Antero Resources Swings to $849M Loss in 2016, Prod Jumps 24%

On Tuesday, Antero Resources, one of the largest and most active drillers in the Marcellus/Utica, issued its 2016 and fourth quarter 2016 update. The company reports net daily production averaged 1,847 million cubic feet equivalent (MMcfe) per day, a whopping 24% increase over 2015 production levels. Digging through the update we found this interesting statistic: It cost Antero an average of $0.84 million per 1,000 feet to drill and complete a Marcellus well, and it cost the company an average of $0.99 million per 1,000 feet to drill and complete a Utica well. Those numbers are 29% and 27% less than a year ago, respectively. The company continues to have some of the best hedging (prices locked in early for the gas they sell) in the business. The company’s natural gas production for 2017 is fully hedged at an average index price of $3.63 per thousand cubic feet (Mcf). The Henry Hub price as this was being written was $2.77/Mcf. Smart! But all was not butterflies and unicorns for Antero in 2016. The company reports losing $849 million in 2016, after making $941 million in 2015. That’s a swing of nearly $2 billion in one year. Ouch. More interesting factoids from the update: Antero plans to average sinking nine wells per pad in the Marcellus, and six wells per pad in the Utica in 2017. Here’s the full update, along with a brand new PowerPoint presentation…
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Eclipse NatGas Production Up 23% in 2016, Big Utica’s Coming 2017

In early February, Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA that drills mostly in Ohio, released an operational update for fourth quarter and all of 2016 (see Eclipse Resources 2016 & 4Q16 Update – Super Laterals Coming). Yesterday the company released a full update, including financials, for full year and fourth quarter 2016. The report shows natural gas production was up significantly in 2016, up 23% from 2015. However, natural gas liquids (NGL) production was flat and oil production, a small part of the company’s production, was down. On the financial side, Eclipse lost $204 million in 2016, which is a vast improvement over their $971 million loss in 2015. Things are turning around. During 2017, Eclipse plans to drill 24 wells with an average lateral length of approximately 13,300 feet. Eleven of those 24 will be “Super-Laterals” with lateral extensions exceeding 15,000 feet. Mammoth! You may recall Eclipse has drilled what is (so far) the longest Utica well ever, the Purple Hayes, some 18,500 feet long (see Eclipse Res. 1Q16: Drills Longest Shale Well Ever! “Purple Hayes”). Can you imagine another dozen of them?! Buckle up, here comes 2017 for Eclipse…
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O&G Industry Begins to Pick Up Again in Muskingum County, OH

A “boost” from the oil and gas industry, specifically the Utica industry, is beginning to “trickle” through Muskingum County once again, says the director of the Zanesville-Muskingum County Port Authority. No, we’re not talking about drilling Utica wells–not in Muskingum, anyway. What we are talking about are companies that work in the industry. Oilfield services companies like Halliburton and Producers Service Corporation are, once again, expanding their businesses and adding new jobs. Muskingum is located next to four of the best counties in which to drill a Utica well–Guernsey, Belmont, Noble and Monroe. Belmont has the bonus of being the likely location of the next ethane cracker to commit to the region–PTT Global Chemical’s cracker plant. With an uptick in Utica drilling, and activity around the coming cracker plant, Muskingum County is in the catbird seat for economic expansion…
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TransCanada Selling Stake in Iroquois Gas Pipeline – to Itself

Companies in the oil and gas space, in particular midstream (pipeline) companies, have complicated ownership structures on paper. There are usually a number of subsidiary companies. Sometimes these companies have a “mother ship” which is owned by stockholders, and a subsidiary that is a master limited partnership (MLP), which is a different kind of corporate structure. MLPs don’t have shares of stock but instead issue units (about the same thing as shares of stock). MLPs give the unitholders certain tax advantages not offered to stockholders. Yes, its complicated. The important thing to know is that often these large pipeline companies have layers within layers. Which is the setup for this story. TransCanada, which purchased Columbia Pipeline Group last year for $10 billion (see TransCanada and Columbia Pipeline Tie the Knot Today). TransCanada controls another subsidiary called TC PipeLines, an MLP. On Monday, TransCanada issued a notice that it intends to “sell” its ownership stake in the Iroquois Gas Transmission System (an important Marcellus pipeline) along with its remaining ownership in Portland Natural Gas Transmission System (PNGTS), a New England pipeline, to its TC PipeLines subsidiary. Why? To raise money. How can a company selling something to itself raise money?…
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Kinder Morgan Sells 49% Stake in Elba Island LNG to EIG for $555M

Elba Island LNG facility

Kinder Morgan’s Elba Island, Georgia (near Savannah) LNG export facility received a green light from the Federal Energy Regulatory Commission (FERC) last June (see KM’s Elba Island LNG Export Plant Approved by FERC). Kinder has since started construction at the site. In December, the U.S. Dept. of Energy granted Elba Island permission to export LNG to non-Free Trade Agreement countries (see Elba Island LNG Update: Non-FTA Exports Approved, Dump Truck City). What does the Georgia’s Elba LNG plant have to do with Marcellus/Utica? The Williams Transco pipeline runs through Georgia. Kinder owns and operates the 200-mile Elba Express pipeline, which connects the LNG facility to the Transco. Currently Elba Island imports LNG, getting it to market via the Transco. However, Williams has been on a mission to send Marcellus gas south–including to Georgia (see Marcellus Gas Heading to Georgia via Transco Pipeline). Marcellus Shale gas will, via the Transco, be at least some of, if not the primary, source for gas exported from the Elba Island facility. Although work continues at the facility, Kinder has decided they can use some money to help finish the project–so they’ve just sold a 49% stake in the project to investment firm EIG Global Energy Partners for $555 million. When the project is complete, Kinder says it will be worth $1.3 billion. So EIG got 49% of a $1.3 billion project (or $637 million worth of value) for $555 million. Sounds like EIG got a good deal, or perhaps Kinder was a tad desperate for the cash?…
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VA Senate Committee Nixes Frack Trade Secret Protection

In January MDN told you about an effort in Virginia to ensure new changes in Virginia’s environmental regulations that require “mandatory disclosure of fracking chemicals, baseline water testing and monitoring, and spill prevention and response planning” would still protect trade secrets–the exact combinations of chemicals used by drillers when fracking (see Proposed VA Law Would Protect Frack Chemical Trade Secrets). As we said at the time, Big Green groups are demagoging the issue, claiming drillers want to keep fracking chemicals secret from first responders and doctors. Not true. But that doesn’t stop the headlines from continuing, like “Citizens have a right to know about fracking chemicals” and “King George supervisors lobby for disclosure of fracking chemicals” (see Debate & Misinformation re Frack Chemical Disclosure Rages in VA). Here’s the thing: fracking chemicals ARE required to be disclosed. The proposed law that modifies the regulations doesn’t change that. The new law only shields the exact combinations of chemicals from being disclosed–and even the exact combination can/will still be exposed for doctors and first responders. However, the damage has been done. Enough lies hit the fan that members of a Virginia Senate committee have rejected it, ending the bill before it could receive a full vote. In other words, Senators believed the lies…
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Trump Signs Exec Order Targeting EPA “Waters of the U.S.” Rule

In May 2015, Obama’s rogue Environmental Protection Agency (EPA), along with the Obama U.S. Army Corps of Engineers (USACE), released a finalized rule clarifying what “Waters of the United States” (WOTUS) means vis-à-vis what can be regulated under the federal Clean Water Act (see EPA Power Grab: Redefines Waters of the U.S. to Include Everything). Essentially the rule change redefines everything down to mud puddles (no, we’re not exaggerating) as subject to the federal Clean Water Act. In October 2015 a federal judge stopped WOTUS from going into effect, while it’s litigated (see Sixth Circuit Court Stops EPA from Implementing WOTUS Anywhere). It took a year, but in November 31 states along with other entities filed briefs with the 6th U.S. Circuit Court of Appeals opposing the rule (see 31 States Ask Court to Dump Obama WOTUS Rule as Unconstitutional). It now looks like we won’t have to litigate it out after all. Yesterday, fulfilling a campaign promise, President Trump signed an Executive Order directing the EPA to reconsider WOTUS. Among the many at the signing ceremony was the new Administrator of the EPA, the marvelous Scott Pruitt–who has pledged to move forward immediately with rolling back WOTUS…
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Time to Swing the Ax at the EPA – Let the Firings Begin!

Less than two weeks ago Oklahoma Attorney General Scott Pruitt was confirmed to be the new Administrator of the Environmental Protection Agency (see Scott Pruitt Confirmed to Lead EPA – Swamp Draining Begins). As we observed at the time, “A labor union representing more than 9,000 EPA employees actively opposed Pruitt’s confirmation. We personally think those 9,000 employees should be fired.” Perhaps our wish is coming true! Well, at least in part. President Trump is proposing to ax 24% off from the EPA’s annual, way overinflated budget. The speculation is that the new budget will result in firing 20% of the EPA’s 15,000 employees. Hooray! It’s about time. Let’s see how the insular bureaucrats who love to tell us all what to do like getting an unemployment check…
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