The Weekly USA Oil & Gas Update: 11th November 2014

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

New refinery in North Dakota just three weeks from startup

Montana-Dakota Resources (MDU), along with its partner Calumet, will soon open the all-new 20,000 barrel per day refinery near Dickinson. Costing close to $350 million, the facility will refine local crude oil into diesel and byproducts to sell into the local market. The plant's gas-fired steam boilers were fired up in October, and workers are just finishing up instrumentation and controls. "The plant now has a heartbeat. It's exciting," said MDU spokesman Tim Rasmussen. MDU and Calumet recently announced they are considering an additional refinery in the area. Article here

Chesapeake Energy holding production targets despite falling oil prices

With prices for crude oil recently down over 20%, many have been expecting cutbacks in US drilling activity. The falling prices don't scare Chesapeake however, who plans on maintaining its original production targets released last August. The reason? Falling costs to drill new wells. In Chesapeake's two largest fields, the Marcellus and Eagle Ford, well costs were down 11% and 13% during the first seven months of this year compared to last year. It is probable that other E&P companies are seeing similar falling costs, which should help mitigate the impact on profitability from falling crude prices. Article here

Unconventional Oil & Gas News

BHP Billiton plans to export Eagle Ford condensate overseas

Despite lacking the government's explicit authorization, BHP Billiton struck a deal to export 650,000 barrels of fractionated condensate to a Swiss trading firm. Pioneer and Enterprise have also been exporting condensate, but both have received permission from the Commerce Department--BHP will be exporting without this blessing. The orders aren't licenses, but do provide legal assurance that the exports have formal approval. "The announcement is not surprising and is fully consistent with the framework of the export regulations, which contemplate self-classification by exporters," said Ted Kassinger, a partner at law firm O'Melveny & Myers, who represented Enterprise before the bureau. "I expect others having similar processes will follow the same path." This could be the front end of a condensate export boom. Article here

Sunoco to build NGL pipeline from Ohio to east coast ports

The Mariner East 2 will carry up to 275,000 barrels per day of natural gas liquids (NGLs) including propane, butane and ethane, and will cost $2.5 billion to build. The first phase of the project is Mariner East 1 and will carry only 70,000 barrels per day but will be completed later this year; the larger Mariner East 2 won't begin service until 2016. "This vital energy project will provide a comprehensive solution in the region to transport, store and process NGLs from the Marcellus and Utica Shales, and will provide the foundation for the continuing rebirth of the local manufacturing sector," Michael J. Hennigan, president and chief executive officer of Sunoco Logistics, said in a statement. By creating access to markets for these NGLs, the pipeline goes a long way to supporting continued growth in the Utica and western portions of the Marcellus plays. Article here

Environment and Safety News

Bakken trucks often haul overweight loads creating safety hazards

Lax enforcement and customers who pay by the ton/barrel have created a culture where many drivers take overweight loads to increase profits, while jeopardizing safety, according to the recent Minneapolis Star Tribune article by Maya Rao. "You have to go heavy just to keep up with the wells," said Jesse Scheffler, who has previously been fined for an overweight truck. "We didn't come to North Dakota for the scenery. We're here for money." Trucks designed for loads no greater than 80,000 pounds have been found to frequently haul over 100,000, greatly diminishing their ability to safely stop the truck. The government just doesn't have the resources to enforce the regulations, says McKenzie County sheriff's deputy Scott Luhman. "[The state's] lack of enforcement causes trucks to be out there that are unsafe, and they're letting down the general public with that," he said. Article here

Mergers and Acquisitions News

MDU looking to sell its upstream subsidiary, Fidelity Exploration & Production

Montana-based MDU wants to use the capital to grow other parts of its business, including a second refinery in North Dakota. "We expect to grow our utility, pipeline and construction business units in a more meaningful way and pursue that growth with a lower overall business-risk profile," said CEO David Goodin. Fidelity CEO Kent Wells thinks the E&P company may be a good target for foreign buyers. "Put aside the oil price, it could be a unique opportunity for someone to move into the U.S. shales," Wells said. Fidelity owns assets across the Rockies region and in Texas. Article here