NGI The Weekly Gas Market Report / NGI All News Access

Industry Briefs

Tennessee Gas Pipeline Co. LLC is holding a binding open season through Aug. 20 for firm capacity on the Rose Lake Expansion Project, which would provide incremental firm capacity from Zone 4 receipt points between Stations 321 and 313 to delivery points at its existing interconnection with National Fuel Gas Supply at Rose Lake and the Zone 4 Station 219 Pool. Tennessee said it expects firm capacity for the expansion project to be around 230,000 Dth/d, with an in-service date of Nov. 1, 2014. The company is also offering additional limited term capacity from mutually agreeable receipt points in Zone 4 between Tennessee's Stations 321 and 313, the Rose Lake interconnection with National Fuel and/or the Station 219 Pool. The company is specifically offering up to 55,000 Dth/d from Nov. 1, 2014 to Oct. 31, 2016, and up to 15,000 Dth/d from Nov. 1, 2016 to March 31, 2017, all to Rose Lake/Station 313.

Eagle Rock Energy Partners LP agreed to pay BP America Production Co. $227.5 million in cash for the BP Panhandle System, including the Sunray and Hemphill gas processors in the Texas Panhandle, which combined have processing capacity of about 220 MMcf/d. Eagle Rock plans to integrate the assets with its existing system, which would result in about 6,463 miles of combined gathering pipelines serving 5,000-plus wells and more than 480 MMcf/d of combined processing capacity. The total current gathering volumes from the combined systems would equal about 380 MMcf/d. Once the sale closes the companies plan to begin a 20-year, fixed-fee midstream agreement under which Eagle Rock would gather and process BP's gas production from the existing connected wells. BP and its partners also agreed to commit to Eagle Rock under the same terms all future natural gas production from new wells drilled within an initial two-year period from closing, subject to mutually agreed extensions, and within a two-mile radius of the existing 2,500 mile gathering system.

Kinder Morgan Energy Partners LP (KMP) is acquiring 100% of Tennessee Gas Pipeline (TGP) and a 50% interest in El Paso Natural Gas (EPNG) pipeline from Kinder Morgan Inc. (KMI) for $6.22 billion in a dropdown transaction. The deal includes about $1.8 billion in assumed debt at TGP and $560 million of proportional debt at EPNG. The transactions are part of KMI's agreement with the federal regulators in its acquisition of El Paso Corp. (see NGI, April 23). The deal would be effective Aug. 1. KMP is purchasing the assets at about eight times 2012 earnings before interest, taxes, depreciation and amortization.

Anadarko Petroleum Corp. is soliciting bids for all of its operated coalbed methane (CBM) assets in the Atlantic Rim project in Wyoming. Warren Resources Inc., which first disclosed the news in a regulatory filing, has a partnership interest and preferential rights on Anadarko's share as a working partner in the Spyglass Hill Unit in the Eastern Washakie Basin in Wyoming, which covers around 113,000 acres in the Doty Mountain, Sun Dog, Jack Sparrow and Brown Cow units. Anadarko wrote down $978 million in 2Q2012 in part because of low natural gas prices for CBM (see NGI, Aug. 6). Anadarko has "solicited and received bids to sell its assets in the Atlantic Rim, including all of their operated CBM assets, 50% interest in the midstream gathering, compression and pipeline assets (Warren owns the other 50%), and mineral rights in the deeper formations prospective for Niobrara oil," according to Warren.

Colorado Interstate Gas Co. (CIG) has filed an application at FERC seeking authorization to build an expansion of its existing High Plains System to provide additional takeaway capacity from the Denver-Julesburg (DJ) Basin to the Cheyenne Hub in Weld County, CO. CIG proposes to build an eight-mile lateral (Lancaster Lateral) to connect natural gas production and processing facilities in the DJ Basin with the 164-mile High Plains Project in Adams, Morgan and Weld counties. The lateral would initially be capable of transporting 225,000 Dth/d, with this potentially rising to 600,000 Dth/d over time. The High Plains System currently has a design capacity of approximately 899,000 Dth/d, according to the application [CP12-496].

The Bureau of Ocean Energy Management (BOEM) said a team of scientists has embarked on an expedition to study marine life in the Hanna Shoal area of the Chukchi Sea, a prerequisite to opening areas in offshore Alaska to oil and natural gas leasing. The Department of Interior (DOI) agency said the scientists would be tasked with conducting research on the area's teaming marine life, which includes waterfowl, walruses and whales. In late June, the DOI unveiled the final version of its OCS [Outer Continental Shelf] Oil and Gas Leasing Program for 2012-2107 (see NGI, July 2). BOEM said information gathered from the Hanna Shoal study would enable it to make informed resource management decisions in the future for the Arctic.

Access Midstream Partners LP, formerly Chesapeake Midstream Partners LP, reported that net income jumped more than 25% year/year in part because of increased business in the Marcellus and Barnett shales. Global Infrastructure Partners LP (GIP), which helped Chesapeake Energy Corp. form a midstream business three years ago, paid $4 billion in June to buy most of the profitable arm, which it rebranded as Access Midstream (see NGI, July 9). Access earned $51.6 million in 2Q2012, which was $10.5 million higher than in the year-ago quarter. Adjusted earnings were $120.9 million, which was 53% higher than in 2Q2011, when the unit earned $79.3 million. Revenue in the latest period rose 12% from a year ago to $149.3 million from $133.2 million. Throughput in the latest quarter totaled 261.0 Bcf, or 2.87 Bcf/d, which was one-third higher than in 2Q2011, when throughput was 2.15 Bcf/d.

DCP Midstream LLC plans to double its midstream assets in the Denver-Julesburg Basin to nine gas processing plants with a total capacity of about 800 MMcf/d and natural gas liquids (NGL) production of 70,000 b/d by the end of 2014. While projects making up the effort have been announced or are under way, the announcement "should be welcomed by basin observers," said Wells Fargo Securities analyst David Tameron. Operators in the basin include Noble Energy Inc., Anadarko Petroleum Corp., Encana Corp., PDC Energy Inc., Bill Barrett Corp., Synergy Resources Corp. and Bonanza Creek Energy Inc.

Lower natural gas liquids (NGL) prices weighed down 2Q2012 earnings for both DCP Midstream Partners LP (DPM) and Energy Transfer Equity LP (ETE), the companies' executives said in separate conference calls with analysts. Weakness in NGL markets helped to drive down earnings for DPM, which reported $35 million (8 cents/share) in earnings for 2Q2012, a 36% decrease compared with 2Q2011 earnings of $55 million (30 cents). But the NGL segment "continues to experience substantial growth," according to CEO Mark Borer. ETE's net income for 2Q2012 fell to $74.5 million (19 cents/unit) versus $106.7 million (30 cents) for 1Q2012. The midstream segment saw its earnings before interest, taxes, depreciation and amortization slip to $93.4 million, "down slightly from second quarter of last year" and driven primarily by lower NGL prices and higher operating and general expenses, according to CFO Martin Salinas.

Pacific Gas and Electric Co. (PG&E) is hoping to reach a global settlement on four California regulatory proceedings concerning the San Bruno, CA, gas explosion two years ago (see NGI, Sept. 13, 2010), according to PG&E Corp. CEO Anthony Earley. "These settlement discussions are multiple proceedings with many parties, and they are extremely complex [including the U.S. Attorney's and California Attorney General's offices]," he said. PG&E is also "making lots of progress" on separate third-party civil cases. PG&E has more than $455 million in claims to date, and those could grow to $600 million.

Wyoming Gov. Matt Mead has asked the U.S. Environmental Protection Agency (EPA) to defer to his state in regulating regional haze, which ties directly to the state's oil, natural gas and power generation industries. Mead wrote to EPA's air quality program director to head off the mandate of a federal implementation plan (FIP). EPA earlier rejected Wyoming's state implementation plan (SIP), requiring the FIP be used, which Mead has argued would be more costly without providing any apparent benefits over the SIP.

Rep. Bill Flores (R-TX) has introduced a bill that would further delay action on the Bureau of Land Management' (BLM) proposed rule governing hydraulic fracturing (fracking) activities on public and Indian lands until Interior Secretary Ken Salazar submits a report examining the effects of the rule. The legislation (HR 6235) would require the department to conduct a study of the effects that the proposed rule would have on the development and production of oil and natural gas on federal and Indian lands; the impacts on royalty revenue; the staffing and other resource demand required to enforce the regulation; and potential conflicts with existing state and federal regulations. The preliminary report will be subject to a 120-day comment period, which would be followed by a final report. In May BLM proposed a rule requiring producers to disclose the make-up of the chemicals used n their fracking operations. The rule allows producers to wait until their fracking operations are completed to report the fluids (see NGI, May 7). In early July the BLM extended the comment period for its proposed fracking rule to Sept. 10 (see NGI, July 16).

The Luzerne County Zoning Hearing Board in Pennsylvania is scheduled to decide at a meeting Sept. 4 whether to allow a proposal by UGI Energy Services Inc. to construct 27.4 miles of pipeline across Wyoming and Luzerne counties. The balance of the project, 23.4 miles, would be a 24-inch diameter pipeline starting at the current terminus of UGI's Auburn Pipeline, with a new interconnection with the Transcontinental Gas Pipe Line (Transco) at West Wyoming Borough. The proposed compressor station would have three units with about 200,000 Dth/d of capacity. UGI also proposes to build four miles of 12-inch diameter pipeline, which would run south from the Transco interconnect and enter the city of Wilkes-Barre, where it would connect to the natural gas distribution system operated by UGI Utilities Inc.

Magnum Hunter Resources Corp. said it plans to test for the first time the potential of the deep Pearsall Shale formation in South Texas after agreeing to pay $2.35 million to buy an additional 1,885 net mineral acres in Atascosa County. The deal brings the company's gross acreage in Atascosa County to 7,278 and net acreage to 5,212. The company's existing acreage in the county to date has been used to drill Eagle Ford Shale wells, a spokesman noted. The Pearsall formation is about 2,500 feet beneath the Eagle Ford Shale. "The company is actively reviewing additional acreage expansion opportunities throughout the South Texas region where we continue to successfully develop our leasehold position in the Eagle Ford," said CEO Gary C. Evans, and "we have been monitoring the Pearsall Shale developments for almost a year now. We are excited about the prospects for future development of the evolving Pearsall Shale play and anticipate additional expansion of our existing leasehold position in this region." The new acquisition gives Magnum a total of close to 40 total net drilling locations in the Pearsall formation.

Elected officials in two municipalities in upstate New York -- the Town of Caton in Steuben County, and the Town of Oxford in Chenango County -- have decided to remain neutral on the issue of high-volume hydraulic fracturing (HVHF) and will wait until the state Department of Environmental Conservation (DEC) issues its report on the practice. The Caton Town Board voted unanimously against adopting a pro-drilling resolution submitted by the Steuben County Landowners Coalition. Meanwhile the Oxford Town Board tabled a one- or two-year moratorium on HVHF after about 30 people spoke at its meeting. New York Gov. Andrew Cuomo's administration has hinted that HVHF could first be allowed in five counties along the Pennsylvania border -- including Chenango and Steuben counties -- provided the DEC grants regulatory approval (see NGI, June 18).

Alcoa Oil & Gas, a subsidiary of Alcoa Inc. has been awarded a contract from Pennsylvania General Energy to produce 3,500 feet of aluminum alloy drill pipe, which would be used for natural gas drilling in the Marcellus Shale. Alcoa said its 4.5-inch drill pipe would enable carrier-mounted drilling rigs to drill to a depth of about 7,500 feet, or 1,000 feet deeper than conventional steel drill pipe without relying on more expensive rigs. Alcoa's drill pipe is a tapered, high-strength aluminum alloy tube with proprietary thermal connections, a technology the company said makes its pipe up to 50% lighter than steel but with comparable durability and strength.

©Copyright 2012 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus