The Weekly USA Oil & Gas Update: 19th August 2014

Rig Counts - select states with key plays

Oil & Gas Prices - Bloomberg/EIA

General News

US natural gas production up 5.3% over last year

According to the US Energy Information Administration (EIA), expect natural gas production to exceed last year's record setting rate of 73.89 bcf/d by 3.71 bcf/d . This will make 2014's production the fourth year of record-setting production. On the demand side, consumption in 2014 only rises 1.24 bcf/d, or 1.7% from 2013, creating a glut with downward pressure on pricing. Based on this, the EIS expects an average price Henry Hub price this year of $4.46, dropping to $4.00 in 2015. Article here

Unconventional Oil & Gas News

Rising crude production in the Permian outpaces pipeline growth

By utilizing direction drilling and multi-stage hydraulic fracturing, the Permian has undergone a dramatic resurgence, with analysts expecting production of 1.72 million barrels of oil per day in September, up 38,000 bpd from August. But the increasing supply of crude in this rural part of west Texas needs to be transported to other places, and pipeline capacity is maxed out. "On the whole, there's not enough takeaway capacity. What we will see is the differentials widening out as other forms of transportation like rail and trucking will become more economical," said Amrita Sen, chief oil analyst at Energy Aspects. Magellan's new BridgeTex pipeline will help, able to move 300,000 bpd from the Permian to Houston-area refineries and scheduled to start up September, but more is still needed. Sunoco's Permian Express II, due to come on line in Q2 2015 may solve the problem, but expect a rising number of rail shipments until this is operational. Article here

Columbia Pipeline to invest $1.75 billion to transport gas from Utica

The 160-mile pipeline will move a massive 1.5 billion cubic feet per day from the Ohio and West Virginia gas-producing areas to Columbia's regional markets via an interconnect in Kentucky. Firm shippers on the line include Range Resources, Noble Energy, and American Energy. Article here

Environment and Safety News

Water recycling in Texas' Eagle Ford thriving after rule changes

Hydraulic fracturing uses a lot of water; Chesapeake Energy estimates a single Eagle Ford well can use up to 125,000 barrels of water. Many operators understand and appreciate the value of recycling water used in completions activities, but state regulations often make recycling difficult or almost impossible through many rules' unintended consequences. Texas' state regulating body, the Texas Railroad Commission, took on this problem in 2013, easing rules around pit construction, fluid storage, and water re-use to enable recycling in an economical fashion. As a result, numerous service providers innovated economical techniques to re-use flowback and produced water in water-scarce south Texas. The result: estimates are that water re-use has increased from 1% five years ago in the region to around 30% today, with expectations this could rise to 50% over the next five years. Article here

Mergers and Acquisitions News

Ultra Petroleum buys Shell's assets in the Pinedale Anticline

In exchange for all Shell's working interests in the Pinedale Anticline, located in western Wyoming, Ultra will pay $925 million and give Shell 155,000 acres in its Pennsylvania acreage, primarily in Tioga and Potter counties, a deal valued at over $2 billion. The deal makes Ultra the owner of 68% of the Pinedale field, with 1,577 gross wells. Article here

LINN Energy looking to sell its Granite Wash assets for $2 billion

According to sources close to the deal, LINN wants to sell its Granite Wash assets, located in the OK an TX panhandles, to pay down its debt from the recent $2.3 billion acquisition it made from Devon Energy. The Granite Wash region has seen a fair bit of activity recently, so the sale process should bring plenty of interested parties. Article here