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Ask Shale Sheet
Q. Is there any correlation between fracking and ice-cream prices?
Guar gum is a thickening agent used in frack fluid, and it has a similar use in ice cream. With the number of horizontally fracked wells increasing nationwide, the guar-gum market has tightened.
Nearly three-quarters of guar gum comes from India, where production is expected to increase about 50 percent during the next couple of years, but in the meantime energy companies and ice-cream junkies are feeling the pinch. Halliburton Co. in June said its North American margins would take a hit because of higher- than-expected guar-gum prices. Prices of guar powder, used to make guar gum, went from $1 a pound two years ago to about $12 a pound, according to RBC Capital Markets. So, yes, you can blame fracking for higher ice-cream prices.
Q. Doesn’t the recent gas-well explosion in Tuscarawas County show that state regulators aren’t prepared for the drilling boom?
Yes and no. The Bolivar well was a conventional — vertical — well drilled about 5,000 feet below the ground in 1985, according to the Ohio Department of Natural Resources. It is an older, much smaller operation than the 7,000-feet-deep, 5,000-feet-across horizontal wells in the Utica Shale formation. Still, that doesn’t mean regulators are prepared for thousands of new wells during the next handful of years. ODNR has said it plans to add about 70 employees this year to help with permitting and regulating. The inspector count at the beginning of the year was approximately 32. Doing the math, that means about 100 inspectors by year’s end and energy companies will drill nearly 4,000 wells by 2015. While the explosion has little to do with Ohio’s regulatory efforts, it is certainly a reminder that well-trained regulators will be in high demand for years to come.
Q. What’s going on with Chesapeake Energy Corp.? It seems like there’s a new, negative story about the company every other day.
Chesapeake, the Oklahoma City-based energy company and major shale player here in the Mahoning Valley, has its share of issues.
Most of the missteps have been uncovered by a series of Reuters articles, which has reported that company CEO Aubrey McClendon borrowed more than $1 billion from one of the company’s lenders and that Chesapeake may have conspired with competitor Encana Corp. to keep land lease prices low in Michigan.
Investors have watched Chesapeake’s stock price tumble double-digit percentages this year, and the company is selling nearly $14 billion in assets in attempt to close a widening funding gap. The website ProPublica even has a running count on all of the company’s mishaps. Chesapeake is set to release its second quarter earnings report Aug. 6, though it doesn’t appear the company – or its troubles – are going anywhere soon.
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