Total exploratory well completions rose during the first three months of this year, but natural gas drilling fell by 28% from a year ago, according to the American Petroleum Institute's (API) latest well completion report. There were 2,495 natural gas wells completed in the quarter, while oil well completions were pegged at 5,352, down 1% from activity in 1Q2011; dry holes were estimated at 1,116 completions. The Washington, DC-based producer group reported that a total of 8,963 wells -- both exploration and development -- were completed in the first three months, down 9% from the same period of 2011. Total well completions were 9,877 in 1Q2011, including 5,425 oil well completions, 3,444 gas well completions and 1,008 dry holes. A total of 10,383 total wells -- 6,149 oil wells, 3,217 gas wells and 1,017 dry holes -- were completed in 4Q2011 (see NGI, Feb. 6). While overall well completions dropped in 1Q2012, exploratory well completions rose 12% from year-ago levels.
Houston onshore operators Halcon Resources Corp. and GeoResources Inc. have agreed to merge in a cash-and-stock transaction worth an estimated $1 billion. The merged Halcon would continue to be run by CEO Floyd C. Wilson, who founded and had run Petrohawk Energy Corp. until it was bought by BHP Billiton for close to $12 billion in 2011 (see NGI, July 18, 2011). Under terms of the acquisition, Halcon agreed to pay $37.97 per GeoResources share, with $20.00 in cash and 1.932 in Halcon shares. Once the transaction is completed, which is expected in the second half of this year, GeoResources shareholders would own 18% of Halcon. The boards have unanimously approved the agreement; shareholder approval other customer approvals still are needed. The transaction woule effectively increase Halcon's estimated proved reserves by more 150% to an estimated 52.8 million boe, 69% weighted to liquids, with average net daily production up more than 170% to about 11,070 boe based on 4Q2011 production rates.
Kinder Morgan Energy Partners LP (KMP) agreed to pay a Kohlberg Kravis Roberts & Co. LP (KKR) affiliated investment group $300 million in common units for its 50% interest in a joint venture (JV) now half-owned by El Paso Corp., which KMP parent Kinder Morgan Inc. (KMI) is acquiring in a $38 billion buyout due to close by the end of May (see NGI, Oct. 24, 2011). KMI would control the JV and hold a 50% interest; KMP would own a 50% stake. The 1,100-mile-long Altamont gathering and processing system in the Uinta Basin includes more than 450 well connections and operates a processing plant with 60 MMcf/d of gas gathering capacity and a 5,600 b/d fractionator. Also acquired was the Camino Real Gathering System in the Eagle Ford Shale, with 150 MMcf/d of gas gathering capacity and 110,000 b/d of oil capacity.
Wyoming Gov. Matt Mead warned state agencies to prepare for 8% cuts in their budgets in response to a dwindling revenue stream on low natural gas prices. Gas production provides the single largest source of revenue to the state, and Wyoming's budget analysts had forecast future revenue on the basis of $3.25/Mcf average gas prices, but the price is currently at a 10-year low. "If this lower price holds through the end of this year, it could mean a reduction of more than $125 million of revenue to the general fund," a spokesperson for Mead said. The 8% cuts would result in knocking out $74.5 million from the fiscal 2014 budget, which starts July 1, 2013. Mead also asked for an immediate cap on filling vacant staff positions to cut spending.
Salt Lake City-based Questar Corp. has launched Questar Fueling to provide consulting, design, packaging and installation of natural gas vehicle (NGV) fueling stations nationwide, with a specific target on trucking fleets. The new unit's operations are separate from the company's utility statewide NGV fueling outlets, operated under Questar Gas. The new unit isn't expect to make a big impact for a year to 18 months but after that, Questar is expecting a different story. Executives said they already are working with "a fair number of customers nationally."
Liberty Natural Gas LLC has withdrawn applications to build a liquefied natural gas (LNG) import terminal off the coast of New Jersey to avoid any regulatory confusion over a "substantially revised" project that it plans to refile. Officials with the Maritime Administration and the U.S. Coast Guard were notified of Liberty's decision. The Jersey City, NJ-based company had originally proposed building and operating a deepwater port 16.2 miles from the coast to serve LNG regasification vessels and would have been fully submerged when not in use. Liberty's original plans also called for a 9.2-mile onshore pipeline, connected to a submerged pipeline connecting to the port. The onshore pipeline was designed to transport up to 2.4 Bcf/d of gas to markets in New Jersey, New York and other nearby regions. Interconnections with the Texas Eastern Transmission LP and Transcontinental Gas Pipe Line Co. were also planned.
The Ohio Department of Natural Resources (ODNR) is on pace to receive a record number of permit applications this year for new injection wells and is processing a backlog of 19 permit applications submitted since late November, around the time the last four of 12 seismic events hit northeastern Ohio. It typically takes between 45 and 60 days to review a permit application and about 10 of the 19 applications were submitted before the ODNR issued a 24-page preliminary report on the earthquakes, which regulators believe were caused by a Class II injection well owned by Youngstown-based D&L Energy Inc. and operated by Northstar Disposal Services LLC (see NGI, March 12).
The Ohio House of Representatives has passed a mid-biennium budget review bill but stripped out Gov. John Kasich's proposals to restructure taxes and regulations on the energy industry. HB 487 passed the House by a 61-33 vote and moves to the Senate. Kasich had proposed new taxes on hydraulic fracturing (fracking) and natural gas liquids (NGL), passing the revenue along to Ohioans in the form of a personal income tax cut (see NGI, March 12). But the governor's Republican colleagues in the House, unenthusiastic about raising taxes, tabled the proposals (see NGI, March 26).
Cabot Oil & Gas Corp. first quarter results improved over the year-ago period, mostly through an expanding production base. Oil and gas volumes both set records, although low gas prices weighed on the Houston-based producer. Production was 59.7 Bcfe in the quarter, with 56.4 Bcf of gas output and 538,000 bbl of liquids, representing increases of 58%, 55% and 138%, respectively, compared with 1Q2011. Gas price realizations were down 22% to $3.65/Mcf, while oil price realizations were up 11% to $96.67/bbl. Net income was $18.3 million (9 cents/share), compared with $12.9 million (6 cents) during the year-ago period. Excluding special items, results were $28.5 million (14 cents/share), compared with $20.7 million (10 cents).
The Susquehanna River Basin Commission (SRBC) as of Friday had restored all but one of the 17 water withdrawal permits it had temporarily suspended on April 18 following drought conditions in the basin (see NGI, April 23). A spokeswoman said the one permit still under temporary suspension was for Tennessee Gas Pipeline Co. in Tioga County, PA, where the operator was permitted to draw water from an unnamed tributary of North Elk Run. However, the pipeline wasn't technically affected since the company only needed the water for construction and testing of the pipeline.
Well control experts succeeded in plugging Chesapeake Energy Corp.'s runaway oil well that had been spewing natural gas and drilling mud for a few days near the town of Douglas, WY, in part of the Niobrara formation in Converse County. Work crews managed to reduce the pressure and regain control by plugging the well with mud. Houston-based Boots & Coots and parent company Halliburton Co. conducted the well control work, pumping mud down the wellbore through steel lines to stem the emissions and avoid the threat of an explosion and fire. The incident occurred during a procedure to install steel well casing. The cause was under investigation. No one was injured, and there was no threat to air or water, according to officials.
The environmental group Citizens for Pennsylvania's Future (PennFuture) released a 24-page report translating Act 13, the Pennsylvania Marcellus Shale law, into "plain language" as a free public resource. The project attempts to be "as unbiased as possible," according to President George Jugovic Jr. "I think the interesting thing going forward is not what decisions were made, but were they the right decisions," he said, noting that the organization is in the process of creating its legislative policy guidelines that will outline "what parts of this law should be improved and how should they be improved."
Hess Corp. saw first quarter profits fall 41% year/year, as lower crude oil sales and high operating costs offset higher commodity prices. The New York City-based operator earned $545 million ($1.60/share) in 1Q2012, versus $929 million ($2.74) in 1Q2011. Production in the period reached 397,000 boe/d, down slightly from 399,000 boe/d a year earlier. Through its hedging programs, average sales price for natural gas in the quarter were $6.23/Mcf, up from $5.84/Mcf in the year-ago quarter, while oil prices were $89.92/bbl, versus $87.22.
Rapid City, SD-based Black Hills Corp. has hit a regulatory roadblock to replace old coal- and natural gas-fired generation plants with a single 88 MW gas-fired plant near Pueblo, CO. The Colorado Public Utilities Commission (PUC) and an administrative law judge (ALJ) concluded that Colorado Electric did not adequately substantiate the need for replacing anything other than its 42 MW W.N. Clark coal-fired plant. The Black Hills' utility had sought to also replace two 60-to-70-year-old gas-fired plants at the Pueblo Airport Generating Station. The Colorado gas producers' association had argued that Black Hills "met the burden of proof," and it urged the PUC to set aside an ALJ's recommendation for denial, and approve the settlement. The company said it intends to refile with state regulators by July 31.
A warmer-than-normal winter colored Southern Company's 1Q2012 financial results, but gas issues and coal-to-gas trends dominate, officials said. Given low gas prices and environmental pressures on coal, CEO Tom Fanning said the company's fuel mix estimates are 47% gas and 35% coal, with the remaining from nuclear and hydroelectric sources. By comparison, the five years ago was 16% gas and 70% coal-fired generation. Three new combined-cycle gas-fired units are being built by Georgia Power, one 840 MW unit that started operations last fall, a second to begin operations soon and a final unit that is to start up in November. In the first three months the gas-fired generation fleet achieved a capacity factor of more than 70%, and the company has projected that it could burn up to 600 Bcf of gas for the full year, about 1.7 Bcf/d or three times more than it burned in 2007.
The effects of low natural gas prices are spreading to marine transportation and other potential industrial expansion in the Pacific Northwest, according to the Northwest Gas Association (NWGA). NWGA Executive Director Dan Kirschner said there is "intense interest" in natural gas applications in the marine transportation sector and the forest products industry and "whispers" about some growth in fertilizer projects in the region. At least two large Puget Sound-area ship operators -- Washington State Ferries and cargo operator Totem Ocean Trailer Express (TOTE) -- are planning to tap into low-cost natural gas supplies in place of diesel, each planning to make $100 million bets on converted vessels to run on liquefied natural gas. Natural gas prices in the region are about half of what they were a year ago, causing other industries, such as forest products, to consider switching to gas.
A Canadian family doctors' association has called on New Brunswick to enact a moratorium on hydraulic fracturing (fracking), while researchers with the University of New Brunswick (UNB) are urging Fredericton, NB, to proceed with caution. According to reports, Anick Pelletier, president of the New Brunswick chapter of the College of Family Physicians of Canada, sent a letter to the province's legislators outlining the group's concerns about fracking. Although seismic testing caused an uproar in the province in the past (see NGI, Aug. 29, 2011), the researchers said its impact on groundwater supplies "is expected to be minimal."
Moody's Investors Service has placed Spain's Repsol and Maritimes & Northeast Pipeline LLC (M&N) under review for possible downgrades after Argentina announced it would nationalize YPF SA. According to Moody's, nationalization would reduce Repsol's stake in YPF from 57% to 6%. The analysts said that without adequate compensation, the move would weaken Repsol's credit metrics. Repsol is considering legal action against companies that assist Argentina with developing its assets, but media reports said executives from France's Total SA and Brazil's Petroleo Brasilerio, or Petrobas, have already met Argentine officials. Executives with Chevron Corp., ExxonMobil Corp. and Apache Corp. were also scheduled to meet with Argentina.
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