EQT Big Announcement Coming Within 2 Wks to Split Co. in Two

Yesterday EQT, now the largest natural gas producing company in the United States following its acquisition of Rice Energy, released 2017 numbers. On an analyst call to discuss the number, CEO Steve Schlotterbeck turned the conversation in the direction of “sum of the parts”–which turned out to be the really big news. What in the world is “sum of the parts?” In October 2017, prior to EQT consummating its deal to buy Rice, Steve Schlotterbeck said following the merger EQT would study a plan to split the newly consolidated company into two pieces–upstream/drilling and midstream/pipelines (see EQT CEO Signals Company Likely to Split in Two After Rice Merger). EQT is considering a split under pressure from a corporate raider (aka “activist investor”). You know what we think of corporate raiders. Scum of the earth. Anywho, in high finance, the theory is that if you split a company in two different lines of business into pieces, with each piece focusing on a different market (drilling vs. pipelines in the case of EQT), the two companies would be worth far more to investors as standalone companies than they are joined together. In other words, the “sum of the parts” is worth more than the whole. EQT honored its word, hiring two new board members following the Rice merger. Their role is specifically to help with reviewing and crafting a plan to split the company. The outcome of the review (and the plan to split the company in two) was due out by the end of March. However, on yesterday’s analyst phone call, Schlotterbeck said the review and a plan will be released by “the end of February”–in less than two weeks. Frankly, there’s no doubt the review will recommend a split, judging by Schlotterbeck’s comments (see below). Schlotterbeck said yesterday, “[W]e intend to implement the plan on an accelerated basis.” Welcome to splitsville…
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EQT Makes $1.5B in ’17; Drilling Fewer Wells in ’18; Tax Cut Helps

Yesterday the biggest natural gas producing company in the U.S., EQT, released its fourth quarter and full year 2017 update. As we pointed out in our lead story today, the 800-pound gorilla in the room was talk about an impending announcement to split EQT into two companies (see EQT Big Announcement Coming Within 2 Wks to Split Co. in Two). However, there was plenty of other news coming out of the 2017 update and accompanying analyst phone call. Of course the big news for EQT in 2017 was closing on the deal to buy Rice Energy (see EQT Buys Rice Energy in $8.2B Deal, Becomes #1 Gas Producer in US). Sadly, about half of Rice’s employees were fired as a result. EQT kept 275 out of the roughly 500 employees employed at Rice at the time of the merger. EQT reported a net income of $1.5 billion in 2017, which is up from a loss of $453 million in 2016 (a nearly $2 billion swing in one year!). Contrary to the naysayers, the Trump tax cut is having a huge impact on shale companies (on everyone, actually). EQT will be $1.2 billion richer this year due to “deferred tax liability”–taxes it expected to pay at the old rate of 35% rather than at the new rate of 21%. That’s money not going into the black hole of Washington politicians’ hands but instead getting reinvested right here in the Marcellus/Utica. In 2017, EQT picked up an *additional* 110,000 acres in the West Virginia Marcellus/Utica region–and that’s without including the acreage picked up in the Rice Energy deal. How about some hard numbers for drilling? In 2017, EQT drilled 144 Marcellus wells, 49 Upper Devonian wells, and 4 Utica wells (197 wells drilled, total). In 2018 they plan to drill 134 Marcellus wells, 16 Upper Devonian wells, and 25 Utica wells (175 total). So, their drilling program will slightly decrease, and they will drill less Marcellus/UD wells and more Utica wells. EQT also issued an announcement about proved reserves–the amount of gas (and equivalents) in the ground, under their leased acreage, that they could extract using today’s technology at today’s prices. EQT reports total proved reserves at the end of 2017 were a stupendously high 21.4 trillion cubic feet equivalent of natural gas–59% higher than 2016. Below are the announcements issued yesterday from EQT, along with the latest PowerPoint slide deck and excerpts from the analyst phone call…
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CNX Resources CEO Says Average CNX Worker Makes $170,000 per Year

It looks like CNX Resources (formerly CONSOL Energy) is THE place to work if you live anywhere in the orbit of Pittsburgh. Our eyeballs about fell out when we read comments made by CNX Resources President and CEO Nick DeIuliis in a speech he gave yesterday at the Pittsburgh Business Times’ VisionPittsbugh event. According to PBT reporter Paul Gough, “He [DeIuliis] said the CNX workforce was young, highly skilled and driven, drawn from Baldwin Borough to Nigeria, and making an average of $170,000 a year.” Wow! Where do we sign up? In commenting on Pittsburgh’s ongoing water issues, DeIuliis said “so-called green fixes is absurd.” A man after our own heart. Here’s more of what DeIuliis said yesterday…
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Frac Sand Barge Facility Near Pittsburgh Gets $638K Grant to Expand

McKees Rocks barge facility

While we don’t (yet) have hard numbers for how many shale wells were drilled in the Marcellus/Utica in 2017 versus 2016 and 2015, we’re pretty sure the 2017 number went up–a lot. Why do we think so? Because frac sand use went through the roof in 2017. Yes, drillers are using more sand to frack each well, so the numbers could reflect drilling the same number of wells using more sand–but we don’t think that explains it all. Not this much sand. McKees Rocks Industrial Enterprises operates a barge/transloading facility on the Ohio River in McKees Rocks (Allegheny County), PA. Jim Lind, operator of the facility, says sand shipments soared 200% in 2017 over previous years. Put another way, sand shipments doubled–at just this one facility! Sand is barged in to the facility from the Midwest, then loaded onto trucks and rail cars for delivery to Marcellus/Utica well sites throughout the region. Business is good. The barge facility needs to expand. Pennsylvania recognizes the facility’s value to the shale industry, so the state has just made a $638,015 grant to allow McKees Rocks to handle more barges at the same time at the 100-acre facility. That’s good for the Marcellus/Utica, and it’s good for the regional Pittsburgh economy…
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5 Big Green Groups File Another Lawsuit to Stop Mountain Valley Pipe

This simply must stop. We MUST begin to countersue (monthly/weekly/daily if necessary) the Big Green radical groups that continue to bring a flood of lawsuits against legally permitted pipeline projects. We must! It is the only way to even the playing field. Mountain Valley Pipeline (MVP)–a $3.5 billion, 301-mile pipeline that will run from Wetzel County, WV to the Transco Pipeline in Pittsylvania County, VA–is one of the targets of Big Green. MVP has had so many lawsuits filed against it, we can’t keep track of them all. Two recent examples. (1) Five radical green groups, including the Sierra Club, Appalachian Voices, Chesapeake Climate Action Network, West Virginia Rivers Coalition, and Wild Virginia, sued the Federal Energy Regulatory Commission (FERC) in federal court in early January over FERC’s approval of the project (see 5 Radical Green Groups Sue to Stop Mountain Valley Pipeline). A few weeks later, the radical Chesapeake Bay Foundation and the Southern Environmental Law Center, on behalf of more than a dozen environmental groups (the including the ones previously listed) sued the Virginia Water Control Board for approving MVP’s application for stream crossing permits (see Big Green Files Lawsuit Against VA Regulators for Approving Pipe). And now, the same lawyers involved in those other cases are doing it again. On Wednesday, five Big Green groups, including the Sierra Club, West Virginia Rivers Coalition, Indian Creek Watershed Association, Appalachian Voices, and the Chesapeake Climate Action Network sued the U.S. Army Corps of Engineers in federal court over the Corps’ approval of the project. Enough! Start to sue back! Here’s the details (and a copy of) the latest lawsuit by Big Green radicals…
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York, PA Electric Plant to Drop Coal, Burn Only Marcellus Gas

Something momentous has just happened. The loons at the Sierra Club, who once loved natural gas until they began irrationally hating it, have just admitted to the world that burning natural gas to produce electricity is A.O.K. with them. Brunner Island Power Plant is located in York County, PA, straddling Lancaster County. It is a huge, 1,490 megawatt coal-fired electric generating plant, and has been the target of environmentalists for years. In February 2017, MDN told you that the new owner of the plant is investing $100 million to retrofit the plant so it can, at least part of the time, burn Marcellus Shale gas (see York County, PA Electric Plant Begins Using NatGas as Fuel). Talen Energy (the new owner) said it “plans to burn little or no coal until 2019 as part of a ‘site evaluation.’” Meaning almost all (perhaps all) of the fuel powering the plant at this point is Marcellus Shale gas. Which is why we’re interested in the plant and what happens to it. However, it appears they still burn coal from time to time. Talen has just signed to settle a lawsuit brought by the odious Sierra Club. The terms of the settlement say they will burn only Marcellus gas during “peak ozone season”–from May 1 through Sept. 30–starting in 2023. Talen will phase out coal completely by 2028. In other words, the Sierra Club, contrary to its own “end natural gas” campaign, has just signed a settlement admitting they think natural gas is far better for the environment than coal. Actions speak louder than words…
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Co-Tenancy Bill Passes WV House, Goes to Senate for Final Vote

MDN has written a number of posts about an effort in West Virginia to correct an ongoing issue called co-tenancy (see our co-tenancy stories here). In some cases rights owners can’t be found to sign leases, resulting in a great deal of acreage being unavailable for drilling that otherwise would be. In WV there are often multiple rights owners listed for a property–sometimes 200 or more rights owners for a single piece of property! It is difficult, if not impossible, to track them all down and get them all to sign on the dotted line. Co-tenancy corrects that situation by allowing 75% of rights owners to agree/sign for everyone. Yesterday we told you that the full House of Delegates was slated to vote on House Bill (HB) 4268, “Co-tenancy Modernization and Majority Protection Act” (see WV Co-Tenancy Bill Survives Challenge, Amended, Final Vote Today). Indeed they did vote, and the bill passed–60 voting for, 40 against. Which is good news for everyone–for drillers AND for rights owners. The bill now goes to the WV Senate for consideration. Here’s an update on yesterday’s vote…
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Green Antis Try to Reverse City’s $7.5M Deal to Allow NEXUS Pipe

MDN told you last week that anti officials who lead the City of Green, OH (Summit County), had finally faced the reality that NEXUS Pipeline–a $2 billion, 255-mile interstate pipeline that will run from Ohio through Michigan and eventually to the Dawn Hub in Ontario, Canada–will come through their vicinity (see Antis of Green, OH Finally Face Reality – Will Allow NEXUS Pipe). Green previously hired a high-priced Cleveland law firm to try and scuttle the NEXUS project (see Green, OH Paying Lawyers $100K to Fund Stop NEXUS Crusade). In the end, everyone has their price. For Green, the price is $7.5 million and 20 acres of land that sit next to an existing city park. While Green antis in city government hate the idea of the pipeline getting built at all (especially Green’s anti-pipeline mayor), the writing is on the wall. They will lose and they know it. To save face, the mayor negotiated a deal with NEXUS that city council voted to accept. However, the mayor and city council’s actions don’t sit well with some of the more radical elements in Green. The rads have since launched a campaign to force the city to accept a vote on whether or not to settle with NEXUS. The city says the signed settlement from last week is an administrative action, not subject to a popular vote. The rads say otherwise. It’s shaping up to be a legal battle royale in Green–antis against antis. Grab the popcorn!…
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PA DEP Allows ME2 Underground Drilling to Resume in Chester County

In what can only be considered a government shakedown, Sunoco Logistics Partners agreed last week to pay a massive (historically high) $12.6 million fine to the PA Dept. of Environmental Protection (DEP) for “permit violations related to the construction of the Mariner East 2 pipeline project” (see Sunoco LP Pays PA DEP $12.6M to Resume ME2 Pipeline Construction). So we’re not surprised to learn that a few days later the DEP has magnanimously allowed Sunoco Logistics Partners to resume drilling work in Chester County for ME2–work that had been on hold since last summer (see ME2 Pipe Work in Chester County Creates Water Well Issue for Some). As we reported last year, the water wells for a dozen households in Chester County became cloudy–or lost pressure–after underground horizontal directional drilling (HDD) by Sunoco attempting to install pipes underground in places where digging trenches will not work. Sunoco paid for five families to temporarily stay in local hotels for several nights. Sunoco also provided bottled water for all of the affected families. The working theory is that bentonite clay (i.e. drilling mud) is the source of the cloudiness. Fortunately, bentonite is non-toxic and used to manufacture many products, including toothpaste and kitty litter. Because of the episode in Chester and several locations, the DEP stopped HDD work for the project. Sunoco later cut a deal to continue the work (see Sunoco Strikes Deal with Devil, “Settles” with Anti Groups re ME2). Then, all work everywhere for the ME2 project was stopped by the DEP in early January. That is, it was stopped until Sunoco paid the DEP $12.6 million for permission to restart construction. So yes, $12.6 million ought to buy the right to restart HDD drilling in Chester County, as it just has, although the DEP is still holding the threat of “further penalties” over Sunoco’s head as a way of encouraging them to avoid any further drilling mud spills…
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Other Energy Stories of Interest: Fri, Feb 16, 2018

The “best of the rest”–stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Maryland official asks Army Corps to delay permission for short pipe under Potomac River; record number of laterals feed new pipes & plants in M-U; $65/bbl the new “sweet spot” for oil price; investment in upstream o&g; natural gas processing economics; M&A activity will increase in 2018; OPEC to Houston–“We have a problem”; Netherlands permanently bans fracking; Argentina on the cusp of a shale boom; Saudis look to double natgas output next 10 years; and more!
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