Hopeful Signs for Turnaround in the Marcellus/Utica Industry

One of our favorite M-U reporters, Paul Gough of the Pittsburgh Business Times, went in search of news about Appalachian shale drilling and its future. He found some rays of light. Gough talked with several of our favorite M-U people–CNX CEO Nick DeIuliis, Deep Well Services CEO Mark Marmo, and Range Resources COO Dennis Degner. Those three (and others) are certainly not Polyanna about what the future holds. There will be bumps. But they do offer hope that on the other side of this pandemic the M-U will actually emerge stronger and better.
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Poison Pill Worked? Gulfport Big Investor Withdraws Board Picks

As recently as early March Gulfport Energy, a major driller in the Ohio Utica Shale, and its single largest investor, Firefly Value Partners (owns 13.1% of outstanding shares), were sniping at each other. Firefly was actively trying to pack the board of directors with its own nominees (see Gulfport’s Largest Investor Wants to Pack Board, Force Change). Two days ago Firefly announced a ceasefire. They will no longer attempt to get their own candidates elected to the board at the upcoming annual meeting. What changed?
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Montage Opens Up the Taps – Shut-in Utica Wells Now Back Online

In April, Montage Resources shut-in “low margin production” wells in its liquids-rich producing area. The shut-ins primarily impacted Utica condensate production. In early May during the company’s first-quarter update conference call, CEO John Reinhart said the company had begun to restart some of the shut-in or “curtailed” production (see Montage Res. Drilled 4 Utica Wells in 1Q, Budget Cut Another 10%). Good news. As of June 1, “substantially all” of the shut-in production is now back online.
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CNX Finances Continue to Improve – Buying Back $400M in Notes

CNX Resources announced yesterday that it will buy back $400 million (roughly half) of its outstanding notes, debt that’s not due to be redeemed until 2022. They’re buying it back early. The company’s finances continue to get stronger. It was just February when Standard & Poor’s Global Ratings downgraded the credit rating for six of the biggest M-U drillers, including CNX (see S&P Downgrades Credit Rating for Six Big Marcellus/Utica Drillers).
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Gulfport Caps Utica Production, Delays Drilling to Late 2020

Gulfport Energy, the third-largest (by number wells drilled) producer in the Ohio Utica Shale, issued an update yesterday to its previous plans on drilling in the Ohio Utica (and Oklahoma SCOOP), revising down the amount of natural gas it will produce and revising down drilling activity previously planned for 2020. The company says it will delay until later this year/early next year more of its production than previously announced–due to ongoing low prices for natgas.
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Range Resources Begins New Air Monitoring Test at SWPA Well Site

Cecil Township, Washington County, PA

Range Resources has launched a second ambient air monitoring test program in Washington County, PA. You may recall the results of a previous two-year study Range commissioned near a high school and elementary school campus in Washington County (see Study Shows No Health Impacts from Marcellus Drilling Near School).
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PA Supremes Hear Oral Arguments in Can of Worms Royalty Lawsuit

On Wednesday the Pennsylvania Supreme Court heard oral arguments in a case challenging whether or not the state Attorney General’s office has the right to use a consumer protection law to prosecute companies like Chesapeake Energy and Anadarko over royalty payment shenanigans. The law the AG’s office wants to use has never been used that way before. According to legal experts, drillers are very concerned if the AG’s office wins this one, as we reported last November (see Chesapeake Royalty Lawsuit at PA Supreme Court – Can of Worms?).
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EQT Provides More Details on DGO Asset Sale, 1.4 Bcf/d Curtailment

EQT announced yesterday it has closed on a deal to sell “certain non-strategic assets” to Diversified Gas & Oil (DGO) for $125 million, plus another potential $20 million later on. MDN first told you about this deal on May 13 (see Diversified Buys 900 EQT Wells (67 Shale Wells) for $125M). This is the first time EQT has commented publicly on the DGO deal. EQT’s statement differs from previous news accounts about the deal.
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CNX CEO Says Pandemic Exposes ‘Church of Climate’ as a Fraud

We have a confession. We have a man crush on Nick DeIuliis, CEO of CNX Resources. Beginning last year DeIuliis began to publicly and openly fight back against global warming zealots who demand you bow before the altar of man-made global warming or risk being ostracized from polite society. The warmists are irrational fossil fuel haters–dedicated to eliminating the use of fossil fuels. DeIuliis has had enough and he now regularly says so in public forums. The latest example of DeIuliis pushing back is a column appearing today in The Hill, the Washington, DC uber-insider publication. DeIuliis says the pandemic has exposed the “church of climate” and the “dog’s breakfast of special interest groups” that compose it, for the fraud it is.
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OH Landowner Loses Post-Production Royalty Case to Chesapeake

Chesapeake Energy keeps winning Ohio royalty lawsuits in the U.S. Court of Appeals for the Sixth Circuit. In March the company beat a lawsuit by a group of Ohio landowners who claimed Chessy had cheated them out of a collective $30 million in royalties (see Chesapeake Energy & Total Beat Class Action Royalty Lawsuit in OH). In April Chesapeake won a second lawsuit that claimed the company had fraudulently concealed information on royalty statements dating back to 1993 (see Chesapeake Beats Another OH Royalty Lawsuit in Federal Court). And now, a third royalty lawsuit has gone Chessy’s way too. Strike three for landowners.
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Judge OKs Class Action Royalty Lawsuit Against 3 NEPA Drillers

On October 3, 2016, landowner James Slamon filed a lawsuit against Carrizo and Reliance Industries in the Susquehanna County (PA) Court of Common Pleas. Slamon alleged Carrizo and Reliance underpaid royalties on oil and gas leases to him and a class of other landowners “exceeding one hundred members.” The drillers got the case moved to federal court on October 31, 2016. Fast forward to this past Monday and a judge in the federal court case has certified (in part) the class-action request. The lawsuit will now move forward.
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Regulators Reject Pieridae/Shell Plan to Feed Nova Scotia LNG

Pieridae Energy wants to build an LNG export plant in Nova Scotia, Canada. The project is called the Goldboro LNG project. We’ve tracked the project for years hoping Marcellus/Utica gas might one day feed it (see our Goldboro LNG stories here). Our hopes to have M-U gas feed Goldboro were dashed when Pieridae announced a deal last June to buy assets from Shell in Western Canada with plans to pipe the gas to the Goldboro plant (see Pieridae Buys Shell Assets in W Canada to Feed Nova Scotia LNG). Canadian regulators in Alberta have just scuttled the deal, refusing to grant permission.
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The Origins of Diversified Gas & Oil – From 1 to 60,000 Wells

Rusty Hutson, Jr. (credit: Tyler Star News)

We’ve always found Diversified Gas & Oil (DGO) a fascinating company (see our DGO stories here). DGO’s strategy is to seek out wells in “the long tail.” That is, wells already along the decline curve. In the first two years after a shale well is drilled, it produces something like 75% (rough numbers) of all the oil and gas it will ever produce. As time goes on, production greatly tapers off.
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M-U Drillers See New Interest from Bond (Debt) Investors

Wow! What a difference three months can make. In January Moody’s Investors Service downgraded EQT Corporation’s bonds to “junk” status (see Moody’s Downgrades EQT Debt to Junk Status Following Write-Down). A few weeks later Standard & Poor’s Global Ratings downgraded the credit rating for six of the biggest Marcellus/Utica drillers, including EQT (see S&P Downgrades Credit Rating for Six Big Marcellus/Utica Drillers). Once thought risky and speculative, investors seem to have changed their minds about investing in M-U debt. They’re taking a second look.
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