The Weekly USA Oil & Gas Update: 04 March 2014

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

Bakken crude transportation analysis

Sandy Fielden with RBN Energy presents a compelling case on why no new pipelines have been built to take away crude from the burgeoning Bakken oilfield. Sandy's analysis includes a informative stack chart, comparing crude production with available transportation alternatives that puts the situation in perspective. Article and chart here The real driver in this scenario of transportation alternatives is economics - rail enables producers to reach coastal refiners willing to pay Brent prices for Bakken crude, while at least right now, pipelines transport crude to already well-supplied markets that only pay a discounted price. This coastal premium offsets the more-expensive rail shipping costs, at least at the present time.

Feds boost crude-by-rail shipping standards

In response to several recent derailments and resulting fires, federal agencies have called for more stringent standards around shipping volatile crude oil via railcar. On February 21st, the US Department of Transportation (DOT) and the Association of American Railroads announced new safety practices to to in effect over the next five months. These are primarily focused on trains carrying more than 20 tanks of oil, and include slower speeds (reduction from 50 to 40 mph), safer routing, enhanced braking systems, and better emergency planning. Yet to come are likely tougher standards on the tank cars themselves. Article here

Unconventional Oil & Gas News

Chesapeake triples Utica production from 2012 to 2013

Average daily production increased 309% from 2012 to 2013, to 189 million cubic feet per day of natural gas produced. As of year end 2013, Chesapeake had 425 Utica wells, with 230 of these in production and 195 awaiting pipeline connections, making it by far the most active E&P company in the Ohio play. Article here

Environment and Safety News

North Dakota contractor caught stockpiling radioactive waste

Minerals from deep in the earth often carry with them small amounts of radioactivity, called Naturally Occurring Radioactive Material, or NORM. In its natural form, radioactivity in this material is typically too low to cause any concern, but when it becomes concentrated in production equipment, like filter socks or tank bottoms, NORM levels can often exceed state levels for disposal in landfills. That is the case in North Dakota, where filter socks often exceed the state's maximum limit, requiring shipment out-of-state for disposal. The expense and complication of managing this activity have caused problems however, with numerous examples in North Dakota of improper disposal in local landfills, or in the case of RP Services, stockpiling the offending filter socks without disposal. The North Dakota Department of Health is taking action after resident's complaints, and is investigating RP Services. It appears that they have a history with improper disposal, having received a $27,000 fine from McKenzie County last July for sending 27 filter socks to the municipal landfill. "What has to happen to get some enforcement action to make it known that this is not going to be accepted anymore? What do we have to do?" said Rick Schreiber, director of the county's Solid Waste Department. Article here

Mergers and Acquisitions News

Chesapeake sells midstream compression for $520 million

Access Midstream Partners LP and Exterran Partners LP agreed to purchase a total of 437 compression units and related assets from Cheasapeake. Access' assets purchased are located in the Marcellus and Utica plays in Ohio and Pennsylvania, while Exterran's assets purchased are in the Oklahoma, Texas, Colorado area. Article here