If you want to dig into the nuts and bolts of the pipeline infrastructure that exists in the area, this article would be a good place to start.  The maps are amazing.  The spiderweb of pipelines that crisscross the region is pretty dense.  Even more amazing is that they’re building more all the time.  For me, imagining all the manpower that has gone in to and is going in to creating this infrastructure is mind blowing.

As the price of oil and gas has fallen, drilling activity in the Marcellus and Utica shales has also fallen.  Interestingly, production of gas in our area has continued to increase.  The increase has been due to a large number of drilled wells being completed and put into production, and also due to improved drilling techniques which have increased production per linear foot from each new well.

Now for the first time we are beginning to see forecasts of a decrease in production.  That decrease won’t really hit until next year, so we can expect low gas prices through the rest of this year.

While gas prices being down really hurts those of us who work in the industry, this is pretty much par for the course.  There is a boom/bust cycle that lasts about eight years.  The last bust was in 2008, so this one is a bit early, but the next one might not come around for 10 years so it all evens out.  It would be nice if oil and gas producers would limit themselves a bit during the good times so that the good times could last a little longer, but everybody is competing with everybody else for their little bit so they open up the spigots as far as they’ll go while they can get good money.

Here’s to the good times, may they come back sooner than later.

Here in the next few months we may see another deep drop in the price of oil.  Bloomberg has pointed out in this article that the U. S. is probably running out of space to store oil.  While the article also points out that it’s difficult to be sure exactly how much storage the U. S. has, the simple fact that the known capacity will be filled or close to filled in a few months should be enough to drive prices down.  It will also influence oil companies to reduce the amount of drilling and encourage oil companies to shut in wells.  Pretty much everything is going to slow down.

That’s all going to happen if that’s actually the case.  You can never predict what’s going to happen in oil and gas.  If I were a betting man, though, I’d bet on cheap road trips this summer.

Forbes ran an article in February about how Chesapeake has been systematically cheating royalty owners out of their royalties.  While pretty much everyone knows that Chesapeake has been stiffing people on royalty payments, I hadn’t realized just how wide spread the practice was.  This article was an eye opener for me.  If anyone who reads this has been receiving royalty payments from Chesapeake, you absolutely must spend some time reading your old check stubs to make sure you were paid the right amount.

Marcellus Drilling News linked to an article from the Gas and Oil Mag which reports that the City of St. Clairsville, OH got $8,700 an acre to sign a lease on a 195 acre tract of city property.  The deal was with Rice Energy, which has a really great well in the vicinity.

I’d like to point out just how close St. Clairsville is to Wetzel and Marshall counties here in West Virginia.  Google Maps gives me a distance of 11.2 miles from St. Clairsville to Wheeling.

To me, that means that leases in West Virginia have been going for next to nothing.  Sure, the Utica is deeper, but it produces dry gas in huge quantities.  Exhibit A is Stone Energy’s Pribble 6H well in Wetzel County, producing 30 MMcf per day when it came in, and Exhibit B is Magnum Hunter’s Stewart Winland well in Tyler County, producing 45.6 MMcf per day when it came in.  Also, the Marcellus underlies the same acreage, and produces wet gas in large quantities.  It’s a two-for-one deal.

I can’t think of a lease I’ve seen in West Virginia that went for more that $5,000 an acre, unless we’re talking about State property, which has gotten up over $6,000 an acre.

The recent downturn in oil prices has driven gas prices down, and consequently chilled oil and gas leasing.  But it hasn’t stopped leasing altogether, and negotiated prices haven’t dropped much.  I still think that West Virginia oil and gas properties are being leased for much less than they could be.

HB 2688, the West Virginia forced pooling bill, known in some circles as eminent domain for oil and gas producers, was defeated over the weekend.  MetroNews of West Virginia had an article on the proceedings.

If you’d like a quick summary, here’s what happened.  The House passed the bill and sent it to the Senate.  The Senate modified the bill and sent it back to the House.  The House vote ended in a tie on the last day of the session, late in the evening.  There wasn’t time to fix things, so the bill died.

I’m both happy and sad.  I don’t like forced pooling because it takes control out of the hands of the owner.  I liked a couple of the provisions in this bill, particularly the part that put the mineral interest back in the hands of the surface owner after five years.  Anything that can tie mineral and surface ownership back together is a step in the right direction to me.  But I’d prefer to see something like that created in a stand-alone bill.  It will be interesting to see what legislators come up with next year.

The Intelligencer out of Wheeling, West Virginia, put a list of all the leases that had been taken in Wetzel County, WV in January 2015.  While this list may have been longer in September 2014, it’s still pretty lengthy.  Even with the drop in prices for oil and gas, there’s a lot of development going on.

On a side note, I’d like to thank Marcellus Drilling News.  I get a lot of the information that I use from them.  They do excellent work for the whole Marcellus/Utica region.

There’s a very interesting article in the Pittsburgh Post-Gazette about the cracker plants that are planned for the Marcellus/Utica region, and why oil prices affect whether to build one or not.  What it boils down to is that you can use either oil or ethane to make the same product.  When oil prices are high, the ethane has a big price advantage over oil, so an ethane cracker plant is very attractive.  When oil prices are low, the advantage isn’t so great.  At $50/bbl, the cracker plants in this area would still be making money, but not enough to strongly attract the investment capital that is necessary to build.  Hence the current wait-and-see attitude of Shell and Odebrecht.