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Marcellus Shale Strategic Analysis

Marcellus Shale Strategic Analysis. May 17, 2010. Tasking. Companies involved in MS/ possible end-users Possible strategic partners Analysis of PA regulations regarding compression Standards: Operating Pressures Pipeline flows Fracturing practices. Methodology (cont’d).

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Marcellus Shale Strategic Analysis

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  1. Marcellus Shale Strategic Analysis May 17, 2010

  2. Tasking • Companies involved in MS/ possible end-users • Possible strategic partners • Analysis of PA regulations regarding compression • Standards: • Operating Pressures • Pipeline flows • Fracturing practices

  3. Methodology (cont’d) • Identify companies involved • Open Source • Specialized databases • Compare companies involved w/ other shale plays • Indicates strength in industry • Identify compressor MFR’s • Profile • Identify Compressor MFR’s association in MS

  4. Methodology (cont’d) Marcellus Other Shale Compressor MFRs

  5. Key Finding: Top Players • Chesapeake Energy • Range Resources • Seneca Resource /EOG • Statoil • Atlas Energy • EQT Corp • Chief Oil & Gas • XTO Energy • EXCO Energy • Talisman/Fortuna • Cabot • East Resources

  6. Low Hanging Fruit (See Matrix Cover Sheet/Matrix Overview)

  7. Strategic Profile • MFR compressor packages • Associations w/ MS • Other shale plays • Revenues $5 M – $25M • Not teamed w/ Ariel

  8. Company Rankings • Dearing Compressor & Pump • Kinglsy Compression • Sullivan Palatek • Rix Industries • McClung Energy Services • Titan Compressor Systems • Big Gas Compression • ACI • Brahma • Compass Compression • Natural Gas Compression Systems • UE Compression • Natural Gas Services Group

  9. Dearing Compressor • Revenue: $20 – 50 million • Employees: 93 w/ plans to add • Shale Affiliation: Marcellus • Products: GE, Gardner Denver, Ariel, Reliance • Location: Ohio

  10. Kingsly Compression • Revenue: $10 million • Employees: 40 (2 branches) • Shale Affiliation: Unknown, actively marketing • Products: Ariel, Cummins, Ingersoll Rand, Quincy • Location: Ohio/Pennsylvania • End Users: EQT, Chesapeake, Range Resources

  11. Sullivan Palatek • Revenue: $23 million • Employees: 90 (last reported) • Shale Affiliation: Barnett Shale and Marcellus Shale • Products: OEM • Location: Indiana • Partner: Union Drilling

  12. The Hanover Company • Purchased by Exterran • Other Exterran Compression Distributors • Global Compression • Universal Compression • Weatherford International • Ariel

  13. Compressions Systems Inc • Headquarters: Midland, TX • Locations: Midwest • Shale Affiliations: Likely • Products: Ariel, GE Gemini

  14. State Management • Decentralized, unorganized • No comprehensive overview • No method for sharing w/ connected states • Priorities: • Water management • Environmental degradation • Construction codes • Reclamation

  15. Future State Issues • Severance tax • Increasing bond limits • Single - $2,500 • Multiple - $25,000 • “Disaster Watch” • Fracturing Home water well exploded by gas fracking in Dimock, PA. Source: http://beavercountyblue.files.wordpress.com/2010/02/dimock-well-explosion-photo1.jpg

  16. Fracturing • Horizontal wells (60% will increase) • Hydraulic dominant over air • Greater access/Higher ROI • $3.5 million per rig • 750 – 2500 psig • More accident prone • Vertical wells (40% will decrease) • Limited access/Lower ROI • $255 K • 50 – 350 psig • Easier accident containment

  17. Compressor Regulations • Pennsylvania • None • Ohio • None • West Virginia • None • New York • >125 psig requires permit = Good Faith Agreement *intervene only if problems

  18. Brownie Points - NGV • Louisiana Act 469 • Tax credit increases • 20 to 50% on conversions • $3000 for direct buy • Payroll tax credit for workers • NAT GAS Act 2009 • Sponsored by Rep. Dan Boren (D-OK), John Larson (D-CT) • AT&T • Investing USD $565 M in natural gas hybrids • 15K vehicles in the next 10 years • Congressional Natural Gas Caucus • First hearing 10/2009 • Tennessee Gas Pipeline • Dominion Keystone Pipeline

  19. Brownie Points (cont’d)

  20. Wiki Tour http://marcellusshale.wikispaces.com

  21. Thank You Questions?

  22. Contact Information Kathleen Moore kmoore80@mercyhurst.edu Zach Auerbach zauerb90@mercyhurst.edu SladjanaMilicevic smilic44@mercyhurst.edu Casey Grueber cgrueb97@mercyhurst.edu

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