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July 15, 2013
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Driven primarily by the continued success of its drilling program in the Marcellus Shale, Range Resources Corp. saw its production volumes surge to a record high of 910 MMcfe/d in 2Q2013, a 27% increase over 2Q2012, the Forth Worth, TX-based company said. Production during the quarter was 79% natural gas, 15% natural gas liquids (NGL) and 6% crude oil and condensate. Oil and condensate production increased 39% compared with 2Q2012, NGL production rose 35% and natural gas production increased 24%, Range said. Total 2Q2013 production exceeded the high end of Range's guidance of 880-890 MMcfe/d due to the timing of turning wells to production and continued positive performance of wells in the Marcellus Shale. Range's production number came in "well ahead of both Street and our estimate of 904 MMcfe/d," said Wells Fargo Securities analysts, who added that they are looking for an update from the company on Marcellus infrastructure and pricing.

A Securities and Exchange Commission (SEC) inquiry could bust up the planned $4.3 billion tie-up of Berry Petroleum Co. with Linn Energy LLC and LinnCo LLC (see NGI, July 8). But if the deal doesn't go through, Berry has attractive options for going it alone, an analyst following the company said. Berry's "stock has held up much better [than the Linn companies] and at this time trades as a standalone company, in our view, given the stock is near $40/share and the current acquisition terms sit around $33/share..." said Wunderlich Securities Inc. analyst Jason Wangler in a note. He said Linn and LinnCo could work through the SEC troubles and complete a deal; however, Wunderlich is assuming the deal can't be completed and is valuing Berry to reflect this. The firm has a "hold" rating on Berry shares with a $46/share price target.

Colorado drillers may face more scrutiny about emissions from their oil and natural operations under regulations being considered by the Department of Public Health and Environment (CDPHE). The Colorado Oil & Gas Conservation Commission has primary oversight of exploration and production and the CDPHE oversees air quality. Being considered are regulations governing fugitive emissions and leaks by increasing their identification and requiring leaks be repaired; wellhead venting and flaring; a timely tie-ins of wells to natural gas sales lines to reduce venting or flaring.

The Bureau of Land Management (BLM) has approved Enterprise Mid-America Pipeline LLC's (MAPL) proposal to build 234 miles of pipeline to accommodate increased natural gas liquid (NGL) production in the San Juan Basin and in the Rockies. "As natural gas production increases in the San Juan Basin and in the Rockies, the existing capacity of the MAPL Rocky Mountain pipeline will not be sufficient to transport the anticipated increase of NGL production," said the BLM in its decision of record on MAPL's Western Expansion Project III (WEP III). The system currently is flowing at near capacity at 275,000 b/d of NGL production. The WEP III expansion is expected to increase the capacity of the existing pipeline system to approximately 350,000 b/d. The $320 million project would provide takeaway capacity for producers from the Rocky Mountain region to Hobbs, NM, and ultimately to markets in Mont Belvieu, TX. The newly proposed pipe is evidence of Enterprise Products Partners LP's continued focus on expanding NGL infrastructure as prices for the commodity remain attractive and production continues to ramp up from shale plays across the country. Houston-based Enterprise owns 16,650 miles of NGL pipelines.

Half of the top 20 world's largest corporations in the latest Fortune Global 500 list are oil and natural gas operators, with three based in the United States -- ExxonMobil Corp., Chevron Corp. and Phillips 66 -- the magazine reported. Eighty-nine Chinese-based companies are on this year's listing, versus 73 a year ago, while there are 135 U.S.-based companies. Royal Dutch Shell plc repeated as No. 1, while ExxonMobil fell one spot to No. 3, displaced by Wal-Mart Stores. China's Sinopec Group was at No. 4, and fifth place belongs to China National Petroleum. BP plc dropped to sixth place from No. 4, while Chevron fell to No. 11 from No. 8. Phillips tied for No. 16.

The Government Accountability Office (GAO) called on the Department of Transportation (DOT) to develop guidance for natural gas pipelines enabling them to conduct safety inspections of their systems beyond a fixed interval of seven years in highly populated areas. Gas pipelines generally are required to reassess the risks to their systems every seven years. The DOT neither agreed nor disagreed with the GAO report's recommendations. The GAO first requested that the interval between pipeline re-inspections be extended in 2006. Specifically, it asked Congress to consider revising the Pipeline Safety Improvement Act of 2002 to allow gas pipelines to reassess their systems for safety threats at intervals based on the risks to individual pipelines, rather than at a fixed interval of seven years for the entire industry, as is currently required in the pipe safety law. The 2002 law required pipeline operators to assess the integrity of their pipeline segments in high-consequence areas by December 2012 and to reassess them at least every seven years thereafter.

A coalition of environmental groups led by the Sierra Club has called on the Federal Energy Regulatory Commission to direct Dominion Cove Point LNG to assess the potential impacts that climate change could have on its proposed liquefaction and export facilities on the Chesapeake Bay in Maryland. "Climate-related risks of placing a large LNG [liquefied natural gas] export facility on the Chesapeake Bay have not been addressed adequately," according to a letter sent by the Sierra Club, Patuxent Riverkeeper, Potomac Riverkeeper, Shenandoah Riverkeeper and Stewards of the Lower Susquehanna Inc. to the Commission. Specifically, the potential for higher wind and storm activities should be reviewed to assess the risk of compromising the LNG export facility or causing tanker accidents. "A breach at the LNG facility or the shipwreck of a vessel carrying LNG could have catastrophic consequences for the surrounding communities and therefore must be assessed as part of FERC's consideration of the project," the groups said.

Advanced Power North America, a subsidiary of Switzerland's Advanced Power AG, said it plans to build a 700 MW power plant fueled by natural gas in Carroll County, OH, an $800 million project in the heart of the Utica Shale. According to reports, Advanced Power's Carroll County Energy LLC plans to build and operate the combined-cycle facility on a 77-acre site about two and a half miles north of Carrollton. The company chose the site because of its proximity to transmission lines owned by American Electric Power, and to the Tennessee Gas Pipeline, which would provide fuel. Advanced Power said it has submitted plans for the facility to the Ohio Power Siting Board, and management believes it will take regulators up to one year to approve or not approve the project. Construction could begin by the end of 2014, with the completed power plant creating about 30 full-time jobs.

Rex Energy Corp. said it has seen "impressive" five-day sales rates, excluding downtime, from its first three wells in the Warrior South prospect, in Ohio's Utica Shale. The State College, PA-based company said its Noble #1H well produced at 1,783 boe/d [44% gas, 43% natural gas liquids (NGL) and 13% condensate], while the Guernsey #2H well produced at 1,764 boe/d (44% NGL, 42% gas and 14% condensate), and the Guernsey #1H well produced at 1,646 boe/d (44% NGL, 42% gas and 14% condensate). The figures for all three wells, which were drilled in Noble County, OH, assume full ethane recovery and a natural gas shrink of 20%.

Malaysia national oil and gas company Petronas (Petroliam Nasional Berhad) is in negotiations to sell a 10% stake in Canadian shale properties it acquired last year to the state-owned Indian Oil Corp. Ltd. (IOC). According to reports, a deal between Petronas and IOC for assets in the Montney Shale could be valued at $1.5 billion. Last year, Petronas acquired Calgary-based Progress Energy Resources Corp. for C$5.5 billion (see NGI, July 2, 2012). News of a potential transaction between Petronas and IOC appeared similar to a deal announced in March between Japan Petroleum Exploration Co. Ltd. (Japex) and Petronas (see NGI, March 11), when Japex acquired a 10% stake in natural gas blocks in North Montney, British Columbia, and formed a Canadian subsidiary, Japex Montney Ltd.

Five people were injured after a Marcellus Shale gas well owned by Antero Resources exploded in Doddridge County, WV, on July 7. Tom Aluise, spokesman for the West Virginia Department of Environmental Protection (DEP), told NGI the explosion occurred at Antero's Hinterer 1H well, near New Milton, at 4 a.m. EDT, as workers were trying to repair a pump. An unknown ignition source caused two 20,000-gallon storage tanks containing produced water to explode, and another two to catch fire. Aluise said there didn't appear to be any groundwater contamination, and the well had not been hydraulically fractured at the time of the incident. Antero vice president Alvyn Schopp said the five injured workers had varying levels of burns and were transported to the West Penn Burn Center in Pittsburgh for treatment.

Houston-based units of Royal Dutch Shell plc have agreed to resolve alleged violations of the U.S. Clean Air Act by paying a $2.6 million fine and spending "at least" $115 million to control air pollution from industrial flares at a refinery and petrochemical facility in Deer Park, TX, southeast of Houston, said the Department of Justice and the U.S. Environmental Protection Agency. The proposed consent decree, subject to a 30-day review, was lodged in U.S. District Court for the Southern District of Texas, and includes a first-of-its-kind agreement to recover and recycle flared natural gas at the petrochemical facility. About $1 million would be spent to monitor and publicly post benzene levels at the facilities' fenceline. Shell processes about 333,000 b/d of crude oil at the refinery and 8,000 tons/day of ethylene, benzene and other products at the petrochemical plant.

Frio County, TX, is in the heart of Eagle Ford Shale country, but drilling waste hauling and disposal worries have overshadowed the economic boom that oil and gas activity has brought to the South Texas region, county officials said. "The Eagle Ford frack waste and its related disposal business partnerships are placed on notice to consider responsible and fair practices to dispose in Frio County," said County Judge Carlos Garcia. "The facts clearly state Eagle Ford has an indication of 77% increase in the production of oil exploration and this waste is now coming to Frio County. We must strike a balance to successfully promote the potential of our local economy, while we are also striving to protect our environment -- yes, we are being challenged!" The commissioners recently passed a resolution opposing new disposal wells in the county; however, it's the Railroad Commission of Texas that has regulatory oversight of injection wells. There are more than 7,500 active disposal wells statewide. Frio county has been the site for disposed oil and gas field waste with an increase of 473% within one year, according to the county commissioners.

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