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Shale Energy Now Episode 93

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Show # 93

Airdate:
July 17th, 2015
Guests:

Eli Logan: President at Texas Classic Productions

Michelle Manningham:  VP of Marketing at Texas Classic Productions

Kristie Kubovic: Director of Communications at Shale Media Group

Shale Energy Now Episode 92

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Show # 92

Airdate:
June 16th, 2015
Guests:

Leslie Haines: Editor in Chief at Hart Energy Publishing

Jody Kennon, Shane Hollerich, Jon Demore:  Kryptonite Energy Services

Shale Energy Now Episode 91

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Show # 91

Airdate:
April 10th, 2015
Guests:

Rick Stouffer: Senior Energy Editor at Shale Media Group

Kevin Miranda: Director of Corporate Strategy at at Mac Safety Consultants

(more…)

Shale Energy Now Episode 90

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Show # 90

Airdate:
April 1st, 2015
Guests:

Rick Stouffer: Senior Energy Editor at Shale Media Group

Kristie Kubovic: Director of Communications at Shale Media Group

Matt Smith: Committee Member at Society of Petroleum Engineers

Rob Albinger: Vice President of Safety Products at Strata Worldwide 

Right click and select “save linked file as” to download this episode.

Shale Energy Now Episode 89

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Show # 89

Airdate:
March 13th, 2015
Guests:

Rick Stouffer: Senior Energy Editor at Shale Media Group

Joseph D’Amico: Board Member at The North American Coalbed Methane Forum

Matt McJunkins: Vice President of Business Development at Ozark Oilfield Services

Right click and select “save linked file as” to download this episode.

 

VOICE:  Welcome to another exciting episode of Shale Energy Now where every week we talk to experts across the energy industry about what’s going on in and around our American energy landscape.  This week we’ll be checking in with the Senior Energy Editor of Shale Energy Business Briefing, Rick Stouffer.  He’ll be filling us in on the past week in shale, oil and gas.  Then we’ll be talking Utica Shale with Matthew McJunkins of Ozark Oilfield Services, and lastly checking in with Joe D’Amico of the North American Coalbed Methane Forum.  He’ll be speaking live from the February Elite Energy Event about natural gas from coal and some of the science behind energy efficiency.

Some events coming up in the near future start with March 19 when we’ll have the Elite Energy Event in Bentleyville, PA.  Following shortly after that on March 25th in Pittsburgh, PA we’ll have the Northeast Oil and Gas Awards where some of the top energy industry companies gather to recognize each other’s accomplishments and achievements.

And then, April 28 and 29 at the Belmont County Convention Center in St. Clairsville, we’ll have the Ohio Valley Regional Oil and Gas Expo.   Be sure to check out these events and more at ShaleMediaGroup.com/events.  We’ll turn it over to Rick Stouffer.

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TEJAS GOSAI:  This is Shale Energy Now and I’m your host, Tejas Gosai.  Every week we talk to Rick Stouffer about the current situation in the American oil and gas market.  He’s the editor for Shale Energy Business Briefing.  You can find the info out at SEBB.us.   He’s watching what’s going on in our shale, oil and gas landscape.  First we’re going to talk about non-American shale because Mexico has large reserves; and Rick, I’ll hand it over to you.

RICK STOUFFER:  Good day, Tejas.  And good day to your listeners.   We’ve talked about Mexico in the past.  As you know, Mexico has been pretty much closed off to any foreign investment in their oil and gas industry.  It has been totally run by PEMEX which is the Mexican Oil and Gas Company.  The president of Mexico last year finally got through their version of congressional legislation that opens up the Mexican Oil and Gas industry to foreign investment.  Their first round of auctions is going to be taking place in mid-July.  A number of big heavy-hitter, worldwide energy companies like Chevron, France’s Total S.A., and Royal Dutch Shell are among the companies that will be bidding.  This first run of bidding is for some shell water blocks in the Gulf of Mexico, but eventually they’re going to move onshore and there’s going to be a lot of excitement.  There will be a lot of companies interested, not just the huge ones, but once you get on shore I can foresee some of the larger independents in the US wanting to get involved with what’s going to be going on in Mexico.

TEJAS GOSAI:   So we see a lot with the ups and downs of what happens in the oil and gas industry—the price of crude and the fluctuation of the price of natural gas and propane.   I wanted to start with this one specifically because it’s a country that is doing what they need to do with the legal and regulatory part of it to make sure they can extract the resources properly.  Bluntly, every business—like every country or state—they’re in it to make money.  They want it to be profitable.  They want nice roads and schools.  That’s really what’s coming together.

RICK STOUFFER:  Yes.  The Mexican government forecasts that over the next five years there will be almost $17 billion of foreign investment in their oil and gas industry.  That’s a big chunk of change.  Obviously for the country they can find worthwhile things to do with that revenue.

TEJAS GOSAI:   What’s really fun is to see this happening across other countries and even just the states playing with each other.   We previously talked about the governors of PA, Ohio, and West Virginia battling for tax relief to get Royal Dutch Shell to build the cracker plant in Beaver County.  Pennsylvania’s previous Governor Corbett won that battle but of course now we’re seeing all of these different moving pieces in the northeast with the lower price of crude oil, but also Governor Wolfe is in office and there’s a lot of, I’d say difficulty, but we’re trying to understand better and better.   We’re going to talk about EQT in a few moments, but they’re one of the biggest players in this region.  EQT is selling some of their Marcellus pipeline system and it’s for a good bit of money, but they’re one of the bigger players who are waiting to see what happens legislatively so we don’t lose this boon we found.

RICK STOUFFER:  EQT said earlier this week they’re going to be selling their northern West Virginia Marcellus gathering system along with an interest in EQT subsidiary.  They’re going to actually sell it to one of their units, EQT Midstream Partners.  Midstream Partners is public, but the majority owner as of right now, EQT, has a 34.4 percent limited partner interest in Midstream Partners.  But they’re going to sell it for a little over a billion dollars.  Both companies make out.  EQT obviously is making out because they’re getting a little over a billion dollars of which most is in cash.  And Midstream Partners, because it adds to their system, it gives them a wider range of geographic territory which they cover with their pipeline system so that’s good for them, too.

So it‘s one of those win-win situations.  You’re seeing a lot of these deals.  It’s called a drop down where the parent company will sell to a unit of the operation—a pipeline, or a fractionation plant, or whatever.  Both make out in the end.

TEJAS GOSAI:  Let’s predict something with what’s going on with EQT.  I know you’re going to talk about their public offering announcement, too.  But for a minute—we’ve seen Rice Energy just form a midstream partnership and they’ve been drilling in this region as well.  At some point they might do something similar.

RICK STOUFFER:  Yes, in fact, Rice came out today—Thursday—with their quarterly earnings for the fourth quarter of last year, and one of the things they talk about is what’s going on with their midstream operation, Rice Midstream Partners.   The analyst community is saying that yes, they are going to start dropping assets into Rice Midstream, and again, just as EQT did and a number of other players have done, or planning to do, it seems to be a win-win for both parties.

TEJAS GOSAI:  Being able to understand and navigate the corporate business world legally with creating these corporations is really mathematics for a lot of these folks.  They get the best people to figure out how and what to do.  PR has a lot to do with it as well.  We’ve kind of repeated the cycles over and over.  To wrap up EQT let’s talk about their public offering.

RICK STOUFFER:  EQT Midstream Partners—we just talked a bit about them.  They also said this week they’ve begun a public offering of eight and a quarter common units.  Now that’s common units, not common shares because this Midstream Partners is a limited partnership.

So they have common units.  They intend to wrap it up later this month.  They’re going to be using the proceeds from this offering to help pay off the deal they just finished with EQT.  The $1.05 billion purchase of the Marcellus gathering system in West Virginia.  What I always look at when I look at these public offerings is how many and who are the companies that are servicing as the book runners, the ones who are putting the offering out into the market.  If you look at the players doing the mid-stream partners—

TEJAS GOSAI:  Can I run down the list real quick?   They are Wells Fargo Securities, JP Morgan, Barclays, Merrill Lynch, Citigroup, Credit Suisse, Goldman Sacks, Deutsch Bank, and RBC.  We see the same people over and over in most of the energy commodities.

RICK STOUFFER:  There is a very lucrative operation in putting one of these offerings together.  That’s why so many of the big players like to do it.  Plus, it adds prestige.  If you have this many players with this high of a profile it helps when you go to market and try to sell.

TEJAS GOSAI:  Let’s keep the discussion going.  Let’s wrap it up with Mountain Valley Pipeline.  We’ve talked about pipeline a lot, but let’s close on a good one.

RICK STOUFFER:   Yes, Mountain Valley Pipeline is a joint venture between EQT and Next Era Energy which is a public utility down in the south. They are jointly venturing on a pipeline project and they announced this week that WGA Holdings, which is another mid-stream player, has bought into the pipeline project.  They took a 7% ownership interest in the joint venture.  Another company, a Houston-based commodities manager, Vega Energy, acquired a 3% interest in Mountain Valley Pipeline which means next year it will hold 35% interest and EQT Midstream Partners is expected to take over EQT’s 55% majority interest in the joint venture and operate the proposed pipeline.

A little bit about the pipeline itself—it’s going to be moving at least two billion cubic feet per day of natural gas.  They’ve already secured commitments but they’re not saying who—twenty year term commitments for at least $2 billion a day.  Roughly it’s a 300-mile pipeline that is 42 inches in diameter moving Marcellus Shale natural gas along the east coast.  The price tag is between $3 and $3.5 billion.

TEJAS GOSAI:  Just to wrap this up, we talked a lot about EQT.  This past Elite Energy Event we’ve been discussing pipelines and mid-stream infrastructure.  What started with just a word—Marcellus—and we had a lot of new friends and faces drilling in the area.  It took us awhile to understand what was going on.  If you look at the drilling and the cyclical cycles, we know things go in ebbs and flows.  We’ve already seen gas at the pump fluctuate between 40 to 80 cents over the past eight months.  We know there’s a lot to come for the future. Some of these bigger companies have been making sure they’re hedging their bets the right way for decades.  They’re not in it for a quarter or a year.  Just as a note to our listeners, don’t head for the hills.  There are good things to come.  Some of the pieces we’ve discussed are negative, but it’s the ebb and flow of energy.

That brings me to our last topic, Rick.  For SEBB every Sunday you do a Sunday analysis so throughout the week there are top news pieces.  On Saturday there’s the top five of the week.  On Sunday you discussed US midstream development entering a pause phase due to LNG prices and production.  It’s kind of funny to talk about this after we talked about the midstream; let’s relate this together.

RICK STOUFFER: Last Friday there was a webinar that I listened to where two midstream experts were talking about what’s going on with midstream on a national scale.  They both agreed the U.S. is currently entering what they said would be a three-year pause in terms of midstream pipeline additions.  They quickly clarified what they were talking about. These would be the larger diameter pipelines.  Their feeling was that where prices are right now for natural gas liquids, and they talked a lot about natural gas liquids, there is going to be a slowdown.  We’re seeing it.  We’ve been talking about it.  Lower prices—you can make money at X amount, but if you’re getting below that amount you’re not making any money and you’re going to slow down your operation.  We’re seeing it around the country.  These experts said that they see a pause.  It was going to take about three years for things to come back, for prices to come back and those prices would lead to more of the large diameter pipelines being built.
They did say the gathering lines, which are the lines that move the product from the well-head to the processing facility wherever that might be, will still be built.  They just don’t see a large diameter pipeline being announced again within the next three year period.

TEJAS GOSAI:  Let me counter this.  I read the articles but they’re talking about North America, and specifically some of the other areas. I would venture to say that in southwestern Pennsylvania, or eastern Ohio, we’re a bit more insulated from a lot of what’s happening in Texas, Oklahoma and the Dakotas, especially the Dakotas because they went straight up and they’re on the way down.  Here, we have such a good product and our highways, rivers, and rail are plentiful.  Pittsburgh is a good city to be near in terms of transportation.  I think we have a little less to worry about with the pause.  There’s still a lot more activity.

RICK STOUFFER:  True.  There are a lot of pipelines being constructed and more have been proposed and are on the drawing board.  I agree with you that while they sort of lumped everyone together in North America, this area is a bit unique because it didn’t have the infrastructure needed to handle the volume of production that is coming out of the Marcellus and Utica. So we might see some of these large diameter and more expensive pipelines being built, but on an overall basis, looking at North America as a whole, they were very adamant that we were entering a three-year pause.

TEJAS GOSAI:  You should never do this out loud, but I think with the US chemical industry and what’s going to happen with the cracker plant at some point, as a gas to liquids industry, we’re not going to see as large a pause in this region, assuming that things don’t get worse.

RICK STOUFFER:  Yes, I agree.

TEJAS GOSAI:  That’s Rick Stouffer, Senior Energy Editor with Shale Energy Business Briefing.  Check it out at SEBB.us every day at 4 p.m.  You get an email with the past 24 hours of information.  I’m Tejas Gosai, this is Shale Energy Now.

TEJAS GOSAI:   Our next speaker—with oil and gas—that’s one portion of the whole thing.  We have upstream, midstream, downstream, pipeline infrastructure—all of this taking place as we speak.  There’s another group of people we started to talk with a little bit ago—coalbed methane.  Personally, we didn’t know anything about coalbed methane in the beginning, but we’ve learned a lot and how serious of an issue it has been, and the ways to remediate or alleviate the situation. So, Joe D’Amico is going to share a couple of slides with us.  Again the 30th anniversary is coming up in May.  You can register at our website.  It’s a really great group and includes a lot of very seasoned veterans who know exactly what’s going on with the industry and how to capitalize on it.

JOE D’AMICO:  Seasoned—another word for old!

TEJAS GOSAI:   I’ve been practicing.  I’ll put the first slide up.

JOE D’AMICO:  It’s very nice to have us here.

TEJAS GOSAI:  Do you want to start with some of your background and what you do for the board?

JOE D’AMICO:  You have to figure out what is “the board”.  What is the North American Coalbed Methane Forum?  It was established 30 years ago.  It’s seasoned.  It’s basically for the purpose of advancing mine safety.  Thirty years ago coal mining in general was huge.  It’s still big.  You’ll see why in a minute and why it will stay big.  Increased production of coalbed methane worldwide as an energy source—did we do that?  You bet we did. The Forum itself consists of scientists, engineers, geologists, mining engineers, attorneys, business managers.  We have all walks of life and the main thing is there is a platform where you can exchange info and ideas.  That’s what it does.  Focused on CBM research as well as technology, it mostly applied to the recovery and utilization of coalbed methane. You might see at the top it says CBM and alternative energy.

How can coal be connected with alternative energy?  Let’s take a look.

Never forget—there’s lots of coal on the planet earth—lots of coal!  In America we have more coal than the Saudis have oil.   A few years ago we were importing all of this oil you say what are we going to do with our coal?  Can we make oil and gasoline?  You bet we can.  Germans did it fifty years ago and we can do it even better today.  It’s just a question of what’s the price.  So that, too, plays a factor in what you see going on with the price of oil.  If it stayed where it was—I personally was leading the charge to go cold liquids but somebody blinked.  It wasn’t us.

TEJAS GOSAI:  Cold liquids.  That’s a loaded thing to say.

JOE D’AMICO:  Yes, that means diesel, jet fuel, you name it.  We can do it.  That’s just with our existing mines and never ever expanding into new areas of mining.  More coal in hydrocarbons here than the Saudis have oil.  Never forget that fact. Let me come back to the point about how that relates to alternative energy.  Well, part of coalbed methane, and almost 10% of America’s natural gas is coalbed methane, so that’s a big chunk.  Within that group of coalbed methane, which means it could just be a bed of carbon under the ground, it’s not being mined, you just drill into it and produce the gas.  It doesn’t mean it will come out as pure methane either.

What if you look at the coal mines?  In this area where we live there are all of these underground coal mines right here.  In order to be safe they have to de-gas those mines and that methane is vented to the sky.  So there it is.  Right here, if we don’t use it, we lose it.  That’s the same creed that the solar energy boys face, or the wind boys.  If we don’t use it, we lose it. And we’ve done a great job at recovering and utilizing it.

TEJAS GOSAI:  Also, the safety element, too.

JOE D’AMICO:   The big reason for doing it is to be safe.  I’m just an energy guy so I went to the coal companies 25 years ago and said there’s an energy source we can recover and utilize.  That doesn’t mean they welcomed us with open arms.  It just means we had to keep it up until we all came to the same meeting of minds and we started recovering a lot of that wasted methane.  Now, we do plenty of it right now and we can do more.   You’re probably wondering how that works.  Well, here’s a cross section of an underground coal mine.  You can see if you have a big shear moving it’s like a giant snowblower machine going left and right.   It’s moving in this direction from left to right.  That gives you the coal seams.  In back of it, when the longwall goes forward a little bit, the roof collapses.  That’s the best frack job you ever did.  It’s natural.  All the rubble breaks up and a lot of gas comes to the surface.  If you’re smart, you’ll go out there and drill some gob-gas wells and you’ll capture that gas.

If you’re not, then it’s just venting to the sky.  As it goes forward we get underground and start drilling horizontal wells.  Drilling into that coal seam, ahead of the mining, and de-gasing that block of coal, what does that do for the mine?  It makes that mine ultra-safe.  You don’t see any stoppage in production. No gas-outs.  No problems.  That means production just rolls.  That means the cost of working goes down.  And lastly, surface directional wells—15 years ago we developed surface directional drilling to go down and go out almost a mile horizontally.  We de-gas large blocks of coal before the mining even gets there.
That’s still part of coal mine methane.  That works very well because now you’re not even constricted by the operation underground.

I’ll give an example.  Ventilation air has to be less than 1% and most mines run close to that limit of 1% methane.  We got finished doing our program and that 1% went down to .2%.  The mine face was zero.  That’s huge for safety.  The other side of this is we recovered that energy that would have been wasted.  You’d have to bring it from some other part of the world.   It displaces a like amount of energy.

TEJAS GOSAI:  That’s a beautiful thing.  We were trying to figure out how to relate shale, oil, and gas to coal.  And coalbed methane is really the best marriage of all those things.  It’s safer.  At the end of the day you are utilizing what should be used.

JOE D’AMICO:  And we use very similar practices, except for the fracking part, that you use to produce shale gas.  We produce shale gas, too.  Let’s face it—drill down a little deeper.  Let’s get it all. Just to let you know, all the gas does not come up as pure methane ready to go into a pipeline.  You’d be dreaming.  It comes up and many other molecules are mixed in with it and it has to be processed.  So you have to have large gathering systems at very sophisticated processing plants.   It has to be the right kind of system to do that job. That’s what it takes to get it done.

The little insert there is just showing you the Federal Government’s prediction for the future.  Here’s 2012:  coal, nuclear, and renewable natural gas and you can see how they’re going to be growing.  Well, coal is not going away.  It’s here to stay.  Nuclear is here to stay.  Renewables will grow some—that’s okay and good.  And natural gas is growing the most.  Why is that?  Well, it’s because you try to displace the old coal-fired power plants and put in natural gas.  The problem is that somebody decided to tear them down and put in a combined cycle gas turbine.  Once you do that you can never go back to coal.  I’m just a scientist—what’s wrong with the steam turbines?  They’ll burn anything.  They’ll burn oil, coal, gas.  Multiple choices!  And if you were around during the Arab oil embargo during the 70s, you remember there were times when we couldn‘t get oil.  We couldn‘t even get natural gas.  You just have to live long enough to witness these things.  So I like multiple fuels.  If I was on the Public Service Commission I’d be raising hell about knocking these things down.  Old coal-fired power plants are one thing, but to knock down a new one is ridiculous.   Now, watch this.  Here’s the home run.  If you’re interested in greenhouse gases and you’re interested in the environment take a look at the big picture.  It’s a smoking gun right in the middle of the room here.  What is thermodynamic efficiency?   Thermodynamic efficiency means just how efficient it’s going to be.  If you generate electricity from coal it’s going to be 30% and you take that BTU and you want to send it through some wires and get it to your house or industry; you can lose almost 20% in just transporting it through the power lines.

When you work it all backwards to the plant itself, you end up with 30% overall thermodynamic efficiency.  What is it if you use natural gas?  Well, you get a little bit better at 35%.  Here’s the best one.  It’s called direct use natural gas.  What does that mean?   It means 90% thermodynamic efficiency.  What is that?  That’s putting it in the pipeline and sending it to your house.  It goes into your furnace and it results in 90% thermodynamic efficiency.  How about we send it to industry?  That is also 90% thermodynamic efficiency.  So if you can just keep making electricity to do this, like at my house we have a development full of heat pumps, it’s ridiculous.  We have heat pumps. We should have an infrastructure of distributed natural gas in there.  It’s coming, by the way.  They’re finally doing it.
Before I forget, gas is a feedstock.  This is the chemical industry.  It used to be big in America.

Now, the fertilizer industry.  Aren’t we the breadbasket of the world?  Don’t you need fertilizer?  We get it from Qatar.  I built those fertilizer plants over there in the seventies.   I did live just long enough to talk about these things!  Why haven’t we built them here?  Let’s do it here.  As you know it’s more than just the energy side—it’s the government regulation side as well.

TEJAS GOSAI:  All of that is coming to a head for the first time.  People are getting smart enough to say that we should be doing things more efficiently.  We have the technology.  Why don’t we turn coal into diesel?

JOE D’AMICO:  We can do that; it depends on the price of oil.   You need economies of scale.  It would be three billion dollars’ worth of plants.  Then you have long term investment.  All of a sudden the Middle East or OPEC drops the price of oil like what’s going on now.  Your project could be on shaky grounds.  But we pushed the technology far enough that we could probably break even at $30.00 a barrel.  And aren’t we getting close to that now?

Take a look at this—3:1 ratio.   I’m close to Washington DC.  I go into Washington and they even invite me back.  I just tell them the way it is.  It’s the facts of life.  They may not like to hear it, but that’s what it is.  Why are we not doing this?  Why are we knocking down things that work?  Thermodynamic efficiency is important.  We shouldn’t be burning natural gas.  Anybody’s plan to make electricity should be doing much more distributive heat directly because you get a 3:1 bang.  Often they’ll put up slides about how much pollution is going on for coal-fired plants.  I say really—triple, 3:1!  You better get your overall, big picture straight first.  Then we’ll talk about the details.

North American Coalbed Methane Forum—you would love it because it’s a group of scientists, engineers and people who have great ideas.  They come together.  It’s a good thing.

TEJAS GOSAI:  I think a lot of people will have things to talk over with you in a moment, but there’s a question over here.

QUESTION:  What about dismantling the EPA?

JOE D’AMICO:  Actually the EPA likes me, mostly because I was one of the first who went to the coal producers and said let’s recover that methane that’s venting to the sky.  That was not easy to do.  They said, oh he’s great.  I said I’m not an environmentalist; I’m just an energy guy.   This is just what makes sense.  That’s what really won the day with the coal producers; I said let’s do things that make sense.  It had nothing to do with the environment.  Yes, it’s good for the environment, but if you did the right things originally it would be much better off.

Dismantling the EPA is a loaded question.  We don’t have enough time to talk about that idea.  I invite you all to come to Washington with me.  I won’t be the only John McEnroe in these lectures when the guy puts up ridiculous slides.  I say, you have got to be kidding.

TEJAS GOSAI: Thank you!  I love what you’re sharing.  Check out the North American Coalbed Methane Forum on May 21.   Thank you.

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HOST: Every week Shale Energy Now is joined by expert guests heightening the discussion about the energy development happening the world over.  Thank you to all of our listeners who continue to support us and tune in week in and week out.  Stay further connected with SEN and the Shale Media Group network at www.ShaleMediaGroup.com and with our Facebook and Twitter.

 

TEJAS GOSAI: I’m your host, Tejas Gosai.  We’re speaking with the Vice President of Business Development and partner of Ozark Oilfield Services, Mr. Matthew McJunkins.   Where are you from, Matthew?

MATTHEW MCJUNKINS:  I’m from Arkansas.

TEJAS GOSAI: Ozark is a very established company.  You practice oilfield services all over the US; can you name some of the states?

MATTHEW MCJUNKINS:  Wheeling, West Virginia is our primary center which covers all three states, including Ohio and Pennsylvania.  We also work in Oklahoma, Texas, and Arkansas.

TEJAS GOSAI: You mentioned Wheeling. Strategically, you can place your yard there.   You originally worked in the northeast about six years ago and then moved to the southwest.  Why did that happen?

MATTHEW MCJUNKINS:   It’s just with both plays, the Utica and the Marcellus being down there, we were one of the first containment installation companies in the area.  That was a big need down there because of so many rigs being in the area. When Marcellus hit in West Virginia we were very busy because we were the only ones available.

TEJAS GOSAI:  Ozark Oilfield Services does a lot of containment and spill prevention.  Tell me some of the specifics.

MATTHEW MCJUNKINS:   Especially in the northeast tier, environmentalism is a sensitive issue.  We try to be an ambassador – trying to be the link between the state and its people.  The operators are very interested in what they’re doing and what’s required of them—usually above and beyond what’s required of them.  We try to provide those services to help them meet their compliance needs. What we do specifically is to lay the plastic containment on the locations to prevent spills.  We also mix cuttings that come out of the ground—we solidify them so they can be properly disposed of. There are a lot of things we do.  We claim the fluid that’s on the cuttings and create a better re-use for that element.

TEJAS GOSAI:  With the price of crude oil and the fear out there that things are slowing down, you’re actually gaining some momentum, correct?

MATTHEW MCJUNKINS:  This has been a fantastic first quarter for us.  We are really fortunate in this area because we’ve not see what a lot of the United States has seen in regards to the market.  You go down to Oklahoma and you see it really struggling.  Up here it’s thriving.

TEJAS GOSAI: I’m happy you said it that way.  With western PA, eastern Ohio and northern West Virginia we’re more insulated.  If it happens at all we might be able to stay in motion.

MATTHEW MCJUNKINS:  Right.  And with as much gas in the area that’s big because you’re close to the east coast.  You’ve got strong operators like Rice Energy, AEP, and the guys up here who have strategic models.  They have experience in this area to know how to be profitable.  It’s great because the job market has been fantastic here.

TEJAS GOSAI: Thanks for sharing this news.  There are a lot of tough things in the news about this industry we have to discuss so it’s nice to hear someone saying something positive. This is Tejas Gosai on Shale Energy Now.  We’re talking with Matthew McJunkins who is the Vice President of Business Development and a partner with Ozark Oilfield Services.  It’s an environmental company helping in containment and spill prevention here in the northeast.

Let’s get into Ohio, eastern Ohio specifically.  The Ohio Valley Regional Oil and Gas Expo is coming up on April 28 and 29.  You can find out about it at OhioValleyOilGasExpo.com.   I know you’ll be there.  Tell me about eastern Ohio’s business with the Utica.

MATTHEW MCJUNKINS:  It’s wonderful.  I don’t know if you know the guys from this association but these guys are fantastic.  They care about this area.  That’s why they put together this association.  I’m excited to work with them.  As far as our work in eastern Ohio, it has been great.  The Utica is very strong. The operators down here show no signs of any serious setbacks.  They’re all pushing forward and ready to drill.

TEJAS GOSAI: Another big benefit of the Ohio Valley is the river system.  There is rail.  All the transportation pieces are right there.  How far is your yard from that area?

MATTHEW MCJUNKINS:  We can be to the river in five minutes being right in the middle of Wheeling.

TEJAS GOSAI: What made you want to be a part of the Expo?  I’m sure you’re exhibiting there.

MATTHEW MCJUNKINS:  We very much wanted to be a part of that locality.  We think any representation this industry has in the area is fantastic because it puts a positive spin on the people who are here.   It allows them to see that good people in the industry want it to grow.  They want to bring jobs and help the area grow financially.  With what we do, we believe in taking care of this environment.  I have to go home and look my kids in the face and tell them what I do is responsible.  That’s what we want people to understand.  We want to make money and provide for our families, but it has to be done in a way that’s responsible.

TEJAS GOSAI: Is your family up here or do you go all over?

MATTHEW MCJUNKINS:  I’m all over.  As one of the owners I have to be at each branch frequently.  My family lives in Arkansas, but yes we travel a lot.

TEJAS GOSAI: I’m happy that you’re here and conducting business.  We appreciate what Ozark is doing.  Anything in closing, Matt?  What do you think of the oil and gas industry up here?

MATTHEW MCJUNKINS:  From everything I hear—from the customers I have—we’re going to have the biggest summer ever up here.   I think maybe some of the companies have scaled back on the rig counts, but I think that’s temporary.  You also see the setback in the price of oil.  But everything I hear is that we’re going strong.  We’re hiring and planning on having a huge year.

TEJAS GOSAI: Congratulations!  And we’ll see you at the Ohio Valley Oil and Gas Expo.  Thanks for being with us.  That is Matthew McJunkins.  He’s the Vice President of Business Development and a partner with Ozark Oilfield Services.  He’ll be at the Ohio Valley Regional Oil and Gas Expo on April 28 and 29.  You can find that info at OhioValleyOilGasExpo.com.   Shale Media Group will be there covering it.

VOICE:  Thank you once again for tuning into Shale Energy Now.  One more thank-you to our guests: Rick Stouffer, who is with us every week with Shale Energy Business Briefings, check out SEBB.US; Matthew McJunkins the VP of Business Development with Ozark Oilfield Services; and Joe D’Amico of the North American Coalbed Methane Forum.  Until next time stay energized America!

 

Shale Energy Now Episode 88

Posted by on 3:31 pm in Radio Show | Comments Off on Shale Energy Now Episode 88

Show # 88
Airdate:
February 27, 2015
Guests:

Rick Stouffer: Senior Energy Editor at Shale Media Group

Jeff Shields: Communications Manager at Sunoco Logistics 

Rachel Grossman: Assistant Controller at Absolute Equipment

Right click and select “save linked file as” to download this episode.

 

TEJAS GOSAI: Welcome back to another episode of Shale Energy Now. Every week we talk to shale energy experts across the industry about what’s going on and how it affects you. This week we will be catching up with Rick Stouffer live from the Alternative Fueling Conference that was held in Monroeville, Pennsylvania. We’ll be talking to him about the past week in the oil and gas industry. Then we’ll be checking in with Jeff Shields from Sunoco Logistics; Jeff is the communications manager there. We’ll be talking about the Mariner East Project among other things. And last but not least, we’ll be talking to Rachel Grossman from Absolute Equipment. Absolute Equipment supplies rentals, sales, and equipment services since 1959 for homeowners and contractors.  We’ll be checking in with her to see how the oil and gas industry in the area has been affecting their business.

Some upcoming events: March 4 we have the YPE Crew Change at the Pittsburgh Bottle Shop. Every month about 50 or 60 people gather for a night of networking in the energy industry. You might want to check that out.  March 19 is our first E3 of the year and it will be held in Bentleyville, Pennsylvania. That’s the Elite Energy Event where there will be many great speakers as well as networking. And March 25, the Northeast Oil and Gas Awards will be held in downtown Pittsburgh, Pennsylvania where some of the finest companies in the oil and gas assemble to recognize each other’s accomplishments. Be sure to check out our parent company, ShaleMediaGroup.com, for a complete listing of events all across the world in the oil and gas industry. I’ll turn it over to you, Rick, in just one moment.

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TEJAS GOSAI: This is Tejas Gosai at Shale Energy Now with Rick Stouffer talking about the past week in the oil and gas world. Every week we talk to energy experts about the energy industry and what’s going on across North America. Rick will be checking in on some of the big things that have happened in the past 48 to 72 hours. Rick, let’s get right into it—interesting things with Citibank! We live in a number hungry society where people always want to know what’s going on. So there’s a study that took place if you’d like to share news about that one.

RICK STOUFFER: Yes, thanks, Tejas. Good day to you and good day to year listeners. Citibank has tried to quantify the sharp drop in oil prices. We’ve been talking now for a few weeks about how companies are cutting back much on what they will spend in 2015 on capital projects.  City has come up with $50 billion that will not be spent this year by 66 companies primarily based with some foreign companies that have major operations in North America.

TEJAS GOSAI:  And this is basically money that would have been spent had the price of crude oil not become as low as it is.

TEJAS GOSAI:  There’s no reason to really sugarcoat it. We’re in a really difficult time and it’s really hitting people. A lot of the drop came right before the end of the year after people had finished their budgets and there are a lot of other changes taking place so we’re watching that effect which is really detrimental to us.

RICK STOUFFER:  Absolutely! A couple of the briefs we’ll talk about in a minute—but one piece of big news was that they came out with their quarterly numbers for the fourth quarter but they also came out with their new capital budget numbers which were extremely sharply cut. So we’ll talk about that.

TEJAS GOSAI: The second piece of news is about Obama and the Keystone Pipeline.  We’ve been watching that for years now. It’s almost a running joke now—when is it ever going to happen? A lot of people are frustrated and you see a lot of frowning faces because of what just took place. We have a very infrastructure-hungry country and without this infrastructure we can’t do XY and Z when it comes to the shale play, or an energy play. And this affects everybody so let’s get into that one.

RICK STOUFFER: Yesterday the President did what he said he was going to do for probably months now; he vetoed the Keystone Pipeline construction legislation that the Republican-controlled House and Senate had put on his desk yesterday morning. He vetoed it by the afternoon. There was nothing new there. Everyone knew he was going to do it. His reasoning was that all the jobs that have been touted as far as construction of the XL Pipeline were way overblown so it’s not a jobs bill. He’s very concerned about what the impact will be. You build the pipeline and you take the crude oil from the oil sands of Western Canada; what is the impact of taking the crude from the ground in terms of greenhouse gases and global warming?

RICK STOUFFER: Obviously, the environmentalists were extremely pleased and of course the Republicans just tore him to shreds. Boehner had some really choice comments. O’Connell has said he is already going to come back later in the year. They’re probably going to try and override his veto which most people think they can’t do. They’re less than a handful of votes short of overriding and that’ll happen before March 3 which is next week. O’Connell said he’s going to come back to XL construction in another type of bill which will be a lot harder for the President to veto.

We’ll just have to wait and see.  Russ Girling, who is the CEO of TransCanada Corp., who wants to build XL, has said we’re committed to the XL and will answer any questions. If you remember, this was proposed more than six years ago going on seven years. It’s the most looked at and examined pipeline in the history of the world. And we’re still at it.

TEJAS GOSAI:  So this is going to feed into one of the next briefs. Going back to a bill on Capitol Hill, the President can be vetoed. He has executive power and the legislature can override what’s taking place as long as they have the majority. The great thing is to see something happen with this.  It’s like just waiting on pins and needles for something to happen, to change with energy. That gets into your next brief and that’s TransCanada again.

RICK STOUFFER:  Give us some good news for TransCanada. They sold 33% interest in one of their US pipelines. GTN Pipeline I believe, on the West Coast for $460 million. They sold it to a company they formed called TC Pipeline which was formed to basically own all of TransCanada’s US assets. They’re in the process—they have, I believe, five more pieces of pipeline equity—positions in U.S. pipelines that they want to ‘drop down’ is the word that everyone uses.

That’ll happen probably before the end of this year. It’s basically a win-win for both companies and TC Pipeline gets the asset. They can make money off of it and obviously TransCanada gets a big chunk of change because they’re selling it as TC Pipeline. It’s one of those win-win situations.

TEJAS GOSAI: Getting into some of the last pieces of the news that you share every day, 365 days a year seven days a week—Shale Energy Business Briefing.us to sign up—no ads just the information directly to your inbox. Some big companies like Chesapeake, Range, Rice Energy, have seen a lot of ups and downs with stock prices. With issues with the crude oil we’re seeing only the problems and a lot of the good parts are being covered up. The good news is on the back page and the bad news is always on the front. Range and Chesapeake are having some ups and downs but they have their year-end earnings for last year which I think you can share and then we’ll get into Rice Energy.

RICK STOUFFER: Range came out with their numbers late yesterday; Chesapeake came out with their numbers early this morning. Basically, they both reported positive earnings, positive profit. I believe revenue was up for both of them. A couple minutes ago I talked about the big cutback that Citi’s found with 66 companies. Both Chesapeake and Range sharply cut back on their capital expenditures for this year. This was to be expected. Chesapeake spent last year about $6.7 billion and this year they’re looking to spend between $4.2 billion; that’s a pretty big jump.

Range actually dropped 46%, almost half. They’re down to about $870 million. Both of them claim – and I have no reason to doubt them – even with sharp cutbacks in capital expenses they will both actually produce during 2015 what they produced in 2014. That goes back to something we talked about for a long time and that is the efficiencies that all of these companies demonstrate. Seemingly every time they come out with their quarterly numbers their efficiency is better and better. That’s why they’re able to cut back on the number of drilling rigs they’re using and yet their production goes up. That’s a good thing. Production is a good thing. Sorry to see them cut back so much on capital expenditures because they’re paying other companies to do that work.

TEJAS GOSAI: It’s a trickle-down effect. See how one thing leads to another. Again, we’re getting more efficient. Everyone is getting smarter or technologically-driven to make sure that were producing the energy most efficiently. Last, but not least, because we are running out of time, Rice Midstream Partners was just announced on the Stock Exchange. The Rice brothers—of course Rice Energy drilling, leasing in southwestern PA, and also in eastern Ohio.   They just started RMP.  They’re going into the infrastructure part of what we’re talking about; they’re another company that’s thinking outside the box to try to make things more efficient. We’ve been looking at the midstream for a long time but conferences are coming up for the downstream; you can stay in tune with all of this information with the ShaleMediaGroup.com. Visit Shale Energy Now for our previous podcasts; that’s at ShaleEnergyNow.com.
We’ll tune in next week; thank you, Rick.

COMMERCIAL:  For the decision maker needing the latest information covering the North American Shale Oil and Gas industry, Shale Energy Business Briefing is the online publication that conveniently provides you with the news you need.  Unlike other publications, SEBB is just the facts articles—concise, ad-free, mobile device compatible and delivered to your In Box and published on SEBB.US 360 days per year at no additional cost.  For those businesses, investors, or energy enthusiasts who want to get a handle on what is happening, how it impacts your decision making, and what could/should be your next step then you need Shale Energy Business Briefing.  Visit SEBB.US or call 1-844-USSHALE.

TEJAS GOSAI:  This is Shale Energy Now and each week we talk to experts across our northeast and American energy landscape. There are a lot of things happening with shale, oil, and gas.  Every week Rick Stouffer and I talk about some of the good, bad, and ugly.  Of course right now we’ve seen a lot of the ugly.  We’ve seen the prices of crude oil go lower than usual.  The price has been fickle for the past 60 days so there are ups and downs.

One company that has been in the energy fueling world for a long time is Sunoco Logistics.  They have been hammering the market doing really great things.  Today we’re speaking with the communications manager at Sunoco Logistics. Welcome, Mr. Jeff Shields.

JEFF SHIELDS:  Hello.  How are you?

TEJAS GOSAI:  Good, thanks.  As for being here, I wanted to get into the big Mariner East Project.  There’s a first phase and a second phase.  If I’ve never heard about this—and needed a simple explanation—could you provide me with that information?

JEFF SHIELDS:  The Mariner East Project was conceived around 2012 when the natural gas industry in southwestern Pennsylvania desperately needed takeaway capacity for the liquids that were coming out of the ground along with the methane, those being propane, ethane and butane. So with the Mariner East One Project, we saw that we could use our existing Sunoco logistic infrastructure since Sun Oil goes back to 1886.  We’ve had pipes in the ground moving refined products such as gasoline, jet fuel, and diesel.  We determined we could change the use of some of those east-west pipelines and we could move propane and ethane from southwest Pennsylvania over to our Marcus Hook facility.   The Marcus Hook Industrial Complex was formerly the Marcus Hook Oil Refinery which was built in 1902, but was idled as an oil refinery in 2011.  Since that time our people have been committed to repurposing that as a hub on the east coast for natural gas liquids.   Mariner East is the first phase of doing that.

TEJAS GOSAI:  If I may jump in, we’ve seen people around this area who have never heard of the word, Marcellus, or Utica, or shale.  It’s not new, but it’s newer to this area.  Drilling has been around for many years.   The reason that re-purposing is taking place is because we do have a glut or an abundance of energy that just doesn’t go to the right places yet, so that’s why it makes sense.

JEFF SHIELDS:  Right.  And we’re hoping our project will show people in southeastern Pennsylvania and central PA that there are benefits in the Marcellus shale for them.   We already started moving propane in December on the Mariner East One Line; we’re moving about 10K barrels a day.  Right now that’s going right out to the local market in trucks from Marcus Hook.  There are about 190,000 households that heat their houses with propane, and there are crop drying and other industrial uses for propane so we’re sort of beginning the process of making people understand in this part of the state what the promise of Marcellus holds for the Philadelphia region.

TEJAS GOSAI:  Let’s talk about that for a second.  Right now we’re in the middle of a deep freeze in the northeast with almost no end in sight.  When I left my house this morning it was 18 degrees.  For the near future this project is helping Pennsylvanians during this cold time.  Assuming the cold times continue this will be beneficial for decades to come.

JEFF SHIELDS:  Yes.  The Mariner East Two Project will have enough propane to provide all of PA with propane if it’s necessary.  Now,  Pennsylvania doesn’t necessarily need all that propane right now, but we think there are great possibilities, not just for providing lower cost heating for the market, but also using that propane as an industrial feed stock here.  It’s really the seed of different industry enterprises that will help the manufacturing industry in southeastern Pennsylvania.

TEJAS GOSAI:  Very deep goals here.  We all know that when you have an abundance of supply you have to figure out the use for it.  With what you’re saying and where it could go there is a bit of education that has to take place.  I feel like—and you can correct me if I’m wrong—but common business folks think about their own usage or their own vehicles.   Not a lot of people know that buses commonly run on propane, as do a lot of other vehicles.  So the educational element is difficult to shine light on.  You’re looking at industrial uses.   This is millions of gallons of gas equivalents and these are significant numbers.  Can you explain some of these numbers you’re talking about, maybe over a year or a quarter?

JEFF SHIELDS:  You know, the petrochemical industry has really suffered in recent years—by the loss to the foreign market and Gulf Coast for the available feed stocks.  Now we have the chance to bring these feed stocks directly from the Marcellus and Utica shale.   That would include propane.  That could include butane and ethane as well.  As you process those—at each point in the process there is a different manufacturing process that creates job and whole business enterprises and that creates a feedstock that can be used by other enterprises.
Propane for instance becomes Propylene.   That is the basic building block of plastics and turns into Polypropylene through another process and other chemicals that can be used.  These are used in the clothing you wear, the carpet on the floor, and the everyday plastics you use.
Now in terms of the numbers—we’re talking about 70,000 barrels a day capacity when Mariner East One is fully online by mid-year this year.    Now Mariner East Two which goes from Ohio, West Virginia, and southwestern PA and parallels Mariner East One to Marcus Hook, that’s another 275,000 barrels a day,  so now you’re talking 345,000 barrels a day of these natural resources from PA and the surrounding region being available to the local market for export.
But what we really see is the opportunity to create further opportunities for Marcus Hook which is an 800-acre complex.

TEJAS GOSAI:  Bravo!  We’re really happy to hear about projects like the ones you describe.  There has been so much negative talk in the media it’s good to get some bright, shining light in here. We’re talking with Jeff Shields who is the Communications Manager at Sunoco Logistics.  This is Shale Energy Now.  Check out our previous podcasts at ShaleEnergyNow.com.

Mr. Shields, a common theme through the industry is always—Texas, Texas, Texas.  Hello to the companies that are based out there.  Then a lot of them have set up shop here in Pennsylvania.  What does Mariner East mean to Sunoco for being a PA-based company?  Are you expecting some new friends?

JEFF SHIELDS:  Well, we hope to remind people that we have a lot of old friends in the state.  We’ve been based here; when Sun Oil when was formed it was essentially out of Pittsburgh and did its first business in Ohio.  In the early part of the century we moved headquarters to Philadelphia and we’ve been here in this general region ever since. You know, the Marcus Hook, when you think about that facility being idle as a refinery in 2011 after 109 years, that was a real blow not just to the community but also to the people in this company who really took pride in it.  From that time on, they’ve expressed the desire to get jobs back at Marcus Hook.  We mean real family sustaining jobs back.  It’s really a personal thing with us.  When we talk to people—such as our labor friends in mid-state, they tell us we want to see Marcus Hook succeed because what happens in southeastern PA drives the economy in central PA as well.   We know that to be true.  We think we can make an impact.

TEJAS GOSAI:  I believe so, too.  We’re just seeing the tip of the iceberg—a literal iceberg of what can happen to these industries.  We’re still hearing the inklings of Shell’s ethane cracker plant.  All of these projects are on the way.  Sadly, the normal consumer doesn’t think about things in decades like the big dogs do.  One amazing thing that I know is, if you can comment on it, the Mariner East Project will help the environment.  There are a lot of beneficial environmental impacts the project will bring.  Can you comment on this issue?

JEFF SHIELDS:  Well, you know just the propane alone that Mariner East One is moving right now is equivalent to about 25 truck trips a day so we’re reducing truck and rail traffic with the pipelines.  We’re following the existing right of way as much as possible.  With Mariner East One we had 250 miles of existing pipeline plus 50 miles of new pipeline so we didn’t have to create a whole new right of way for that and so the land was disturbed as little as possible.

Pipelines are the safest and most efficient way. They’re the least disturbing way to move products and we’re happy to do that.

TEJAS GOSAI: Agreed.  Thank you for shedding light on both Mariner East projects.  That’s Jeff Shields, the Communication Manager at Sunoco Logistics.

One final question—along with the ups and downs I have to ask what your crystal ball says for the future.  Anything on how these ups and downs will go?  A lot of people are really happy to pay $2.50 for gasoline.  I’m aggravated that our price of gas goes low.

JEFF SHIELDS:  Companies like Sunoco Logistics that have been in it for a long time see the cyclical nature of the business.  It always happens. It usually comes back around.  The smart companies and the strong companies will weather these storms.  On the natural gas liquids side these are really stable projects that are tied into long term commitments from shippers.  That’s why we really feel these are stable projects.

TEJAS GOSAI:  We hope for the best and look forward to speaking with you in the future about the continued progress.  Thank you so much, Mr. Shields.  That’s Jeff Shields, Communications Manager at Sunoco Logistics.  I’m Tejas Gosai with Shale Energy Now.  I’ll be right back.

COMMERCIAL:  TeemCo is the nation’s leader in environmental services for the oil and gas industry—the one stop shop for professional environmental engineering and consulting.

HOST:   Every week Shale Energy Now is joined by expert guests who heighten the discussion about the revolutionary energy developments happening the world over.  Thank you to all of our listeners who continue to support us and tune in week in and week out.  Stay further connected SEN and the Shale Media Group Network at www.ShaleMediaGroup.com, and with our Facebook and Twitter.  Don’t go away; there’s still much more to be discussed when Shale Energy Now comes back after the break.

Tejas Gosai:   Welcome back to Shale Energy Now.   We’re based in southwestern Pennsylvania.  One of my favorite things to do on shale Energy Now is to talk with people who have family owned businesses who have seen a change with business operations when it comes to the industry of shale and how it has is affecting the region’s economy.  So for every one energy job or oil and gas job we have multiplier effect is roughly ancillary jobs for employment positions that open up whether it’s pumping gas at a gas station, donuts and coffee, bank tellers, everybody in the region is affected when you look it as a whole.

Today we’re talking with Rachel Grossman who works with Absolute Equipment.  Check out their website at AbsoluteEquip.com.  They are based in southwestern Pennsylvania and it’s a great equipment company.  They’ve been affected by the shale region here and there. Rachel, welcome to Shale Energy Now.

Rachel Grossman:  Thank you, Tejas.

Tejas Gosai:  Let’s cut to the chase.  How is an equipment company that has been around for—how long have you been around now?

Rachel Grossman:  We have been in the business since 1959.

Tejas Gosai:  Amazing.  It has been a family owned and operated business the whole time, correct?

Rachel Grossman:  Yes.   We have a little bit of a detailed history because we had an original business that was sold.  This is the second business now that we’ve been growing that actually started in 1992.  It has really changed in the past few years.

Tejas Gosai:  Let’s talk about the past few years.  Shale drilling has definitely had an effect on our area.  We’ve chatted in the past about some of your involvement in the industry.  Can you tell me how Absolute Equipment has been involved in the shale oil and gas industry?

Rachel Grossman:   We’ve had equipment they use in the industry and just in the past few years the demand in the area has come to us.

Tejas Gosai:  What specific type of equipment?  Air compressors, generators, what else?

Rachel Grossman:  Light towers, heaters, fork lifts, pressure washers, skid steer loaders, mini excavators to mention a few.  We have other equipment that is used in the industry.

Tejas Gosai:  Also, I see that you are a woman’s business enterprise.  How does that help you in the market with oil and gas companies?

Rachel Grossman:  Honestly, I wish there were more opportunities, but there are opportunities for women-owned business.   We are actually certified by the WBNC which is the largest third party certifier. I think there is more opportunity for us.  I’d just like to get our name out there more for the women-owned business.

Tejas Grossman:  Have you had to change some of your operations because of the oil and gas demand?  Take me through some of the beginnings of it.  The industry crept up on a lot of people very quickly.  How did you adapt to those things?

Rachel Grossman:  It did happen quickly.  We happen to be very service-oriented and meet the demands a lot quicker than some of the other industries.

Tejas Gosai:  Service.  What does that mean?  Are you available at odd hours?

Rachel Grossman:  We do have 24-hr emergency delivery and pickup service.

Tejas Gosai: Is that one of the benefits and why Absolute Equipment is having success?

Rachel Grossman:  Yes, I believe so.  I think also it’s the knowledgeable staff we have for the equipment that we offer and the personal service.

Tejas Gosai:  Excellent.   So when it comes to equipment and what Absolute Equipment offers, it’s anything you can think of in terms of equipment, and you can make that happen.

Rachel Grossman:  Yeah, it’s more of the construction type equipment.  We do have our specialized equipment—the DuPont Portable Power which is the air compressors, generators, and light towers.  We can buy almost any type of construction equipment a customer would need.

Tejas Gosai:  Also, with the residential market over the last few years picking up, and there’s a lot of commercial construction because of the development, has that ancillary part with home building affected you guys?

Rachel Grossman:  Yes, we do service other areas because obviously we didn’t start out with the oil and gas industry, so the general construction has definitely been impacted.  You know, just with the area growing, people with good income jobs want to do home improvement, so we provide equipment for home owners too.  I think it’s a trickle-down effect for us.

Tejas Gosai:  What are some of the other industries that Absolute Equipment services?

Rachel Grossman:  General construction, bridge painting and sandblasting, landscaping, utility work and homeowners.

Tejas Grossman:  We’re talking to Rachel Grossman with Absolute Equipment.  Check out their website at AbsoluteEquip.com.   The phone number is 412-931-6655.  You’ve definitely exhausted how well you guys are doing in this piece of the industry.  With the outlook, there has been a lot of difficulty when it comes to the price of a barrel of oil and how it has affected the industry.  Have you guys seen any downturn or negative?

Rachel Grossman:  We’ve not seen it yet.  Our customers haven’t experienced yet, so hopefully we won’t. There’s nothing bad that I see right now.

Tejas Gosai:  A lot of the media is buzzing about how the shale industry is being affected so negatively.  There’s some truth to that.  Almost everyone I talk to has seen things remain status quo.  Maybe compact a little bit, but not bad. We’re looking forward to hearing more from you soon.  Thanks for coming on, Rachel.

That’s Rachel Grossman, Absolute Equipment.   Check out their website, AbsoluteEquip.com.  Their number is 412-931-6655.

COMMERCIAL:  One decision, endless possibilities. California University of Pennsylvania opens your mind to more than 130 programs of study—programs that matter to education and healthcare, to technology and to the future of our world.  California University of Pennsylvania—because the world is waiting for you.  Visit or apply online at Calu.edu.
Thank you for tuning into our 80th episode of Shale Energy Now.   We’d like to say thank you to our guests once again:  Rick Stouffer, our Senior Energy Editor at Shale Media Group, and Shale Energy Business Briefing; Jeff Shields with Sunoco Logistics; and Rachel Grossman with Absolute Equipment.

Until next time, stay energized, America!

 

Shale Energy Now Episode 87

Posted by on 4:56 pm in Radio Show | Comments Off on Shale Energy Now Episode 87

This unique episode of Shale Energy Now contains content originally recorded in front of a live audience at Shale Media Group’s Elite Energy Event.

 

Show # 87
Airdate:
February 11, 2015
Guests:

Megan Cook: Director of Marketing at Mustang Oilfield Services, LLC

Tom Foster: Owner at The Northeast ONG Marketplace

John Craynon Ph.D, P.E.: Director of Environmental Programs at Virginia Center for Coal and Energy Research at Virginia Tech

Chris Miranda: President at Mac Safety Consultants

Rick Stouffer: Senior Energy Editor at Shale Media Group

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TEJAS GOSAI:  Welcome back to another exciting installment of your favorite energy program, Shale Energy Now.  I’m your host, Tejas Gosai.  Every week we talk to experts across the energy world about what’s going on with the American shale oil and gas energy landscape.  This is episode 87.  You can check out previous podcasts at ShaleEnergyNow.com.  Today’s program is a little different than usual.  We’re coming to you live from the Elite Energy Event which took place this past January.  A lot of hefty info about everything that has been going on with the crude oil.  Everybody don’t head for the hills because things are still really good when it comes to shale oil and gas.  Our guests will be sharing that information.

Today we’ll talk with Megan Cook from Mustang Oil Field Services.  Check out Mustang Oil Field Services.com.   They grew from 5 to 60 employees and now are up to 25 trucks based in eastern Ohio.  Also, Tom Foster is here from the Northeast ONG Marketplace.  You can find their info at ONGmarketplace.com.  It’s a publication that our parent company Shale Media Group works with day in and day out.  The publication is available online and available via delivery to anyone who is interested in receiving it.

Touching on health and safety is Chris Miranda from MAC Safety.  Check out their site at MACSafety.com.  Also,  John Craynon, Ph.D, P.E., Director of Environmental Programs at Virginia Center for Coal and Energy Research at Virginia Tech is checking in about their program.  There’s a call for white papers.  You can find that info at ShaleMediaGroup.com.

Also, Rick Stouffer, our Senior Energy Editor and the man behind Shale Energy Business Briefing.  Rick will check in with us about the E3 and kind of give us our State of the Union and everything related to oil and gas this year.
Stay tuned for a Safeland course coming up on Tuesday, March 3 in Monroeville, PA and the Alternative Fuels Conference will be February 24 – 26.  That’s all on our events calendar.  Our next Elite Energy Event is February 26 which is the final day of the Alternative Fuels Conference.  You can register at ShaleMediaGroup.com.

Finally, the North American Coal Bed Methane Forum has their 30th annual conference.  It’s a two day event on May 20 and 21.  You’ll see that information at NACBMForum.com.

I’m Tejas Gosai and we’ll be right back after the break.

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TEJAS GOSAI:  Welcome back.  First we’re going to talk to a great company that is based in eastern Ohio. They’re fantastic and they’ve been growing by leaps and bounds.  We have become friends with the company.  Let’s give a round of applause to Megan Cook, Director of Marketing at Mustang Oilfield Services, LLC
Let’s get into it.  Mustang Oilfield Services is a water hauling company/trucking company based in eastern Ohio.   A lot of our previous discussions were about how Ohio is doing a better job than Pennsylvania when it comes to regulation, or when it comes to the cost of water, or when it comes to being a good infrastructure for the oil and gas industry.  Ohio is definitely doing a better job than Pennsylvania has been doing.  Now that we have a new governor coming in everyone is very intimidated and afraid about a potential tax at some point.   Megan, tell us about Mustang and some of the history.

MEGAN COOKE:  We started in 2013.  We began with four trucks.  We went to a local Volvo dealership.  We started with them and Peterbilt.  Now we have 25 power units.  We’re not biased.  We love Macs, Kenworth, everything.  Our drivers know how to work all of them.  We have 25 power units and 21 of them are water trucks.  They are currently working in the tri-state area 24 hours a day.  We’re really excited.  We have a huge yard and shop in Ohio.  Recently, we’ve done a lot of work in Western Pennsylvania.  After evaluating our assets we actually bought a fleet of trucks that are pretty much only legal in PA and West Virginia at this point when they are loaded.  We decided to move assets to Pennsylvania.  We officially moved this past year in October and opened our Waynesburg yard.  We have a fulltime yard manager who is on call 24/7.  Her name is Tiffany Pierce.  She has been in the industry for quite some time.  We send out about 6-8 trucks a day down there. Our end goal is about 12 trucks a day for work in Western PA.

TEJAS GOSAI:  Can you share some of the companies that you’ve been working with?

MEGAN COOKE:  In Ohio we work with Rice Energy.  We love working with them.  St. Clairsville just leased their land with Rice Energy.

TEJAS GOSAI:  You’re one of the typical family owned and operated companies that took a risk a few years ago.  You went after this opportunity and kept the company lean. So in making those decisions and where you’re at today I know you’re still hiring.  So, I want to slowly dispel some of the issues and misinformation that’s out there. You’re still working.  Your company is still running pretty hard.  So let’s talk about it specifically.  How is it going?

MEGAN COOKE:  It’s actually going great, Tejas.  Being a water hauler, every time it rains or snows they need us.  We’ve actually been to pad where the rig mats are actually floating because it has rained so hard.  They need us regardless of whether we’re delivering fresh water—that’s where the big push has been.  Let’s cut down on the truck traffic.  We understand and want them to save their costs. We’ve helped with some of the transfer services that some of the operators have decided to go with.  At the end of the day when your rig pads are floating you’re going to need to call us. All of the legacy production will have to come from the wells that we are drilling.  With us being positioned in Ohio as well as eastern PA we’ve been able to lock up some of that work which keeps our trucks busy 24 hours a day.

TEJAS GOSAI:  How many employees are you up to now?

MEGAN COOKE:  We keep around 60 employees.

TEJAS GOSAI:  What did you start with two years ago?

MEGAN COOKE:  About four people.

TEJAS GOSAI:  There’s no slowing down in the near future even though we’re seeing some challenges taking place.

MEGAN COOKE:  We’ve not seen it.  Our director of business development, as well as my husband, have been to some events and they have heard the gloom and doom about the industry.  But if you talk to people in the industry, over the last 35-40 years this type of thing has happened many times.  We’ll come out of it and from our perspective what we’ve seen—we haven’t considerably slowed down.  We’re still pushing double digit trucks every shift out in the field to work.  We’re very blessed.

TEJAS GOSAI:  Check out Mustang Oilfield Services.com when you get the chance.  They have a great video that follows one of the truck drivers though his day.  The last thing I’m going to ask you to talk about is how strict you have to run your shop.  Can you talk about ISNetworld and how Ray helped you guys maintain a good score?

MEGAN COOKE:  Absolutely.  Safety is our utmost concern.  Our favorite question to answer is what somebody who has no idea asked us.  The person we buy our office furniture from asked us the other day, “What makes people call you and not someone else?”   The director of business development and I both said at the same time, “Safety!”  Our guys don’t leave until they’re properly dressed. They’re not even allowed into our shop until they have their full metatarsals on.  They have to have all their gear on and ready to go.  The other thing is that we self-police our own trucks.  We do DOT audits on ourselves.  We do DOT checkpoints on our own trucks before they even leave the shop.  We do a lot of in-house checks and balances as far as those standards go.  We’re not just a trucking company. We go into the oilfield also.  So there’s a whole other set of rules that we’re required to follow.  Ray was able to get us set up with ISNetworld as well as PIC.   We are PIC certified.  We got that certification at the end of 2014 for one of our customers.  With that, it just houses all of our safety records and safety manuals, our new hire orientation and our two week training process that every new employee goes through at Mustang.

TEJAS GOSAI: Megan Cook, thank you for joining us.
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TEJAS GOSAI: Let’s give Tom Foster a round of applause.   Tom actually operates two papers.  Do you want to talk about them?

TOM FOSTER:  It’s a family business with my father starting a trade paper for the coal business twenty eight years ago.  When he retired, my brother and I said let’s get involved in the oil and gas business.  We started in 2011.  At the time Marcellus was the buzz and Utica was something in the background.  So here we are a little over three years and now the Utica is part of the buzz, too.

TEJAS GOSAI:  The way we work together is that Laurel Strongosky is our chief design officer so she actually designs the publication using all of the ads, and Kristie Kubovic does a good bit of the writing.  Rick has done a few articles.  Tom talks to people in the industry and helps compile all of this information.  Then it’s printed down in Beckley, West Virginia.  If you look through it you’ll see events and trade shows.  I like the ads—a lot of good information about the northeast portion of the oil and gas industry.  Can you tell us about the circulation, Tom?

TOM FOSTER:  It’s actually something I was thinking about.  We’ve been printing if for about three years and we send out 11,000 copies every month.   Probably about 8,000 of those are in West Virginia, Pennsylvania and Ohio.  Then we go up to Michigan and then southern Illinois and Kentucky where drilling is going on. We send a couple thousand to Texas and Oklahoma where the headquarters are because people are deciding stuff down there that impacts up here. We had a guy from California who wrote an article for us.  It was in our Northeast publication, read by someone in Houston, so they could hire him to do work in Utah.   The 11,000 we sent out—I didn’t intend this to be a sales pitch but here’s the sales pitch—if you’re a business trying to get into the industry and you want to reach the people in the industry then there’s no other way to reach 11,000 people in this region other than our publication and maybe a couple of websites.

The articles are pulled from experts like you guys—because you’re the experts.   So we go to companies like you guys and ask you to write an article about something you’re an expert on.  So we’ve had articles on natural gas and natural gas vehicles, and articles on safety.  Ray Pader has written a few for us.  It’s a great way to not only see your name but to say this person is an expert in this industry.  You know, it’s worked out well for us and for the industry to be a source for who the experts are and who is doing what in the industry and how can we all get connected.

TEJAS GOSAI:  There are also a couple of people whom we quoted.  I think Kristie wrote an article and quoted someone in one sentence and one of the gentlemen got a job offer literally from this one sentence in which he was quoted.  All these things are great.  We love working with Tom.  The bigger thing here is what’s happening for the future.  I know you’re going to be at the Marcellus/Utica Midstream event.  The question is, with the publication—are there issues?  Do you foresee anything with listing events in the future?  Have you run into any of those problems?

TOM FOSTER:  Other than the NAPE show getting cancelled which, I don’t know if it was premature on their part.  The NAPE show covers this whole other end of the industry than what we probably deal with which is more the drilling, water hauling and that sort of stuff.  I don’t know, maybe they understand that better than I do, but it seemed a bit premature.  But no one else I know of is cancelling their shows.  We actually publish a training calendar and more and more people are reaching out to me asking if I can put their event on the calendar.  So—I don’t think it’s slowing down at all.

TEJAS GOSAI: Awesome.  Any questions, anyone?  Anyone interested in writing an article?  Give your card to Tom!  It’s a free publication so give me your card or shoot an email.  Give Tom a round of applause.  Thank you very much, Tom.

TEJAS GOSAI:  This is Tejas Gosai with Shale Energy Now.  Our parent company is Shale Media Group and it shares a ton of information when it comes to shale oil and gas.  Check out our video section.  It’s ShaleMediaGroup.com/video.   A lot of great information is there.  If you spend some time there it’s as if you’re at the events. Thanks for tuning in and thanks for listening.

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TEJAS GOSAI:  Welcome Professor John Craynon Ph.D., P.E., Director of Environmental Programs at Virginia Center for Coal and Energy Research.  Let’s get right into it.  What do you do at Virginia Tech?

JOHN CRAYNON:  Well, I’m the Environmental Programs Director at the Virginia Center for Coal and Energy Research.  Part of that is running a program called ARIES—Appalachian Research initiative for Environmental Science.   Seven years ago coal was actually in a very good place.  They had a lot of demand for the product and prices were really high.  But they had a challenge and it was getting permits.  Part of the reason they couldn’t get permits was a lot of conversation going on, but not very good science, that the coal industry was causing all of these public health problems and all of these environmental problems. They hired a lot of consultants who said that wasn’t so.  They went to the regulatory agencies and they said it’s consulting work—where is your peer-reviewed science?

So they decided to get together and fund a research program being carried out by the research universities in the Appalachian Region.  They wanted to really look at those allegations that the coal industry was creating.  At the time they had a little bit of foresight to understand that the problems that coal was being alleged to create were no different than the problems that electricity generation or gas production or pipelines would eventually be told they were causing.  And here we are seven years later and, interestingly enough some of the same folks who were making those allegations about the coal industry are now making them about the shale gas industry—dust from wells creating lung problems in communities around them.  Seven years ago the same folks were saying it was from coal mines.

TEJAS GOSAI:  Can you mention the schools that are looking at the research?

JOHN CRAYNON:  We were fortunate in they came to Virgin Tech to manage the process.  We were fortunate to get a lot of the major research universities across the Appalachian Region involved—the University of Kentucky, Marshall University, WVU, Ohio State, Penn State, Pitt.  We also have the medical schools at Georgetown University and John’s Hopkins involved in the project.

TEJAS GOSAI:  So seven years ago has been a long time and there’s been an entire shift in this energy stuff.  I’m going to talk about boom and bust cycles and you see that in energy no matter where you are or what you’re doing.  You always see boom and bust.  Is the research working?  Are you getting it to where it needs to be?   Can you share that?

JOHN CRAYNON:  We are really fortunate they put up millions of dollars.  We got a really good investment and it’s over four years that it has been up and running.  We’ve spent about 80 million dollars in research and we’ve gotten over 80 peer reviewed publications in journals, and peer reviewed conference proceedings which is a pretty good rate of return.  We’re seeing everything from water chemistry indicating the allegations of harm really aren’t true, to looking at the critters in the stream and they’re still there even though the water chemistry might not have indicated that fact.  Or, looking at public health where we don’t see the same chronic correlation between energy development and birth defects or cancer or some of the other things that had been alleged.  I think the research is working very well.

TEJAS GOSAI:  It’s heavy stuff.  Those papers are quite lengthy.

JOHN CRAYNON:  And in some cases they’re in some of the most influential medical journals in the world.

TEJAS GOSAI:  So what’s the next step?  What’s the plan for ARIES besides some events taking place?

JOHN CRAYNON:  We agreed that when we started this program we’d start as a five year program because sometimes research programs start and they keep going and going because scientists always have more questions to ask.  But the practical nature of it is that sometimes the answers are finished early.  We’re reaching the end of that five year commitment and looking at what to do next regarding coal.  We see a great opportunity to have some of our researchers in this cadre of folks looking at other issues.  Sixty-five researchers at these eleven universities can look at problems in other parts of the energy sector. So we want to reach out to folks in the shale gas industry and the pipeline industry.  We want to see if there’s an interest in fostering this kind of research.  As a part of that, we are hosting a second conference to allow these researchers and others that are working in these areas to come together and talk about what’s going on.

Our second conference will be September 19-22 at the Omni William Penn here in Pittsburgh.  We have brochures available about the conference.  We are still accepting abstracts from people who want to do a paper or presentation.

TEJAS GOSAI:  So we’re going to have a bunch of southerners up here?  I’m joking of course.

JOHN CRAYNON:  I worked for the federal government in Washington for 28 years and I lost my Kentucky accent.  So I hope you all noted I am a southerner.

TEJAS GOSAI:  Last but not least, there’s a website and information online.  Hopefully, we’ll be sharing that info.  One thing you could talk about is the team members down at Virginia Tech; we got to meet some of them.  They didn’t always just drill with water.  They even drilled with gasoline, or they fracked with gasoline at one point?

JOHN CRAYNON:  We have a pretty big project working with the Department of Energy where we’re injecting CO2 into coal seams to increase the recovery of gas from the coal bed methane wells.  We actually are the only place in the country that’s looking at recovery enhancement by injecting CO2 into shelf formations. We’re seeing good things from the preliminary results, but the other possibility is that when you start looking at the wet shales like the Utica, the possibility of using CO2 as a fracking fluid instead of water has some real exciting possibilities.  CO2 moves liquids better than water does.  So we’re really excited about some of our preliminary research and looking for opportunities to move that ahead as well.

TEJAS GOSAI:  Something else to mention—I don’t remember the date, but we started working with the North American Coal Bed Methane Forum and they’re doing a conference as well.  It’s the perfect place where shale and coal have a good relationship.  May 20-21 is the date for the forum which is at the Hilton Garden Inn at Southpointe.

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HOST:   Every week Shale Energy Now is joined by expert guests who heighten the discussion about the revolutionary energy developments happening the world over.  Thank you to all of our listeners who continue to support us and tune in week in and week out.  Stay further connected SEN and the Shale Media Group Network at www.ShaleMediaGroup.com, and with our Facebook and Twitter.  Don’t go away; there’s still much more to be discussed when Shale Energy Now comes back after the break.

TEJAS GOSAI:  This gentleman teaches courses and runs a very strict office.  We get to work with the family.  Chris Miranda, if you don’t mind coming on down.  Please give Chris a round of applause.
So let’s get right into it.  What does MAC Safety do and why are you guys good at it?

CHRIS MIRANDA:  Thanks.  We provide on-site safety training as Tejas mentioned.  We do safety consulting.  We staff numerous sites in Ohio, West Virginia, and Pennsylvania right now and we have 13 full-time safety professionals out in the field at this moment.

TEJAS GOSAI:  Let’s talk about the whole progression.  You guys are located right next to where the proposed cracker plant will be.  Before any of this happened, you already were safety experts.  You just had to pivot and learn a lot of what was happening, correct?

CHRIS MIRANDA:  Yes, that’s right.  Probably where we started was heavy manufacturing, steel mills, and chemical plants.  That has allowed us to move into the oil and gas on-site construction facilities and make it a little easier to transition into providing fulltime safety professionals for customers.

TEJAS GOSAI:  I’m trying to build a story here—there are a lot of people afraid of what’s happening and the difficulties.  I would think that if there’s an indicator and you’re losing rigs or there are problems in the oil and gas industry you wouldn’t need safety experts. Have you seen a drop or other issues?  Are you still running hard?

CHRIS MIRANDA:  I’d say we’re running hard.  Maybe it’s because we’re not just oil and gas and we have the ability to go into steel mills and regular general industry facilities along with construction sites.  Oil and gas might be a strong section of the business right now but it still allows us to move into various other avenues.

TEJAS GOSAI:  Those other avenues are still directly related to the boom that we’re seeing.  Or, a potential bust that we’ll talk about.  But all of these things are related.  One thing you guys are really waiting for is when this cracker plant starts—which we think is going to happen. But in positioning yourself the right way you’ve made a lot of inroads with a lot of different companies.  Specifically, how do you work with an oil and gas company, or contracting company that works with oil and gas?

CHRIS MIRANDA:   Well, I think it goes a bit further than the actual working with a company.  The family aspect you mentioned has allowed us to instill our values into our guys off- site who take those values to the people who are actually working on-site.   I would say we’re probably a bit different.  We’re not your normal safety consulting company that is kind of just identifying issues and then walking away.  We try to provide solutions.  If you’ve worked or talked with any of our guys, they’re stories are more like a family-type environment.  The energy they bring is a lot more than they can possibly ratchet up on a daily basis.  These guys go 100% and really drive hard.  They take it a bit more seriously than just being the safety person; they want to incorporate themselves into how that company does day-to-day operations.  It’s almost a seamless transition to where no one really knows you’re a MAC Safety employee.  They think you’re just “X” employee.

TEJAS GOSAI:  I think that’s the most fun thing about MAC Safety.  It’s really a culture that you have to instill based on safety whether it’s a seat belt or something else.  But that’s what you guys have become really good at.  You’re doing the research and finding out what needs to be done.  We once had a conversation—maybe an odd one—about death and how when something happens at a facility you can’t say, “I told you so.”  It has to be, “We should have started this properly.”

CHRIS MIRANDA:   I think you’re right. Our approach is more pro-active.  If you’re going to start thinking reactively, I think everyone understands safety and what you’re supposed to do and when you’re supposed to do it. Our ideas are more geared towards wanting to be proactive and identifying things before they are a problem.  Even if it’s an injury, it happened and now we have to go back and undo it when maybe we could have identified something prior to it actually happening.

TEJAS GOSAI:  That’s the worst way it can be—if someone loses an arm or limb.  It goes into workers compensation ad someone may not know how to deal with those issues.  They call you and kind of gear up that relationship.  What’s on the horizon for MAC Safety?  I know you’re still running strong, but what do you see yourselves doing for the rest of this year and further?

CHRIS MIRANDA:   It’s going to be continuous growth.  We haven’t slowed down.  We’ve been aggressively going after more contracts and contractors.  It’s trying to instill our culture across the board.  I think the energy we bring is a lot different than most other people in the safety industry.

TEJAS GOSAI:   Thanks Chris.

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TEJAS GOSAI:   All of this is orchestrating what’s going on and how we see it.  Our existence comes up to this moment.  We’re continuing with things.  I’m watching and talking to all of these experts that we work with all the time.  There are questions, theories, and issues.  Everyone is wondering what is going to happen.  Let’s talk about how we figure out what’s going to happen—the crystal ball.  No one knows what’s going to happen in the future.  I have a lot of graphs that I’ll be sharing in a moment. I’m going to just tell you about this—to make good decisions, which is what our company was built on. Shale Media Group saw a lack of information in the oil and gas industry.  It seems like a lot of the oil and gas producers were trying to get leases signed without explaining things like what a Pugh Clause is or exactly how much the minimum for royalties can be and what the price should be.  There are all of these different pieces that are hidden.  So, we first focused on finding those pieces.  That’s the raw data, right?
Raw data is comprised of random facts and stats.   In and of themselves, there is little value in making conclusions based on data in its raw form that will lead to flawed decisions based on incomplete data sets.

The reason I mention that is that some people say it’s about data, data, data.  But the data by itself doesn’t work to help you make the right decisions.   Let’s take it further:  information.  Information is an evolved or more complete data set.  It’s derived from a collection of process data, and context and meaning have been added to disparate facts which allow for more analysis.

The conclusion of what I have to say is with this part of it.   I think when you look at data and information and you can properly get rid of bad data and you’re left with good information you have knowledge.  When you have knowledge you can make an educated decision.  No one knows what will happen in the future.  In the end everyone is just guessing what will happen, or they’re just trying to do the right thing.  You can be really safe and open a Jamba Juice, but then someone might open something else across the street.  There are a lot of examples but the only one I could think of was Jamba Juice!

Let’s look at some data.  Range Resources.  On June 5, 2014, Range was trading at $93.70.  Something really funny happened on that day.  If you look at that trend they’re fairly high and they had reached that level over the past few years because of what was happening with the Marcellus and Utica.
I actually don’t own any stocks, but I love looking at stock values all the time because it shows trends.

If you look after June 5, you see an incredible decline all the way to today at $48.38.  So yeah, terrible, awful!  What can you do about it?  At the end of the day what I want to go to is that Range Resources and some of the larger companies like Chevron, Shell, Exxon—these guys don’t make decisions like some of us do.  I’m thinking about next quarter and the end of the year, or maybe next year.  These guys are thinking about seven and ten years down the road.  They’re thinking in much larger time periods. We’re going to look at the price of crude oil from 1868 until today as well.  All of this is much related.

But to be able to talk about this I have to have our right hand man, Rick Stouffer.  C’mon down, Rick.
If you haven’t read Rick’s stuff he has 30 years of writing experience and he has worked for some very well-known outfits in the oil and gas industry.  He’s our data cruncher.  Seven days a week we have a product called Shale Energy Business Briefing.  So, Rick can’t get sick!  He is constantly on the wire.  Seven days a week he is the one who cranks out data and it gets into your In Box at 4 p.m.     He’ll scour all the data across the country, read it, and then brief it for you.  Rick, Range Resources—what did you nickname them?

RICK STOUFFER:  The Grandfather of the Marcellus Shale.

TEJAS GOSAI:   They were the first guys to drill.

RICK STOUFFER:  The first well started around 2004 and finished the actual drilling in 2005.

TEJAS GOSAI:  Was it a horizontal well?

RICK STOUFFER:  it was a vertical well.

TEJAS GOSAI:  So they started with a vertical well in the Marcellus and then they went to the horizontal system once they found out how productive it was. You’ve had a lot of interaction with those folks.  You’ve seen the stock price jump up over time.  Are they going anywhere?  Are they going to be shutting down?  Do you have any insight on it?

RICK STOUFFER:  No, they’re not going to shut down.  All you have to do is look at their regional headquarters that just opened not too long ago.  They invested for the long haul. In fact, with Range, I think it’s around 80% or higher, as far as all of their work is in the Marcellus.  They’re not going anywhere.  Now, does that mean they might slow things down?  Absolutely! You know, the big thing today is if you talk to any of the producers everyone has to live within cash flow. That has not always been the case.  Up until a year ago that wasn’t the case for a lot of the players because they would just go to the market and sell debt or equity and they never, ever had a problem.  People were just busting their down doors to get a piece of the action. That’s changed.  It changed before the oil prices started to drop.  Now everyone’s mantra is, “Live within cash flow.”  So does that mean Range might slow down?  Yes, they have to live within their cash flow.

TEJAS GOSAI:  But with that $850 million building in Southpointe they’re probably not going anywhere.

RICK STOUFFER:  I don’t think so.

TEJAS GOSAI:  Moving on.  My favorite company is Rice Energy.   A lot of us are friends with Toby Rice.  June 5 was their highest stock price for the year.  They started publically trading in January of last year.  I think they started at $21 but their IPO, which I know a lot of our staff members bought, went all the way up that day to $33.32 and if you look afterwards there is a complete decline to now.  It’s at $17.41.
So I started with I don’t own any stock.  I’m definitely going to buy some Rice and Range stock now.
When we get to the conclusion of this talk the point will be that a lot of this will come back.  If you’re going to think about the past ten years, you have to think about the future ten years. Human beings are forgetters.  We forget about the last time we got burned so we test the stove again.  We just don’t remember everything the way we should.

If you’re going to look back then you have to also look forward.  You can’t just look at the year in the past and not think about the year in the future.  I just wanted to show their stock price is having difficulties.  I know for a fact now that Range, as of today—EQT and Rice—are holding back on their leases.  So, if you have an EQT lease in possession you have until the 28th to sign it.  All of those leases will be rescinded.  This is the difficulty.  It’s based on what’s happening with a bunch of these companies.  Rice just built a ridiculously large building in Southpointe.  They’re family is tied to multi-billion dollar investment funds. Does everyone know what the word “hedging” means?  If you have hedged your debt properly and you have the proper advisors and they have a head on their shoulders they have planned for things like this to take place.  It’s just a fact of the matter. When it goes down you get lean and mean.  You make sure you do things the right way.  I think right now we’re in a pause or purge period.  It’s calculated by design.  It’s coming from the people against our interests.  This is the patriotic part of it.  If you want to make people borrow money you lower the interest rates.  If you want to screw America do what you’re doing right now.  That is definitely what’s happening.  We got 84 Lumber doing well because the economy started doing well and people started building houses.  They needed wood.  All of these companies started doing well because of what was happening with all of this energy stuff.   For every energy job there were three or four ancillary jobs.  People needed coffee, doughnuts, and all of those other pieces of the picture.

If you look at the trend line it was pretty straight for a long time.   This period—specifically 1927 going through 1969—Rick, maybe you can help me with this part.  You’re looking at history and you’re looking at what’s happening now.  We need to think differently.  We need to think in five or ten year increments. So, if you look at it and wonder how these prices can fluctuate this much right now, I don’t have the drop in here.   There’s the drop—specifically from September of last year to what’s happening right now.  This chart doesn’t factor that in; it only goes to 2011. At that time it was still at an upward angle.  How high can the price get?  How low can the price get?  These are factors we cannot fully determine because we don’t know what’s going to happen in the future.  But if we look historically at what happened—a really big and awesome thing happened in 1969 and 1970.
We realized at the time that we were the only country in the entire world—everybody else, the people who sell us oil—they run 40% of their vehicles on natural gas and LNG.  America realized that we needed to build an infrastructure that does the same thing.  So they tried to.  And the initiatives went out there and the government said we should be doing this—we should build this infrastructure.  So an attack took place right afterwards—a very big attack.  That’s what happened.  They hiked up the price.  They dropped the price afterwards.  They basically shut everything down that had to with infrastructure.  They lobbied. It doesn’t matter what you say about lobbying—if you have a million dollars then someone else has a million and five bucks to shut you up.  And that‘s what you see.  Movies like Promised Land that are funded by Saudi princes and their media companies.  We’re victims of this type of culture.
We did a lot of homework and we did a lot of data hunting to figure out what is exactly happening.  This is an atomic bomb that is being dropped on us.  But there are a lot of people going to the gas pump and paying this small amount of money for a gallon of gas.  But this is like poison.  We are really hurting ourselves in the long run.  We need this infrastructure and if we don’t follow that momentum that we’ve built up, it’s going to be an issue.  What’s going to happen again?  They’ll jack up the prices after all of these oil and gas producers aren’t doing what they’re doing—-and they’ll shut down a bunch of CNG vehicles and CNG stations that will be built.  So, Rick, I think you were going to focus on the last ten years.  Go for it.

RICK STOUFFER:  Obviously you can’t watch TV or listen to radio or pick up any kind of publication these days where they’re not talking about the price of oil.  And you know where oil has come from in the last seven months.  So let’s go back to last June.  Actually, the price for a barrel of West Texas Intermediate Oil which is what the benchmark is in this country.  It’s WTI—West Texas Intermediate.  The price of a barrel of WTI since December 2012, only for one week in that period which is a little over two years, went below $90.   We got very comfortable.  The industry and the country as a whole got very comfortable with very high prices for crude oil at $90 and above.  So what happened last June?  Last June a lot of different factors came together.
Number one, you’ve also heard over the last few years about the oil rush in this country with the Bakkan Play up in North Dakota, and the Permian Basin in West Texas and the Eagle Ford Shale in South Texas.  We’ve been pumping a tremendous amount of oil in this country. In fact, I believe it’s just under five million barrels per day.  We had a jump from four years ago until today.  That’s a huge amount in a short period of time.  In fact, in the last year it’s actually gone up 1.3 million barrels of oil a day.  Now a barrel is 42 gallons—so if you want to do the math, and I don’t, you can figure out how many gallons we’re talking about.  It’s a lot of oil that we’re pumping now.  Because of horizontal drilling and hydro fracturing we’re up to roughly $107 a barrel last June when these factors came into play.  One, this country does not export crude oil.

TEJAS GOSAI:  By design.

RICK STOUFFER:   By design.  There are laws in the books since the 70’s because of the Arab Oil Embargo that Congress found it in their hearts to say we couldn’t export crude oil because we didn’t want to be in a bind that the OPEC nations put us in during the mid-seventies.  We can’t export, however, now that we’re using so much for our own oil.  A lot of the imports that we were bringing into the country because we needed to, we don’t need anymore.  So that oil has to go somewhere else. Even though we don’t export per se, or export directly, when we do produce in this country we now have this huge factor around the world.  The imported oil that we no longer import is going somewhere else so that impacts price.  That’s one thing.
Libya is a major producer in the Middle East.  For a long time they weren’t in a good position when it came to producing.  They brought a tremendous amount of product back on line beginning last year.  So that’s another reason.  So you have more production from them coming on.  You have more production coming from Iran.  You have more production coming from Russia.  I believe it’s 70% of Russia’s gross domestic product is based on crude oil.   That’s a huge number.  So, obviously, they’ve got to sell their crude or their economy goes down the drain which is what’s happening now.

TEJAS GOSAI:  And they’re going to make sure they sell their crude by any means justifiable.

RICK STOUFFER:  So you had all of these factors come together and the head of it was last June when the price started to dip.  When it started to dip nobody gave it a great deal of thought.  It was a blip on the radar.  We had gotten used to this $90 and above per barrel for two or more years.  It will work itself out.  Well, it didn’t work itself out.  And, particularly, it didn’t work itself out because the Saudis have acted as sort of the gatekeeper for many years, even decades in terms of how product was going to come to the market and what the price was going to be.  They sort of ran the show.  They’re part of OPEC but they really are OPEC.
The day after Thanksgiving—Black Friday—we think of it as a good thing because that’s when we all go shopping for Christmas.  It was really Black Friday because the Saudis came out and had one of their monthly meetings.  They came out and said we’re going to maintain 30 million barrels of oil a day.  We’re going to maintain for the foreseeable future.  We’re not cutting back so the price goes up.  We’re going to keep pumping and producing.  Basically, they thumbed their noses at the U.S. because the U.S. has suddenly come on gangbusters as far as oil production.  This is a big test.  I’ve talked to a lot of experts and analysts that watch the industry.  This is a big test.  The Saudis want to see how far they can push the U.S. before the U.S. starts to crumble.  One of the reasons for that is that hydrofracturing is non-conventional production.  If you drill a vertical well that’s conventional production.  If you do a horizontal well that’s non-conventional.

All of the models and everything that OPEC has on its books about how the U.S. reacts is based on conventional drilling.  They don’t have anything on their books as to how far they can push the non-conventional drillers before they break and they start cutting back.  And so they’re pushing.  They have $900 billion in their treasury so they can sort of hang back and yes, they’ll lose some money but they won’t’ lose a lot of money.  And even if they do have $900 billion in reserves they think they can weather the storm.

TEJAS GOSAI:  it’s like playing poker against someone that has ten times more money than you.  They don’t pull it out until you have all yours in.

RICK STOUFFER:  So we’re in this position now where the price of oil today, I believe, is around $47 a barrel.  That’s down from $107 just seven months ago.  Will it go lower?  Maybe.  Nobody really wants to say anything because everybody is sort of hanging back.  They don’t want to put themselves out there saying something and it doesn’t come true.  So what’s going to happen and how do we get out of this?
The people I talk to say that by the middle of the year oil prices are going to be inching back up.  I’ve talked to three or four people who actually agreed.  I talked to them separately.  They believe by the end of this year we’ll be back up to around $70 a barrel which isn’t $107 but it’s a whole lot better than $48.
Now can our people—can the American producers make money at that number?  For the most part, yes.  Probably a majority of producers can make money at $70 or $80.  What they’re doing now is they’re cutting back on new projects for one.  They’re cutting back on drilling in areas that probably aren’t the best areas but when you’re over a $100 a barrel you can afford to do some drilling in those areas.  So they’re pulling back into what’s called the sweet spots.  These are the areas that the producers control and they know they have a tremendous amount of product.  It’s good product and strong.  They bring it out of the ground and people will want to buy it.  So they’re doing that.  They’re also laying down rigs which literally means they quit drilling.  Again, going back to the idea we have to live within our cash flow.  Commercial banks basically have said we don’t want anything to do with you guys right now because of the way the price of oil has gone.  We don’t know where it’s going to bottom.  It’s harder to get financing.  So indeed, they have to live within their means which is what we do on a weekly basis.  Most of us do.   Live within your cash flow.

How long will it last?  By the end of the year we should be up around $70 or $80 a barrel. Some of the people I’ve talked to said that for so many decades OPEC was the gatekeeper.  They’re now saying the U.S. is going to become the gatekeeper.  The U.S. is going to be the ones calling the shots.  It’s no longer going to be OPEC.  As our oil is more developed and we produce more we’ll have a bigger say about what happens around the world.  In fact, there’s a possibility, although not a strong one, that Congress is going to basically rescind the laws against exporting crude.  If that happens it’s on.  It’s back on.  It’s game on. That takes the gloves off as far as going to war with OPEC in terms of production of crude. It will raise the price and that’s a good thing.
I’ve read a lot of experts saying that because of the lower price of crude oil that it’s going to actually help the natural gas industry, particularly when you have all of these projects beginning next year.  LNG exporting, basically compressing natural gas until it becomes a liquid so it’s easier to transport, you can make a ton of money in Asia and Europe trying to sell natural gas as opposed to this country where we’re down around $2.75 per thousand cubic feet of product.  We do have a glut.  We’re the largest producer of natural gas in the world.  We’ll soon be the largest producer of crude in the world.  The head of Dow Company is probably the most vocal opponent to exporting natural gas because there are so many manufacturing projects under construction or on the drawing board.  It’s over 150 billion dollars’ worth of projects that want to take advantage of our inexpensive natural gas. And they’re worried if indeed all these projects come online are we going to have enough natural gas if we start exporting it?  Again, I guess it depends on the experts you talk to; the ones I talk to said we won’t have a problem at all.  They’re more concerned with the price.  From my perspective I don’t know if it’s going to two bucks; I don’t know how much it will go up.  I assume it will go up.  But then again if it does go up then you’ve got all the producers saying this is impetus to do more drilling.  It goes back to the infrastructure issue.  We’re still in need of getting the right amount of infrastructure for the natural gas we are producing.  The last number I saw was there are 1,000 wells in the Marcellus that have been drilled that are waiting to be tapped into.  We can’t get to them because we don’t have the infrastructure in place.  Those wells are just sitting there waiting.  How long will they wait?  That’s another one of those questions.
It’s going to be very interesting.  Before the election, obviously, most of the gas producers were very much in keeping Corbett in office because of exactly what you said—Tom Wolfe wants to put a severance tax on natural gas production.  Obviously, if you’re trying to make money by pulling gas out of the ground and selling it, taxes are not your friend.  So it’s going to be interesting because he ran on that platform.  That was one of the strongest planks in his platform—that he was going to put a severance tax on natural gas.  He’s a Democrat.  The legislature is solidly Republican, so how much is he going to compromise?  How much will they compromise?  We’ll have to see.

I don’t see Range leaving the area.  They could slow down.  They could move more rigs to eastern Ohio or northern West Virginia.  That’s business.  That’s capitalism.  You go where you can make money.  We’ll just have to wait and see.
TEJAS GOSAI:  Rick Stouffer, thank you so much.  Awesome discussion!
So the last graph I’ll show you in this one.  You see 1950 to 1953 there was the Korean War.
1950 to 1970 Vietnam War.  And this is my favorite graph because it shows what is going on in the world to make the price of crude change and it’s very specific.  A lot of it has to do with that word—war, which is terrible.  But there are a lot of reasons that takes place.   Previous peak in April 1980—$107.94 and our next highest peak was $146.50 in the 2000’s.  So this one also specially doesn’t give you the straight down curve, but this was Friday’s close in 2000 something.

I want to conclude.  Prices could go down even more to try to drown things out.  That would be awful.
They could stabilize here which would be awful.  They could go up.  That would be great.  But they need to get a lot higher for things to actually change.  So what we don’t know is this unidentified time period and that’s the worst thing to not understand, but that’s the life we live.

If it can immediately happen it will take nearly ten months to get to where it needs to be.  Even if it goes straight up, if it takes a year, that would be great.  The process would begin sooner than later. If it takes two years it will dwindle out and purge a lot of companies that can’t handle this trend.  If it takes three years we’re looking at war.  That’s exactly what we’re facing.  The government should step in even though I’m not as pro-government as some folks.  There’s a lot that can be done and voices should be heard. The good thing is space, location.  We do know that it’s here.  Pennsylvania, West Virginia, Ohio—we have this amazing shale and we know where it is located.  Then, the ‘what’.  The ‘what’ for these past ten years has been shale and all of these other businesses that have been part of this industry—all of the ancillary businesses that take advantage of it.    But the ‘what’ can change.  We have something that took place a long time ago.

There was something called the “Gold Rush”.   It lasted three years—three simple years.  In that time the people that made the most money were the ones selling the picks and shovels.  There’s a guy, Samuel Brandon III, who started a newspaper for the Gold Rush and you know he was screaming there was gold, gold, gold in the American rivers.  He didn’t care about the gold.  He just cared about the people hearing about it.  So he started this newspaper in California.  He had one of those shops that sold shovels and picks and he made at that time millions of dollars because of those tools.  Then he grew the paper and Star Paper is still around.

Infrastructure.  So Hollywood was built at that time.  What are the building blocks on which Silicon Valley was built at that time? All of these different pieces resurged that area.  You don’t find that often.  We have a gold rush here and this boom/bust cycle can continue.  We’ve actually had our downturn.  We’ve had a boom and bust cycle.   Drillers were staying at these hotels. They’re from Kentucky.  They go where the boom is—not where the bust is.   A lot of this has to do with past history.  But if Shell builds that cracker plant—we are looking at an entire new world of the chemical industry.  We’ve also had a lot of different voids filled in with industry because it makes money in this area.  They wonder what happens if this goes away.

So, I’ve been waiting to announce this.  It took us seven months to start Shale Energy Business Briefing. It costs $1k a year.  Every day, 365 days a year, you get briefs from Rick and the team delivered to your In Box.  No ads, just news.  So we want to arm people with good information so they can make good decisions.  I get to announce this finally—all of our partners that we work with who, bluntly, give us the money to allow us to do what we do—will be receiving licensed packs of 10 SEBBs so that we can sign up all the companies we work with every day. So they will be armed with the knowledge that Rick and the team has been producing.

Here’s a bit of how it works.  We throw the news together.  We get to edit and produce between 2 – 3 p.m. in the afternoon. We get it into our email database.  It goes out at 4 p.m. on the dot.  We’ve been doing this now for close to five months.  We have never missed a 4 p.m. deadline.  We’re not going to either.  The goal is to keep continuing this information bubble. There are folks like George Elish at Rosetta Capital who said I can reference them.  He looks forward to the email because he only has an hour left in the day.  He hears a ding go off and he reads SEBB and makes good decisions.

I’ve talked your ear off.  My friends, let’s turn on some music and have some drinks.

TEJAS GOSAI:  And that’s our 87th episode of Shale Energy Now. Check out our previous 86 shows at ShaleEnergyNow.com.  I’d like to thank our guests today from the Elite Energy Event.  The next E3 is coming up on February 26.  It’s the last day of the Alternative Fueling Expo in Monroeville.  Same place, same time at our headquarters in Bentleyville.  You can register at ShaleMediaGroup.com.

Our guests today:

Megan Cook, Director of Marketing at Mustang Oilfield Services.  Find them at MustangOilfieldServices.com

Tom Foster with the ONG Marketplace—go to ONGMarketplace.com
Chris Miranda from MAC Safety—MAC Safety.com
Professor Craynon with ARIES
Rick Stouffer with Shale Energy Business Briefings—Check out Shale Energy Business Briefing at www.SEBB.US.

Thank you for listening.

Shale Energy Now Episode 86

Posted by on 4:51 pm in Radio Show | Comments Off on Shale Energy Now Episode 86

Show # 86
Airdate:
December 15, 2014

This special year end episode of Shale Energy Now rounds up the year’s top stories and events. Additionally Rick Stouffer and Tejas Gosai discuss the past year’s implications on America’s energy future in 2015 and beyond.

Right click and select “save linked file as” to download this episode.

 

TEJAS GOSAI:  Welcome back to another exciting installment of your favorite energy program, Shale Energy Now.  I’m your host, Tejas Gosai.  Every week we talk to experts in the energy world about what’s going on across the American shale oil and gas energy landscape.  There’s always a lot happening.  It’s tough to keep the pulse on it.  Our parent company, ShaleMediaGroup.com, does that very well.  You can listen to our previous podcasts at ShaleEnergyNow.com.

A couple of events to get through quickly—SafeLandUSA orientation with Shale Markets is on January 6.  Also the Marcellus-Utica Midstream Conference and Exhibition at the David Lawrence Convention Center in Pittsburgh will be on January 27-29.  You can find that info at MarcellusUticaMidstream.com.
Also, a non-profit event that we’re helping with and on which MACSafety Consultants do a fantastic job—we had Chris Miranda on our previous podcast—they’re doing the MAC Safety Bowl on December 20.  It’s a flag football game and the proceeds are going to Legacies Alive which is an organization that is giving back to the Gold Star Families that have lost someone in previous wars.  You can find their info at LegaciesAlive.com.  Mike Vetti will be completing his walk across the country this weekend and ending up at the Army/Navy Game. So, a lot of exciting stuff!

This week we switched up and have Rick Stouffer with us for the entire show.  First, we’re going through the past week in the oil and shale world, and then we’re going to do the top stories of 2014.  We do this every year for the last several years.

Let’s get into the first news brief.  Rick, welcome back to Shale Energy Now.  Let’s talk about a good number here—22 billion of something—hopefully money.

RICK STOUFFER:  Good day to you and your listeners.  PWC, the old Price Waterhouse Coopers, a well-known consulting firm, came out with a new study this week saying that the use of shale gas by U.S. manufacturers could save those manufacturers $22 billion annually by the year 2030 which isn’t all that far away.  We’re talking 15 years.  They’re also saying continued shale gas activity will create 930,000 shale gas driven manufacturing jobs by 2030, and 1.41 million jobs by the year 2040. These are huge numbers.  We’ve talked about the impact that shale gas is having on manufacturing in this country.  The last numbers I saw were just in the chemical industry alone.  There are over a 100 projects either under construction, on the drawing board, or being talked about.  Those 100+ projects are worth more than $100 billion.  So again, a huge number all centered on the availability of low cost natural gas.

TEJAS GOSAI:  Let me interject—this is the last show of the year.  We’re going to talk about everything that is going on.  For years now we’ve seen the ripple effects of shale oil and gas.  It was really difficult for everybody to understand it.  With all of these stats and numbers and research projects we’re seeing a very big change and then we’re hearing about it because of the politics and the issues involved.  With what’s going on with crude oil will this affect us negatively?  This just came out over the last few days—are people not looking at that?

RICK STOUFFER:  It’s hard to say right now just what the impact from a negative perspective on the dropping oil prices is going to be.  Obviously, if you’re a consumer and you go to your local gas station you’re loving what’s happening in terms of gasoline prices which are falling to numbers I didn’t think I’d ever see again. On the other hand you do have a lot of production of crude oil in this country that basically leverages up on debt because it’s a very capital-intensive business drilling for oil, particularly when you’re drilling horizontally and using hydro-fracturing.  Estimates on where you’re drilling, or how deep you’re drilling, are up to $10 million per well.  That’s a lot of money.  And when you have prices this low—now remember they dropped from roughly $107 in June and as of Thursday this week they were down to under $60 a barrel—that’s an unbelievable drop in a short amount of time.  You have a lot of the smaller guys who are out there drilling who are going to have a hard time getting additional funding because the public markets have already dried up and investors are going to take a hard look and ask if they’re going to be able to cover their expenses or will they be able to pay me back?
So it could have a very negative impact, but we have to see.

TEJAS GOSAI:  I’m waiting and seeing. I just wanted to read one more sentence from the previous brief but this survey that you’re talking about also found continued increases in the number of companies telling the investment community how shale gas actively affects their business.  In 2013 there were 40 U.S. manufacturers that had talked about it in their public filings, which was up from 29 in 2011, so we’re seeing the trends continue.  The market is still actually picking up.  Yeah, maybe some of the smaller guys will be hurt, but I guess while we get into this let’s talk about the fact that we saw a drop in crude oil prices not long ago and it was in 2007 that it started.  It ended in 2008 with our economy collapsing.  So it behooves anyone to say this is definitely an attack that has been in the news.  The Economist has an article out there about it.  A lot of people have talked about it as we have done.
This is a battle.  ‘Wait and see’ is what the folks who are trying to hurt our U.S. economy are trying to wait out.  They want to keep the prices low so they can shut down any potential sense of American energy security.

RICK STOUFFER:  That’s absolutely correct.  Our friends in the Middle East, particularly Saudi Arabia, refuse to cut production.  They’re looking to maintain production basically for as long as it takes until they bring the U.S. producers to their knees.  They’re not used to this kind of competition from this country.  It’s never been this way; we’re approaching numbers in terms of oil production in this country that we’ve not seeing in 40 years.  The Saudis aren’t used to it so they’re hoping if they maintain their production and prices stay where they are or go lower, that most, if not all, producers in this country are going to basically play their rigs down so that prices will zoom back up and the Saudis will be able to maintain their market share and they’ll make money again.

TEJAS GOSAI:  It’s really not cool. That’s the best way to put it.  It’s tough to see it happen and then it’s easy for folks like this to be able to change the market in our country that well.  It’s like a click of a switch. You can turn it on or turn it off and it’s very difficult to understand that our economy is that relaxed, that it’s that fickle, or changeable.  We need some type of armor around it and this industry was supposed to be that armor. We’re supposed to get to this American energy security and now there’s a big thorn in the side.  We’re missing a leg and we’re going into 2015 with this happening.  Two companies that keep coming up and are aggressive and strong about what’s happening with our infrastructure here, Kinder Morgan and Cheniere Energy Inc., have some interesting things happening for long term transportation.

RICK STOUFFER:  Kinder Morgan is the largest infrastructure company in North America.   Cheniere is the first mover when it comes to exporting liquid natural gas.  They announced another deal this week.  This time it’s revolving around Cheniere’s new LNG export facility that is under construction in Corpus Christi, Texas on the Gulf of Mexico, south of Houston.  Basically, what the agreement entails is that three separate Kinder Morgan pipelines—Kinder Morgan Texas, Kinder Morgan Tejas, and the Tennessee  Gas Pipeline—have entered into 15-year transportation agreements and a multi-storage agreement which Cheniere at the Corpus Christi facility. Kinder is going to provide about 550 million cubic feet per day of natural gas, as well as three billion cubic feet of storage capacity to serve the Cheniere LNG facility.  This isn’t the first deal these two have put together. Cheniere is also building an LNG export facility in Louisiana.   It’s called the Sabine Pass Facility and Kinder and Cheniere have also signed a transportation—a gas provider contract—for that particular facility.  So it’s good to see.  Obviously, with their size Kinder Morgan can offer a great deal and obviously, Cheniere needs the product so that it can begin to export; I believe they’re going to start exporting in early 2016.

TEJAS GOSAI:   All of these companies you just mentioned—their goal is their own infrastructure for their companies to be successful, but while they’re doing that they are helping our American infrastructure.  The sad news is that a lot of these companies making billions of dollars don’t like to work with each other or they try to battle each other, so when you see something like this it’s fantastic.  The goal is to keep the market Laissez-faire attitude and don’t let the government interject into any of this, but it’s not happening fast enough.  Talking about the time part of it, if we could press a button and have our infrastructure we would win the battle that we’re talking about. We’re slowly getting towards that point.  The problem becomes more apparent when we have a glut of natural gas that we don’t know what to do with. The infrastructure can’t catch up so it’s not feasible that way.
RICK STOUFFER:  It’s interesting for most of these export facilities that are either being built right now or are on the drawing board.   They started out their lives as import facilities because let’s remember up until 10 years ago, or 15 at the outside, we thought we were running out of natural gas and so we were going to import natural gas primarily from the Middle East.   And then the shale revolution, the shale wave, the shale gale, whatever you call it, came on the scene and now we have such an abundance of natural gas that we need to export it.  So it’s just an amazing thing that has happened in this country in terms of our oil and gas production over the last decade.

TEJAS GOSAI:  It’s still always up and down.  How many shows have we done where we talked about something good, bad, or difficult?  But it continues and hopefully never going anywhere as we get toward our American energy security.
TEJAS GOSAI:  We’re talking with Rick Stouffer, Senior Energy Editor with Shale Media Group.    We’ll be right back after the break.

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TEJAS GOSAI:  We’re back with Shale Energy Now.  I’m your host, Tejas Gosai.  We talk to experts about the energy industry.  We’re with Rick Stouffer, Senior Energy Editor with Shale Media Group.  We talked about Cheniere Energy, Kinder Morgan, and wrapping up the year with the big pieces.  We’re doing the top stories of 2014.
In the next brief, Americans are polling and staying in support of what’s happening contrary to what the media has to say about what’s going on.  Let’s get into this news brief.

RICK STOUFFER:  Before the break we talked about Kinder Morgan building some new infrastructure to help out Cheniere Energy.  Honeywell—or one of the divisions of Honeywell, which supplies equipment to natural gas producers, did a survey of the American population.  It was an online survey. What they found out was that half of all Americans support development of more infrastructure to expand the use of natural gas in this country.  I thought that was very interesting.  In addition, about 75% of poll respondents agreed that the development of natural gas is driving economic growth in America, obviously underpinning the support for infrastructure development.

So, according to this particular poll by Honeywell, most Americans are getting how important the development of natural gas is—and you could put crude oil in there—and our fossil fuels of which we have an abundance—how important they are to us.  If you’re going to develop you need sufficient infrastructure.  The American people understand you have to build the infrastructure and we really do need to develop the resources that we have in this country.

TEJAS GOSAI: Thank God this type of thing is still happening.  You know how when one normal thing comes in support of natural gas usually five days later there’s another study that says something else and that makes it difficult.  I’ll just quote Rebecca Liber, the Senior Vice President and General Manager of UOP’s gas processing and hydrogen business.  “The survey results demonstrate that most people recognize the importance of natural gas to the U.S. economy and support investment needed to expand its use.”
Let’s get into the next news brief.  Another company we always like to mention—CONSOL—has been doing a lot of things.  I love MLPs.  We were looking to have Ken Kazak on our program from Trustmont Financial, but we’re still getting that interview through compliance.  So an MLP is when a normal U.S. citizen can invest in a vehicle that’s basically circumventing the taxes, or going through taxes in the right way, sanctioned by the government, to help their investment contribute to infrastructure and energy.  This is one of my favorite things in the world.  We’re always seeing new MLPs, or new companies forming. Let’s get into this one, Rick.

RICK STOUFFER:  Yeah, CONSOL announced this week that they’re going to put their Pennsylvania coal assets into a master limited partnership.  They actually talked about this a few months ago when Nicholas J. DeIuliis, who became the company’s CEO in May, oversaw in September putting CONSOL’s natural gas gathering pipelines into an MLP.  He also said that he wanted to do the same thing with coal.  This week they announced they were going to do that.  They also said they might establish a subsidiary to run their metallurgical coal mine in VA. The bottom line is that CONSOL is focusing on its natural gas business.  So, if it can spin off these assets into an MLP, which it will still control, some of it will be sold to the public and it’s obviously going to help their gas business too.

TEJAS GOSAI:  Just to close the briefs up with this for a second, you don’t play in quarters and months and weeks when you’re a multi-million dollar company.  A lot of these folks, even the Saudis and OPEC folks, play in 50-100 year increments to make sure things can stay consistent at different levels.  It’s good that companies are aggressive as they can be for what’s taking place.

We’ll be right back with the top stories of 2014.  I’m Tejas Gosai and this is Shale Energy Now.

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TEJAS GOSAI: We’re back with Shale Energy Now and I’m your host, Tejas Gosai.  We’re talking with Rick Stouffer, Senior Energy Editor with the Shale Media Group.   Everyone looks forward to our top stories of the year.  We’ve done this for four years in a row now.  We’re always talking about the top stories.  Rick, let’s get started. We have five stories to do.  Let’s go with the first one. This first one I think we’ve talked about every year.

RICK STOUFFER:  It’s always tough to try to whittle down the top stories for the previous year.  I tried to pick the top five. My first one is—I think also my first one last year—is the proposed cracker facility in Beaver County, about 35 miles northwest of Pittsburgh.  Shell has been talking about this since 2012.  I think it was March 2012 they said they were looking at possibly building a cracker plant.  They liked western Pennsylvania.  There’s no definite yea or nay.  They haven’t made the decision. Of course, when you’re talking $4 billion to build something you want to be absolutely sure that everything is the way it needs to be to make it successful.  But they did a few weeks ago actually secure the option.  They had the option for a long time on a specific piece of property.  They did exercise that option which is obviously a good sign.  They’ve also acquired nearby property.  They’ve talked to homeowners in the area about buying their property.  The state has agreed to relocate a portion of state Route 18.  So everything seems to point in the direction that, yes, the cracker is going to be built. Most experts have said that once Shell makes a decision if they do agree to go ahead with the project, it will not be the only cracker built in the northeast, but in fact we could see 3-4 depending on a lot of factors.  There could be a number of crackers in this western Pennsylvania, eastern Ohio, northern West Virginia area.

TEJAS GOSAI:  It all has to do with what we talked about earlier in the program.  We’re looking at infrastructure.  That’s what we need—to get to energy saving or energy producing.   We need to get it to the market.  That’s the goal for the whole industry; that’s what makes an industry flow.  Now, that’s number one!  Getting to the next piece—number two is exactly why this is such a big deal right now.  People never heard of the word Marcellus until a few years ago.

RICK STOUFFER:  My number two story for the year is the continual growth in terms of production from the Marcellus Shale play.   It’s really hard to believe that 10 years ago there was zero gas flowing from the Marcellus Shale.   I just saw the latest federal government figures earlier this week; today there are more than 16 billion cubic feet per day coming from the Marcellus.  That number continues to climb.  It’s the place of all the shale plays—of all the plays in the country—it’s the place for the most production, the most significant production.  It’s up to around 25% of the entire gas production.  It will soon surpass that number.  It’s a success story that just about tops everything else that our country has gone through in terms of something happening so quickly with such an impact on the entire economy.
TEJAS GOSAI:  The revolution is taking place.  People in this area didn’t talk about energy.  They weren’t thinking about shale.  Now it’s one of the most common words.  There are so many license plates we’re seeing and that translates into real estate and that turns into taxes.  It lifts up an area.   That goes right into the next one.  There’s a problem when I feel like we can’t have anything nice for the country.

RICK STOUFFER:  We just talked about this particular subject a few minutes ago.  My number three is the crude oil price drop from roughly $107 a barrel in June.  This week we’re down under $60 a barrel.  The big question is how long is this going to happen?  Who is going to give in?  Is anyone going to give in?  If no one gives in how low will prices go?  The lower they go then you’re going to have more and more companies that will have to make a decision because they’re basically going to run out of money.  Cash flow only goes so far.  A lot of them are levered up with debt because it’s such a capital-intensive business.  They’ll have to make the decision whether to lay down their rigs basically to stop drilling, stop producing until prices go up, or do we keep going and hopefully the Saudis are the ones who say, ‘Ouch,’ the loudest and decide to slow their production allowing prices to again go up so that everybody can make money and not just a select few.

TEJAS GOSAI:  They’re doing the right thing.  In a poker game you get up to a good bit of chips—and someone else has a bunch of chips—they’re going to try and crush you really quickly.  So you have to slowly shell out the chips over time so you get a good hand.  It’s typical warfare.  It’s a battle taking place.  You’re slowing any type of growth in your competition.  You want to crush your competition.  I got to say all of these top stories flow into each other.  There’s another way to gamble.  You take donations from the people in the area and that has to do with number four—dealing with MLPs.

 

RICK STOUFFER:   We talked a bit about master limited partnerships.  There was just a flurry of MLPs this past year.  Just off the top of my head:  EQT did it with their mid-stream operations; Rice Energy did it with their mid-stream operations.  CONSOL, Noble, you name it.  Everyone was doing it. Investors love MLPs.  They’re a high yield vehicle.  You can make a lot of money as an investor. So to me that was the fourth biggest story of the year.  The rush by the energy companies into creating master limited partnerships.
TEJAS GOSAI: The reason I give the poker analogy is that when you get more chips—these are U.S. citizens that can put money into the investment vehicle to fuel our energy security.  So it really all ties together.
And the last—number five—saving the best for last…..

RICK STOUFFER:  By the end of this year—I’ve seen some stories in just the last couple of days—certainly early into 2015, the United States, which is the birthplace of the oil industry going back to 1859 with Colonel Edwin Drake in northwestern Pennsylvania, we will surpass Saudi Arabia and become the world’s largest oil producer.  Now, again, that’s not taking into consideration what’s happening with crude oil prices today.  If production continues as it is we will become the largest oil producer.  About four years ago the U.S. became the largest natural gas producer in the world so it’s really unfathomable to try to wrap your head around the fact that we are the largest oil and gas producer in the world.  What kind of an impact has the oil and gas industry had on this nation’s economy?  We went through a very bad recession a few years ago, but if we hadn’t had oil and gas production it would have been much worse and we could have been talking about us in another Depression.

TEJAS GOSAI: Well, those are the top five stories of 2014, stories with Rick Stouffer, Senior Energy Editor of Shale Media Group.  You can check out the website, ShaleMediaGroup.com.  I’m Tejas Gosai.  It has been a fantastic year and thank you for listening to our program.  All of our previous podcasts are at ShaleEnergyNow.com.
Happy New Year to everybody!

Shale Energy Now Episode 85

Posted by on 3:27 pm in Radio Show | Comments Off on Shale Energy Now Episode 85

Show # 85
Airdate:
November 21, 2014
Guests:

Kristie Kubovic: Director of Communications at Shale Media Group

Rick Stouffer: Senior Energy Editor at Shale Media Group.

Chris Miranda: President at Mac Safety Consultants

 Right click and select “save linked file as” to download this episode.

 

TEJAS GOSAI:   Welcome to another exciting installment of your favorite energy program, Shale Energy Now.  I’m your host, Tejas Gosai, and every week we talk to experts across the energy industry about what’s happening across the shale oil and gas landscape.  Check out our parent company’s website at ShaleMediaGroup.com for the latest news and information on the oil and gas industry.  Also, you can listen to our previous podcasts which can be found at ShaleEnergyNow.com.

Today’s guests are: Rick Stouffer, Senior Energy Editor with Shale Media Group who will review the past week in the oil and gas world; Chris Miranda from MAC Safety Consultants (Check out their website, MacSafety.us); and last but not least, Kristie Kubovic, who was on the scene at the Penn State Midstream PA 2014 Conference.  We’ll chat with her in a minute.

A couple of events are taking place very soon.  First, on December 2 the Energy Industry Training Series will be held at the Doubletree on Racetrack Road.  The event will be a lively debate on the real impact of the Marcellus and Utica discoveries.  You also get CLE Credits, accounting credits, and AAPL Credits for attending.  That info can be found at Energy Training Series.com. On that day as well—Dec 2—is an all-day SafeLand Training at SafeLandUSA.   You can find that info at Shale Markets.com.  The instructor of the course is Chris Miranda who will be on our program shortly.

Next year, Hart Energy, very large and productive oil and gas information folks—we’re big fans of Hart Energy—are holding their next Marcellus and Utica Mid-stream Conference.  That will be January 27-29 at the David L. Lawrence Convention Center.  You can find that info at HartEnergy.com.  So every week we’re always talking about everything that’s happening with shale oil and gas.  There’s so much happening.  It’s always fun to keep a pulse on it.
We’re going to talk with Kristie Kubovic right now who is the Director of Communications with the Shale Media Group.   She was at the Midstream PA 2014 Conference held at my alma mater, Penn State.

TEJAS GOSAI:  So, Kristie, tell us about the conference.  Why does mid-stream matter?  Why gather people together about the midstream before the end of the year?

 

KRISTIE KUBOVIC:  First off, it was a good conference.  It was on November 18 at Penn State and there were about 200 participants.  The room was filled.   The mid-stream is so important right now because that’s what is holding up a lot of the process as we’re trying to get the product from the ground to the particular sources.  It was a good conference.  They spoke of many different things related to the pipelines. The Polar Vortex was a popular term thrown around due to the need for natural gas during the all-important winter season coming up.  They also looked at terms like ‘flaring’ and various things all relating to the industry.

TEJAS GOSAI:  So, midstream.  We have upstream, midstream, and downstream.  We’re taking the product and pushing it through the pipeline and then we’re getting it to where it will make money.  That’s the name of the game for all of these oil and gas producers.  That’s why this region is doing so well.  They want to earn a respectful dollar with it.  But with that is a lot of intricacy.  Because this region has never seen this stuff before that’s why Shale Directories and the folks at Penn State got all of these guys together to chat about it.  It’s not the first time with the Midstream but this was a good collection of those folks.  Who was speaking and what were some of the topics?

 

KRISTIE KUBOVIC:  The speakers ranged from folks with Williams, Dawood Engineering, and Cabot Oil and Gas.  It was a great collection of folks talking about their individual companies and how they’re specifically dealing with things within the region and also the country as a whole.  We focused on the Marcellus Shale, but also took a look at the Utica and even places in the Bakken.  The midstream relates to all aspects of the industry whether you’re in Pennsylvania or North Dakota; it’s the process of making sure the pipelines are built to get these products—the natural gas—from Point A to Point B.  It doesn’t matter if you’re in Pennsylvania or North Dakota.  Flaring was a topic.   A lot of companies like Cabot—they arrange things ahead of time so everything is set up so they have very little flaring.  We see it more often in North Dakota where the midstream is lagging and you’re seeing more flaring of natural gas there.

 

TEJAS GOSAI:  Let’s talk about flaring.  The reason it’s a huge problem is because the infrastructure is not built to be able to capture the energy so they’re basically getting rid of the product.

KRISTIE KUBOVIC:  That’s correct.  It’s wasteful. Right now there is no alternative.  Some companies are more forward thinking in making sure that mid-stream capacity is there prior to drilling the wells where others are just drilling the wells and getting the product.  What they can’t take out via truck is being flared.

TEJAS GOSAI:  This is the heat of the moment.  We have so many different companies that are not being able to utilize this profitable energy resource because that infrastructure isn’t there.  But government, politics, lobbying—all of those concerns come into play as well.  We’re looking at the individual states and the individual regions to try and make this happen.  What do they say about government—call it interference or assistance—in how that works?
KRISTIE KUBOVIC:  One of the important conversations held was with Frank Nieto.  He works for the Midstream Monitor which is a Hart Energy publication.  His presentation focused on what the government can do to help this situation.  When we’re building the pipelines not only do we need to worry about state policies, but national policies as well.  It was interesting.  This conference was held the morning of November 18 right before the Keystone XL Pipeline failed by one vote.  In Frank’s presentation he gave four things the national government could be doing to help out the pipelines and also to help out the industry as a whole.
One was helping to open up the foreign markets.  The second one was the passage of the Keystone XL Pipeline.  That hasn’t failed completely.  There’s a chance it will be brought up again, but ironically later that evening it got killed by one vote.  Also, they looked at ending the loosening ban on crude exports.
The fourth point he made was developing national electric grid standards which is something we don’t have now.

TEJAS GOSAI:  Ten years ago we were still using the advent of hydraulic fracturing and horizontal drilling to make the process perfect.   Well, rarely do you hear we have perfected the way we’re doing it. Now the market is saying we need to be selling this product but the best place to sell crude oil or natural gas is to foreign companies that need the energy so LNG Exports, Cove Point, Dominion and a lot of companies can basically make the money they’ve been hedging their bets on.  I think an MCF of natural gas in Japan—they’re paying around $16.00 and in American it’s $4.00.   If you look at the disparity of what these companies can get downstream the right way, that’s what makes sense.  Again, that’s not really happening, right?
KRISTIE KUBOVIC:   Right.  One other thing brought out is there are a lot of concerns about why we would send this elsewhere.  We really can do that because there is so much supply.  They look at other regions like China and Australia and the U.S. where our supply is; it’s easily accessible in comparison.  China has the reserves but they’re in areas of the country where it’s very difficult to get to.  The infrastructure is not there.  Exporting it is something we could do.  It not only helps us but we could also make money from it as well.
TEJAS GOSAI:  The other side of the debate is that it doesn’t help us because of the price which is always volatile in any market.  If the oil and gas producers are able to make their money back by exporting everything, that would raise the price from $4.00 to maybe $8.00.   Then, when you look at that going on in other parts of the downstream, will that change the price of a gallon of gas equivalent for CNG or LNG?  So the fear of the folks in America is that we should hang onto everything and keep the price down which is then bad for the producers but good for the consumers.  So it’s really fun to see how this is going to play out.  I think time will tell.  It’s only a matter of time.  But, again, that gentleman is part of Hart Energy and they’re going to be doing a lot of discussion in January about this topic.  Let’s move on to the other speakers or discussion points.  Is there anything else that stuck out for you?

KRISTIE KUBOVIC:  I think one of the more interesting points to me was made by Wade Horigan from IMG Midstream.   What they’re doing is building power plants on a much smaller scale.  They’re doing them very close to the natural gas supply so that way you cut down on the transportation factor.  But these particular facilities need about two acres.  They produce enough power for about 1300 homes and they have a functional life of about 20 years.  The thing is they are starting to build them across Pennsylvania.  Three of them are going up in Washington County.  I think there are about 15 of them in total across the state.  One of the most important aspects of this is the size; they have a much smaller footprint overall.  We’re looking at better environmental benefits and also better community benefits, as well as benefits to the natural gas industry.  I thought that was one of the more interesting topics.
TEJAS GOSAI:  What kind of power plants?

KRISTIE KUBOVIC:  They are electric generation projects.  They don’t break up the gas at all.  They’re more for very specific areas, but it’s for electric power generation.

TEJAS GOSAI:  That’s the other debate with Japan and some of the other folks.  They don’t want to rely on nuclear.  Other companies are getting smarter about energy.  This makes a lot of sense.  Why isn’t American doing this?  You wonder why the right thing isn’t happening with the media and other folks who are looking at shale oil and gas, because there’s confusion and not enough knowledge is spread to realize this is a very, very good thing if we do it safely.  But I’m sure that raging debate took place there as well.

KRISTIE KUBOVIC:  One of the other interesting things is you tend to get the larger conferences in Pittsburgh; you’ll get a lot of the Pittsburgh folks and draw up people from the south.  In terms of this conference one of the things I noticed is more of the state was equally represented.  At the particular table where I sat there were folks from New York coming down and looking at things.  We’ve had a lot of debate in New York, but also York County, Pennsylvania.  There was varied representation so you could talk to different folks from across the area and see how everyone is trying to fit in.

TEJAS GOSAI: We’ll stay tuned for the next conference you’re attending.  Thanks for filling us in on the Midstream 2014.
KRISTIE KUBOVIC:  Thanks for having me.

TEJAS GOSAI:  That’s Kristie Kubovic, Director of Communications for the Shale Media Group.   A special thanks to Joe Barone and Vera Anderson from Shale Directories.com.  They have a national database of companies that work with shale oil and gas.  That’s ShaleDirectories.com.
I’m Tejas Gosai and we’ll be right back.

 

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TEJAS GOSAI:   Welcome back to Shale Energy Now.  I’m your host, Tejas Gosai.  Every week it really is a pleasure to talk to energy experts about what’s going on.  This is a very vibrant time in our society and what we’re seeing across America has no end in sight.  There’re a lot of good things to look forward to.  Make sure you check out our previous podcasts at ShaleEnergyNow.com.   We’ll get back to the show.

Welcome back to Shale Energy Now.  I’m your host, Tejas Gosai.  We’re talking with Rick Stouffer, Senior Energy Editor of Shale Media Group, our parent company.  You can check out ShaleMediaGroup.com when you get a chance.

Let’s get right into it, Rick.  Welcome back.  I think our first brief is about a $1.4 billion deal that took place.  Can you fill us in?

RICK STOUFFER:  Good day to you and your listeners.   Apache Corporation is one of the larger independent oil and gas producers in the U.S.  They have been under a lot of heat recently.   An activist hedge fund called Janna Partners has really been pressing them to basically sell off a lot of what Janna considers non-core assets.  Actually, Apache has been doing just that.  More than $10 billion in asset sales, or stakes in projects since late 2012—so that’s a lot of assets they’ve dropped.  This week they announced two new deals.  They’re selling assets in Texas, Oklahoma, and Louisiana.  The two deals combined total is $1.4 billion.  These two deals are a little different because Janna has been pushing Apache to sell off assets outside of the U.S.  Obviously, these two deals in Texas, Oklahoma, and Louisiana sort of go against the grain there.  Apache determined these deals—these assets—were not core to them, or core to where they want to be in terms of areas of the country’s shale plays. So they sold the assets off to unidentified third parties.

TEJAS GOSAI:  When you talk about a company like Apache, this is a producer.  They’ve been doing very well for many years.  They operate in other countries such as Argentina, Egypt, and Canada.  They’re moving things down the line.  What do you think about some of the companies that might be picking it up?  They don’t really list who or what they are.

RICK STOUFFER:  It could be private equity firms.  It could be private companies.  I’m not really sure.  I haven’t delved into it very much to see who might be buying out there.  As we’ve talked about many times there are always buyers and sellers.  They obviously didn’t have a person selling these assets.  I will say that another thing Apache did this week—and this has to do with the falling oil prices which we’ve talked about and have been ongoing for about a month or five weeks—they’re reducing their spending in North America for 2015 by 25%.  That’s a huge chunk of change.  They’re going to drop spending for next year to $4 billion down from $5.4.  That’s a considerable amount.  But you’re seeing this more and more from producers that are involved in the oil simply because the price is dropping.  When you go from over $100 a barrel down to around $75, that takes a lot of wind out of your sails when you’re trying to do business.

TEJAS GOSAI:  Earlier in the program we were talking with Kristie about price volatility and whether or not we can export a lot of these products.   You never see gas prices going lower and lower week after week.  It’s alarming right now.  I know a lot of the friends in the CNG world are thinking what if the price of gas goes to $2.99.  What’s it going to look like for people who have just spent hundreds of thousands of dollars to convert their fleets over to compressed natural gas?  Of course, it’s cleaner burning but the environment is usually secondary when it comes to financial benefits.  Let’s get into that because right now US production and what’s happening with the lower prices of crude oil is really changing.

RICK STOUFFER:  We just talked a little bit about what Apache was doing for next year.  HIS, which is a huge consulting firm worldwide, just came out with a new study saying that despite these lower prices for crude oil, overall US production growth remains what they call resilient.  They say roughly 80% of gross US type oil capacity additions next year would remain at West Texas Intermediate.  Even if crude oil drops to $70 per barrel they see an 80% probability that not a whole lot is going to change in the oil patch, particularly they’re talking about Permian and Eagle Ford oil which would be like the Bakken in North Dakota.  This is good because you do have a lot of companies—and I’ll go back to Apache—who are trying to figure out their budgets for 2015 right now.  They’re looking at these dropping oil prices and saying we’re going to have to make some cutbacks.
TEJAS GOSAI:  Take a pause and talk about all of this.  We’ve been doing this program for a few years.  Is it possible that this could be a strategic—I don’t want to say attack—but you know there is a lot of turbulence in the world when it comes to energy, cost and price.  Markets are volatile.  You can make things go up and down.  You can battle how great and efficient shale oil and gas is now, but we know there’re a lot of folks in the United Arab Emirates and this is kind of a perfect timing for this to happen.  It’s in November right before December.  What controls the volatility of these things?

RICK STOUFFER:  Well, obviously, the first thing is the economic conditions around the world.  There has been a slowdown in economic activity in China.  And China sort of drives the vehicle on a worldwide basis simply because they are as big as they are and they consume as much energy as they do.  So that’s one reason.  Let’s face it, the Saudis and Middle East in general, their idea is to make money.  Now you’ve got the U.S. who, I believe it’s by the end of this year, will become the largest oil producer in the world, or certainly close to it because of what’s going on in the Bakken, Permian, and Eagle Ford shale plays.  So they’ve got some big competition that they haven’t had in decades.  So what do you do when you have competition?  One of the things that economics 101 teaches is you probably are going to lower your price so that you can keep your market share and not lose it to the upstart, the United States.  That’s exactly what Saudi Arabia in particular has done.

TEJAS GOSAI:  If you don’t mind I’m going to quote the end of this brief.  “Lower oil prices bring into question the ongoing extent of one of the most important developments in the world oil market—the great revival of American production.  This is definitely a world play.  It’s a world energy play.  It’s the largest commodity we have.”  Well, America is going through some great changes now that the weather has dropped significantly.  This is the time where the natural gas producers get to cash in on some of their chips.  Can you get into the next news brief?

RICK STOUFFER:   Every week the U.S. Energy Information Administration, which is basically the statistical arm of the Department of Energy, comes out with their survey of gas in storage around the country.  This week they came out and said that natural gas stocks had dropped by 17 billion cubic feet for the week ending November 14.  They’re always a week behind.  That compared with an expected increase of 38 billion cubic feet anticipated by analysts.  Now, maybe the analysts hadn’t taken into consideration that we had a severe blast of cold weather last week which continued into this week.  Nevertheless, stockpiles are now a little over 5% below where they were a year ago, and about 6.4% below the five year average according to the Information Administration. Now is this a bad thing?  Not really, because we still had tremendous injections of gas into storage through the spring and summer, so it’s not like we’re running out of gas already.  However, this is supposed to be a very cold winter again.  Many forecasters are saying it’s going to be very cold.  We just have to keep an eye on how much gas we do have in storage because obviously that can affect prices as you move forward through the winter.

TEJAS GOSAI:  Again, it’s perfect timing as we’re in the winter season and we’re going into 2015.  In Pennsylvania we have a new governor that is going to take his position in January.  So it’s a little bit tumultuous to see what Wolf is going to do for next year.  Everyone is working their budgets and stressed out. Sticking to the good stuff—let’s end with pipeline.  I love to say the pipelines are coming but just not fast enough.  I still remember a few years ago thinking what are we going to do with this glut?  Now it’s such a severe issue and we need to get our infrastructure where it has to be.

RICK STOUFFER:   DTE Energy, which actually is based in Detroit, is primarily a natural gas public utility out in the Detroit area.  They signed a contract awhile back with Southwestern Energy which is a Houston-based oil and gas producer.  This week they announced they were expanding the contract they have with Southwestern Energy and it’s centered on the Bluestone Pipeline and a Marcellus Shale gathering system in Pennsylvania.

The new agreement increases the infrastructure associated with DTE by roughly 50% in Susquehanna County, PA which is up in the northeastern part of the state.  It also increases Southwestern’s transportation capacity on the Bluestone Pipeline.  Now, Bluestone is not a large pipeline in terms of length.  It’s only 44.5 miles long.  But it does deliver a great deal of natural gas—about 800 million cubic feet per day. Currently, Bluestone is being increased in terms of capacity to an even one billion cubic feet per day capacity by the middle of 2016.

TEJAS GOSAI:  It’s getting there.  The pipeline and infrastructure problem is getting solved but again it’s just not fast enough.

RICK STOUFFER:  You’re right, yes.

TEJAS GOSAI:  With 2015 right around the corner and people projecting to 2016 the energy play is always a long play.  People are thinking decades ahead of time.  Do you think we’re going to be in a better position mid next year, or still in the same spot?

RICK STOUFFER:  I think a lot depends on the new governor here in Pennsylvania, Tom Wolfe.   One of the things that he ran on was the imposing of a severance tax here in the state of Pennsylvania.   And while it’s not going to chase every producer out of this state it’s going to have an impact.  There are some nervous producers out there that are wondering just how big a deal this is going to be particularly since Wolfe, who is a Democrat, is going to have to work with a Republican assembly and a Republican senate here in the state.  So they’re concerned about what happens there.  As far as the pipelines catching up—that’s a tough question.  It’s not for a lack of trying.  With the pipeline situation you have to go through the permitting process.  Many times not just state but national permits too.  That takes such a long time.  Let’s just say the pipeline developers are busting their backs just trying to lay that pipe as quickly as they can because they’ve got customers waiting.

TEJAS GOSAI:  And the industry needs to make sure they cash in on what they’ve been hedging their bets on while they continue to do it safely and efficiently.  Well, there you have it—the past few weeks in the shale oil and gas world with Rick Stouffer, Senior Energy Editor with Shale Media Group.

HOST:   Every week Shale Energy Now is joined by expert guests who heighten the discussion about the revolutionary energy developments happening the world over.  Thank you to all of our listeners who continue to support us and tune in week in and week out.  Stay further connected SEN and the Shale Media Group Network at www.ShaleMediaGroup.com, and with our Facebook and Twitter.  Don’t go away; there’s still much more to be discussed when Shale Energy Now comes back after the break.

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Tejas Gosai:  I’m your host, Tejas Gosai.  Every week we talk to experts across the energy industry about what is going on across our American shale oil and gas landscape.  Every week we talk about the pipelines that are coming through the region.  We’re getting more and more efficient when it comes to energy, but safety is paramount in this industry, as in many industries.  But with oil and gas safety is always one of the key factors that we’re looking at.
Today we’re speaking with Chris Miranda from MAC Safety Consultants. You can check out their website at MACSafety.us.  Their phone number is 724-513-4491. They are the experts in safety.  With that, welcome to Shale Energy Now, Chris Miranda.

CHRIS MIRANDA:  Good afternoon and thanks for having me.

TEJAS GOSAI:  No problem.  Let’s get right into it now.  MAC Safety has a team of very skilled people and you’ve been doing a lot in oil and gas over the past years.  Let’s talk about what you’re doing right now and how you’re making sure the companies are staying safe.

CHRIS MIRANDA:   Right now we’re located in some of the larger plans and compressor sites in eastern Ohio.  We’ve pretty much designed the team concept where maybe there’s not so much one professional there for all contractors, but we have a host of professionals rotating in and out of the job site to kind of be there daily observing and auditing contractors and recording back to the site. That way we’re establishing a safety culture to keep all employees on site safe.

TEJAS GOSAI:  Safety culture is very important.  With oil and gas I’ve even heard that there may have been someone who went on an interview, jumped in the car with the recruiter and didn’t put on his seat belt and they didn’t make it to the interview.  It’s a cultural thing where you make sure you’re safe all the way around. How much do the oil and gas companies stress safety?  Why is it such an issue for you and your folks to be out on site and continually training?

CHRIS MIRANDA:  It’s a very competitive business.  A lot of contractors are trying to get to a large amount of work.  When you get down to it, safety is a high metric for sites to determine which contractors may come on site as far as their safety performance has gone.  Our core philosophy is to try to help everybody.  We don’t want to be the problem for contractors—we want to be the solution to help them, to even that playing field for everybody.  Our main goal is to ensure that from top down policy and procedures are administered to ensure at the end of the day that every job is conducted in a safe manner.

TEJAS GOSAI:   I like how you said it.  Competition is good—especially business and economic competition.  Company X in the oil and gas field has most likely gone through ISNet World, maybe SafeLand Training.  They keep everyone up to date and have their protocols.  What you say is correct—you want to have the best safety rating so you are seen as a trustworthy company to work with, right?

 

CHRIS MIRANDA:   Policies and procedures are important.  Everyone can’t re-invent the wheel. Everyone knows to wear fall protection.  Everyone knows to wear hard hats and safety glasses.  Where our team approach kind of changes it is that we provide more of the solutions—almost thinking a little bit ahead with our experience on a lot of these oil and gas sites.  We’re forecasting what ways to prevent problems and ways to promote a new level of safety.  It might not be just safety but it might be a little bit of operational ideas where some of our professionals learn a little bit of the actual specifics of how plants are operating which kind of leads to being able to administer work permits.  It may not be your cookie cutter safety, but a kind of segueing into the operations, being proactive as opposed to being reactive.

TEJAS GOSAI:  I appreciate what you’re saying because being proactive is the name of the game.   Going back to the basics of MAC Safety in the oil and gas industry, you are really a risk analysis company.  You’re trying to make sure that people know what to do when something does take place.  How about ISNetworld and SafeLand?  How have the training and metrics to measure a company’s safety performance been compared?  Have there been companies that you’ve worked with that started out in ISNetworld and now they’re re-certifying? How does that work?

 

CHRIS MIRANDA:   ISNetWorld is a great program.  We’ve actually dove into a company’s policy writing and procedures that have them approved.  Some sites will require, before all of this gets started, that you as a contractor are ISNetworld approved.  That might mean you have certain policies, procedures, and programs already in place.   For smaller or mid-size companies, those become cumbersome events because it might be a total cultural change.  Everyone does perform in a safe manner but are you actually documenting it?  Are you able to show a litany of programs in training?  That’s what we do as well.  In SafeLand that has become the bare basics for a lot of employers for their employees to get on-site, to have that basic training  That is a course we teach quite regularly to ensure that at least the bare basics with SafeLand are accomplished for companies.

TEJAS GOSAI:  Let’s take a minute and define ISNetworld and SafeLand Training.  ISNetworld is basically an aggregation of information on folks and their safety training.  You want to get an A+ score and you don’t have any issues that are taking place.  If you do, you must report it and that’s what kind of lowers your score.  Is that a good explanation?

CHRIS MIRANDA:  That’s right.  It’s checking boxes with lots of questions.  It’s a risk assessment.  If A can happen, then B can happen, then C can happen.  It kind of goes that way with ISNet.  Yes, you might have a safety program, but do you train?  Are your programs written in a certain way that answers these questions?  An example in the oil and gas industry is first aid.  What’s your company doing?  You might send one or two people out to a compressor site—how can two people administer first aid—if one gets injured do you know where you’re at or where you’re located?  Your cell phone barely works.  Everyone wants to know how you are going to help somebody if this does happen.  So policies and procedures are written very stringently to ensure that at no point any of those questions go without being answered.  Do your employees understand those written programs?

TEJAS GOSAI:  So that’s where SafeLand come in.  Correct?

CHRIS MIRANDA:  SafeLand is a 26-topic, basic introduction to the safety world.  What we do at MAC Safety is a little bit different.  We focus on doing the individual company as well.  We try to incorporate company-specific information as well into that mass amount of safety information.   So when we start talking about fall protection, we kind of use that individual company’s actual information to kind of make it that much more encapsulated to the employees who are sitting there.  They are getting a lot of information. We provide the information, but sometimes when you know it’s your own policies as well it kind of sits a little more real with you.

TEJAS GOSAI:  How did you get your background in SafeLand?  I know it involves pretty regimented training to become a SafeLand trainer.  I know from the classes—I don’t think you’re allowed to have over a certain amount of people in the class.   And basically all of the oil and gas companies—whether you’re a producer or whatever—almost everybody has to go through that training.  Correct?

CHRIS MIRANDA:  For the most part the most effective training is staying around that 20 to 25-person class.  It is allowed if you extend outside of 25 people but when you do that another instructor has to be part of it.  That’s your first segue into it.  The second part leads a little more to the training part; for us we started about two years ago to dive into it.  As we were working on a lot of these gas sites we were hearing second hand about SafeLand.  At that point our company became certified to administer the course and now, with our expertise on the oil and gas sites, we can make some of the training more real-life and then leave it to the audience to bring back to us what they’ve encountered.  You hate to dictate classes and what the information is.  There’s a lot of core info that needs to be discussed.  We try to make it interactive—more as a workshop than an actual SafeLand class setting.

TEJAS GOSAI:  How long after you get a full day of SafeLand Training does your certification or license last until you have to re-do the course?

CHRIS MIRANDA:  At the end of the course you have an automatic 45-day temporary card as long as you passed each module.   So, at that point, for 45 days you have a temporary card. However, during that time we’ve taken pictures during the class time to actually get your license card.  Typically you’ll get it within two to three weeks. No refresher.  The cards are transferable from company to company.   With any safety training, a lot of companies want their records to show you’ve gone through the class.
So you may have to go through it again which is just perfecting training. It’s like going through forklift training.  Company A might want X training and company B wants the same training but now that you are their employee they want to make sure you’ve gone through the training and not just saying you have a card, but you’ve  had the training itself.

TEJAS GOSAI:  This is great information.  A lot of people have heard—and the media is always saying—the oil and gas industry needs to be safe, efficient, and productive.  You don’t often hear about the safety elements and how diligent you have to be to administer it every single day over and over again.
It doesn’t make sense to verbally check all of these things; you should be documenting the information every single day so it goes into your records.
CHRIS MIRANDA:  And that’s what MAC Safety has really driven home.  We focus past just standing out in the weather and simply watching, to being more interactive.  It doesn’t matter which company we’re representing, but taking the site as one entity and making sure everyone understands the site requirements as far as, for example, do they have operators who have done aerial lift training, or making sure they had fork lift training.  It’s making sure everyone is under that same umbrella because, God forbid, if something happens the team can respond correctively.

 

TEJAS GOSAI: One amazing and exciting thing we have to share is that MAC Safety is growing here in southwestern Pennsylvania and Ohio.  You are looking for more people, which is excellent for the industry and the company.   Check out MACSafety.us and the phone number is 724-513-4491.  We’re talking with Chris Miranda, president of MAC Safety.

So expanding the company is a good problem to have, isn’t it?   You need to have the right people to learn and do the job.  How many people do you have on staff right now?   Would you mind sharing that info?

CHRIS MIRANDA:  Currently we have 13 full-time safety professionals.  We are scattered on oil and gas sites in eastern Ohio.  We are in power plants in Beaver County.  We are in power plants in southwestern PA. We have interaction on an industrial mill site in Youngstown, Ohio.   We have people who have safety degrees.  We also have people who have 20+ years of experience in the field as well.   Where we kind of mix and blend is where we can interact with all contractors.  We don’t want to say this is our way so you have to listen and do exactly as we’re saying.   We want people who have done the work and understand what needs to be done.  At the end of the day everyone is looking out for each other so that everyone is going home as they came to work—all in one piece.

TEJAS GOSAI:  I like your style there.  I know you’re a family-owned business.  You have a great charity event that’s taking place on December 20.  Ironically, it’s football.  You’re gathering a lot of folks together for the MAC Safety Bowl which is something you’ve done for a while now and you’re raising money for a non-profit for soldiers who have passed away in recent wars.  It’s called Legacies Alive.  Why MAC Safety Bowl?  What’s the reason behind promoting the charity?

CHRIS MIRANDA:  Thanks for bringing it up.  It’s about giving back.  It has been a lot of hard work and long hours.  The event is a way to bring everyone together.  Our family is surrounded by a lot of people who have enjoyed individual careers in all walks of life.  It’s about bringing everyone back together and we were looking for a charity to expand to.  I don’t want to take any credit from my son whose diligence has morphed this into such a great event.  We’d be remiss not to mention how excited we are; our whole family is excited and really helping out.

TEJAS GOSAI:  We are looking forward to it.  You’re raising money and putting it to a good cause.  In closing, we have a new year upon us and we have a new governor.  We have a lot of oil and gas activity that’s hopefully not leaving the area.  We have a Shell cracker plant coming into place.  And you’re hiring so anyone who is interested can put in a resume out to MACSafety.us.  The phone number is 724-513-4491.  Last question—what’s in the future here?  Are you expanding into other areas of oil and gas?

CHRIS MIRADA:  Good question. I’d be remiss not to touch on the successes of 2014.  We can all get better and elevate everything that we believe in into 2015 and be excited to grow. The structure of what has been developed by all of our safety professionals leads to the foundation of where we believe we’re positioned to help more people.   We can help more contractors, more industries, and be able to provide more training.  I guess that’s the theme—we’re structured to really strive in 2015.

TEJAS GOSAI:  We’ll have you back on, Chris.  That’s Chris Miranda, the president of MAC Safety Consultants.  Check out MACSafety.us.  The phone number is 724-513-4491.  I’m Tejas Gosai and we’ll be right back.
COMMERCIAL:  One decision, endless possibilities. California University of Pennsylvania opens your mind to more than 130 programs of study.  Programs that matter to education and healthcare, to technology and to the future of our world.  California University of Pennsylvania—because the world is waiting for you.  Visit or apply online at Calu.edu.

TEJAS GOSAI:  You’re listening to Shale Energy Now.  Check out our previous podcasts at ShaleEnergyNow.com.  Check out our parent company, ShaleMediaGroup.com.  I’d like to thank our guests:  Rick Stouffer, Senior Energy Editor with Shale Media Group;  Kristie Kubovic, Director of Communications with Shale Media Group told us about the Mid-Stream PA 2014 conference; and Chris Miranda with MAC Safety Consultants.  Check out MACSafety.us. As I mentioned earlier, MAC Safety is doing a fundraiser on December 20 near the proposed cracker plant in Beaver County.  The proceeds will go to Legacies Alive where the gentleman‘s name is Mike Viti who is soon to complete his walk across the country in the name of soldiers who passed away in recent wars.  Check out LegaciesAlive.com when you can.

Tune in next time to Shale Energy Now.  Thanks for listening.

 

Shale Energy Now Episode 84

Posted by on 4:00 pm in Radio Show | Comments Off on Shale Energy Now Episode 84

Show # 84
Airdate:
November 14th, 2014
Guests:

Rick Stouffer: Senior Energy Editor at Shale Media Group.

Matt Steele: President at Ohio Valley Oil and Gas Association.

Right click and select “save linked file as” to download this episode.

 

TEJAS GOSAI:   Welcome to another exciting installment of your favorite energy program, Shale Energy Now.  I’m your host, Tejas Gosai, and every week we talk to experts across the energy industry about what’s happening in shale oil and gas extraction.  We have seen the nation take a shift over the past ten years with the advent of hydro-fracturing and horizontal drilling.  Shale oil and gas is eight to ten times more efficient than it has ever been in our history.  Energy is obtainable.  This means it’s excellent if you can do it properly without any environmental or human consequences.  There’s a lot in the construction process and you go a mile beneath the earth to extract this resource so there are issues that take place.

Now, this episode of Shale Energy Now is incredibly important because we just had a governor’s race where the person who basically put the oil and gas industry in action is no longer going to be in office.  Of course, Governor Corbett will be replaced with Governor Wolfe.  That will happen in January.  This is the first time since 1954that an incumbent Pennsylvania governor did not either win re-election or cede power to his own party.  And it couldn’t come at a more difficult time when it comes to energy.  Wolfe has said that he is going to establish a shale extraction tax.  He’s going to try and prevent some of the drilling from taking place that has already been permitted or signed for.  No drilling in state parks and forests, as well as other environmental protection orders and some issues with climate change.  When it comes to energy you couldn’t have two more different governors in the office. Now, with this being said, the oil and gas companies—some folks have stated they just may leave, pick up and walk out the door.   Lou D’Amico, the president of PA Independent Oil and Gas Association, says that Wolfe’s policies could lead to job losses.  So the PIOGA, along with the Marcellus Shale Coalition and some of the other lobbying organizations, represent the drillers.  Let me go back to some of the things that Lou D’Amico says.
He says some drillers are talking about leaving the state if Wolfe succeeds in imposing a new severance tax.  Of course this is going to take some time.  He goes on to say that although the industry doesn’t enjoy bi-partisan support, in Harrisburg D’Amico worries about lawmakers from non-drilling areas like Philadelphia; that’s always been the constant crux we’ve been dealing with.  He goes on to say if you’re not seeing your hotels full, you’re not seeing the local Ford dealer selling trucks to drillers, then you’re not concerned as much in Philadelphia with the potential slowdown of gas drilling as you are in Bradford, Tioga, Susquehanna Counties, or here in southwestern PA where we’re based.  This is going to be a bit of a battle.  One good thing is that it will be a battle.  One good thing is there will be some time before this battle takes place.

 

It’s still November.  We still have December, and Wolfe takes office in January.  There will be some interesting battles that will take place across the Republican and Democratic parties.  Just to let you know, the Republicans control the Legislative portion of the Pennsylvania government, while the Democrats control the Executive branch.  This will be very interesting. We’ll follow it shortly.

Let’s get to some of the good stuff that is still going on.  Although Wolfe is taking office in a couple of months and it will take some time to get through this, there may not be a severance tax and there are still a lot of big things happening.
Domestic natural gas production is moving into uncharted territory.  Bentek came out with some good information saying they found gas production in the lower 48 states averaged about 69.9 billion cubic feet per day in October.  That’s per day!  So that’s breaking the previous record and posting the tenth straight month of gains.  Gas production last month was 7.9% higher year over year.  This is a story that Rick Stouffer wrote.  We’ll be checking with him shortly.  This is from last week.  So the current level of production is uncharted and we don’t know how far domestic natural gas markets will grow.  They show no signs of slowing down.  There are a lot of great things happening.  We’ll keep measuring some of the difficulties that go along with them. Later on in the program we’ll be talking with Matt Steele who is president of the Ohio Valley Oil and Gas Association.

Next week we’ll be at the Midstream PA 2014 Conference at Penn State University.  It will be held on November 18. On November 20 there’s a SafelandUSA Training taking place in Bentleyville at the Holiday Inn Express.  On December 2 the Energy Industry Training Series will take place on Racetrack Road.  Go to EnergyTrainingSeries.com.   The topic will be permitting.

Let’s check in with Rick Stouffer about the last week in the shale oil and gas world.
Rick, I’ll turn it over to you.

RICK STOUFFER:  Thank you, Tejas.  Good day to you and to your listeners.   As we say every week there’s a lot happening in the natural gas and crude oil industry in the country.  Let’s start off with a relatively hot topic these days. As we talked about many times, there are a number of liquefied natural gas facilities that are going to be built in this country because we have such a glut of natural gas.  It has to go somewhere.  The producers want to ship it overseas because they can make a great deal of money doing so.  There’s been a sort of backlash against the idea by primarily chemical companies saying, hold on a minute, let’s not do any major exporting until we see if we have enough to satisfy the needs in this country first.   Keep in mind the chemical industry alone has roughly 100 projects worth over 100 billion dollars either underway or soon to start and all of them are based on inexpensive shale produced gas.
With that as the background the Energy Information Administration, which is basically the statistical arm of the Department of Energy, came out with a report yesterday that was very interesting.  What they basically said is—their premise was that just with the increase in natural gas production, that 60-80% of any potential demand increase due to additional liquefied natural gas exports could easily be handled.  In other words, four-fifths of additional need could be handled in this country simply by raising production which, if you stop and think about it, is not a very hard thing to do simply because there is so much gas here.  There have been some cutbacks because there’s no place for the gas to go; there’s not the demand in the country.  Until LNG exports begin you have to slow down.  That’s what’s happening.  The EIA is saying if you let things go as the producers want basically it doesn’t matter how much you export.  We’re still going to have enough natural gas in this country to satisfy everyone.
TEJAS GOSAI:    Let’s break down the LNG for a second.  CNG is compressed natural gas.   LNG is liquefied natural gas.   It’s a much colder version of compressed natural gas which makes it easier to transform because it takes up a smaller footprint and then you expand it when you get to the location.

RICK STOUFFER:   They actually cool down the gas until it becomes a liquid.  As you say it makes it much easier to transport.  When it gets to the destination, be it Europe or Asia or wherever it’s going, they basically reverse the process and bring it back to a gas state.  Then they ship it to where it needs to go.
You do need the proper equipment and that’s why we have so many projects either in planning stages or under construction to be able to take the gas, convert it to liquid and be able to ship it.
TEJAS GOSAI:    We are in a very interesting time because of that specifically, but also our infrastructure is getting overhauled.  Our country is getting upgraded if we allow it to happen.  Of course, allowing it to happen requires laws and voting.  Here in Pennsylvania we just had an election that may change some of the things that happen with natural gas production which is what you are saying.   With that being said, and not going into it but mentioning about Wolfe’s term taking off, we’ll see what happens.  There are still a lot of companies expanding their efforts.

RICK STOUFFER:  We’ve talked about mergers and acquisitions within the oil and gas industry, particularly centered around the shale oil and gas play. Enterprise Products Partners is one of the largest midstream companies, which we’ve talked about many times.  They basically connect via piping wells being drilled with the plants that are separating products from the natural gas stream.  Enterprise Products, certainly among the top five in terms of size, announced a six billion dollar deal this week with a company called Oil Tanking Partners.  They’re actually owned by a German firm and they’re known for their ability to ship products via the water, so we’re talking exporting.  Also, they have a huge amount of oil and oil product storage in the U.S.  Enterprise is branching out.  They’re one of two companies which broke up earlier this year. They were given permission by the federal government to be able to ship condensate, which is very, very light oil, out of the country.  As many of your listeners know, shipping oil in any form out of this country has been prohibited since the 1970s when we went through the whole OPEC episode of raising prices and we had shortages.  They’re a very aggressive company and obviously, buying oil tanking for six million dollars, they seized the advantages of the storage in this country but also the ability to move production across the Atlantic and Pacific.
TEJAS GOSAI:    We have a world crunch right now.  Anybody is who anybody is making sure they are grabbing hold of some of this energy demand.  Only because of the time factor, let’s get to your last news brief.  It has to do with Canada and some of the abilities they have in place.

 

RICK STOUFFER:  As many of your listeners know, western Canada has a huge amount of what’s known as oil sand which very thick oil that basically has to be mixed with other liquids to even be moved via pipeline.  The Canadian Energy Research Institute, which is a very prestigious research entity in Canada, came out yesterday talking about the oil sands.  They made some projections about how much money is going to be spent to move the oil sands out of western Canada into the States and around the world.  Just as this country wants to export liquefied natural gas, the Canadians likewise want to export LNG, but they also have a tremendous amount of oil sands and they’re looking to export that also.  So the Energy Research Institute yesterday predicts that between now and the year 2038, investment in the oil sands will exceed 455 billion dollars.  That includes new projects and continued investment.  There are a lot of projects already operating in western Canada.  I don’t have a definite number but most of the major oil companies have some sort of an operation in western Canada.  The Research Institute says that oil sands production between 2014 and 2038 will grow from under two million barrels a day to almost four million barrels a day by 2020, and 5.2 billion barrels by 2030, and then they believe it will be higher than that as you get closer to 2038.

They also said that revenues from all existing and new projects will exceed 2.2 trillion dollars.  Obviously, the Canadians are looking to tapping into the taxes.  Huge numbers and a long time frame but as we’ve learned here, huge numbers you get used to.  We talk about billions on a daily basis and it’s amazing what’s put into these projects.
TEJAS GOSAI:    The opportunity is my favorite topic.  When you look at it from a global perspective, Australia and the UK, Africa—all of these different countries are trying to have the best place for the companies to extract energy. It’s the most valuable commodity in the world.  It really is a battle.  We’re just scratching the surface.   Next year will be a strong year.  Thank you, Rick.

RICK STOUFFER:  Always a pleasure.  Thank you, Tejas.

 

TEJAS GOSAI:    That’s Rick Stouffer, Senior Energy Editor with Shale Media Group.  We’ll be right back after the break.
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TEJAS GOSAI:  Welcome back to Shale Energy Now.  I’m the host, Tejas Gosai.   Every week it truly is a pleasure to talk to energy experts.  This is a very vibrant time in our society and what we’re seeing across America has no end in sight.  There are a lot of good things to look forward to in 2015.  Make sure you check out our previous podcasts at ShaleEnergyNow.com.  We’ll go back to the show. Every week we talk to experts around the industry about what’s going on across our shale oil and gas landscape.  Today we are highlighting the Ohio Valley Oil and Gas Association which is obviously located in Ohio.  We have the president with us today—his name is Matt Steele.  He’s also with Steele and Cooke Insurance.  Matt, welcome to our show.

MATT STEELE:  Thank you, good to be here.

TEJAS GOSAI:  Did you start this association or was it something you took over?  Tell me some of the beginnings of your story.

MATT STEELE:   The association began with and originated in a number of lunch meetings and dinners that eventually turned into the formation of the association.  Those early luncheons/dinners were just a group of people who are in my network and I connect with on a regular basis.  Some are clients and people I do business with.  We were sharing information about the growing oil and gas industry actually back in 2011.  That’s when those early meetings began.  At that point, the more each one of us was involved in those meetings and as we talked to other people in our networks, we realized there was more interest.  There just seemed to be a need to create more of a formal entity and a way to gather together to promote our own businesses and educate ourselves on the growing shale energy production and industry in our area.

TEJAS GOSAI:  What was the reason for those meetings?   Was it about oil and gas?  Were there people working with oil and gas and touching some of the industry?

MATT STEELE:  Originally, it was started because we saw a bunch of pickup trucks driving around with Oklahoma and Texas license plates and we saw pretty serious equipment coming through our small town.  We began asking, who were these people and why were they here? Probably more importantly, how can we do business with them?  So that’s where it really began.  We wanted to educate ourselves on what they were doing.

TEJAS GOSAI:  And insurance surely has a lot to do with the industry.  I’m sure, although you’ve been in the field for a long time, that your family has yet to teach yourselves a little bit about what the oil and gas industry has to do with insurance.  Correct?

MATT STEELE:   That is correct.  It has been a learning process in the area over the last few years.  The insurance requirements we’ve seen coming out of the oil and gas industry are what I consider to be more complex and rigorous.  There’s a lot more focus on risk transfer from the higher level oil and gas producers down to the contractors that they’re utilizing.  It has been a learning process but we’ve definitely learned from it and are prepared to grow with the industry now.

TEJAS GOSAI:  So with OVOGA and the success you’ve had, you’re different than some of the other organizations like OOGA or PIOGA because there is an element of business and not necessarily lobbying for law-based reasons.

MATT STEELE:  That’s right. In our mission and when we set up the organization we really didn’t want to become a political or lobbying organization.  We didn’t have a tax fund or anything like that.  The focus was really on educating our members and promoting ourselves to the industry.  We do that through various networking events, educational forums, and engaging speakers to come and present to us.  That’s the majority of what we’re doing and why we exist.

TEJAS GOSAI:  Tell me about some of the things you’ve seen and done in the past because we all know with what’s happening in the industry, particularly with the current governor’s election that took place,  we’re in some tumultuous times. But Ohio is really kicking it up a few notches.  Tell me about the growth and your association’s membership.

MATT STEELE:  Just to speak to your point about views of the industry, I want to make mention that we don’t consider ourselves an Ohio organization.  We consider it the Ohio Valley which encompasses Ohio, West Virginia, and Pennsylvania.  We have membership that spans all three states and more, to be honest. We’re hearing very positive things about the industry moving west into West Virginia and Ohio.
It’s not just moving; it’s here at this point.    In Ohio especially, we’re hearing it’s a very favorable place to do business from a legal and regulatory environment.  As far as membership growth we did have an initial surge of mainly friends and contacts from that initial group of people in our meetings. Now, while some of those have shaken out if they didnt see themselves being involved in the oil and gas industry, the new members are very interested in doing business with the industry.

We’re also here to provide resources for the larger producer and mid-stream providers because they are looking for local service and product providers in the area.  It’s a good way to match up the different groups of people.

TEJAS GOSAI:  Let’s talk about what’s happening currently and how outrageously good it has been for the Ohio Valley.  A lot of the businesses are reinventing themselves and tailoring themselves to the industry.  We’re seeing a lot of return here.  Can you tell me—I know some of them—there is Gulfport, Eclipse.  What are some of the other producers in your area?

MATT STEELE:  Rice Energy is big in Belmont County.  We have Antero in the Barnesville area.  Of course, there’s Gulfport.  There are a number of others in the surrounding areas.  As everyone knows, Chesapeake will remain in Ohio but they have sold off their West Virginia assets recently.  That doesn’t mean the production will stop.

TEJAS GOSAI:  Just a little stat—Gulfport Energy Corporation was the second most active natural gas producer in Ohio’s Utica shale play and they’re bluntly running out of room to expand.  So Gulfport has 184,000 acres under lease in the Utica.   It’s not just in your area but there’s a lot in the Ohio Valley.  They’ve added about 500 acres since August of this year.  It’s just one Goliath of a company.  And Rice, of course, is very aggressive in an official way to produce energy.  It’s great to see what’s coming.
Let’s talk about the crystal ball.  What is going to happen now that Ohio has settled itself as the place to be?  How do you think things will change?  In fact, you grew up in the area, correct?

MATT STEELE:  I did grow up in the area.  For a few decades it was on the downhill.  Industries were moving, steel mills were closing, and coal companies were consolidating although they’re still very active.   We definitely see the crystal ball as you say showing continued growth in the area. New housing development should be coming in.   A lot of new industrial parks are coming, too.  You see a lot of new building in Belmont County and eastern Ohio in general.  We just expect that to continue.  It’s on the map.  It’s a quality product they’re finding right beneath us and we will be here and we hope that all of our membership will benefit from the growth that is sure to come our way.

TEJAS GOSAI:  Absolutely.  The last thing is you have a great event coming up soon.  It’s an industry match-up which is like a speed dating kind of thing.

MATT STEELE:   You could say that—I try not to focus on the speed dating.  It’s definitely a speed networking event.  It’s for business purposes.  We feel we have a really good environment for contacts to be made both ways from the local service providers to the oil and gas companies that may be looking for local providers.  They’re coming in and don’t know people or have the resources they need.  Through this structured event we’ll facilitate quality contacts and make it worth everyone’s while.

TEJAS GOSAI:  I think it’s definitely a great idea.   The idea is that you may spark a connection with a vendor or supplier.  It’s a way to get a lot done in a short period of time.

MATT STEELE:  I just want to say it’s more than just a social network event.  It’s a structured environment where a person has to register online prior to attending and indicate what they are looking for, or what they can offer.  And once that registration process takes place there are signs to match those folks up.  That’s where the magic will happen.  We have partnered with SpeedNetworking.com and they have a real focus on facilitating these events to make sure they’re successful. I would also like to thank our corporate sponsors for the event.  That would be Eagle Manufacturing, Hall and Associates, and Pipelines, Inc.   They’ll all be in attendance.
TEJAS GOSAI:   That is on Tuesday, November 18 from 6-9 p.m. at the Wheeling Island Casino.  You can find more information at OVOGA.org.   Matt, much success to you and the organization!  Let’s keep in touch and maybe catch up in the future.

MATT STEELE:  You bet.  Thank you.

TEJAS GOSAI:  I’m Tejas Gosai.  That was Matt Steele, president of the Ohio Valley Oil and Gas Association.  OVOGA.org.   Also, he is with Steele and Cooke Insurance dealing with the natural gas industry in eastern Ohio.  Shale Energy Now will be right back after the break.
HOST:   Every week Shale Energy Now is joined by expert guests who heighten the discussion about the revolutionary energy developments happening the world over.  Thank you to all of our listeners who continue to support us and tune in week in and week out.  Stay further connected to SEN and the Shale Media Group Network at www.ShaleMediaGroup.com, and with our Facebook and Twitter.  Don’t go away; there’s still much more to be discussed when Shale Energy Now comes back after the break.

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TEJAS GOSAI:  Every week we talk to energy experts across the energy industry landscape.  Today we spoke with Rick Stouffer, Senior Energy Editor at Shale Media Group, our parent group. Check out ShaleMediaGroup.com.  Also, thank you to Matt Steele who is the president of the Ohio Valley Oil and Gas Association.

Tune in next time to Shale Energy Now.  Thank you very much for listening.