MHR - PINK:CMTX

Cooperstown Brewery Fights N.Y. Fracking
‎
Bloomberg - Jim Efstathiou Jr. - 22 hours ago

Towns are “increasingly aware of the great burden gas drilling imposes on ... In Pennsylvania's portion of the Marcellus Shale, which stretches from ...
ECA - COG - BHI

Fracking foes drill no-show industry
‎
istockAnalyst.com (press release) - 2 hours ago

Esposito also called on the state to consider the cumulative impacts of a gas drilling boom across thegas-rich Marcellus Shale, which stretches from the ...

Back to School
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Huffington Post (blog) - 20 hours ago

By contrast, companies that extract Marcellus Shale natural gas using the environmentally devastating process of "fracking," will not be taxed at all -- an ...

Earthquake Swarm Rattles Colorado
Hundreds Report Feeling Magnitude 5.3. Quake
April Schildmeyer, News Producer

POSTED: 4:08 am MDT August 23, 2011
UPDATED: 5:24 am MDT August 23, 2011

TRINIDAD, Colo. --

The largest earthquake to strike Colorado in almost 40 years has shaken
hundreds of people near the New Mexico border.

The magnitude 5.3 earthquake was recorded at about 11:46 p.m. MDT Monday about nine miles southwest of Trinidad, Colo., and about 180 miles south of Denver, according to the National Earthquake Information Center in Golden.

By 4:00 a.m. more than 900 people had logged on to the U.S.G.S. web site to report feeling the quake. The reports reach up to Fort Collins.

Fewer people reported feeling three aftershocks. A 3.2. reported around 3:37 a.m. A 3.5 around 12:56 a.m. and another 3.8 around 1:17 a.m. Tuesday.

The magnitude 5.3. quake is the largest in Colorado since a magnitude 5.7 was recorded in 1973, U.S. Geological Service geophysicist Amy Vaughn said. That one was centered in the northwestern part of the state -- about 50 miles north of Grand Junction, she said.
A few homes have been damaged and deputies were investigating reports of rockslides along a highway, a Las Animas County Sheriff's Office dispatcher said.

This area of Colorado saw a similar swarm of earthquakes in September 2001. The largest magnitude in that swarm was 4.1.

“We have not seen one of this magnitude in this area at all,” said U.S. Geological Survey geophysicist Jessica Sigala.
Did you feel the quakes? Log onto usgs.gov to report what you felt.

Is the Shale Gas M&A Market Ripe for a Correction?

Neal Anderson
Wood Mackenzie Inc.
Houston, TX

Shale gas has captured the attention of the global E&P industry and policy makers everywhere. The primary appeal is its enormous resource potential, which could offer energy importing countries greater energy security in an increasingly volatile world.

The emergence of shale gas plays has driven a more and more frantic M&A market as new entrants seek to gain access at prices that appear to be disconnected with current – and likely future – market fundamentals.

In this article, we make the case for a short-term correction in the shale gas M&A market and examine how this correction is expected to affect the medium- and long-term outlook.

Why is shale gas so attractive?
Over the past several years, there has been an increasing perception that access to attractive E&P investment opportunities has become more challenging, as some prospective countries remain out of bounds to foreign E&P investment, such as Saudi Arabia. In other scenarios, investors face the prospect of forced expropriation of their assets, as has been the case in Venezuela. Also, some host governments and regulators favor the existing national incumbents over foreign investors, which could be argued is currently the case in countries such as Brazil and Russia.

Coupled with these scenarios, upstream taxation has escalated over this time period¹ as governments seek to extract an ever greater share of the economic rent as oil and oil-linked international gas prices have risen.

In addition, the last decade has seen the emergence of the expansionist National Oil Companies (NOCs), which have rapidly become major competitors to the established International Oil Companies (IOCs), aggressively pursuing opportunities and bidding prices for assets that the IOCs find challenging to top.

The rise of shale gas plays in North America and Europe has fulfilled an important industry need, namely the desire to enjoy material growth opportunities in areas where access is open and transparent; where there is no fear of expropriation and the upstream taxation regime is designed to generate an attractive return for all parties involved.

Finally, shale gas plays appeared to offer the once elusive prize of material resources with limited to no finding risk, providing companies with onshore, long-life assets, with repeatable drilling opportunities in attractive, stable regimes.

How did North American shale gas plays evolve?
The Barnett shale in Texas heralded the potential of shale gas with Devon Energy’s acquisition of Mitchell Energy in 2002 arguably being the key event, as it brought significant capital to bear in exploiting the play for the first time. Throughout the mid- to late-2000s, US Independents began testing the potential of other shale gas plays ranging from the Fayetteville, Haynesville, and Woodford to the Marcellus.

Shale gas production began to ramp up in 2006 (c. 2 bcf/d), supported by strengthening gas prices and operators’ ability to quickly apply new technological knowledge. With material production (c. 4 bcf/d) from shale gas plays in 2007, shale gas plays quickly began to attract interest from across the global industry.

Initially, the larger US Independents began to build positions, e.g., Anadarko, followed by the Majors, e.g., BP, with the European companies in rapid pursuit, e.g., BG, ENI and Statoil. The swift ramp-up in production coincided with a marked fall in demand due to the looming Global Financial Crisis, resulting in natural gas prices crashing from historic highs in 2008. These access transactions were typically structured as Joint Ventures (JVs) with the new entrants usually funding a promoted share of future costs, exacerbating the over-supply situation.

Since then, the pool of potential shale gas investors has expanded beyond experienced onshore North American operators to include companies willing to commit up to several billion dollars to enter and develop plays. It can be argued that they have neither the skills nor experience to efficiently exploit the resource and evaluate selling gas into the most liquid, dynamic natural gas market, alien to their own typically regulated natural gas markets.

The continued waves of new investors have committed c. US$90 billion² to exploiting the shale gas plays in North America, throwing a lifeline to the established players who have been able to continue to hold and exploit their lease holdings using their new investors’ money.

Who is making money?
An analysis of the results from Q4 2009 through Q4 2010 of both shale gas operators and related service companies illustrates that the operating margin is increasingly being taken by the service companies at the expense of the operators (see Figure 1). Operators have been responding by bringing activities in-house, which typically has been the domain of the service companies, owning everything from rigs to hydraulic fracture stimulation crews, in an attempt to control service cost inflation.

Supply economics support this financial picture with the majority of shale gas plays failing to break even on a full-cycle basis³ at prevailing gas prices – the notable exceptions being the liquids-rich plays (see Figure 2). This analysis is backed up by a review of current drilling activity, which shows an increase within the liquids-rich plays, e.g., Eagle Ford, at the expense of the dryer gas plays, e.g., Haynesville. The attraction of an additional, valuable, liquids revenue stream is rapidly driving up liquids-rich asset prices.

This harsh economic reality has been postponed through a combination of the continuing flow of new investors, and the ability of operators to hedge gas production at economic prices. Unfortunately, this prop is being removed with companies only being able to hedge their gas production at prices ranging from US$4.00 to US$5.95/mmbtu⁴.

Figure 1

Why is the shale gas M&A market still so strong?
Given the challenging play economics that are finally being translated in operators’ financial statements, it is important to understand why the M&A market continues to thrive.

It seems that the equity analyst community has played a key role in helping fuel the shale gas M&A market, acting as the chief cheerleader for shale gas plays. A review of historic analysts’ notes shows that their enthusiasm for reserve bookings and production growth has only recently been replaced with a focus on value, namely an analysis of which companies are actually making money, as opposed to recycling money.

The ultimate irony of the current hot M&A market is that historically, greater value has been created through grass-roots entry of resource plays rather than through acquisitions⁵.

What is the future of shale gas plays?
While we have made the case that the shale gas market has become over inflated and will in the short-term suffer a correction, select, top-tier shale gas plays will remain a viable growth area in the future. The market correction will herald a change from a sellers’ market to one in favor of the buyers.

Over time, it has become apparent that the original premise that shale gas plays offered limited to no finding risk has increasingly been thrown into question. While the hydrocarbon molecules may be present in the play, being able to produce them commercially remains a challenge. Additionally, while the plays offer long-life potential, this will only be realized through significant ongoing capital investment.

Only the very best shale gas plays will have a long-term future supported by operational efficiencies, which will continue to advance, coupled with a new focus on applying subsurface science and technology, and will help to identify the sweet spots and yield more long-lasting results. The ultimate winners will be those companies that proactively screen shale gas opportunities, awaiting the coming market correction and executing on the best deals.

Figure 2

Neal Anderson, Wood Mackenzie

About the author
Neal Anderson (energy@woodmac.com) is the Global Head of Consulting for Wood Mackenzie and was elected a member of the US National Petroleum Council in 2010. He advises clients ranging from the super-majors and National Oil Companies to start-ups. Client projects have ranged from developing new corporate growth strategies to improving both function and business unit performance. Wood Mackenzie's consultants provide strategic advice based on real substance to clients in the global energy, mining and metals industries.

References
1 Wood Mackenzie Global Oil & Gas Risk and Rewards 2004; Government Take Study 2007; Petroleum Fiscal Systems 2010.
2 Wood Mackenzie estimate, aggregate of all shale gas access transactions.
3 Gas price required to make a 10% nominal return inclusive of land costs; current Henry Hub price US$4.261/mmbtu May 20th, 2011.
4 Company reports 2011 floor price.
5 2010 Wood Mackenzie Study of the value created or destroyed by seven North American Resource Play Operators over the last decade, analyzing both grass-roots entry (E&A spend) and entry through acquisition (M&A spend).

Article content subject to copyright.

Source:

Oil & Gas Financial Journal

Natural gas plays a key role in our nation’s clean energy future and the process known as hydraulic fracturing (HF) is one way of accessing that vital resource. HF is used by gas producers to stimulate wells and recover natural gas from sources such as coalbeds and shale gas formations. HF is also used for other applications including oil recovery. Over the past few years, several key technical, economic, and energy policy developments have spurred increased use of HF for gas extraction over a wider diversity of geographic regions and geologic formations. It is projected that shale gas will comprise over 20% of the total US gas supply by 2020 PDF (230pp, 2M, About PDF). Along with the expansion of HF, there has been increasing concerns about its potential impacts on drinking water resources, public health, and environmental impacts in the vicinity of these facilities.

Underground Injection Control Guidance for Permitting Oil and Natural Gas Hydraulic Fracturing Activities Using Diesel Fuels

EPA is developing Underground Injection Control (UIC) permitting guidance for hydraulic fracturing activities that use diesel fuels in fracturing fluids. Learn more about approaches EPA is considering and opportunities to comment.

EPA's Draft Hydraulic Fracturing Study Plan

In its Fiscal Year 2010 budget report, the U.S. House of Representatives Appropriation Conference Committee identified the need for a focused study of this topic. EPA scientists, under this administration and at the direction of Congress, are undertaking a study of this practice to better understand any potential impacts of hydraulic fracturing on drinking water and groundwater. EPA consulted with experts in the field through peer review, and technical workshops and engaged stakeholders in a dialogue about the study through facilitated public meetings.

EPA has submitted its draft study plan on hydraulic fracturing for review to the agency's Science Advisory Board (SAB).

The overall purpose of the study is to understand the relationship between hydraulic fracturing and drinking water resources. The scope of the proposed research includes the full lifespan of water in hydraulic fracturing, from acquisition of the water, through the mixing of chemicals and actual fracturing, to the post-fracturing stage, including the management of flowback and produced water and its ultimate treatment and disposal.

The SAB plans to review the draft plan March 7-8, 2011. Consistent with the operating procedures of the SAB, an opportunity will be provided for stakeholders and the public to provide comments to the SAB during their review. The Agency will revise the study plan in response to the SAB's comments and promptly begin the study. Initial research results are expected by the end of 2012 with a goal for a report in 2014.

For additional information:

Proposed Study Timeline

With input from the meetings in July, August, and September, EPA plans to submit the draft study plan to the Science Advisory Board for peer review in early 2011. EPA expects to initiate the study in early 2011 and to have the initial study results available by late 2012.

Hydraulic Fracturing Study Technical Workshops

Experts will contribute to the workshops as presenters and provide technical knowledge during workshop discussions. Meeting space is limited and EPA will select approximately 40-50 experts for attendance at each workshop. Experts with significant relevant and current experience that reflects the topics of the technical workshops will be selected. Subject-matter experts will also be selected to maintain balanced viewpoints from various stakeholder groups including industry, environmental, academic, and regulatory communities.

For more information on workshop topics, download the workshop flyer PDF (1pp, 54K,About PDF)
Agenda for Chemical and Analytical Methods Workshop, February24-25, 2011 PDF, (3pp, 175K, About PDF)

Hydraulic Fracturing Information Request

On September 9, 2010, EPA issued voluntary information requests to nine leading national and regional hydraulic fracturing service providers. The data requested is integral to the Hydraulic Fracturing Study now underway by EPA, which seeks to understand any potential relationships between hydraulic fracturing and drinking water. EPA is seeking information on the chemical composition of fluids used in the hydraulic fracturing process, data on the impacts of the chemicals on human health and the environment, standard operating procedures at hydraulic fracturing sites and the locations of sites where fracturing has been conducted.

On November 9, 2010, EPA announced that eight out of the nine hydraulic fracturing companies that received voluntary information requests in September agreed to submit timely and complete information to help the Agency conduct its study on hydraulic fracturing. However, the ninth company, Halliburton, has failed to provide EPA the information necessary to move forward with this important study. As a result, and as part of EPA's effort to move forward as quickly as possible, today EPA issued a subpoena to the company requiring submission of the requested information that has yet to be provided.

On December 3rd, EPA received written confirmation from Halliburton that it will comply with the agency’s mandatory request for information on the company's hydraulic fracturing operations. Halliburton has agreed to provide the information on a rolling basis through January 31, 2011. EPA is pleased to have reached an agreement to access this crucial information that will help us carry out our congressionally mandated study on the potential impacts of hydraulic fracturing on drinking water. EPA's subpoena remains in place and is subject to enforcement if the terms of the recent agreement are not met.

Historical Documents

Hydraulic Fracturing Research Study PDF (2pp, 152k, About PDF)

What is Hydraulic Fracturing "Hat tip" Youtube and Chesapeake Energy

New Federal Air Standards To
Counter Hydraulic Fracturing

EPA to propose a new set of air standards as per court order

The new rule will specifically target wells drilled by the method of Hydraulic Fracturing

The court deadline to submit the new proposal is February 2012

The use of controversial drilling process known as hydraulic fracturing will soon
come with a set national air standards submitted by the Environmental Protection
Agency (EPA). The move comes in light of a court order that has ruled in favour of
certain environmental organisations who sued the agency on grounds of a lack of
clear system of protocol for the oil and gas industry and demanded new and
environment friendly standards that will reduce the impact of its pollution.

Hydraulic Fracturing is a method used for drilling oil and gas wells, which leaves
room for toxic emissions to escape in to the environment when the well is
prepared for production.

According to the agency the new rule would specifically target wells drilled
using Hydraulic Fracturing and the surrounding areas, which would significantly
lower the amount of air toxins and volatile organic compounds that leak in to
the environment during oil and gas production.

EPA's deadline is closing in with the agency readying to submit the new set
of standards before February as per the court order.

Pages

Marcellus & Utica Shale News Briefs

Earthquake Swarm Rattles Colorado

Hundreds Report Feeling Magnitude 5.3. Quake

Underground Injection Control Guidance for Permitting Oil and Natural Gas Hydraulic Fracturing Activities Using Diesel Fuels

EPA's Draft Hydraulic Fracturing Study Plan

Proposed Study Timeline

Hydraulic Fracturing Study Technical Workshops

Hydraulic Fracturing Information Request

New Federal Air Standards To Counter Hydraulic Fracturing

New Federal Air Standards To

Counter Hydraulic Fracturing

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New Federal Air Standards To
Counter Hydraulic Fracturing