Marcellus gas estimate swells

The Marcellus Shale region of Western Pennsylvania and bordering states could contain more than double the amount of recoverable natural gas than initially thought, a Pennsylvania State University professor who is a nationally known authority on the topic said Friday.

Terry Engelder's revised outlook is sure to expand the level of strong interest in what lies beneath the Allegheny Mountain area. Dozens of locally based and out-of-town energy producers are leasing acreage in the region and drilling into land that was an inland sea 350 million to 400 million years ago.

Engelder based his new estimate that up to 392 trillion cubic feet of the fuel could be captured over the next few decades on numbers from Chesapeake Energy Corp., one of the largest stakeholders in the Marcellus area.

"Geologists are still attempting to size this play. We don't know yet how much gas is there, and how much can be recovered," said Engelder, a professor of geologic science who has studied Appalachian shale formations for more than 30 years. He first gave his new numbers this week in Pittsburgh, at a conference on Appalachian gas sponsored by energy information firm Platts.

Oklahoma-based Chesapeake Energy, in a recent meeting with investors, said each square mile in the Marcellus area could contain 30 billion to 150 billion cubic feet of gas. Engelder used an average of that range, 90, to figure the entire 31-million-acre region might hold 4,359 trillion cubic feet of gas.

If 30 percent of that gas were brought out of the ground, as Chesapeake anticipates, he said, that would be 1,307 trillion cubic feet from the entire region. And because another gas producer, Range Resources Corp. of Fort Worth, Texas, points out that not all the Marcellus acreage contains gas, even if just 30 percent of it proves productive, that's 392 trillion cubic feet.

To put it all perspective, that's more than 13 times the 30 trillion cubic feet produced each year across the United States.

Engelder and another geoscientist, Gary Nash of the State University of New York at Fredonia, first stirred the industry early this year with their estimate that 10 percent of a total 516 trillion cubic feet might be recovered.

A 30 percent recovery figure may be more reasonable over time, based on petroleum industry figures, he said, but in any case the new estimate "is a whole heck of a lot larger" than the initial one.

Producers working in the region will provide a more accurate picture over time, he said, adding he's trying to keep his estimates conservative. "The one thing we don't want to do is exaggerate what is there," he said.

Richard Weber, CEO of Atlas Energy Resources LLC, told an audience at an Airport Area Chamber of Commerce event yesterday about the natural gas producers "flooding in" to the Marcellus regions. Atlas of Moon announced yesterday it has drilled 98 wells there.

Equitable Resources Inc. is drilling 20 Marcellus wells this year, and plans 75 next year. "We believe Marcellus easily holds a 10- to 20- year supply of natural gas -- that's for the nation, based on current consumption," said Dave Spigelmyer, spokesman for the North Shore-based company.

Range Resources and a partner opened a refrigerated gas processing plant last week in Chartiers, Washington County, and, "that starts to demonstrate that it's all for real," spokesman Matt Pitzarella said.

Range estimates 15 trillion to 22 trillion cubic feet of recoverable gas are in its acreage, he said.

While natural gas has fallen in price since June, "The people we are talking with have not reduced the wells they are looking at," said Bob Garland, Northeast regional sales manager for Superior Well Services of Indiana, Pa.

He attended the Platts event where Engelder spoke. "There was a lot of excitement at the meeting," Garland said.

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Beaver County business incubator plans to grow

Doug Campbell has been so successful in attracting new startup companies at his "incubator" building in Chippewa Township that he needs a new, larger building.

That's why he is seeking proposals from developers on building StartingGate Proving Grounds, a $6 million, 75,000-square-foot building on an 11-acre site he owns in that Beaver County community. It would more than double the size of his 31,500-square-foot location. Bids are due by Nov. 7.

Demand for and the number of incubators -- locations that offer inexpensive space and startup services to fledgling companies -- continues to grow nationally and in the region.

Last week, the Airport Area Chamber of Commerce, partnering with DiCicco Development Inc., announced plans to build a one-story 50,000-square-foot business incubator in the Cherrington Commerce Park in Moon. Construction will begin in the spring.

Last summer, pair Networks announced plans to offer an incubator program that will provide space at its offices in Riverpark Commons, South Side, along with equipment and advice to teams who will work on their ideas for three months. It will set up a corporation for them and, at the end of the process, may help find venture capital. In return, pair Networks gets an ownership stake of usually no more than 10 percent, said spokesman Scott Hallam.

The National Business Incubator Association in Athens, Ohio, says there are 49 incubators in Pennsylvania and 1,100 nationally. About 31 percent are sponsored by economic development organizations, 21 percent are sponsored by governments, 20 percent are by academic institutions, and the rest are privately run.

"A true incubator operation includes offering startup or small companies not only space within a larger building, but mentoring options, such as helping the company develop a business plan, help in financing, providing legal services and other services -- all for a fee," said Robert Stevenson, president, Regional Industrial Development Corp. of Southwestern Pennsylvania.

For Dave Beier and his partner Darrell Martin of Instrument Calibration Solutions, tenants at StartingGate building, a larger facility will work just fine.

Using the facilities at the current Progress Center for Business building at 2750 Constitution Blvd. in Chippewa the two-ex Marines have found success in providing calibration services on materials used in a variety of industries.

"Most of our business is with tool and die companies, manufacturers and materials used in the aviation industry, such as for US Airways," Brier said.

Since StartingGate opened in 1994, at least 10 start-up companies have grown to the extent they needed to relocate into larger quarters elsewhere, Campbell said.

And as quickly as their space became available, a new company or individual moved in.

Paul Orlando started Nitor Technologies Inc. in Campbell's current building.

"I chose them because they help small businesses to develop. They helped Nitro resolve business problems and because of their connection with state officials and other resources, they proved valuable help for my business," he said.

Nitor has been at its location for the past six years where it developed and refined it services of helping detect leaks and vapors in underground pipelines, particularly those carrying gasoline, natural gas, ethanol and methane -- but not water.

"We have a system, called the Prowler, which when we place our system above the pipeline, it can cover up to five miles and within 10 feet locate any leaks or vapors," he said. The system works best when it is placed over lines being installed.

The largest employer is Amptech, with over 30 employees. The company is based in Michigan but has a unit that has been doing business at StartingGate since its opening in 1994, said Larry Alway, general manager. The firm is a contract manager for development of electronics for companies.

Alway said no decision has been made on whether to relocate into the new building, but noted that his firm occupies five of the 10 "bays" in the current building.

There are 11 companies in the building with 59 employees and Campbell estimates his new building, to be located at 2835 Darlington Road, near the Chippewa Township municipal building, will be able to house about 25.

"I expect we will have initial occupancy of about 55 to 65 percent when we open in November 2009, many of the tenants relocating from our existing building," he said.

Airport area to hatch business incubator

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Strong profit lifts Mylan shares 17 percent

Shares of Mylan Inc., the biggest U.S. maker of generic drugs, rose 17 percent Thursday after profits beat expectations, sales tripled from acquisitions and the company reaffirmed its access to cash.

Mylan, which had lost half its value this year as investors fretted over debt from the purchase of Merck KGaA's generics business, leaped $1.19 to $8.17.

Mylan paid $6.7 billion, more than its own market value, for Merck KGaA's generics business last year to increase manufacturing capacity and reach fast-growing European markets. The unit contributed 40 percent of Mylan's revenue in the quarter, the Canonsburg company said today in a statement.

"The new Mylan has clearly demonstrated that it can execute and it has solidly done so for the past three quarters," said Corey Davis, an analyst at Natixis Bleichroeder in New York, in a note to clients yesterday. "The stock should react very positively."

Mylan has more than $1 billion in cash and untapped credit and won't need access to capital markets again "in the foreseeable future," Chief Financial Officer Ed Borkowski said in the statement. The company can pay its debt and compliance with loan covenants "will not be an issue for the foreseeable future," he said.

"Liquidity concerns are unfounded," said Ronny Gal, an analyst at Sanford Bernstein & Co. in New York, in a note to investors. He recommended buying the stock, with a price target of $12.

Third-quarter net income grew to $172 million, or 45 cents a share, from $150 million, or 60 cents, in the year-earlier period, the company said. Profit adjusted for one-time items beat by 12 cents the 11-cent average estimate of analysts surveyed by Bloomberg.

Revenue was $1.66 billion, including $687 million from the former Merck KGaA unit. The sale of rights to the blood pressure drug Bystolic added $455 million. Without acquisitions, sales volume was "consistent" with the year-earlier period, Mylan said.

The Merck KGaA deal made Mylan the world's third-biggest maker of copied medicines with the size and low costs it needs to survive in the competitive industry, said CEO Robert J. Coury on Oct. 9. Acquisitions have helped makers of generic drugs offset low prices as more copies of brand-name medicines become available.

Mylan increased its forecast for 2008 earnings to the range of 64 cents to 67 cents, excluding certain items, from 47 cents to 53 cents. That reflects an additional $75 million to $100 million the company expects to save as it digests the Merck KGaA business.

Mylan sold rights to Bystolic to Forest Laboratories Inc. in February and completed the transfer last month, the company said. Mylan retains royalty rights to the drug through 2010, it said.

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Boscov's sites get caretaker

The fate of closed Boscov's stores at Monroeville Mall and South Hills Village now is in the hands of a court-appointed receiver.

Gregory T. Malony, CEO of Jones Lang LaSalle Americas Inc., a Chicago-based commercial real estate company, was named caretaker of the two anchor store sites closed and left vacant in the wake of Boscov's bankruptcy filing on Aug. 8.

"We will be coming to the sites in the next few days to get a better feel for their conditions and what's left there," said Malony, whose appointment was approved Thursday by Allegheny Common Pleas Court Judge Paul F. Lutty Jr.

Malony said his role will include making sure utility and other necessary bills are paid and the properties kept in good condition.

After "assessing the condition of the property," he will recommend a course of action to the court, which could include hiring a real estate company to market the property to new tenants.

Court documents say CWCapital Asset Management LLC, of Washington D.C., asked the court to appoint a receiver after H&R Real Estate Investment Trust of Toronto defaulted on a $19.8 million mortgage.

H&R owned the properties and leased them to Boscov's, the documents say. H&R won't make any future payments to CWCapital and will continue to be indefinitely in default, the documents say. H&R officials cound not be reached for comment.

The Monroeville and Upper St. Clair stores, both former Kaufmann's, reopened in 2006 as Boscov's.

Both stores were closed after liquidation sales conducted by restructuring firm Gordon Brothers Group and Hilco Merchant Resources LLC. The South Hills Village Boscov's closed on Sept. 28, and the Monroeville location was shuttered on Oct. 13, according to spokesmen for the two malls.

Despite weakening economic conditions in the U.S., there is reason to believe both the Monroeville and South Hills locations won't stay vacant for long, said Doug German, a retail real estate broker with Hanna Commercial.

"I think this will create opportunity for other retailers," said German. "I am sure there would be a number of companies who aren't yet in this market who would look at the locations," he said.

One potential department store replacement could be Nordstrom, the upscale Seattle-based retailer that just opened a new store in Ross Park Mall in Ross, German theorized.

"It's not unusual for retailers to seek sites for more than one store in a new market, and Nordstrom's has two stores in Indianapolis, which is a smaller market than Pittsburgh," he said.

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Bankrupt Retailers: Pushed to the Brink

Financiers to reap billions in bonuses

Five straight quarters of losses and a 70 percent slide in its stock this year haven't stopped Merrill Lynch & Co. from allocating about $6.7 billion to pay bonuses.

Goldman Sachs Group Inc. and Morgan Stanley, still on track for profitable years, set aside a combined $13 billion for bonuses during the first three quarters of the year, 28 percent less than in the same period in 2007. Even at Lehman Brothers Holdings Inc., which declared the biggest bankruptcy in U.S. history last month, some employees will get the same bonus they received a year ago.

The worst financial crisis since the Great Depression, a $700 billion taxpayer bailout, public outcry over excessive pay and the demise of three of the biggest securities firms won't deter Wall Street from offering year-end rewards to employees on top of their salaries, compensation experts say.

"Critical producers and critical managers will be retained with the same bonus they had last year," said Robert Sloan, head of U.S. financial-services recruiting at Egon Zehnder International, a New York-based executive-search firm. "The others will see sharp cuts."

The figures are based on estimates that about 60 percent of the companies' reported expense for compensation and benefits will be paid in year-end bonuses, as occurred in past years. Average bonuses aren't an indication of how much any employee will receive, since payments range widely from assistants to top traders. Bonuses aren't paid until the end of the fiscal year, so firms could choose to reallocate the funds.

"We are in the process of determining appropriate levels of year-end compensation, and no decisions have been made," said Mark Lake, a spokesman at Morgan Stanley. Ed Canaday, a spokesman for Goldman in New York, declined to comment.

Merrill spokeswoman Jessica Oppenheim said the firm's accrued bonuses aren't down as much as those at Goldman and Morgan Stanley because the firm reduced expenses last year, when it also had a loss. Compensation costs are down 18 percent this year, compared with the first nine months of 2006, Merrill's last profitable year.

Goldman, the biggest and most profitable Wall Street firm until it opted to become a bank holding company last month, has set aside about $6.85 billion for bonuses, or an average of $210,300 for each employee, down 32 percent from $339,400 a year ago. Morgan Stanley, the second-biggest securities firm until it also converted to a bank, has $6.44 billion for bonuses, or $138,700 per person, down 20 percent from last year. Both firms accrue a fixed percentage of their revenue for compensation, so the decline in bonus pools matches the drop in revenue.

The money Merrill has set aside for bonuses equates to an average $110,000 for each of its 60,900 people. That's up from $108,000 a year ago because more than 3,000 jobs have been cut.

A worldwide economic slowdown, caused in part by the financial industry's losses, and a Treasury plan to spend $250 billion of taxpayer money buying stakes in banks, have made pay a political issue this year.

"There should be a moratorium on bonuses," Barney Frank, chairman of the House Financial Services Committee, told reporters last week. "If nobody gave them, there wouldn't be a competitive aspect."

Wall Street workers flee to small-town security

LeNature's trustee files first round of lawsuits

The trustee overseeing the dismantling of former LeNature's Inc. in Latrobe filed two dozen lawsuits in U.S. Bankruptcy Court to recover more than $4 million in payments the company made while it was insolvent.

The lawsuits are the first in a spate of legal actions expected this week against individuals, accounting firms and financial institutions alleged to be involved in the 2006 collapse of the bottling and beverage company whose former executives are the subject of a federal criminal investigation.

Trustee Marc Kirschner has until Friday -- when the two-year statute of limitations expires -- to file legal actions to recover money and other assets.

LeNature's Inc. was forced into bankruptcy on Nov. 1, 2006. The bankruptcy ended earlier this year with the appointment of Kirschner in July. He was authorized to investigate allegations of fraud and mismanagement and to pursue claims to recover money for creditors who are owed hundreds of millions of dollars.

In his lawsuits, he alleges that LeNature's officials made payments to some companies while teetering on the brink of bankruptcy. The actions seek to void these "preferential transfers" and recover the money so it can be distributed to creditors.

Among the largest recoveries sought is more than $1.1 million paid to Owens-Illinois Inc., which makes glass bottles and containers. The other companies sued include equipment makers, packaging companies and a temporary employment company, according to the filings.

The financial collapse of LeNature's triggered a federal grand jury investigation by the U.S. Attorney in Pittsburgh, U.S. postal inspectors and criminal agents from the IRS into money laundering, bank, wire and mail fraud, according to court records.

The grand jury has been hearing testimony, and one former employee has pleaded guilty and is cooperating with prosecutors.

LeNature's executives borrowed millions of dollars based on allegedly fraudulent financial records that made the company appear to be thriving and profitable. The alleged fraud unraveled in mid-2006 when investors began to question the management of CEO Gregory Podlucky, and the company was the subject of lawsuits by investors.

In a related matter, a lawsuit filed in Los Angeles in May against Wachovia Capital Markets and the accounting firms of Ernst & Young and BDO Seidman was transferred earlier this month to U.S. District Court in Pittsburgh.

A group of 75 plaintiffs, led by CalPERS -- the California Public Employees Retirement System -- are alleging the firms misled investors and auditors about missing and bogus financial records. Other plaintiffs include union pension and retirement funds.

Wall Street’s Perfect Storm

Recession 'won't be pleasant,' but hope abounds

Ashley Seitz faces the possibility of getting her MBA from Carnegie Mellon University's Tepper School of Business and walking straight into a recession.

The corporate finance major says it could be worse.

"At least I'm not going into banking," said Seitz, 25, of Shadyside.

Seitz, who will graduate in the spring, said she was encouraged Wednesday night by a panel of economists who explained the crisis on Wall Street to about 200 Tepper School alumni and students at The Rivers Club, Downtown.

They used "plain English," she said, stripping at least some of the mystery and fear surrounding the deepening recession.

"This is not like the Great Depression," said Allan Meltzer, the Allan H. Meltzer University Professor of Political Economy and Public Policy at Carnegie Mellon University.

"It's probably going to be a garden-variety recession, with unemployment going up to around 8 percent," which would be about 2 percentage points higher than it is now, Meltzer said.

"It won't be nice. It won't be pleasant. And it probably will go on for awhile."

Stuart G. Hoffman, senior vice president and chief economist at PNC Financial Services, predicted a recovery will begin in six to nine months.

One major reason he sees a recovery coming is the drop in gas prices.

"If you spend a year at $3 a gallon rather than $4 a gallon, American motorists would spend $100 billion less per year filling up their cars," said Hoffman. Noting that the average gallon of gas costs less than $3, he said, "that will put some purchasing power back in the economy."

Pittsburgh, which missed the housing and economic boom experienced in places like Southern California, likely won't be hurt as much by the bust that's going to continue in the meantime, Hoffman said.

"The tortoise has finally pulled ahead of the hare," he said.

Signs of the downturn have begun creeping into the Tepper School, said the school's dean, Ken Dunn. Alumni have increasingly turned to the school's job network, he said.

"I think fundraising is going to be down for awhile. We'll live through that," Dunn said. "It's going to be a tough job market for our students."

Many students are steering their career paths away from the stock trading floor, where as many as one-quarter of Tepper's graduates used to go, Dunn said.

"The glamour of Wall Street is gone," he said.

Andy Vicen, 23, of Shadyside, who just began studies for a master's degree in computational finance at Tepper, says the stock exchange retains some of its allure despite the crisis.

"I think people still gravitate toward it," said Vicen, whose classes will teach him the inner workings of the complex financial instruments that, in the last few months, have confounded experienced traders and knocked the wind out of some of the world's biggest banks. "People still believe if you're good enough, you can do well."

Robert Ostrowski, senior vice president and senior portfolio manager at Federated Investors, said the crisis will be transformative -- for good or ill.

"It's going to change Wall Street as we know it. There are going to be fewer players" as firms shut their doors, he said.

The $700 billion bailout passed by Congress this month, and the Federal Reserve's consecutive interest rate cuts -- including the half-point cut yesterday, which left the federal funds rate at a four-year low of 1 percent -- are starting to have an effect, Ostrowski said.

"The good news is, I think we're beginning to see some signs of this clogged credit market beginning to be unclogged," he said.

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