includes a quote from TransCanada: "Our business strategy is informed by the risks and opportunities from climate change regulations, physical climate parameters and other climate-related developments such as uncertainty in social drivers ... we anticipate that most of our facilities will be subject to future regulations to manage industrial [greenhouse gas] emissions."
Read the whole article by clicking here.

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Tuesday, October 21, 2014

Links for 10/21/14: Kent State Shale Training, Chesapeake/Southwestern Deal Called Win-Win, and More

Gas & Oil:  Kent State University Offers Job Training in Gas, Oil Industry   -   "Kent State University at Tuscarawas, in partnership with Stark State College, ShaleNET and Ohio Means Jobs (The Employment Source), is offering a floor hand course beginning Nov. 3. This three-week class will run Monday through Friday from 8 a.m. to 4:30 p.m. at the..."

National Science Foundation:  New Tracers Can Identify Frack Fluids in the Environment   -   "Scientists have developed new geochemical tracers that can identify hydraulic fracturing flowback fluids that have been spilled or released into the environment. The tracers have been field-tested at a spill site in West Virginia and downstream from an..."

Columbus Business First:  Bank Deposits Booming in Utica Shale Counties   -   "Just five years ago, in the midst of the Great Recession, it probably would have been unthinkable to see some of Ohio’s fastest-growing banks located in small rural areas east of..."

Bloomberg:  Oil Drop Makes Drillers Own Worst Enemy; Gas Offers Haven   -   "U.S. oil producers that saw profits soar on the North American shale boom are feeling the downside of success: falling prices and shrinking cash are threatening to slow development. At the same time, as crude prices approach four-year lows, natural gas companies are experiencing..."

Energy in Depth:  New Report Says Natural Gas Bad for Climate – Because It’s Good for the Economy   -   "This week, a group of researchers published a report in the journal Nature that hazards yet another attempt at organizing a semi-coherent case against natural gas qua an effective means of addressing climate change. Of course, we’ve seen papers like this in the past, and we’ve addressed at length each of their respective bad-inputs, faulty assumptions and architectural inadequacies in..."

Business Wire:  Fitch: Chesapeake/Southwestern Deal a Strategic Win-Win   -   "The $5.4 billion southern Marcellus and Utica shale asset sale announced yesterday is considered to be a strategic win-win for both Chesapeake Energy Corp. (Chesapeake [BB/Positive]) and Southwestern Energy Company (Southwestern [BBB-/Stable]), according to Fitch Ratings. Chesapeake stands to monetize a non-core asset that will provide considerable proceeds to continue paying down debt and simplifying its capital structure as well as pursue other strategic initiatives. Southwestern will gain..."

Press release:  Antero Resources Third Quarter 2014 Operations Update   -   "Antero’s net daily production for the third quarter of 2014 averaged 1,080 MMcfe/d, including 25,000 Bbl/d of liquids (14% liquids). Third quarter 2014 production represents an organic production growth rate of 91% and 21% from the third quarter of 2013 and second quarter of 2014, respectively. Liquids production for the third quarter of 2014 represents an..."

Norwood News:  Opinion: Rebutting the Climate Change Argument   -   "A recent letter to the editor by Diana Pedi titled, Climate Change Happens in The Bronx Too took aim at fracking even though it’s thanks to fracking and the increased use of natural gas that the U.S. has significantly lowered greenhouse gas emissions. According to Pedi, fracking is to blame for climate change because, “fracking releases methane.” That claim has been directly contradicted by..."

Gas & Oil:  American Energy Partners Regional Headquarters to Be Built in Cambridge   -   "Aubrey McClendon, CEO of American Energy Partners, is locating his regional headquarters in Cambridge. The facility will be constructed at the D.O. Hall Business Center and will create 125 jobs. The Oklahoma City-based American Energy Partners LP has raised billions to..."

The Motley Fool:  Former Chesapeake Energy CEO Sets Sights on California   -   "Bloomberg recently reported that former Chesapeake Energy (NYSE: CHK ) CEO Aubrey McClendon is considering a bid for Freeport-McMoRan's (NYSE: FCX ) California oil assets. The assets, which are worth about $5 billion, would seem like a real departure from the shale-focused growth strategy that McLendon pursued at both..."

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Utica Shale Now Up to 1,560 Permits on Latest Report

The latest weekly permitting update from the Ohio Department of Natural Resources is now posted.  It was a busy week for Harrison County as the Utica shale numbers continue to rise.

12 new permits were issued last week.  6 of those permits were issued to American Energy Utica for Harrison County wells.  5 went to Antero Resources for Monroe County sites, and the remaining 1 permit is for a Belmont County well to be drilled by Rice Drilling.

These 12 new permits now move the Utica shale up to 1,560 total permits issued.  1,122 wells have been drilled, 607 are producing, and the Utica rig count is 46.

View the report by clicking here.

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Chesapeake Sells Off Almost 25% of Utica/Marcellus Operation

Southwestern Energy has acquired 413,000 acres of Marcellus and Utica shale assets from Chesapeake Energy in a $5.375 billion transaction.  Here are the announcements from the two companies.

First, Southwestern Energy:
Southwestern Energy Co., Houston, has agreed to acquire assets in the southern Marcellus shale and a portion of the eastern Utica shale in West Virginia from Chesapeake Energy Corp., Oklahoma City, for $5.375 billion.
The deal, expected to close in the fourth quarter, encompasses 413,000 net acres and 1,500 wells in northern West Virginia and southern Pennsylvania along with related property, plant, and equipment. Average working interest in the properties is 67.5%.
Of a total of 435 horizontal wells, 256 are operated and producing in the Marcellus and Utica and an additional 179 are nonoperated or nonproducing in the Marcellus and Utica.
Net production in September totaled 336 MMcfd of gas equivalent, of which 55% is gas, 36% are NGLs, and 9% is oil. As of Dec. 31, 2013, net proved reserves associated with these properties totaled 221 million boe.
Southwestern Energy will assume a portion of Chesapeake’s firm transportation and processing capacity commitments. Based on capacity and expected future commitments, the company’s preliminary plans are to begin with 4-6 rigs next year and increase to 11 rigs by 2017.
Southwestern Energy estimates that it can drill for a minimum of 20 years maintaining that 11-rig pace. By yearend 2017, the reserve mix for the company is estimated to be one-third each for the Fayetteville, northeast Marcellus, and the newly acquired West Virginia and Pennsylvania properties, compared with two-thirds for the Fayetteville and one-third northeast Marcellus as of the day the deal took place.
Southwestern previously purchased 162,000 net acres in the Marcellus from Chesapeake for $93 million, giving Southwestern Energy 337,000 net acres in the play upon closing of the deal (OGJ Online, Apr. 30, 2013). Earlier this year, Southwestern Energy agreed to purchase 312,000 net acres in the Niobrara shale from Quicksilver Resources Inc. and Swepi LP, a unit of Royal Dutch Shell PLC, for $180 million (OGJ Online, Mar. 7, 2014).
Doug Lawler, Chesapeake’s chief executive officer, commented on the sale from his company’s perspective, “It’s important to note that this transaction has no impact on our expected growth profile or on our views around maintaining a disciplined capital program. We expect our full-year production guidance for 2015 to remain in the range of 7-10% growth from 2014 levels adjusted for asset sales.”
As of May, the total value of sales and divestitures for the year made by Chesapeake totaled more than $4 billion (OGJ Online, May 16, 2014).
Next, from Chesapeake Energy:

Chesapeake Energy Corporation (NYSE:CHK) announced that it has executed a Purchase and Sale Agreement to sell assets in the Southern Marcellus Shale and a portion of the Eastern Utica Shale in West Virginia to Southwestern Energy Company (NYSE:SWN) (“Southwestern”) for aggregate proceeds of $5.375 billion. The transaction, which is subject to certain customary closing conditions, including the receipt of third-party consents, is expected to close in the fourth quarter of 2014.
Chesapeake has agreed to sell approximately 413,000 net acres and approximately 1,500 wells in Northern West Virginia and Southern Pennsylvania, of which 435 are in the Marcellus and Utica formations, along with related property, plant and equipment. Average net daily production from these properties was approximately 56,000 barrels of oil equivalent (boe) during the month of September, consisting of 184,000 Mcf of gas, 20,000 barrels of natural gas liquids and 5,000 barrels of condensate. As of December 31, 2013, net proved reserves associated with these properties were approximately 221 million barrels of oil equivalent (mmboe).
Doug Lawler, Chesapeake’s Chief Executive Officer, commented, “Today’s announcement marks a major step in Chesapeake’s transformation and a dramatic improvement in our financial strength as we seek to maximize value for our shareholders. Earlier this year, we committed to unlocking the significant value inherent in this asset, recognizing the disconnect of its perceived value within our portfolio. It’s important to note that this transaction has no impact on our expected growth profile or on our views around maintaining a disciplined capital program. We expect our full-year production guidance for 2015 to remain in the range of 7-10% growth from 2014 levels adjusted for asset sales. I am very proud of the efforts that our Southern Marcellus team and all of our employees have put into building and developing our assets and creating value for our company. We look forward to deploying the proceeds from this significant transaction in ways that will continue to drive even greater shareholder value.”

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