The Weekly US Oil & Gas Update: 12 November 2013

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

Colorado becoming the frontline on the fracking debate

In last week's election, three cities in Colorado voted through referendum to ban or suspend hydraulic fracturing activities within their city limits, while a fourth narrowly defeated the proposed moratorium. Boulder, Lafayette and Fort Collins, all part of Colorado's front range which has seen increasing development due to operators' success in the Niobrara shale play, were the cities passing the restrictions. Expect the restrictions to undergo legal challenge from the state which currently regulates the practice. The larger worry for Colorado producers, and perhaps much of the pro-industry population in the state, is the possibility of a statewide ban on the 2014 ballot, a measure that would shut down the entire industry in the state with negative repercussions to the statewide economy. Article here

Enbridge makes application to build $ 2.6 billion Bakken oil pipeline

The pipeline would be the largest in the region, carrying 225,000 barrels of oil to a hub in northern Minnesota and 375,000 barrels to one in northwestern Wisconsin. This would take a big bite out of North Dakota's almost 1 million bpd currently produced. Due to lack of takeaway infrastructure, over 60% of crude currently leaves the state via railroad, a method much more expensive than pipeline transportation, but one that enables producers to flexibly seek the best market for the light crude coming from the Bakken. Enbridge still has their open season coming up, where it tests the market for customer commitment to their plan, which will ultimately determine the project's future. Article here

Unconventional Oil & Gas News

Chesapeake's Utica production ramping up quickly

When looking at the Utica shale play, Chesapeake's drilling activity defines the current landscape, with over half of the drilling permits issued in Ohio and a majority of the producing wells for the play. The company announced that its production increased 91% from Q2 to Q3, averaging 164 mmcf/d from 169 producing wells. The company still has another 208 wells waiting on pipeline connections to midsream, which has been lagging behind drilling and production, so expect this number to keep increasing at a rapid rate in the near future. Chesapeake isn't happy with all their acreage in Ohio though, with plans to sell 510,000 non-core acres in the state, indicating that not all Utica acreage meets their economic requirements. Article here

Environment and Safety News

Crude oil train derails in Alabama, catches fire

The 90-car train was hauling crude from North Dakota's Bakken field when nearly 30 of the train's cars derailed and exploded. There was no apparent cause for the derailment, and no injuries were reported. Article here

Interior Secretary Sally Jewell calls on the oil & gas industry to better inform the public on hydraulic fracturing

Its probably a good sign that Sally Jewell sees the current debate over hyraulic fracturing as "confused" and "not well-informed". Last Thursday speaking at an event in San Francisco, Jewell stated "I think that there's a lot of misinformation about fracking," and "I think that it's part of the industry's job to make sure that the public understands what it is, how it's done, and why it's safe. It's our job as a regulator and public land manager to make sure that it is done safely and responsibly, that we use the best available science, and we are in fact doing that." So far, the debate has been marked by hysteria and hyperbole from fracking, opponents. Documentaries such as Gasland and Gasland II have relied on emotional appeals rather than scientific fact, with some success in shaping public opinion. The industry has lately organized and began to educate the public about what is a very complex series of activities. Let's hope that information and science rule out over emotions and sensationalism to enable everyone to engage in a meaningful debate around manageable issues around oil & gas development. Article here

Mergers and Acquisitions News

Talisman selling part of its Montney acreage in British Columbia for $1.4 billion

Progress Energy Canada Ltd. is the buyer on the all-cash transaction which includes 75% of Talisman's 127,000 net acres, with production of 65 mmcfe/d. Article here

Linn Energy raises its purchase price for Berry Petroleum by $600 million

The previous deal expired, but Linn reaffirmed its intention to acqure Berry by upping the price, increasing the number of Linn shares for each Berry share from the previous 1.25 to 1.68. The deal is still subject to shareholder approval. Article here

Wood Group acquires Elkhorn Construction

Wyoming-based Elkhorn provides construction services for midstream oil & gas facilities in the major US shale plays, inluding the Niobrara, Permian, Marcellus and Utica. The company had 2012 revenue of $250 million with 2,200 employees. Article here