PA DEP Orders CNX, XTO & Diversified to Plug 1,058 Abandoned Wells
Yesterday the Pennsylvania Department of Environmental Protection (DEP) issued administrative orders requiring three oil and gas companies–Alliance Petroleum Corporation (a subsidiary of Diversified Gas & Oil), XTO Energy, and CNX Resources–to plug 1,058 abandoned oil and gas wells across Pennsylvania. Alliance has 638 wells, CNX has 327, and XTO has 93. In a quick scan of the list of wells to be plugged, we didn’t spot a single shale well. All 1,058 wells are conventional/vertical wells. So why is this news for MDN? Because all three drillers (but in particular CNX and XTO) drill shale wells, and plugging old conventional wells takes time and money–time and money that could be spent on drilling shale wells. It takes anywhere from $10,000 to $100,000 to plug an abandoned conventional oil/gas well. Most of the wells are located in the southwestern part of the state. CNX responded that in reviewing the list, some 190 of the wells in their list (out of 327) were part of a recent asset sale. Here’s the details on where, and how long these companies have, to plug old/abandoned oil and gas wells…
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In late June Ascent Resources, a company founded by Aubrey McClendon after he left Chesapeake Energy, announced it is buying 113,400 Utica Shale acres along with 93 operating wells located in eastern Ohio for $1.5 billion (see 
CNX Resources was installing a pipeline in Indiana County, PA and apparently didn’t, according to the PA Dept. of Environmental Protection (DEP), properly construct erosion barriers for the project. It rained, hard, and sediment-laden water went over the erosion barriers and got into an unnamed stream, which empties into Mudlick Run, a “high quality water” creek. In other words, a tiny creek got muddy, and some of that muddy water *may have* entered a slightly bigger creek. And for that violation, CNX is going to pay a whopping $250,000 fine. The DEP says following an inspection in March, the DEP ordered CNX to fix the problem by April 3, but as of May 16 the problem had still not been fixed. CNX disputes that they violated their permits and has told the DEP they’ve quit building that particular pipeline. In order to make it all go away, CNX is paying the DEP a $250K negotiated shakedown, PLUS pay to fix the “problem”…
As is so often the case, radical Big Green groups, like PennFuture, attempt to intimidate (i.e. bully) by using threats of legal action, those who dare to use and (gasp) enjoy the monetary benefits of shale drilling. In early 2013 the Pittsburgh International Airport and Allegheny County, PA signed a deal with CONSOL Energy (now CNX Resources) to lease 9,000 acres surrounding the airport for natural gas drilling (see 
Last Thursday, Ascent Resources, a company founded by Aubrey McClendon after he left Chesapeake Energy, announced it is buying 113,400 Utica Shale acres along with 93 operating wells located in eastern Ohio for $1.5 billion. The new acreage tips Ascent over the 300,000 Utica acre line and catapults the company into one of the largest privately owned drillers (exploration and production) in the U.S. The companies doing the selling are CNX Resources and Hess (selling a joint venture they co-owned, each selling their share for $400 million each, for a total of $800 million), Utica Minerals Development (a subsidiary of First Reserve, a private equity firm headquartered in Greenwich, CT, and EMG), and a fourth, unnamed mystery seller. The CNX/Hess acreage (78,000 net acres of the 113,400 acres) is located in the wet gas window of Belmont, Guernsey, Harrison and Noble counties. We’re not sure about the location of the other acreage. The CNX/Hess jv sale marks Hess’ total exit from the Utica Shale. So how will Ascent pay for all of their new shiny new assets? 
MDN exclusively brought you the news, on June 19, that Diversified Gas & Oil had purchased EQT’s Huron Shale assets in Kentucky, Virginia and West Virginia for $575 million (see 
Another interesting story coming from this week’s DUG East Conference in Pittsburgh. CNX Resources (formerly CONSOL Energy), is beginning to use a new strategy of mixing together the natural gas produced from two different rock layers–the Marcellus and Utica. Why do that? The “gas” CNX gets from their Marcellus wells is “damp”–which is a new term for us. Everyone else would call it “wet”–as in there are extra hydrocarbons in the gas, like ethane, propane, butane, etc. In other words, NGLs (natural gas liquids). Interestingly, the Utica wells CNX is drilling in southwestern PA are “dry”–meaning relatively little if any NGLs coming out of the ground along with the methane. By mixing the two together, damp and dry, CNX dilutes the mixture enough that it’s pipeline ready and goes directly to market. That is, the gas doesn’t have to be transported via pipeline (which costs money) to a gas processing plant to remove the extra hydrocarbons (which costs more money). Typically if you can get a good price for those other hydrocarbons, it’s worth the extra transportation and processing costs. But with NGL prices low, and with few markets for ethane (the primary NGL extracted) right now, other than exporting it out of the area, CNX’s “blending” strategy lowers their costs and gets the gas to market quicker. Here’s the beauty of it: CNX can drill both Marcellus and Utica wells on the very same pad, and blend the gas together right at the pad. Less cost and faster to market sounds like a good strategy to us…
CNX Resources announced Tuesday that the company has signed a long-term contract with Evolution Well Services to use Evolution’s 100% natural gas-fueled electric pressure pumping equipment. That is, CNX will use electric fracking equipment, with the electricity generated by burning natural gas (instead of diesel). According to Evolution, their “next generation” equipment saves drillers “up to 95 percent on fuel costs.” Whoa! If that claim is true (we have no reason to disbelieve it), it certainly changes the economics of fracking. Using natgas to generate the electricity, instead of diesel, also has the benefit of cleaner air. And here’s the coolest part: The natural gas used to power the electric generator comes from other other CNX wells in the area, i.e. “field gas.” Look ma, no more endless truck deliveries of diesel fuel! Here’s the exciting news that CNX is a “first-mover” on this new technology…
In 2011, the Municipal Authority of Westmoreland County, PA began a new water testing and monitoring program for the Beaver Run Reservoir which supplies water to about 150,000 residents (see 
The average worker who works for producers (i.e. drillers) in the Pennsylvania Marcellus makes among the highest average salaries of any industry in the state. Looking at six of the state’s top Marcellus drillers, the average worker made $113,610 last year! That’s an average taken from workers at CNX Resources, Range Resources, Chesapeake Energy, Southwestern Energy, EQT and Cabot Oil & Gas. We hasten to add not “all workers” but “average” or “median” workers–meaning there are people who make below that number and people who make well above that number. It also means the majority of Marcellus workers in those companies made at least $100,000 per year. Those working for oilfield services (OFS) companies like Halliburton, Baker Hughes and others didn’t fare quite as well, making an average of $52,000-$80,000 per year. Still, hey, it ain’t bad money! Here’s a look at the average wage for top Marcellus drillers and the OFS companies that serve them…
Now that the Mariner East 1 (ME1) NGL (natural gas liquid) pipeline is back up and running, Marcellus/Utica producers are breathing a sigh of relief–at least, Range Resources, the primary customer for the pipeline, is. Following sinkholes that developed while Sunoco Logistics Partners was drilling for the Mariner East 2 (ME2) project, a portion of ME1 was exposed to open air in Chester County, PA, which prompted the state Public Utility Commission to shut down ME1 in early March (see 
Yesterday CNX Resources, formerly CONSOL Energy, released its first quarter 2018 update–its first full 3-month update since separating from the coal company. CONSOL began life as a coal company 150 years ago and only in recent decades entered the oil and gas business. The company split itself into coal and oil/gas back in November (see 
On Tuesday CNX Resources (formerly CONSOL Energy) held an investors day in Pittsburgh to disclose the company’s strategy for the next few years. CNX is one of the big players in the Marcellus/Utica. The company owns 531,000 net Marcellus acres and 652,000 net Utica acres, with some/much of that acreage the same (the Utica layer sits under the Marcellus layer). The company has only developed about 6% of its acreage so far. Not even on first base! CNX CEO Nicholas “Nick” DeIuliis had some big boasts at Tuesday’s event. DeIuliis said CNX’s stacked pay (layer over layer) acreage gives it a leg up and makes the company “a disruptor” in the region. He also said this, with respect to the company’s acreage position: “We’ve got the biggest, baddest sandbox in the Appalachian region.” Indeed! Below is a summary of the event, along with the PowerPoint presentation used at the event (loaded with great information)…
MDN reported yesterday that due to underground horizontal direction drilling (HDD) in Chester County, PA (near Philadelphia) for the Mariner East 2 (ME2) Pipeline project, a third sinkhole had developed (see 
We spotted an intriguing story that summarizes some of the information found in a newly-released report from private equity firm Baird Equity Research. Baird’s report purports to show, using data, “the most productive operators in the Marcellus shale.” What is the criteria used? They use productivity per average well along with how much money the average well is generating for the operator (i.e. driller). We wish we had a copy of the full report. Sadly, we do not. However, we do have the article summarizing it, which shares the top three operators. The top operator stands head and shoulders above the rest. Would it surprise you to learn the top operator in the Marcellus, according to Baird, is Cabot Oil & Gas? No, it didn’t surprise us. What about the other two in the top three? And what about the top Utica operator? Read on…