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 PressuresPipeline flowsFracturing practices

Methodology (cont’d)Identify companies involved

Open SourceSpecialized databases

Compare companies involved w/ other shale playsIndicates strength in industry

Identify compressor MFR’sProfile

Identify Compressor MFR’s association in MS

Methodology (cont’d)

Marcellus Other Shale

CompressorMFRs

Key Finding: Top Players1. Chesapeake Energy 2. Range Resources3. Seneca Resource /EOG4. Statoil5. Atlas Energy6. EQT Corp7. Chief Oil & Gas8. XTO Energy9. EXCO Energy10. Talisman/Fortuna11. Cabot12. East Resources

Low Hanging Fruit

(See Matrix Cover Sheet/Matrix Overview)

Strategic ProfileMFR compressor packages

Associations w/ MS

Other shale plays

Revenues $5 M – $25M

Not teamed w/ Ariel

Company Rankings1. Dearing Compressor & Pump2. Kinglsy Compression3. Sullivan Palatek4. Rix Industries5. McClung Energy Services6. Titan Compressor Systems7. Big Gas Compression8. ACI9. Brahma10. Compass Compression11. Natural Gas Compression Systems12. UE Compression13. Natural Gas Services Group

Dearing CompressorRevenue: $20 – 50 million

Employees: 93 w/ plans to add

Shale Affiliation: Marcellus

Products: GE, Gardner Denver, Ariel, Reliance

Location: Ohio

Kingsly CompressionRevenue: $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

Sullivan PalatekRevenue: $23 million

Employees: 90 (last reported)

Shale Affiliation: Barnett Shale and Marcellus Shale

Products: OEM

Location: Indiana

Partner: Union Drilling

The Hanover CompanyPurchased by Exterran

Other Exterran Compression DistributorsGlobal Compression Universal CompressionWeatherford International

Ariel

Compressions Systems IncHeadquarters: Midland, TX

Locations: Midwest

Shale Affiliations: Likely

Products: Ariel, GE Gemini

State ManagementDecentralized, unorganized

No comprehensive overview

No method for sharing w/ connected states

Priorities:Water managementEnvironmental degradationConstruction codesReclamation

Future State IssuesSeverance tax

Increasing bond limitsSingle - $2,500Multiple - $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

FracturingHorizontal wells (60% will increase)

Hydraulic dominant over airGreater access/Higher ROI$3.5 million per rig750 – 2500 psigMore accident prone

Vertical wells (40% will decrease)Limited access/Lower ROI$255 K50 – 350 psigEasier accident containment

Compressor RegulationsPennsylvania

None

OhioNone

West VirginiaNone

New York>125 psig requires

permit

= Good Faith Agreement

*intervene only if problems

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 PipelineDominion Keystone Pipeline

Brownie Points (cont’d)

Wiki Tour

http://marcellusshale.wikispaces.com

Thank You

Questions?

Contact Information

Kathleen Moorekmoore80@mercyhurst.edu

Zach Auerbachzauerb90@mercyhurst.edu

Sladjana Milicevicsmilic44@mercyhurst.edu

Casey Gruebercgrueb97@mercyhurst.edu