PTT’s “Big Announcement” – Gets a New Partner for Belmont Cracker

PTT Global Chemical, based in Thailand, has snagged a major/important new partner in its project to build a $6 billion ethane cracker complex in Belmont County, Ohio. That partner is Daelim Chemical, a subsidiary of Daelim Industrial, which is one of Asia’s top engineering/construction firms (and one of the largest companies in South Korea). The addition of Daelim is yet another positive sign that PTT will, at some point this year, pull the trigger and make a “final investment decision” (FID) to move forward with the project. PTT disappointed when they didn’t follow through with an FID in 2017, as they had promised. To be fair, these projects are big and a misstep can bankrupt a company. The Belmont cracker will be the largest single investment made by PTT since becoming a company–so we understand their reticence. Still, when you promise, you promise. Just last month, in December 2017, PTT delivered the disappointing news that there would be no FID announcement in 2017, but that there would be a big announcement “in early 2018” (see PTT Global Chemical Officially Delays Cracker Decision Until 2018). We figure the announcement about Daelim must be that announcement. It certainly qualifies as big, and it’s still early in 2018. In football terms (in honor of this weekend’s Superbowl), on Tuesday PTT achieved another first down, retaining possession of the ball (control of the Belmont cracker project), moving it further down the field toward the goal. But they haven’t yet made a touchdown (an FID). Perhaps not learning from past mistakes, PTT set a new expectation that the FID will be made “by the end of 2018″…
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Eclipse 2017 Update: Drilled 29 Utica Wells Avg 13,600 Ft Long

Yesterday Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, held an analyst day to share an operational/financial update for 2017. Net production in 2017 averaged 310 million cubic feet per day (nearly a third of a billion cubic feet)–a 36% increase over 2016. Proved reserves at the end of 2017–the gas in the ground that is feasible to extract using today’s technology at today’s prices–was 1.46 trillion cubic feet equivalent, more than double the end of 2016. In 2017 Eclipse drilled 29 wells with an astounding lateral (the horizontal part of the well) length averaging 13,600 feet! Eight of those wells have laterals OVER 19,000 feet!! That’s longer than 3.6 miles!!! Eclipse is the reigning champ/record-holder for drilling the longest onshore lateral in the WORLD. Below is yesterday’s 2017 update along with a whopping 84-page PowerPoint used to discuss the update, chock-full of great charts and graphs…
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Dominion Cove Point Begins Producing LNG – for Shell

On Monday, Dominion Energy CEO Tom Farrell reported that the company’s Lusby, Maryland Cove Point LNG export facility will become operational and begin to export LNG in “early March” (see Dominion CEO Says Cove Point LNG Operational in “Early March”). Then yesterday, Dominion issued a press release to say Cove Point has now (as of this week) begun producing LNG! What gives? This “we’re now producing LNG” is part of the commissioning process which began back in December (see Dominion Cove Point LNG Export – Dress Rehearsal Begins). Feed gas is imported and used for testing purposes, and is the final step before the plant goes online into full production. The feed gas came from Shell (sourced from Nigeria), and Shell will take delivery of the LNG that results. When the initial commissioning is done, Marcellus/Utica gas will then begin flowing to the plant and the LNG produced will begin shipping (by “early March”) to Japan and India…
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Blue Ridge Mountain Res. Forms JV to Raise $92M for Drilling in OH

In December 2015 Marcellus/Utica driller Magnum Hunter Resources filed for bankruptcy (see Sad Day: Magnum Hunter Files for Chapter 11 Bankruptcy). Five short months later, in May 2016, Magnum Hunter emerged from bankruptcy–without CEO Gary Evans (see Magnum Hunter Emerges from Bankruptcy with CEO Gary Evans Gone). Apparently the new owners of the company (the former debt holders converted into equity holders) didn’t want Evans running the company. So Evans departed to start a new drilling company not focused on the M-U. In January 2017, just one year ago, Magnum Hunter changed its name to Blue Ridge Mountain Resources (see Magnum Hunter Changes Its Name, Leaves the Bankrupt Past Behind). Since that time the only news we’ve heard about the former Magnum Hunter is that they sold their interest in Eureka Midstream (see Eureka Midstream Confirms MDN Article on New Ownership). That is, until now. Earlier this week, Blue Ridge announced it sold a “non-operating interest” in 21,000 undeveloped Marcellus/Utica acres to an undisclosed investor for $56 million, AND got the undisclosed investor to pony up another $36 million (total deal of $92 million) which Blue Ridge will use to fund an ongoing 2-rig drilling program in southeastern Ohio…
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PA IFO Says 2017 Impact Fee Revenue Near Record High

Since 2012, Pennsylvania has collected the equivalent of a severance tax from Marcellus Shale drillers via something called an impact fee. Same concept as a severance tax. You drill a well, gas comes out, you pay a tax. Except with an impact fee you pay whether or not anything comes out of the ground (a more reliable source of tax revenue than a severance tax). The impact fee quickly started to generate hundreds of millions of dollars a year in extra revenue for Pennsylvania–60% of which goes back to the communities where drilling happens (which Philadelphia politicians hate), and 40% of which goes to the black hole of Harrisburg for redistribution (which Philadelphia politicians love). Drilling began to slow in 2014, and crashed in 2015/2016, with low low commodity prices for natgas. As the price went down, so too did the number of new wells drilled. Impact fee revenue (which is delayed a year) also went down. The impact fee doled out this year is based on revenues raised in 2017. The PA Independent Fiscal Office (IFO) does a pretty good job of guesstimating how much impact fee revenue will be generated. Last July, the IFO predicted impact fee revenue from 2017 would end up being around $222 million in revenue (see IFO Predicts PA Impact Fees for 2017 Will Soar, Near Record High). Now that the year is in the can and production reports are rolling in, the IFO now predicts impact fee revenue will end up at $219.3 million. The all-time high for a single year’s impact fee revenue was 2013, when it was $225.7 million. Looks like 2017 will come within a whisker of that record. Meaning higher levels of new drilling is now “back” in the PA Marcellus…
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PA Senate Ctte Passes Resolution to Restore Drilling in State Parks

On Tuesday, Pennsylvania State Senate Resolution 104 passed in the Senate Environmental Resources and Energy Committee (party line vote, Republicans voted for, Democrats against). SR 104, introduced by Sen. Camera Bartolotta, urges PA Gov. Tom Wolf to get off his rear-end and reauthorize drilling in PA state forest land. The bill stands a good chance of being passed by the full Senate, which has the radicals at PennFuture up in arms. They issued a press release (i.e. marching orders to slavish Democrat Senators) to oppose the resolution. Frankly, they don’t have anything to worry about. As we pointed out yesterday with respect to the Senate’s so-called bipartisan resolution to study the sloooooow way DEP issues permits, resolutions aren’t worth the paper they’re written on (see PA Senate Ctte Sends “Study Slow DEP” Resolution for Full Vote). A resolution is a suggestion–it does not have the weight of law. Wolf can (and almost certainly will), ignore it. Resolutions are an exercise in futility. Still, it may score a political point or two–illuminating how Wolf is blocking an important revenue source from being tapped…
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PA DEP Tries to Convince Landowners/Drillers to Plug Orphan Wells

Earlier this week MDN told you about a new bill that passed the Ohio legislature and now awaits Gov. John Kasich’s signature called House Bill 225, which triples the amount of money set aside to cap orphan wells in the Buckeye State (see OH Orphan Well Bill Wins Praise from Both Drillers & Enviros). The bill also “creates a more streamlined and efficient process for identifying and plugging” orphan wells. The amazing thing about the bill is this: both Big Green groups and the drilling industry support it! So-called orphan wells are old conventional oil and gas wells that have been abandoned (for decades). They are hazards for shale drillers who stumble across them when drilling new wells. If you drill horizontally and clip an old/abandoned well, it becomes like an elevator pumping fluids and gas to the surface. Ohio has an estimated 600 orphan wells. In Pennsylvania, it’s a whole other story. PA has some 200,000 orphan wells! The main issue in PA has been who will pay to cap them? Most of PA’s orphan wells are not mapped or known. Yet some of them are known–by the landowners on whose land they sit. A second (very important) issue in PA is that if a landowner or driller tries to cap an orphan well they come across, the party doing the work may be liable if there are any environmental impacts from the effort. Let’s see, nobody to pay for it–and if you assume all the legal risk. It’s a recipe for “Don’t touch that orphan well with a 10 foot pole!” In what is too coincidental to be a coincidence, the PA Dept. of Environmental Protection has just launched a program “encouraging private-sector partners to become Good Samaritans, by participating in a program that helps cap dangerous abandoned oil and gas wells statewide.” Was the DEP goaded into doing something about orphan wells after seeing the success Ohio is having? Whether coincidence or not, the DEP is telling landowners and drillers: If you pay for it and plug it yourself, first getting the DEP’s “mother may I?” permission, you will not be on the hook legally (i.e. can’t be sued) later on if “this old well” ends up harming the environment…
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OH Supreme Court Rejects Challenge to Forced Pooling Law

On Tuesday, the Ohio State Supreme Court rejected a case in which landowners who were made part of a “unitization order” (i.e. forced pooling) had objected claiming their property rights were stripped away without due process. In legal terms, the landowners claimed it was a “taking” of their property without just compensation. The Supreme Court rejected the case because, they said, there were other legal means the landowners could have tried first (a lower court) before appealing the case direct to the Supremes using something called a mandamus action. In essence, the Supremes said, “Nice try, but you need to jump through the proper hoops first.” Ultimately the Supremes did not rule on the Constitutionality of the claim itself because the case had gotten to them via the wrong path. We’re guessing the landowners will now go back to square one and use the path laid out by the Supremes. Here’s the low down on the rejection by the Supremes, from the legal beagles at the Vorys law firm…
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The Great Chesapeake Massacre III: Lawler Fires Another 400 People

2/2/18 Update: Have we been unfair in our characterization of Doug Lawler? Perhaps. We don’t know Doug–have never met him. He started firing masses of people at Chessy before the downturn hit. He arguably inherited a troubled company. We intensely dislike Carl Ichan and other corporate raiders, so we attributed Doug’s actions to Carl’s influence. MDN received a very nice note from a subscriber who personally knows Doug Lawler and has a different perspective to offer, which we’re happy to pass along. He said: “Jim, regarding your article on CHK, Doug Lawler probably learned a lot from Carl Icahn, but knowing Doug the way I do, I can assure you it hurt him to release people at his home office or other areas of operations. He was left with a mess and will take him years to clean it up. Hopefully with oil & gas prices stabilizing and going up, CHK will become profitable.” We thank our subscriber for sending that along!

Just like those 80s slasher movies that did so well at the box office that studios kept making more of them (Friday the 13th, Nightmare on Elm Street, Texas Chainsaw Massacre, etc.), Doug “the ax” Lawler, CEO of Chesapeake Energy, is back with part III of mass firings at the company. In October 2013 when Lawler was newly appointed as CEO (by Chesapeake’s board, which was under the influence of corporate raider Carl Ichan), he swung his ax and fired 800 people in one gory episode, promising that was the last of it (see The Great Chesapeake Massacre: Lawler Fires 800 People in One Day). It worked so well the first time, Lawler came back with a sequel two years later (see The Great Chesapeake Massacre II: Lawler Fires Another 740 People). It’s now a little over two years since the sequel, and Lawler is back for a third time, firing another round of people–400 this time, 13% of the workforce. The latest victims worked at HQ in Oklahoma City. When corporate raiders take control of a company, as Icahn did at Chesapeake, they pressure management to fire people and sell assets–in a bid to make the stock price jump higher so they can sell their shares of stock at a higher price, pocketing the profit. It’s disgusting to ruin people’s lives and pretend it’s “just business.” At any rate, Icahn is long gone from Chessy, but Lawler learned his lessons well by sitting at the feet of the master. This is rich: Lawler said because the company has sold so many of its assets, it no longer needs the people. Kind of a vicious cycle. Fire people, sell assets. Fire more people, sell more assets. Where does it end? Pretty soon Lawler will be able to cater the company’s office Christmas party with a personal pan pizza from Pizza Hut…
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Marcellus & Utica Shale Story Links: Thu, Feb 1, 2018

The “best of the rest”–stories that caught MDN’s eye over the break that you may be interested in reading. In today’s lineup: Big Green groups want “more time” to “review” Shell ethane pipeline plans; natgas industry helps rescue Nicholson from ice jam; Enterprise building ethylene export terminal on Gulf Coast; ND Bakken shale oil field “stronger than ever”; Exxon tripling its bet on the Permian; new study in “Nature” magazine pokes another gaping hole in climate change theory; drilling costs rise as rig counts climb; Trump’s State of the Union for energy; and more!
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