A federal investigation into Chesapeake Energy Corp. and outgoing CEO Aubrey McClendon is continuing, according to the Securities and Exchange Commission (SEC), which informed the company on Dec. 21 that its Fort Worth, TX regional office "has issued subpoenas for information and testimony." In the SEC 10-K filing, Chesapeake said it is "also responding to related inquiries from other governmental and regulatory agencies and self-regulatory agencies." Chesapeake in May received notice from the SEC of an informal inquiry "into, among other things, certain of the matters alleged" in some lawsuits regarding McClendon's financial transactions (see NGI, May 7, 2012).
Regency Energy Partners LP is paying $1.billion to buy Southern Union Gas Services Ltd. (SUGS) from Southern Union Co., which gives it a 5,600-mile natural gas gathering system and about 500 MMcf/d of processing and treating facilities in West Texas and New Mexico. SUGS is near completion of a 200 MMcf/d Red Bluff processing plant with associated treating, and a 200 MMcf/d cryogenic processing facility with associated treating is in the planning stages with in service in mid-to-late 2014. The deal is expected to close in 2Q2013 subject to approvals.
Chevron Corp. has conducted a successful production test on the St. Malo PS003 well in the prolific Lower Tertiary Trend in the deepwater Gulf of Mexico with low rates, though limited by testing equipment constraints, exceeding 13,000 b/d of oil, the operator said. The test, conducted in August and September, was in Walker Ridge Block 678, targeting sands more than 20,000 feet (6,096 meters) under the sea floor. The test was the first development well in the St. Malo field, which is being jointly developed with the prospective Jack field. The Jack/St. Malo project was sanctioned in 2010; when it ramps up as planned in 2014 it is expected to produce up to 42.5 MMcf/d of natural gas and 170,000 b/d of oil (see NGI, Oct. 25, 2010). Together the fields are estimated to hold more than 500 million boe of total recoverable reserves. Chevron holds a half-stake in the Jack field, a 51% stake in the St. Malo field, and 50.67% interest in the planned host facility. Chevron shares the St. Malo field with Brazil's Petroleo Brasilerio, or Petrobras, (25%), Statoil ASA (21.5%), as well as ExxonMobil Corp. and Eni SpA, which each own 1.25%.
Western Gas Partners LP agreed to pay $620 million-plus for stakes in two natural gas liquids (NGL) gathering systems in Pennsylvania that have combined throughput of more than 1.2 Bcf/d. It is paying Anadarko Petroleum Corp., its majority owner, $490 million for a one-third interest in the Liberty and Rome systems. It also is paying $133.5 million to an affiliate of Chesapeake Energy Corp. to acquire a one-third stake in the Larry's Creek, Seely and Warrensville systems. The systems serve producers in north-central Pennsylvania. The partnership would finance the Anadarko acquisition with $220 million cash, as well as by borrowing of $246 million and issuing common units to Anadarko at an implied price of about $54.55/unit. The deal with the Chesapeake affiliate would be financed by debt.
NorthStar Energy LLC is suing Chesapeake Energy Corp., Encana Corp. and O.I.L. Niagaran LLC, alleging that they conspired to rig a Michigan auction bidding process to acquire oil and natural gas leases in 2010. The lawsuit filed in U.S. District Court for the Western District of Michigan claims that the producers entered into an anti-competitive agreement that had the effect of forcing NorthStar to sell the leases at prices less than they were worth (NorthStar Energy LLC v. Encana Corp. et al, 1:13-cf-00200-PLM). NorthStar has asked for a jury trial and is seeking treble charges. Chesapeake said it could not comment on litigation (see related story). Encana in a statement said it intended to "vigorously defend any lawsuit which may be brought..." An investigation into the collusion allegations remains ongoing by the Michigan Department of Natural Resources and the U.S. Department of Justice.
Appalachian midstream provider MarkWest Energy Partners LP and private equity fund The Energy and Minerals Group (EMG) have completed an amendment to give EMG a larger stake in their joint venture (JV) in the Utica Shale. Under the terms of amended and restated limited liability company agreement, EMG will increase its initial capital investment in the JV -- officially known as MarkWest Utica EMG LLC -- from $500 million to $950 million (see NGI, Feb. 11). The companies are developing an integrated system that includes low- and high-pressure gas gathering systems, natural gas liquids pipelines and two large-scale processing complexes that would have nearly 800 MMcf/d of processing capacity.
Range Resources Corp. expects to complete an agreement in April to sell for $275 million its Permian Basin properties in New Mexico and West Texas consisting of 7,000 net acres currently producing about 18 MMcfe/d, 30% weighted to oil and liquids. The Permian team continues to target the Wolfberry and Cline shale oil plays in West Texas. Proceeds of the sale were "well above" initial estimates, according to Wells Fargo analyst David Tameron. Range reported earnings of $73 million (46 cents/share) in 4Q2012, well above most analysts' expectations, and an increase from $53 million (34 cents) in 4Q2011.
North American energy self-suffiency "is within reach," but an energy strategy that capitalizes on U.S. advantages must be implemented, said the Business Roundtable (BRT), a group of U.S. CEOs, in a report. They called on Congress and the Obama administration to adopt policies that will enhance U.S. self-sufficiency, boost economic growth and promote environmental stewardship. The plan includes recommendations in four areas: energy efficiency, traditional energy production, renewable energy production and electric power generation, transmission and distribution. Recommendations in the report include calls for increasing access to onshore and offshore federal lands, and streamlining the permitting and approval processes to expedite critical infrastructure projects.
Unimin Corp. has opened a proppant distribution terminal in Navarre, OH, to serve Utica Shale operators. The New Canaan, CT-based company said the Wheeling & Lake Erie Railway would provide its new terminal access to three Class I railroads. The company said the facility is also easily accessible by Interstate 77 and Ohio Route 21, and it would operate every day. Unimin, which operates proppant terminals across North America, said Navarre will be its seventh terminal serving the Marcellus and Utica shales.
According to a report by StateImpact Pennsylvania, Department of Conservation and Natural Resources Commissioner Richard Allan told members of the state Senate Appropriations Committee's budget hearing on Feb. 25 that royalties from Marcellus Shale natural gas drilling on public lands would add about $60 million to state coffers in 2013. Allan said 307 natural gas wells are currently producing on about 700,000 leased acres. About 1.5 million acres of the 2.2 million-acre state forest system overlie the Marcellus, with 700,000 acres currently leased for drilling. Allan is scheduled to appear before the state House Appropriations Committee for another budget hearing on Tuesday.
An Ohio judge upheld class action status for a lawsuit against Beck Energy Corp. and said XTO Energy, a subsidiary of ExxonMobil Corp., could not intervene in the case. In separate rulings Monroe County Common Pleas Court Judge Ed Lane said three county landowners suing Beck met the criteria for class action status. He also reaffirmed the court's decision on July 12 to void Beck's leases. Court records show Beck sold drilling rights from three landowners' leases to XTO on Dec. 21, 2011, and that Beck had signed oil and gas leases over the last 21 years with about 415 landowners in Monroe County, covering about 32,280 acres. It was not clear if Beck intended to appeal.
Texas will provide $1 million to close a deal with Ascend Performance Materials Texas Inc. to build a propane dehydrogenation (PDH) facility near Houston, Gov. Rick Perry said. The facility, which would be built in Alvin, in Brazoria County, would create 100 jobs and $1.2 billion in capital investment and "further strengthens the Gulf Coast's economy and chemical production industry," Perry said. Execution of the state's agreement is contingent upon finalization of a local incentive package. Funding came through the Texas Enterprise Fund, which has invested nearly $500 million into a variety of projects since it was created in 2003, including most recently a steel pipe manufacturing plant in Matagorda County. Houston-based Ascend has five manufacturing facilities in the United States.
Owmer/operators of the idle San Onofre Nuclear Generating Station (Songs) in Southern California indicated that the plant's fate remains uncertain, along with the 2,200 MW associated with it, which puts uncertainty into the state's summer energy plans. Edison International CEO Ted Craver said the cost of the outage last year totaled $400 million, and work to get both units at Songs back in service could take up to five years.Sempra Energy's San Diego Gas and Electric Co. (SDG&E) holds a 20% interest in Songs, currently valued at $512 million, including $275 million of rate base. While SCE takes the lead on the troubled nuke plant, Sempra CEO Debra Reed clarified the company's exposure and expectations and said there was "no assurance the exact length of time it will take the NRC [Nuclear Regulatory Commission] to review Edison's proposed plan." She said California regulators have opened a multi-year process to determine the costs of the outage. Last February Unit 3 was shutdown on a precautionary basis when a small leak in one of the unit's steam generator tubes was discovered, and a few days later damaged tubing was discovered at Unit 2, which was in the midst of planned maintenance.
Denver-based DCP Midstream Partners LP announced a $626 million dropdown from DCP Midstream of an additional 47% interest in its Eagle Ford joint venture, bringing its ownership to 80%. The partnership also increased its interest in the Goliad Plant and associated infrastructure to 80% with an estimated total investment of $230 million. Goliad is a 200 MMcf/d processing plant in the Eagle Ford with an expected in-service date in 1Q2014. DCP Midstream would provide a 27-month hedge associated with the project beginning in January for the additional 47% interest in Goliad related infrastructure. Separately, the partnership announced a long-term ethane storage agreement with Nova Chemicals, which underpins the expansion of its Marysville, MI, storage facility. The partnership reported adjusted earnings of $252 million in 2012, an increase from $200 million in 2011.
Columbus, OH-based American Electric Power (AEP) agreed to close or refuel by 2015 units at three Midwest coal-fired electric generation plants and fill at least part of the lost capacity with renewable-based power supplies. The plants slated for closure are in Indiana, Ohio and Kentucky. Collectively, 2,011 MW of coal-fired power will be retired as part of the settlement. An AEP spokesperson told NGI that provisions of the deal give the utility the option in Indiana and Ohio of refueling the units using natural gas.
Units of Russia's Gazprom and Pangea LNG B.V. have struck a tentative 20-year offtake agreement for the sale of liquefied natural gas (LNG) to be produced from a floating facility sourcing gas from the Tamar and Dalit fields offshore Israel. The terminal, if constructed, would be the world's first project-financed floating LNG (FLNG) facility. A final deal would be the first sale-purchase agreement from a FLNG project to a third-party independent buyer not involving a major international oil company, according to Pangea, whose Levant LNG unit would contract with Gazprom Marketing and Trading (GM&T) Switzerland AG. Pangea LNG is a holding company with two major FLNG projects under development: the South Texas LNG Export Project on the Texas Gulf Coast (see NGI, Dec. 24, 2012),
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