Nisource/Dominion rumor

I thought this was an interesting development for the Utica/ Marcellus Shale areas.


NiSource Inc. (NI), the owner of natural gas pipelines and utilities in the upper U.S. Midwest, is a prime acquisition candidate for companies seeking to profit from the shale-gas boom.
NiSource shares surged to an all-time high last week amid takeover speculation fueled by a December report that Dominion Resources Inc. was raising money for a purchase. An all-cash deal for NiSource would give Dominion complementary gas assets and boost its earnings, even if it paid a 20 percent premium to NiSource’s closing price Jan. 17 of $33.89, according to Sanford C. Bernstein & Co.
Utility owners are looking to boost returns by expanding in shale-gas markets. NiSource, owner of pipelines and storage systems serving producers in the gas-rich Marcellus and Utica formations, is projected by analysts to post record operating profit this year, according to data compiled by Bloomberg. If Dominion isn’t interested in the $10.6 billion company, a deal may make sense for Canadian pipeline owners Enbridge Inc. (ENB) and TransCanada Corp. (TRP) because they’re eager to collect fees for processing and transporting U.S. shale gas, KeyCorp said.
“NiSource has attractive assets, there is no denying that,” Paul Ridzon, a Cleveland-based analyst at KeyBanc Capital Markets, a unit of KeyCorp, said in a phone interview. “If you are a utility who wanted some shale exposure, you could get an expanded utility platform and a very nice shale platform.”
Extracting Gas
Mike Banas, a spokesman for NiSource, said the Merrillville, Indiana-based company doesn’t comment on speculation, when asked whether it’s been approached by buyers or is considering a sale.
Ryan Frazier, a spokesman for Richmond, Virginia-based Dominion, also said the company declined to comment on speculation, as did Shawn Howard, a spokesman for Calgary-based TransCanada, and Graham White of Enbridge.
Shale refers to the dense rock formations deep within the ground that producers drill through to extract trapped oil and gas. The shale is cracked open with a powerful injection of a mixture of water, sand and chemicals. Pipelines, such as NiSource’s, transport the recovered fuel.
NiSource’s Columbia Pipeline Group operates about 15,700 miles of lines that stretch from Louisiana to New York. NiSource also owns gas utilities that serve 3.3 million customers in seven states and an electric utility in Indiana.

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Permalink Reply by Mark McGrail on January 27, 2014 at 1:16pm

James,

Thanks for the post, very interesting.

The anti shale development crowd claims the value of shale development is over stated. Yet companies such as Dominion are willing to invest millions and billions of dollars. I guess the antis are smarter than the folks at Dominion.

Articles, such as the one you posted, give us an insight into the value of shale development. For us in areas of shale development this means great things in the future.

Permalink Reply by Tony Yurina on January 27, 2014 at 3:28pm

NiSource has smaller lower pressure rated pipelines in the Utica Point Pleasant foot print.  These are 6" to 10" diameter lines, and are typically rated to operate less than 250 psig.

These pipelines are situated in a complimentary position to the Dominion Blue Racer pipelines. NiSource has struggled with debt and lacks the cash to build new and larger pipelines from Eastern Ohio to the larger market areas.  The right of ways are worth a tidy sum & opportunity awaits those who have the business acumen to foresee the future.

If one can envision the ESE Ohio NiSource lines and potentially new and larger high pressure pipelines interconnected to the DOE or Blue Racer System and the near term processing capacity, Eastern Ohio becomes a new ball game. Potentially, market flexibility can be enhanced exponentially.  

 

Permalink Reply by James Vanderink on January 28, 2014 at 1:46am
Thanks Tony, your insights are a true asset of this forum. Where does Gatherco fit into this? There existing Treat Station(Homer, Ohio) and the compressor station being built next to it show up on the recent Kinder Morgan asset/system map.

http://gomarcellusshale.com/forum/topics/compressor-station-constru...
Permalink Reply by Tony Yurina on January 28, 2014 at 9:09am

Gatherco ROW's are positioned nicely.  I can see Treat CS pulling suction on some field lines in the oil window in that geographic area some day.  The gas volumes are typically much lower from the oil bearing wells. 

Gatherco acquired 2,600 miles of line from Columbia in 1997 before NiSource bought all the Columbia companies in year 2000.

Back then, Columbia was seeking something like 35 cents per MMBTU to operate, gather, compress and dehdrate the gas, including line loss, the producer community thought that was high and the result was Gatherco came into existence.  

Look what Chesapeake and other Midstream companies are charging as post production costs today !!!  

I saw a Q3 report from a large Midstream company that posted $1.39 per MMBTU as a cost.

Permalink Reply by James Vanderink on January 28, 2014 at 12:03pm
Thanks again Tony. The Gatherco/Kinder Morgan association intrigues me. We are going to have to see what happens after the 3D seismic there.
Permalink Reply by Tony Yurina on January 29, 2014 at 4:25pm

r2d2

To expound a little more, the oil window is reported to be progressively   less pressurized as you move west.  Assuming the completion technology and techniques can be optimized to make the oil flow out of the shale to the well bore, the well reservoir pressure being lower working in conjunction with compression pulling on the gathering systems at 20 psig to 40 psig, this would be more conducive for the typical oil producing prospects & typically whereby the gas production is the lessor of the two products being produced. 

After a well declines and reaches a state of equilibrium or static production, the move is to install tubing and pumping units, this producing scenario fits the existing Treat System capabilities very well.  That is until the number of wells exceed the system capacity. 

I hope this helps you understand my perspective. Opinion only.

  

Permalink Reply by James Vanderink on January 30, 2014 at 4:56am
What would Kinder Morgan do with an abandoned Treat Station?

Take notice that on September 25, 2013, Columbia Gas Transmission, LLC (Columbia), 5151 San Felipe, Suite 2500, Houston, Texas 77056, filed in Docket No. CP13-549-000, a prior notice request pursuant to sections 157.205 and 157.216(b) of the Commission's Regulations under the Natural Gas Act (NGA) as amended, requesting authorization to abandon in place two 450 horsepower (HP) compressors, two 500 HP compressors, and appurtenances at the Treat Compressor Station located in Licking County, Ohio. Columbia states that, due to reductions in locally produced gas and shifts in gas flow patterns on Columbia's pipeline system, it has determined it no longer needs the Treat Compressor Station to transport gas on its system, all as more fully set forth in the application which is on file with the Commission and open to public inspection. The filing may also be viewed on the web at http://www.ferc.gov using the "eLibrary" link. Enter the docket number excluding the last three digits in the docket number field to access the document. For assistance, please contact FERC Online Support at FERCOnlineSupport@ferc.gov or toll free at (866) 208-3676, or TTY, contact (202) 502-8659.
Permalink Reply by Tony Yurina on January 30, 2014 at 3:17pm

The four Treat compressor engines you cite are 30 + years old.   It would cost a fortune to modify them to make them exhaust emission compliant.  

A new compressor station & related facilities and a new interconnect with Columbia North of the old Treat Homer station makes more operational and economic sense.  

This facility can do what I describe above. 

Regarding the KM connections, I can only speculate..... KM publicly announced they were planning to build a liquid pipeline from the SE Ohio processing plants NW through Ohio. 

The below is speculation:

The proposed KM pipeline route I recall seeing passed in a NW direction near Utica and MtVernon.   One might deduce that the the new compressor station outlet liquids may go into that pipeline. 

From a nostalgia standpoint, the Treat Homer compressor station was the very first natural gas compressor station the Columbia Gas and Electric Company built early in the 1900's.  It is sad to see one of the original building  blocks of Columbia fading into history.  

Permalink Reply by James Vanderink on January 30, 2014 at 11:30pm
Tony, that pipeline plan was dropped. It's sounds like you may have spent some time at the Treat CS. The application to abandon the Treat by Columbia states that do to a reversal of flow the station would be abandoned in place but the facility would stay open.

MOUNT VERNON — Kinder Morgan Energy Partners, which had planned to build a 240-mile pipeline across Ohio, has dropped its plans for the project.

The company’s Cochin Marcellus Lateral Pipeline would have started in Marshall County, West Virginia, and transported natural gas liquids from the Marcellus producing region of Pennsylvania, West Virginia and Ohio to the Kinder Morgan Cochin Pipeline in Fulton County, Ohio. That pipeline would carry the propane, ethane, butane and other liquids to processing plants and other petrochemical facilities in Illinois and Canada.

The pipeline would have crossed Knox County from southeast to northwest.

Company spokesman Alan Fore confirmed Thursday that Kinder Morgan was withdrawing its application to build the pipeline, which had been on file with the Ohio Power Siting Board for some time.

Last summer Fore was in Knox County explaining the project to audiences and telling them survey crews and company representatives would be coming through to obtain easements for the pipeline once they had completed the application process. The company was preparing additional studies and information requested by the board.

The process of obtaining easements, and possibly even a start to construction, was thought possible by the end of 2011.

Fore did not say why the company had decided to drop the project, except to say they had continued to evaluate the project and that “while we are still interested in the Marcellus shale, at this time we are withdrawing our application.”

He did not rule out Kinder Morgan being involved in future Ohio projects as the process of exploiting the Utica shale formation grows.

“We have a good history in Ohio,” Fore said, noting that Kinder Morgan is a transportation company, not a drilling company. “And we look forward to doing business there. ...
Permalink Reply by James Vanderink on January 31, 2014 at 12:34am
Sorry, I meant to say" the compressors would be abandoned in place but the facility would remain open." Maybe Kinder Morgan will use the facility for something. By reversing the flow does that mean NG will not be sent to the storage fields in Ashland Richland etc?
Permalink Reply by Tony Yurina on January 31, 2014 at 8:36am

The treat facility is key to deliveries in Ohio. 

The NiSource gas has and can move both North and South on that K to L mainline system from the storage fields. 

My take is gas will not be flowing from Gatherco to Columbia, and that is what is reversed.

Permalink Reply by James Vanderink on January 31, 2014 at 3:24pm
Tony, you had me at "K to L mainline".lol. My daughter lives in the area and is HBP by a shallow well by Knox Energy. Devon or whoever owns the Utica/PP. She has four staked areas on her acreage where KE and Artex are doing a 3D seismic shoot. It seems everyone has forgotten the oil window. I'm doing the "Snowbird" thing til mid March so I'm anxious to get back and observe the 3 D shoot hopefully before the crop come on. Thanks Again.
J

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