Horizontal Drilling Bill Approved by Ohio Senate

New rules for horizontal drilling in Ohio has been approved by the Senate on a bipartisan basis.

This is in response to those who are attempting to slow down drilling in shale in the eastern part of the United States, which would devastate the extraordinary potential for enormous energy deposits, as well as the creation of numerous, good-paying jobs.

Some of the requirements of the bill include companies having to disclose the types of chemicals which would contact the water supplies used by human beings while they were drilling.

Any well that is to be drilled must also have all water wells within 1,500 feet of them tested.

Whether searching for natural gas, natural gas liquids or oil, the companies also must reveal the location they'll draw water from for the purpose of fracking or blasting the shale to require the energy sources. Also required is the volume and rate at which the firms will extract the water.

Ohio Governor John Kasich lauded the bill saying that "Ohio approaches energy production and consumption in a safe and responsible way, while also giving families and job creators access to more affordable energy."

As for concerns over wastewater, Senator Shannon Jones, who sponsored this legislation, said that will be addressed in separate legislation in the future.

Chesapeake's (CHK) and McClendon's Shale Revenue Alternative

The announcement from Chesapeake Energy (CHK) CEO Aubrey McClendon and Kohlberg Kravis Roberts & Co. (KKR) that they are entering a $250 million joint venture received mixed responses from pundits and analysts.

As for the deal, KKR will supply $225 million of the investment while Chesapeake will invest the remaining $25 million.

The purpose of the joint venture is for the two companies to acquire more oil and gas shale plays in order to generate royalties from the properties.

Chesapeake will do the majority of the lifting because of its expertise in the sector; owning and managing the shale assets on behalf of the venture.

With KKR putting up 90 percent of the capital, it has to stand to reason that they will almost assuredly, after some management fees, take in that same amount in royalties.

Aubrey McClendon has an insatiable drive to own more and more shale assets. But with the capital spigot running dry for Chesapeake, he's extending the reach of the company through the joint venture.

KKR director Robert Antablin said this, "Driven predominantly by the recent advancements in unconventional oil and gas technology, we continue to see attractive opportunities to invest behind the domestic exploration and production of oil and gas."

On Chesapeake's part, they must get more access to oil assets because the low price of natural gas has pressured the company's margins and earnings.

In 2011 they spend upwards of $1 billion to make acquisitions to that effect. This venture gives them access to more land and oil assets without having to cough up money it simply no longer has to make the deals it needs for shale oil acreage.

This assumes McClendon isn't blind or foolish enough to buy up even more major gas holdings with the additional capital in his hands.

The market wasn't impressed with the announcement of the joint venture, as many investors and onlookers believe Chesapeake is already in way over its head. They've already sold off some of its properties and made deal with other parterns.

So the idea of pursuing even more acreage doesn't sound too good for those who have watched Chesapeake with consternation as its debt soared and gas prices plummeted.

If this capital isn't used to acquire significant oil assets, it'll be a shock, and the future of Chesapeake would look as bleak as it ever has.

The good news is if they keep focused, Chesapeake is a good at sourcing and managing resources as anyone out there, and lower risk plays like this could help them gain some respectibility and bring back some significant profitability back to the company.

KKR closed at $13.61, down $0.25, or 1.80 percent. Chesapeake ended the session at $23.56, plunging $0.67, or 2.77 percent.

Study Concludes Shale Gas Extraction Safe

A study by the Polish Geological Institute concluded extraction of shale gas wasn't harmful to the environment, triggering quick responses from so-called environementalist who don't want that to be the narrative going forward.

According to the report, Canadian Lane Energy performed test drills in the norther portion of Poland, whereby there was some toxic residue, but by reusing it during the process, none was released into the environment.

The study concluded this: "Soil, air, water — the studies show that all these elements of the environment are safe if exploration of shale gas is conducted in accordance with legal regulations."

There was no pollution found in the soil, water or air, said the study.

Concerns over the process of removing gas or oil from shale because of the possibility some contaminated water, which is toxic, may reach the surface, is what is being tested.

The process is called hydraulic fracturing, or fracking for short, where mostly water, and some chemicals, are used to shatter shale under the ground so the gas, or oil, can be released for use.

Extraordinary deposits of shale gas and oil in the United States has numerous countries searching within their own borders to see if there are deposits there.

In the case of Poland, the country wants to slash its dependence on Russian natural gas, which can be unreliable.

Poland is still in the process of searching for shale gas deposits, so it isn't clear yet how much actually resides in the country.

BP (NYSE:BP) in Talks with Sinopec over Shale Gas

With the ability to access oil and gas in shale at profitable rates now available, energy-hungry China is in talks with BP (NYSE:BP) via Sinopec, to work out an exploration and development deal concerning shale gas resources in country.

Sinopec says they're planning on increasing the number of bids to six more shale blocks at this time. Adding to the 42 shale gas blocks they already own.

Sinopec's Chief Financial Officer Wang Xinhua said, "We are now in talks with BP on potential cooperation," although he didn't elaborate on it.

As usual, China understands the resource, but doesn't have the technological ability or knowledge to extract the gas from the shale, which is why they have been partnering with Western companies like BP.

BP's (NYSE:BP) TNK-BP Joint Venture Signing Ukraine Shale Gas Agreement

In its ongoing strategy to diversify geographically and by product, BP's (NYSE:BP) joint venture with Russian billionaires, TNK-BP, is reportedly close to signing a shale gas exploration agreement with Ukraine.

They should sign a memorandum for that purpose soon. TNK-BP has a refining business in Ukraine at this time.

TNK-BP has already signed on to acquire BP's assets held in Venezuela and Vietnam in order to expand operations beyond Russia.

Halliburton (NYSE:HAL) Crushed After Earnings Report

With expectations at high levels, the improved revenue and earnings of Halliburton Company (NYSE:HAL) weren't enough to satisfy investors, who sold the stock off after the released quarterly report.

Revenue for the third quarter soared 30 percent to $4.67 billion, up from the $3.59 in the same quarter last year. Net profit grew to $544 million, over double last years' numbers. That equaled 60 cents a share, in contrast to $262 million, or 29 cents a share last year.

Over half the revenue for Halliburton was generated in North America even with the Gulf oil crisis, amounting to $2.4 billion.

Outside of the United States and Canada, results were disappointing, with slow growth in Latin America and the Middle-East-Asia regions, and decline of growth in former Soviet nations, Europe and Africa.

Shale gas fields led the way in North America, helping the company generate record revenue in the quarter.

Interestingly, Halliburton is moving toward more gas production in a depressed natural gas price market, generating strong revenues, while gas companies have been expanding into the oil market for the same reasons: lower margins and prices.

Halliburton plunged to $33.82, losing $2.00, or 5.58 percent at 2:11 PM EDT.

Will Conoco (NYSE:COP), BP (NYSE:BP) Alaskan Pipeline Go Forward?

A recent article in the Financial Times of London where Conoco's (NYSE:COP)chief executive officer Jim Mulva said the company may have to "reaccess" the Denali pipeline it is proposing to develop with partner BP (NYSE:BP).

The comment was based upon the enormous amount of natural gas reserves in the lower 48 states, which Conoco spokesman John McLemore commented on saying: "Clearly, shale gas (in the Lower 48) has changed the dynamics of natural gas in North America."

He added that there hasn't been a new review of the project launched.

This gave the idea to some that maybe the pipeline deal will be put on hold or abandoned, but McLemore said the company is continuing on with the work on the project.

Mulva did say after his comments to FT that natural gas still remains an "attractive" investment for the company, although it seems he's starting to think longer term than he was in the past.

This coming Monday McLemore said Conoco will look closely at natural gas prices over the long term, supply projections, response of the market and tax issues.

It sounds like in the shorter term things aren't looking nearly as good because of the huge supply for the pipeline, and it'll be interesting to see if that affects the timing of starting the pipeline, if it gets built at all by Conoco and BP.

Another factor is a competing proposal from Exxon Mobil (NYSE:XOM) and TransCanada to built a pipeline serving the same region.

Citigroup (NYSE:C) Maintains "Buy" On PPG Industries (NYSE:PPG)

Citigroup Inc. (NYSE:C) reiterated its "Buy" on PPG Industries (NYSE:PPG) while increasing their price target, citing continuing growth.

Citigroup analyst P.J. Juvekar noted, "We recently met with PPG's CEO and walked away thinking that the steady growth we have seen in its end markets is continuing into the fall. Our recent work on shale gas leads us to believe there is upside to PPG's 2011 earnings in the chlor-alkali business, especially as its unfavorable natural gas hedges roll-off. We are reiterating our Buy on this high-quality, early cycle name and are raising our 2011 EPS estimate to $5.40 from $5.20. Price target to $85.

"Cheap natural gas is a significant benefit to PPG and US production costs are 40 percent below Asia on an ECU basis. Chlor-alkali production is energy-intensive and cheap natural gas lowers electricity costs. Caustic soda prices continue to rise and are now up $180/ton, or 82 percent YTD, aided by export demand from alumina and pulp & paper markets in South America. PPG's chlor-alkali business is a natural portfolio hedge to rising raw materials for coatings and throws off roughly $150mm of free cash flow in the current environment."

PPG closed Monday at $72.24, falling $0.85, or 1.16 percent.

ConocoPhillips (NYSE:COP), PetroChina (NYSE:PTR) Negotiating on Shale Gas Projects

ConocoPhillips (NYSE:COP) and PetroChina (NYSE:PTR) have been quietly negotiating on a joint venture in China which would target shale gas projects in the middle kingdom.

Operations would initially be pursued in the Sichuan province, where Conoco would explore an approximate 3,000 kilometer area of Sichuan.

This would a first for China, which has no proof of having had began shale gas production in the country.

As in many cases, the benefit to China would be the expertise of a western company like Conoco, which would have far more advanced technology to perform exploration and testing at a higher level.

China is desperate for natural resources, and a competing world makes their own land the best place to get it if the resources are there.

With the discovery of enormous shale natural gas reserves in America, China is hoping their country may have significant reserves as well, which could last them for many decades, and more.

Understanding Success of Carbo Ceramics (NYSE:CRR)

Carbo Ceramics (NYSE:CRR) is a relatively unknown company in the commodity field for the average investor, as they operate largely under the radar of most traders because they provide support products to the energy sector, rather than the more sexy extraction of large quantities of oil and gas from various projects; offshore or onshore.

Since dropping from a low of a little over $27 a share in April 2009, the share price of the company has soared to $80.20 at the close of trading on Friday. From July 31, 2009, they've almost doubled in price, when they stood at about $41 a share.

What is it that makes Carbo such a powerful company and produce these types of results? A little particle they produce called a "proppant."

Most people understand what fracking is, or if not by that name, at least the principle. It is the process of using very high-pressure liquids to push apart the shale layers where oil or gas reside.

What most don't know, is included in that stream of fluids is tiny little granules called proppants.

How they work is they're basically left before after the separation of the shale in order to keep the shale apart or open. That's what keeps the oil or gas flowing and able to be extracted.

With the huge discoveries of natural gas in the U.S. residing in shale, it has propelled the U.S. to the top of the heap with Russia as the predominant source of the relatively clean energy.

That means there will be, and continue to be, a huge demand for proppant for decades, or longer, into the future. That is why Carbo has been performing so extraordinary, and should continue for a long time.

Obviously the price of the shares of the company have soared, but this play is really just getting going, and there should be an enormous amount of growth for many years.

To confirm all this, in its recent quarterly report, the company generated earnings of $18.7 million, or 81 cents a share, about twice what it was last year in the same quarter. Revenue also increased to $111.5 million, a gain of 61 percent. That far exceeded analysts' expectations of $101.1 million in revenue, or 65 cents a share.

This is a simple and easy to understand company. You watch natural gas demand and the ability of Carbo to supply proppant to meet that demand for the fracking process.