Montage New Gathering Pipe Contract, Hedges for 2020/21
Montage Resources, the company that resulted after the merger of Eclipse Resources with Blue Ridge Mountain Resources one year ago, issued an announcement on Monday with two important pieces of news. One is that the company has renegotiated a deal with the company that gathers the natural gas from its wells, merging a bunch of separate agreements into a single new agreement. The implied message is that Montage will save significant money. Second, the company has most of its natural gas production hedged for the balance of 2020, preselling it for $2.63/Mcf. They’ve also hedged some of their 2021 production–at a slightly lower price.
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Who are the biggest natural gas sellers in the U.S.? You might be surprised to learn that the biggest *sellers* are not necessarily the biggest *producers* of natural gas. Oh, you might recognize some of the names of the top sellers (BP, Shell, ConocoPhillips). But others might be more of a mystery (Macquarie, Tenaska, Sequent, and J. Aron & Co.). Would it surprise you to learn that BP (i.e. British Petroleum) is the #1 seller of natgas in the U.S., and has been for years?
We’d hate to be a big employer right now–like Shell–with all of the COVID-19 coronavirus issues swirling. Shell currently employs some 6,500 construction workers at its Monaca (Beaver County), PA ethane cracker plant site. That’s 6,500 workers coming and going each and every day. Many of them have to get to the job site via a shuttle bus after parking in huge parking lots near the site. Cramped, crowded conditions at a time when the government recommends “social distancing” (who wants to bet that’s the phrase of the year for Merriam-Webster?). Some are criticizing Shell for not shutting down construction. It’s a no-win situation. Shut it down and throw 6,500 people out of work for a month or two or three? Keep working and risk spreading the virus? No good options.
The oil and gas marketplace is often described as being divided into three sectors: upstream, midstream and downstream. Upstream is drilling and producing, midstream is processing and transporting (basically pipelines), and downstream is end-users of all types–converting oil and gas into various products and/or delivering it to end-users. The COVID-19 coronavirus has the power to affect any and all three areas. However, the midstream and downstream (in particular pipeline companies and utility companies) do not expect this insidious virus to affect their operations. Why? It’s called business continuity planning.
As we have often pointed out, if we could have anyone else’s brain in the shale business, it would be our friend Tom Shepstone’s brain. Tom, who writes at 
And so it begins. We’ve seen it before during oil and gas “down cycles.” Some of the first companies to lay off workers are the oilfield services (OFS) companies. Companies like Halliburton. It’s a yo-yo. Lay off a bunch of people (hundreds or thousands), and in a few years when things turn around, hire back a bunch. Some pejoratively call it boom and bust. We’re entering another serious down cycle with impending layoffs. Yesterday Halliburton announced a new twist. Instead of laying off thousands, the company will “furlough” some 3,500 workers. Here’s how it works…
Yesterday we wrote that the price of oil is in a free fall, heading toward $20/barrel (see 
MARCELLUS/UTICA REGION: EQT Corp. surges as the bearish natural gas thesis is dead; CNX Midstream Partners ‘re-evaluating’ capital allocation plans; OTHER U.S. REGIONS: FERC suspends Commonwealth LNG environmental review; Minnesota Supreme Court will review Superior natural gas power plant ruling; NATIONAL: Oil reverses deeply into the red; WTI closes at another four-year low; Estimating the possible decline of U.S. shale oil production with lower prices; Giant LNG projects face coronavirus death or delay; Natural gas price forecast – natural gas markets rollover; COVID-19, price wars and black swans: School of Energy goes virtual.