EQT & Range Recent Cutbacks Won’t Affect Production

Sources talking to the Pittsburgh Business Times have tipped the paper that EQT recently idled something like five fracking crews, and that Range Resources recently idled a top hole drilling rig. Oh oh. Is this an early sign that the gas patch is slowing down again? Are we heading into a downturn? Don’t panic. Although there has been some scaling back, both companies say activity levels and most importantly, production levels, are not jeopardized by their actions. Instead, the moves are about “saving money” and “increasing efficiencies.” The truth is, as technology and strategies continue to improve over time, drillers don’t have to drill as many holes in order to produce the same or more than they produce now. The companies in the Marcellus/Utica patch are getting leaner–more efficient at what they do, and how they do it. Yeah, it sucks when local jobs get whacked due to “efficiencies,” but ultimately it’s a good sign. It means the companies are getting stronger and will stick around for the long term–providing jobs and economic benefits in the communities where they work for years to come…
Continue reading

EQT CEO Didn’t Show Up for Annual Mtg – CFO Talks of Wild Ride

Last Thursday EQT held its annual shareholder’s meeting. By all accounts it was a sleepy affair with few people attending–inside at least. Even the current interim CEO, David Porges, didn’t bother to show up, sending along CFO Rob McNally to be the official face of the company. McNally spoke about the past few years as hectic, going from “one transaction to the next.” McNally said “there’s a light at the end of the tunnel” for things to now settle down–once the company splits in two later this year (into upstream and midstream). However, a handful of Mountain Valley Pipeline (MVP) protesters showed up to mouth off–marching outside EQT HQ where the annual meeting was held. McNally said, in so many words, protests of MVP are no big deal. The company thought there would be protesters, and they even planned for illegal protests in the construction timeline (people chaining themselves to bulldozers, etc.). Just one more day in the life of a fossil fuel company that deals with nutters all the time…
Continue reading

EQT Looks to “Graduate from” (Exit) Huron Shale “Prep School”

Looks like EQT, the largest natural gas-producer in the U.S., is graduating from prep school. That is, EQT is about to sell all of its remaining assets in the Huron Shale play. The Huron is located mainly in West Virginia and Kentucky, also poking up into Ohio and traveling along the edge of Virginia. Most of EQT’s considerable Huron assets (some 12,000 wells) are located in Kentucky. From what we can tell, most of those wells are conventional. That is, not horizontal wells but vertical. The Huron was EQT’s early experiment in shale before shale was “a thing.” EQT played around in the Huron to learn how to drill in shale. According to former CEO Steve Schlotterbeck, “the Huron play was like prep school for us.” Last Thursday EQT filed a Form 8-K with the Securities and Exchange Commission advertising the news they have plans to sell their Huron assets–not only the wells but the pipeline system that connects the wells…
Continue reading

Financial Checkup for Marcellus/Utica Drillers

RBN Energy, headed by founder Rusty Braziel (co-founder of Bentek Energy), is, in our opinion, the premier oil and gas analytics firm out there. Smart people working at RBN. And they offer up some amazing content on their blog site–for free! At least it’s free for a while, then it goes behind a paywall. A few days ago RBN published a blog post on the financial health for the 44 major publicly-traded U.S. exploration and production companies (drillers). RBN groups them into three categories: Oil-Weighted, Diversified, and Gas-Weighted. We found the Gas-Weighted list of 10 companies and the information revealed about them to be fascinating and worth studying. Each of the companies has major operations in the Marcellus/Utica–some of them totally focused on our region. Among the data points shared: revenue, production costs, lifting costs and more. We think of the following as a handy financial health scorecard/checkup for 10 of the biggest drillers in the M-U, including Antero Resources, Cabot Oil & Gas, Chesapeake Energy, CNX Resources, EQT, Gulfport Energy, National Fuel Gas (Seneca Resources), Range Resources, Southwestern Energy, and Ultra Petroleum…
Continue reading

EQT’s Rise from Second-rate Utility to #1 U.S. NatGas Producer

Last year when EQT bought out and merged in Rice Energy, it became the largest natural gas-producing company in the United States (see EQT Buys Rice Energy in $8.2B Deal, Becomes #1 Gas Producer in US). In the late 1980s EQT was known as Equitable Gas, a local gas utility company in Pittsburgh. It was a company with “poor customer satisfaction” (hence our provocative title of “second-rate” utility). So how on earth did a company that did no drilling rise to become the country’s biggest shale gas driller in under a decade? It started with the foresight of a previous CEO who saw the Marcellus as “the next big thing.” The company changed its name and branding to EQT in 2009, and they haven’t looked back since. Here’s the quick (and fascinating) history of how EQT transformed itself from a lowly gas utility into the powerhouse drilling company it is today…
Continue reading

Big Data Comes to EQT – Drilling Now Done Remotely from Pittsburgh

Noble Energy drilling simulator

Back in 2015 MDN editor Jim Willis had an experience he won’t forget. Cabot Oil & Gas chief geologist Buddy Wylie gave Jim and landowner Chris Acker a personal tour of two wells being drilled on Chris’ property. Wyle is THE guy most responsible for Cabot’s enormously successful drilling program in Susquehanna County. As a reminder, Cabot (a single company) currently produces 2.2 billion cubic feet per day of natural gas out of Susquehanna County (a single county), representing 2.6% of ALL natural production in the U.S.! Jim won’t forget Buddy regaling us with the wonders of mud logging. 🙂 Part of the tour included a visit to “the dog house”–the control center that sits atop the drilling rig. The dog house/control center is packed with computers and monitors–akin to something you might see in a jet cockpit. Just like the military now flies airplanes unmanned (drones) with people sitting in a control room thousands of miles away, drilling rigs are now being steered and controlled by a remote cockpit (dog house) hundreds of miles away. Big Data has come to the oil patch–at least it has for the country’s largest natural gas-producing company, EQT. What started as an experiment a year ago has blossomed into a control center operating all 10 of EQT’s active drilling rigs. All directional drilling, geosteering and drilling engineering, happens from a control center in EQT’s Pittsburgh headquarters. It’s really cool stuff. Beyond being cool, it saves money and time, making the company more efficient. Up next? Remote control of fracking operations…
Continue reading

School Near Pittsburgh Considers EQT Deal: $2,500/Ac, 15% Royalty

Last week MDN told you about the ongoing vendetta by a few anti parents in the Mars School District (half hour from Pittsburgh, in Butler County) and their Big Green accomplices. They suffered a major court defeat (see Dela. Riverkeeper Suffers Major Defeat in Martian Well Case). Rex Energy has drilled two wells about 3/4 of a mile from one of the Mars schools, and wants to drill another four. The Martians bleat and blat that faraway drilling activity will somehow hurt “the children.” Compare that attitude with the parents (and school district officials) in the Kiski Area School District in Westmoreland County (about 40 minutes from Pittsburgh). The Kiski Area School will vote tonight on a lease deal with EQT to allow shale drilling UNDER SCHOOL PROPERTY! The district will get $2,500 per acre in a signing bonus, and 15% royalties on any gas produced. If signed, the school’s bonus check could be as high as $310,300–for “the children.” The difference in attitude (and aptitude) between the parents in Mars and the parents in Kiski could not be more striking…
Continue reading

Average Workers at Top Marcellus Drillers Make $100K+ Salary

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…
Continue reading

EQT Continues to Fight PA DEP Fine re Wastewater Impoundment

On Wednesday, Pennsylvania Commonwealth Court (an appeals court) heard oral arguments over how to prove whether contaminants in the soil have moved into groundwater. The case dates back to 2014 when the PA Dept. of Environmental Protection (DEP) slapped EQT with a $4.53 million fine for a leaky wastewater impoundment in Tioga County (see PA DEP Levies Biggest Fine Ever, $4.5M Against EQT). EQT did not say there wasn’t a problem with leaks at the site, but they did say the way the DEP calculated the fine was unreasonable and arbitrary. EQT appealed the fine and the case all the way to the PA Supreme Court, and in early April the Supremes ruled in favor of EQT, saying that the DEP’s levied fine was excessive and that the DEP misinterpreted language in the 1937 Clean Streams Law (see PA Supreme Court Axes DEP $4.5M Fine in EQT Tioga Wastewater Leak). We thought (mistakenly) that was the end of the case. But it’s not. The Supremes ruled on “water to water” contamination in the case, but not on ground to water contamination. PA law allows for companies to be on the hook for each day a contaminant enters the water table. What lawyers argued this week was whether or not, and how, the DEP can prove contaminants in the ground, there because of EQT’s leak, can be proven to have leached into the water on any given day. DEP is calculating a revised $1.1 million fine based on assumptions about how many days the contaminants leaked out of the ground. EQT is forcing DEP to use more than just spitball estimates in calculating the fine…
Continue reading

EQT Pay Dispute – Comparing CEO Salaries for Top M-U Firms

In mid-March, the country’s #1 producer of natural gas, EQT, suddenly and without previous warning lost it’s President & CEO, Steven Schlotterbeck (see EQT CEO Steve Schlotterbeck Suddenly Quits, Leaves Company). Steve is the man who guided the company through its acquisition of Rice Energy last year (see EQT Buys Rice Energy in $8.2B Deal, Becomes #1 Gas Producer in US). It was a tough battle against multiple corporate raiders who didn’t want to see the deal happen, but Steve held it together and made it happen. The notice from EQT was short and sweet and said Steve had resigned immediately, due to “personal reasons.” MDN was the first to disclose what those “personal reasons” were: a pay dispute. According to Steve, the board wasn’t paying him what similar CEOs at competitors are making. So he quit. Makes you wonder how much Steve was making, and what CEOs at other large Marcellus/Utica drillers make. We spotted an article in the Pittsburgh Business Times that reveals what Steve made last year. We did some digging to find what comparable CEOs make. The numbers we discovered may surprise you…
Continue reading

EQT Pays PA DCNR $874,200 to Lease Under Ten Mile Creek

This is a story that continues to bug us. The state of Pennsylvania, specifically the Dept. of Conservation and Natural Resources (DCNR), is grabbing money that we think belongs to private landowners. The DCNR has been, for years, claimed that under a centuries-old law that the state of PA “owns” the property under “navigable” waterways–including rivers and streams (see PA DCNR Publishes Lease Agreements for Deals Under Rivers/Creeks). We understand the state claiming the Delaware River, and maybe the Susquehanna River, is a “navigable” body of water. The DCNR uses the “navigable waterway” excuse to sign leases with drillers under much smaller waterways than the Delaware and Susquehanna–siphoning money that would have gone to landowners. A landowner might own the land on both sides of, say, Ten Mile Creek, as we’re sure happens. However, the land under Ten Mile Creek does not technically belong to them. In fact, certain long portions of the land under Ten Mile Creek are now leased to EQT, and EQT paid handsomely for it. The company leased 218.55 acres under Ten Mile Creek in Greene and Washington counties (southwestern PA) for $874,200, which works out to be exactly $4,000 per acre! Not to mention a whopping 20% royalty! That’s money that (in our opinion) should go to the landowners who own the land along the creek, not to the state. Until landowners sue or the legislature acts, the state will continue to pick the pockets of landowners who own land along PA’s waterways…
Continue reading

EQT 1Q18: Interim CEO Porges Focused on Splitting Company in Two

EQT, now the largest natural gas-producing company operating in the United States (since its acquisition of Rice Energy in 2017) issued its first quarter 2018 update yesterday. Among the flood of news coming from the update: EQT lost $1.6 billion in 1Q18, versus making a $164 million profit in 1Q17. But the big loss was not money out of pocket–it was a paper loss, mostly due to “writing down” the value of assets in the Permian (Texas) and Huron (Kentucky) shale plays. EQT is ending its flirtation with the Texas Permian, selling its Permian assets for a minuscule $64 million. The company refused to talk about whether or not they plan to sell or keep the Huron assets. Most of EQT’s drilling remains Marcellus Shale-focused. In 1Q18 EQT drilled 24 Marcellus wells, 2 Upper Devonian wells, and 6 Ohio Utica wells. Kind of funny (for us) was the way acting CEO David Porges described the current situation he finds himself in. Porges was CEO of EQT until early 2017 when Steve Schlotterbeck took over as CEO (groomed by Porges for the job). Porges has been Executive Chairman of the board since that time. But Schlotterbeck suddenly resigned in March when the board refused to pay him what other top energy CEOs make (see EQT CEO Steve Schlotterbeck Suddenly Quits, Leaves Company). Apparently his abrupt departure didn’t sit well with Porges. On yesterday’s analyst phone call, Porges said this: “Approximately one year ago, I retired as CEO and transitioned to the role of Executive Chairman. As you know, my replacement resigned in mid-March and I assumed the role of CEO to give the board a chance to decide upon a replacement. That search has begun and we expect to have a new CEO in place by the time of separation, which is still scheduled for the third quarter.” Porges wouldn’t even mention Schlotterbeck by name! Called him “my replacement.” Talk about frosty. We don’t think Schlotterbeck will be getting a Christmas card from Porges this year. 🙂 At any rate, as Porges said in his statement, the company expects to name a new CEO no later than third quarter of this year–when the existing EQT splits in two and becomes a drilling company AND a separate midstream (pipeline) company…
Continue reading

EQT Midstream Consolidates, Buys Gulfport JV Share for $175M

As EQT gets ready to split the company into two companies later this year, the midstream (pipeline & processing plants) portion of the company yesterday announced a complicated “drop down” deal to streamline the midstream operation. The short version is this: EQT has midstream assets spread throughout three companies on paper–EQT Midstream Partners, EQT GP Holdings, and Rice Midstream Partners. Yesterday the company announced all three are being merged under one umbrella–EQT Midstream Partners. As you’ll read in the EQT announcement, the entire deal is complex–with various entities buying assets from the others. One of the more interesting aspects of the deal is that EQT Midstream is buying EQT’s (the driller’s) Olympus Gathering System and EQT’s 75% interest in the Strike Force Gathering System. EQT Midstream is also buying out Gulfport Energy’s 25% interest in Strike Force, meaning EQT Midstream will now own 100% of Strike Force–a gathering pipeline system in the dry gas Utica covering 98,000 acres in Belmont and Monroe counties, in Ohio. Here’s the news that EQT is getting its midstream ducks in a row…
Continue reading

Some PA Drillers Threaten to Spoil it for All via Royalty Shenanigans

We’ve written a number of posts over the years about the ongoing, sometimes quiet sometimes not, civil war between Pennsylvania landowners and some (not all) drillers who use inflated post-production deductions to pad their own bottom lines, leaving landowners with peanuts–sometimes with no royalties at all (see Deep Dive: PA Royalties Civil War Between Landowners & Drillers). If we can oversimplify and summarize this complex issue, landowners maintain that a 1979 PA law guarantees landowners a 12.5% royalty regardless of expenses involved in extracting the gas, and drillers say no, landowners must abide by the contracts they’ve signed and if those contracts allow post-production costs to be deducted before calculating a royalty, the rate may go lower than 12.5%–sometimes to zero and below. PA landowners have, for the past six plus years, lobbied for legislation to clarify and protect a 12.5% minimum royalty. Today we have a guest post from the landowner point-of-view. Thad Stevens is a Gaines, PA resident and real estate developer. Thad has negotiated more than 50 oil and gas leases. He sits on the Dept. of Environmental Protection Citizen Advisory Council and is a director with the National Association of Royalty Owners PA chapter. We consider Thad a friend. He’s smart and he’s passionate about the the ongoing issue that some companies take inflated post-production deductions leaving PA landowners with little or nothing. Thad writes that some of PA’s gas drillers are displaying real arrogance in their attitudes toward the very people they need the most–landowners…
Continue reading

EQT Sues WV for Passing Minimum Royalty Law re Flat Rate Leases

Earlier this year the West Virginia legislature passed Senate Bill (SB) 360, which Gov. Jim Justice subsequently signed into law (see WV Gov Justice Signs Bill to Guarantee 12.5% Minimum Royalty). SB 360 overturns a ruling by the WV Supreme Court in Leggett v. EQT Production, a case in which the Supremes (in a very unusual move) reversed their own previous decision and allowed EQT to deduct post-production expenses in an old flat rate lease. In essence, SB 360 guarantees rights owners/landowners a 12.5% minimum royalty, regardless of post-production deductions–but only in flat rate leases. A flat rate lease is a lease in which a company pays a regular (in EQT’s case, annual) payment, regardless of how much oil/gas is produced. Traditionally drillers don’t deduct post-production expenses because the payments they make aren’t all that much anyway. But then EQT began to claim deductions, prompting a lawsuit that went all the way to the Supreme Court. The legislature aimed to “fix” what they considered an error in the court’s ruling. EQT claims the new law is unconstitutional and last week filed a lawsuit (copy below) asking a judge to block implementation of the law, set to take effect on May 31…
Continue reading

PA Supreme Court Axes DEP $4.5M Fine in EQT Tioga Wastewater Leak

EQT had to take their case all the way to the Pennsylvania Supreme Court, but in the end, the company was victorious over a wildly overinflated $4.53 million fine levied by the state Dept. of Environmental Protection (DEP) for a leaky wastewater impoundment in Tioga County dating back to 2014 (see PA DEP Levies Biggest Fine Ever, $4.5M Against EQT). While EQT did not say there wasn’t a problem with leaks at the site, they did say the way the DEP calculated the fine was unreasonable and arbitrary. In fact, EQT says the DEP levied the fine and took EQT to court because a few weeks prior EQT had sued the DEP over a different, unrelated matter (i.e., sour grapes on the part of the DEP). EQT appealed the fine and the case all the way to the PA Supreme Court, which heard oral arguments last November (see PA Supreme Court Hears Arguments in EQT Wastewater Leak Case). Last Wednesday the PA Supremes ruled (5-2) in favor of EQT, saying that the DEP’s levied fine was excessive and that the DEP misinterpreted language in the 1937 Clean Streams Law…
Continue reading