Marcellus Shale: A
Million Acres of Paydirt?
by Dimitra DeFotis Dow Jones Newswires 6/15/2009
The next big thing in U.S. energy exploration will be the Marcellus
Shale, a vast, underground layer of rock stretching from upstate New
York down through Pennsylvania and into Ohio and West Virginia. By some
estimates, this formation contains 50 trillion cubic feet of
recoverable natural gas, enough to meet two years of gas consumption
for the entire U.S. That kind of volume could go a long way to helping
the country cut its dependence on foreign oil.
Enter Range Resources (ticker: RRC). A modest-sized Texas exploration
outfit, it was smart enough to start buying up land rights in Marcellus
Shale in 2004, when prices were still relatively cheap. It now controls
some 900,000 acres of prime Marcellus soil, more than any other energy
company operating in the region. If Range's drilling proves as
successful as fans hope, the company's revenue could surge far, far
beyond the current $1.3 billion a year.
"We are a relatively small company with a tiger by the tail," Chief
Executive John Pinkerton tells Barron's. "If the tiger ends up being
what everyone says it will be, our company will be 10 times bigger than
it is."
All of which makes Range's stock singularly tantalizing. In the next
year alone, bulls say, the stock should climb about 36%, to 65. And it
could keep rising in leaps and bounds for years.
Range, however, must first overcome some real obstacles. Most notably,
Congressional Democrats are seeking to regulate the hydraulic process
used to force gas out of shale. The process, which involves forcing
sand, water and chemicals through a pipe, is called "fracking," and
industry groups insist it is time-tested and safe. But
environmentalists contend fracking threatens water quality and plant
life.
Embarrassingly for Range, just as the debate was heating up recently,
the company reported a Pennsylvania pipeline leak that killed flora and
fauna. The industry can't afford many more incidents like that. If
fracking foes gain the upper hand in Washington, Range and its rivals
could well run into permit delays and, consequently, earnings
shortfalls.
But the company's stock managed to hold firm as the Pennsylvania saga
unfolded. And believers in the promise of the Marcellus maintain that
any final action by Congress will take the form of reasonable
restrictions rather than flat-out prohibitions. "Public policy
has to balance cheap, domestic energy with the potential 1% risk that
fracking is going to damage the water supply," says G. Warfield Hobbs,
a Connecticut geologist and energy consultant with interests in the
Marcellus.
For now, the biggest influence on Range's stock is the price of natural
gas. Just last Thursday, the shares jumped 5% as gas prices rallied.
Depressed demand in recent months has lowered the gas price to near $4
per million British thermal units, but the futures market is projecting
prices will rise to near $6 by December as an improving economy and
curtailed drilling help reduce the current oversupply. That could
sharply boost Range's earnings, and not just from the Marcellus.
While preparing to tap the region, the company has been been drilling
successfully in and around Texas, beating competitors with its
production numbers. And thanks to relatively low costs -- the result of
acquiring land and drilling smartly -- a healthy dose of Range's
revenue goes straight to the bottom line.
Bernstein Research figures Range could produce earnings of $2.12 per
share in 2010, up from an expected 78 cents this year, assuming a
substantial rise in natural-gas prices to keep pace with oil. Earnings
like that would be far above the Wall Street consensus of 81 cents, and
would result in a price-earnings ratio of 22.5, versus the consensus'
dizzying multiple of 59.
"Range has one of the best growth profiles of the peer group, with an
expected 14% compound annual growth rate over the next five years,"
writes Benjamin P. Dell, an analyst at Bernstein. He thinks Range
shares could hit $62.
Range has a long track record, having gone public in 1980 as Lomak
Petroleum. It listed on the New York Stock Exchange in 1996 as Range,
but its growth spurt didn't begin until 2004 when it expanded into the
Marcellus and later the Barnett Shale in Texas, another booming region.
Range now has roughly 2.7 trillion cubic feet of proved reserves, and
it posted compound annual production growth of 19% for the five years
through 2008.
The company's new wells in Marcellus are yielding average daily
production of seven million cubic feet -- an exceptional initial rate.
In Texas, meanwhile, Range claimed earlier this year to have drilled
the most productive well to date in Barnett. Together, the Barnett and
Marcellus operations produce a rate of return of nearly 30% when
natural gas is at $4 -- and that is "hunky dory," says CEO Pinkerton.
He adds that Range will increase its total unproved reserves more than
tenfold, to about 20 trillion cubic feet, by 2015.
The Marcellus Shale, while near the heart of Eastern U.S. coal
production, had been ignored for years due to the expense of extracting
gas and building infrastructure to transport it to customers. But now,
with wells producing more gas than expected and pipelines getting built
out, producers can sell East Coast gas to nearby customers at about a
30-cent premium to the benchmark price, because transportation costs
are lower.
This year, Range is spending about 45% of its $700 million capital
budget in the Marcellus. So far investors have been willing to pay for
high exploration costs, and the company's balance sheet remains
healthy. Range has kept its long-term debt at just over 40% of
total capital. And it still squeezes out a dividend of 16 cents per
share, for a yield of 0.34%.
In 2010, assuming $9 natural gas, Dell of Bernstein estimates Range
could generate $6.27 in cash flow, and at $7 gas, $4.67 in cash flow.
That means the stock is trading at either seven times or 10 times cash
flow, quite reasonable for a company with Range's large acreage and low
costs.
The numbers, of course, could change quickly if Washington throws a
curve ball.
Pinkerton told Barron's in April that water quality "is just not an
issue. There are millions of pages of data -- incredible studies."
Still, the new administration -- clearly concerned about the
environment and prone to increase regulation-could force energy
companies to spend more money to cut risks. One private-equity investor
focused on energy says regulation is likely to add costs and slow
progress a bit, but adds, "The industry will realize it can treat the
water and deal with it."
In addition, U.S. natural gas is a clean-burning fuel alternative, and
exploiting it on a scale like the Marcellus Shale creates jobs and tax
revenue in a wobbly economy.
So, with a little help from gas prices, Range could be well on its way
to helping both its shareholders and its country. Unless you happen to
be a coal producer, it is hard to complain about that.
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Natural gas-powered
Mack refuse truck
6/15/09 LAS VEGAS, Nev.
Mack Trucks has introduced a natural gas-powered version of its
TerraPro Low Entry model truck targeted towards refuse
applications. The engine is supplied by Cummins Westport and a
cabover version of the
truck will be introduced later, Mack announced at the WasteExpo trade
show this week. The 9-litre Cummins Westport ISL G engine is
rated at 320 hp and can
use either compressed natural gas (CNG) or liquefied natural gas (LNG).
It is equipped with a three-way catalytic converter to comply with
EPA2010 emissions standards, Mack says.
“We’re bringing the Mack tradition of application excellence to
alternative fuel vehicles,” announced Dennis Slagle, Mack president and
CEO. “The natural gas products we’ve now brought to market will extend
our position of leadership in refuse into this emerging segment.”
Chicago-area waste hauler Groot Industries has already placed an order
for 20 CNG-powered refuse trucks, Mack announced. They’ll be put into
service by the end of the year. “Refuse companies these days are
expected to be environmental leaders
in their communities,” said Brian Curry, director of fleet and
facilities for Groot Industries. “We look for ways to serve customers
with the cleanest and most efficient trucks available, which is why we
were so interested in Mack’s natural gas solution. Our Mack TerraPros
will help us reduce emissions and our carbon footprint, as well as
lessening the US’s dependence on foreign oil.”
Mack says it has noted an increase in the number of municipalities that
have mandated their contractors use alternative fuel vehicles as a
condition of their contracts. “Natural gas has a number of
significant benefits,” said Tom Kelly,
Mack senior vice-president of product portfolio management. “It burns
very cleanly, there is an abundant supply here in North America, and
it’s comparable to diesel in terms of cost over the life of the
vehicle.”
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400 LNG Busses City
of Phoenix Public Transit Department
Awards Major Natural Gas Fuel Supply Contract to Clean Energy
-- Agency's 400-plus LNG Bus Fleet Projected to Require Approximately
6 Million Gasoline Gallon Equivalents of LNG Fuel Annually --
Seal Beach, CA (June 10, 2009) -- Clean Energy (Nasdaq: CLNE) has been
awarded a new three-year contract from the City of Phoenix Public
Transit Department, AZ to supply the City's Valley Metro Transit Fleet
with liquefied natural gas (LNG) fuel to power its fleet of 400-plus
LNG buses. When the new contract takes effect July 1, 2009, Clean
Energy will begin delivering approximately 6 million gasoline gallon
equivalents of fuel annually to three fueling sites.
James Harger, Senior Vice President and Chief Marketing Officer, Clean
Energy, said, "With this new contract, the City of Phoenix Valley
Metro Fleet now ranks as our largest LNG customer. Overall at transit
agencies across the nation, Clean Energy supplies natural gas fuel for
4,000 buses daily."
Harger added, "We are pleased to provide LNG fueling services to the
City of Phoenix, ensuring that transit buses roll out daily to meet
vital community transportation needs. Clean Energy is committed to
helping reduce pollution and protect environmental quality in every
community and region we serve, and we commend Valley Metro for their
success at achieving these goals." Natural gas is one of the best ways
to reduce air pollution and greenhouse gas emissions because it burns
cleaner than diesel fuel.
The City of Phoenix Public Transit Department is a member of Valley
Metro, an organization of 14 local governments that provides or funds
transit services in the greater Phoenix metropolitan and surrounding
areas. Phoenix deploys the largest fleet of clean-burning LNG transit
buses in the U.S. to cover its 517 square miles of area plus
neighboring cities.
Clean Energy (Nasdaq: CLNE) is the leading provider of natural gas (CNG
and LNG) for transportation in North America. It has a broad customer
base in the refuse, transit, ports, shuttle, taxi, trucking, airport
and municipal fleet markets, fueling more than 15,000 vehicles at 173
strategic locations across the United States and Canada. Clean Energy
owns and operates two LNG production plants, one in Willis, TX and one
in Boron, CA, with combined capacity of 260,000 LNG gallons per day and
designed to expand to 340,000 LNG gallons per day as demand increases.
It also owns and operates a landfill gas processing facility in Dallas,
TX that produces renewable biomethane gas for delivery in the nation's
gas pipeline network. Please visit: www.cleanenergyfuels.com
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Turkey Finds
Natural Gas in Southeastern Anatolia
Asia Pulse Pte Ltd 6/12/2009
Turkey has found natural gas in a Southeastern Anatolian province, the
energy minister said on Thursday. Turkey's Energy & Natural
Resources Minister Taner Yildiz said that Turkey found natural gas in
the southeastern province of Batman the previous week. "This is the
first time we struck natural gas very close to the surface," Yildiz
said in a TV program.
Yildiz said that Turkey was meeting only 2.5 percent of its natural gas
need by itself, and that Turkey wanted to raise this percentage to 10
percent in two years.
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LNG
FPSO Project DNV Approval for Hoegh's
Hegh LNG 6/9/2009
On June 3, 2009, Höegh LNG received the Approval In Principle (AiP)
from Det Norske Veritas (DNV) for its LNG FPSO project, including a
reconfigured membrane containment system. The approval from DNV
confirms that the Höegh LNG FPSO design complies with all rules and
regulations and that there are no showstoppers for its construction.
This completes 18 months of engineering work by Höegh LNG.
The scope of DNV's AiP assessment includes review of all relevant
documents produced for the LNG FPSO FEED (Front End Engineering and
Design) that are subject to classification approval. DNV has also been
involved with Gaz Transport and Höegh LNG during all stages for the
sloshing assessment of the containment system to ensure that the main
assumptions, analysis tools, methods and acceptance criteria used are
relevant and in line with DNV's requirements.
The Approval in Principle covers the complete LNG FPSO design,
including:
The hull and all marine and utility systems designed for offshore use
GTT No. 96 reinforced double row containment system designed by Gaz
Transport Technigas
Niche LNG liquefaction system design and patented by Chicago Bridge
& Iron (CB&I)
Gas inlet facilities
Gas processing modules
Power generation and distribution system
"Höegh LNG is very pleased with reaching this milestone for our LNG
FPSO project. This is a stamp of quality for the engineering work
performed by us and our contractors with Daewoo Shipbuilding &
Marine Engineering Co., Ltd.(DSME)and CB&I. We put emphasise on
developing the project in the right order and with this Approval in
Principle in place we can proceed with commercial agreements. We are
entertaining discussions with a list of 10-12 potential users, and I am
fully convinced that we will land a contract with one of them."said
Mr. Sveinung Støhle, President and CEO.
Mr. W.S. Ryu, Executive Vice President of DSME, the nominated shipyard
for the Höegh LNG FPSO, stated, "DSME is proud of this significant
milestone jointly achieved with our client Höegh LNG. This once again
proves DSME's outstanding performance on LNG FPSO design and the
suitability of the double row reinforced NO96 cargo containment system
for an offshore application. This will also be a historic starting
point for the realization of a LNG FPSO, from the design to the actual
EPC stage. We are confident the Höegh LNG FPSO built by DSME will be
the world's best."
The Höegh LNG FPSO design consists of offshore classed ship-shaped
structure and a topside plant with capacity to treat and liquefy a well
stream of approximately 3.0 billion cubic meters per year, which will
give an annual production of between 1.6 to 2.0 million tons of LNG and
approximately 0.4 million tons of LPG/condensate, depending on the
specification of the gas stream. The design is such that it can be
expanded to 2.4 million tons per year of LNG or reduced to 1.0 million
tons per year. The LNG FPSO will have storage capacity of 190,000 cubic
meters of LNG and 30,000 cubic meters of LPG/condensate.
Höegh LNG is a pioneer in the LNG shipping industry and currently owns
and operates a fleet of four traditional LNG tankers, and has 2
Shuttle- and re-gasification vessels (SRV), under construction at
Samsung for the Neptune project offshore Boston owned by Suez LNG NA.
Höegh LNG further has under development two deepwater port terminals,
one in the US offshore Florida, "Port Dolphin," and one offshore
western UK, "Port Meridian" and is actively pursuing other floating LNG
projects around the world.
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Alaska’s National
Petroleum Reserve oil and gas
World Oil
ConocoPhillips and Anadarko Petroleum discovered oil
and gas with their Pioneer-1 and Rendezvous-2 wells in the Greater
Moose’s Tooth Unit on the North Slope of Alaska. The wells are located
in Alaska’s National Petroleum Reserve about 20 mi southwest of the
Colville River Unit. ConocoPhillips operates with 78% interest and
Anadarko holds the remaining 22%.
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Israel offshore Tamar estimated
5 trillion cubic feet.
Noble Energy February 10, 2009
News of last month’s natural gas discovery off the coast of Haifa just
keeps getting better. Noble Energy announced today, that after flow
testing of the Tamar well, they’ve increased potential natural gas
production in the Tamar from 3.1 trillion cubic feet, originally
estimated, to 5 trillion cubic feet. That’s a production rate of 30 -
150 million cubic feet per day!
Noble has already decided to keep the Atwood Hunter offshore drilling
rig for two additional wells.
HOUSTON, Feb. 10 /PRNewswire-FirstCall/ — Noble Energy, Inc. (NYSE:
NBL) announced today flow test results from the Tamar natural gas
discovery in the Matan license, offshore Israel. As previously
reported, the Tamar #1 well, located in approximately 5,500 feet of
water and drilled to a total depth of 16,076 feet, encountered more
than 460 feet of net pay in three high-quality reservoirs. Testing
procedures, which were performed over a limited 59-foot section of the
lowest reservoir, yielded a flow rate of 30 million cubic feet per day
(Mmcf/d) of natural gas. The flow rate was limited by testing equipment
available on the rig. Performance modeling indicates the well can be
ultimately completed to achieve a production rate of over 150 Mmcf/d.
The pre-drill gross mean resource potential for Tamar was originally
estimated at 3.1 trillion cubic feet (Tcf) of natural gas. Immediately
following discovery, we estimated the gross resource potential to be at
least equal to the pre-drill mean estimate. After analysis of all the
post-drill and production test data, the estimated gross mean resource
potential of Tamar has now been increased to 5 Tcf.
The Company and its partners have elected to keep the Atwood Hunter, a
semi-submersible drilling rig, offshore Israel for two additional
wells. Subsequent to operations at the Tamar #1 well, the drilling rig
will proceed to the Dalit exploration prospect in the Michal license.
Dalit has a pre-drill gross mean resource of about 700 billion cubic
feet of natural gas with an approximate 40 percent chance of success.
Located in 4,500 feet of water and 28 miles offshore, the well has a
proposed total depth of about 12,500 feet. Immediately after concluding
operations at Dalit, the rig will be relocated to Tamar where it will
drill an appraisal well to further define the resources of the
structure.
Charles D. Davidson, Noble Energy’s Chairman, President and CEO, said,
“The test results from the Tamar well confirm our initial analysis that
the discovered reservoirs are very high quality. This discovery is
clearly of a size for commercial development. We hope to extend the
success in Israel by testing Dalit, our second prospect which is
already covered by 3D. Discussions with our various partners are
currently ongoing with plans to potentially conduct new seismic over
our additional leads on other licenses in the area. Each incremental
piece of information gathered is critically important as we continue to
learn more about the potential of the Tamar discovery and this highly
under-explored region. The implications of this discovery to Israel,
Noble Energy, and our partners cannot be overstated, and we all have
committed significant resources to better understand its scale and
scope.”
Noble Energy operates both the Matan and Michal licenses with a 36
percent working interest. Other interest owners are Isramco Negev 2
with 28.75 percent, Delek Drilling with 15.625 percent, Avner Oil
Exploration with 15.625 percent and Dor Gas Exploration with the
remaining four percent.
Noble Energy is a leading independent energy company engaged in
worldwide oil and gas exploration and production. The Company operates
primarily in the Rocky Mountains, Mid-Continent, and deepwater Gulf of
Mexico areas in the United States, with key international operations
offshore Israel, UK and West Africa. Noble Energy is listed on the New
York Stock Exchange and is traded under the ticker symbol NBL. Visit
Noble Energy online at www.nobleenergyinc.com.
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Israel offshore 33-200/MMcfd on the Michal Block
World Oil June 2009
Noble Energy’s Dalit-1 well flowed 33 MMcfd from 43 ft
of pay on the Michal Block offshore Israel. The company said that the
well is capable of flowrates of up to 200 MMcfd and had estimated gross
field reserves of 500 Bcf.
The discovery is located southwest of Tamar Field (5 Tcf EUR) and
announced in February 2009. Noble operates with a 36% working interest
in partnership with partners Isramco Negev 2 (28.75%), Delek Drilling
(15.625%), Avner Oil Exploration (15.625%) and Dor Gas Exploration (4%).
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