EQT Wins Bankruptcy Auction for 86K Stone Energy M-U Acres, $527M

Stalking horse

Stone Energy is an independent oil and natural gas exploration and production company (E&P) headquartered in Lafayette, Louisiana, drilling mainly in the Gulf of Mexico but also has a presence in the Marcellus/Utica Shale with 86,000 acres of leases. Stone quit actively drilling in the Marcellus in 2015, and filed for bankruptcy last October. As part of the bankruptcy filing, Stone signed a deal with Tug Hill (at one time closely associated with Chief Oil & Gas) to sell those 86,000 acres to Tug Hill for $350 million (see Stone Energy Enters Bankruptcy, Sells Marc/Utica Assets for $350M). The deal with Tug Hill is called a “stalking horse bid,” which means Tug Hill would get the deal if no one else came along and bid higher. Someone did come along and bid higher–EQT. Yesterday EQT said it has won with the highest bid at $527 million ($6,128/acre) to take over all 86,000 of Stone’s Marcellus/Utica acres. The stalking horse is dead…
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WV Won’t Push Forced Pooling, Will Push Joint Dev. & Co-Tenancy

Forced pooling legislation in West Virginia has been put forward five times in the past seven years–and each time it has failed to win enough votes in the WV legislature. In its most recent incarnation (last year), forced pooling would allow drillers to form a “unit” for drilling (typically one square mile, or 640 acres) from a group of properties where at least 80% of the mineral rights owners have signed a lease (see WV Forced Pooling Bill HB 4426 Introduced – Debate Rages). 80% is a much higher standard than most other states. But there has been no appetite for forced pooling in WV, at least among rights owners. There have always been other provisions in the forced pooling law that drillers have desired–measures less controversial but important. So this year, the West Virginia Oil and Natural Gas Association says it’s NOT going to push yet another forced pooling bill–but instead will work on two other provisions previously found in the forced pooling bill: (1) joint development, and (2) co-tenancy. What are they? And, are they just forced pooling lite?…
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Spire Files Plan with FERC to Flow Marcellus/Utica Gas to St. Louis

One year ago (February 2016) MDN told you about an exciting new market for Marcellus and Utica Shale gas that may open up in the next 2-3 years in the Midwest (see New Midwest Pipeline to Tap REX’s Marcellus/Utica Gas). Laclede Group, a St. Louis-based natural gas utility, said they want to build a ~60-mile pipeline from St. Louis through southwest Illinois and connect to the Rockies Express (REX) and Panhandle Eastern Pipeline. The new pipeline would bring low-cost Marcellus and Utica Shale gas from REX to the utility–not only for resale to gas customers, but also potentially for new natgas-powered electric plants planned to replace retiring coal-fired plants. Fast forward a year. Laclede has been renamed Spire and the Spire STL Pipeline has just filed an official application with the Federal Energy Regulatory Commission to build their 59-mile, 24-inch diameter pipe that would flow 400 million cubic feet (MMcf) per day of yummy Marcellus/Utica gas from REX to St. Louis…
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Williams Cuts Deal to Increase Ownership in NEPA Pipeline System

In the midstream (i.e. pipeline) world, it seems like nobody owns 100% of anything. Big midstream companies like Williams and Kinder Morgan (and others) are composed of subsidiaries and (sometimes) MLPs–master limited partnerships. And beyond the companies within companies (like a Russian nesting doll), often pieces of pipeline systems are co-owned with other companies, even competitors! In 2014 Williams bought out Access Midstream, the renamed and former division of Chesapeake Energy called Chesapeake Midstream (see Big News: Williams Partners Buying Access Midstream for $6B). When Williams bought Access, one of the regional pipeline gathering systems it got as part of that deal is what Williams calls the Bradford Supply Hub (named after Bradford County, PA). Yesterday Williams announced a deal with a part-owner for portions of the Bradford Supply Hub, Western Gas, to buy out Western’s portion. Through an elaborate deal, Williams gets Western’s 33.75% ownership stake in what is called the Rome and Liberty natural gas gathering systems (part of the Bradford Supply Hub), along with a check for $155 million. In return, Williams is transferring to Western its 50% ownership stake in the Delaware Basin JV Gathering pipeline system, located along the New Mexico/Texas border…
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Ohio Utica Shale Drillers Pay Millions of Dollars in Property Taxes

Click image for larger version

Hiking the severance tax is not only an anal fixation by Democrat governors, like PA Gov. Tom Wolf (see PA Gov Wolf’s New Budget Calls for 6.5% Severance Tax (Again)), it’s also a fixation for RINO (Republican) governors, like OH Gov. John Kasich (see OH Gov. Kasich Recycles Proposal to Increase Utica Severance Tax). Yet in both states drillers already pay more than their fair share of state and local taxes. In PA it’s called an impact fee (i.e. tax), and in OH it’s called a severance tax PLUS an ad valorem, or property tax. In OH, the ad valoreum tax is raising millions of dollars in counties with active Utica drilling. According to a new report from the Ohio Oil & Gas Association and Energy in Depth, from 2010-2015, the ad valorem tax in OH’s top 6 Utica Shale producing counties raised a total of $43.7 million! Over the next 10 years (2016-2026), the report finds OH counties will get $200-$250 million in new tax revenue from ad valorem taxes. And yet Gov. Kasich insists drillers aren’t paying their fair share. What a sham! The report, titled “The Utica Shale Local Support Series: Ohio’s Oil and Gas Industry Property Tax Payments” (full copy below) is chock full of great news for OH counties…
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PA Case Highlights Risk in Using Non-Lawyer to Negotiate Lease

In August 2013 an extensive investigative article about a then-director for the Pennsylvania Game Commission, William A. Capouillez, appeared in the Philadelphia Inquirer (see PA Director of Game Commission Double-Dipping with Gas Leases?). The article spotlighted a potential conflict of interest between Capouillez’s day job and his moonlighting side job as an agent for property owners who lease their land for oil and gas development. The issue? He was signing private deals with the same companies that often work with his state agency. The State Ethics Commission did a lengthy investigation and three years later, the Commission levied a $75,000 fine, which Capouillez agreed to pay (see Former PA Game Commissioner Fined $75K for Lease Moonlighting). Although he paid the fine, Capouillez remained defiant and said the fine is a tiny fraction of the original fine sought–an indication of his vindication. There is new litigation involving Capouillez. One of the leases he negotiated was on behalf of the Laurel Hill Game and Forestry Club with Range Resources. The way Capouillez constructed his leases was that he would get a cut, a percentage, of any lease signing bonus and ongoing royalty payments, in return for the leases he brokered. Range never drilled on Laurel Hill’s property, but they did start to push dirt around a few hours before the lease expired as a way of holding the acreage (some would call their action a less-than-honorable practice). Laurel Hill sued Range and the lawsuit was later settled by drafting up a new lease with new terms. The new lease/terms were not brokered by Capouillez and he was cut out of the deal–so Capouillez sued both Laurel Hill and Range. The moral of the story, according to lawyers writing about the case, is to never use non-lawyers to represent you in lease negotiations…
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Patterson-UTI Energy 2016 Update – $319M Loss

Each month MDN tracks how many rigs oilfield services company Patterson-UTI Energy reports operating–as a proxy for when/if the drop in rig counts for the Marcellus/Utica will turn around. Patterson operates a number of rigs in the northeast, as well as other areas of the continental United States (and Canada). Patterson’s rig count kept sinking month by month until June 2016 when things turned around. Since last June, Patterson has reactived and began running new rigs (higher rig count) in each successive month. Just last week Patterson released their numbers for January and once again it was good news (see Patterson-UTI Jan Rig Count – Continues to Climb). However, financially speaking it’s not all butterflies and unicorns for Patterson. Yesterday the company released its fourth quarter and full year 2016 numbers. Patterson lost $78 million in 4Q16 (compared with losing $59 million in 4Q15), and lost $319 million for all of 2016 (vs. losing $294 million for all of 2015). Looming on the horizon is Patterson’s buyout of, and merger in, of Seventy Seven Energy (see Seventy Seven Energy Throws in the Towel, Sells to Paterson-UTI). Seventy Seven Energy (SSE) is the old Chesapeake Oilfield Operating company–spun out into a standalone company. It never did make any money, from the moment it became a standalone company. Patterson hopes by combining SSE into its own operation, they will spin some gold from straw–the straw being that both companies now lose money. They hope (gamble?) is, of course, that with a pickup in drilling, Patterson’s fortunes will change. Here’s yesterday’s update…
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Drexel Study Claims Fugitive Methane Increasing in the Marcellus

For those of us in a certain generation, you will recognize this: Fred, Daphne, Shaggy, Velma…and of course, Scooby-Doo! If you were raised watching cartoons on Saturday morning, and you watched Scooby-Doo, do you remember the name of the van they traveled around in? That’s right, the Mystery Machine! An image of the Mystery Machine is what floated through our brain as we read about the latest venture in researching air quality in Pennsylvania near drilling sites. Researchers from Drexel University (in Philadelphia) set out across Marcellus territory in “Drexel’s Mobile Laboratory, a Ford cargo van equipped with all the equipment necessary for measuring concentrations of chemicals and particles in the air at 1-10 second intervals while driving.” The Mystery Machine! And what, pray tell, did our intrepid Marcellus sleuths find be-bopping around the countryside? In the recently published study, “Analysis of local-scale background concentrations of methane and other gas-phase species in the Marcellus Shale” (full copy below), researchers say they found that even though the number of Marcellus wells being drilled has slowed quite a bit over the past few years, the amount of fugitive methane in the air has increased. And the increase can’t be explained by a general global increase in fugitive methane. The increase in fugitive methane in the Marcellus is due, our methane sleuths say, to the “increased production of natural gas from the region which has increased significantly over the 2012 to 2015 period.” The researchers conclude that “because everybody knows how evil and nasty fugitive methane is for global warming” (our words), this study is yet more evidence that Marcellus shale drilling (and pipelines, etc.) leak so much methane as to make any benefits we get from extracting and burning methane, over say coal, muted–even lost. Because we can’t put a cork in it, by extracting and using methane we’re making poor old Mom Earth even sicker. Which is, of course, total bunkum…
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Marcellus & Utica Shale Story Links: Fri, Feb 10, 2017

The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Kasich’s severance tax hike a longshot; Lebanon, PA group plans to disrupt Atlantic Sunrise Pipeline construction; what happens to natgas royalties from PA state game lands; protesters fight Addison natgas pipeline; Virginia bill exempts some fracking chemicals from records requests; Georgia pipeline expansion; flowing Marcellus gas to Texas; biggest coal plant in the U.S. closing due to natgas; House Bill would completely defund EPA; and more!
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