EVEP Reports Waterless Fracked OH Well is a Bust

disappointmentReading through earnings calls transcripts (hey, somebody has to do it), we discovered what we believe no one else has (yet) discovered or reported. On an earnings call yesterday, top management from EV Energy Partners, one of the largest acreage holders in the Utica Shale, shared interesting initial results from the test Utica well they drilled in Tuscarawas County, OH–a well drilled using waterless fracking technology from GASFRAC (see Details on GASFRAC’s Waterless Frack Test in OH Utica). The theory being tested by EVEP is that using water during fracking of a well targeted for oil recovery somehow damages the chances of oil recovery. GASFRAC used a mix of 75% butane and 25% mineral oil to frack EVEP’s “Nettles” well. The results? On yesterday’s earnings call EVEP Chairman John Walker revealed that after 90 days in production, the Nettles well is producing about half the production of a similar nearby well fracked using water. That is–the waterless frack job was a big disappointment…
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Williams Buys Out EVEP Interest in Utica East Ohio Midstream for $575M

small potatoesIn early February, MDN told you that EV Energy Partners, a company with a huge amount of leased acreage in the Ohio Utica Shale region, was looking to sell its 21% interest in Utica East Ohio (UEO)–a midstream/pipeline company operating in Ohio (see EVEP Wants to Sell Interest in Utica East Ohio/More Utica Acreage). Yesterday EV announced they found a buyer–none other than Williams, EV’s partner in UEO. Williams currently owns 49% of UEO and is paying EV $575 million in cash to relieve them of their 21%, for a grand total operating interest of 70% ownership…
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19 Oil/Gas Companies on “Death List” – 8 are in Marcellus/Utica

The Death ListDavid Fessler is energy and infrastructure strategist (i.e. stock analyst/researcher) with The Oxford Club–a publisher based in Baltimore, Maryland that publishes the Oxford Resource Explorer, among other financial publications. Fessler spends his days immersed in the energy industry and in the stocks of companies in that industry. Fessler and The Oxford Club have produced a special report called “The Oil Company Death List” which is a list of 19 publicly-traded oil and gas companies that, according to a formula worked out by Fessler, will “die soon.” That is, they’ll go bankrupt if they don’t sell themselves or otherwise sell off major assets. Why? They’re “swimming in debt” and way over leveraged with “ugly balance sheets.” Fessler’s simple formula is all about a company’s debt ratio. When a company’s debts reach 4 times or higher its earnings (EBITDA), that’s a huge red flag. Below we have the list of 19 on the “death list” along with a copy of Fessler’s full report (describing his methodology). The interesting/troubling aspect is that 8 of the 19 are Marcellus/Utica operators–one of which is #1 for highest debt-to-earnings ratios. Some companies in the list surprised us–others did not. Is your favorite Marcellus/Utica driller in the list?…
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EV Energy Partners CEO Resigning, VP/CFO Promoted

Changes are coming at the top of EV Energy Partners (EVEP). Mark Houser, current president and CEO, will resign at the end of February. Houser will remain on the board. In his place, EVEP is promoting Michael Mercer, senior VP and CFO, to the top post of president/CEO. EVEP says the move was planned. EVEP, you may recall, has been trying to unload a hoard of Utica Shale acreage (more than a half million acres) for the past three years–largely unsuccessfully (see EVEP’s Mark Houser Says More Utica Acreage Sales Ahead in 2014). They recently sold their interest in Cardinal Midstream to a pair of South Korean companies (see Total, EVEP Sell Interest in Cardinal Midstream to S Koreans for $612M). Perhaps Mercer will have more luck shopping their considerable inventory of Utica acreage?…
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EVEP Wants to Sell Interest in Utica East Ohio/More Utica Acreage

EV Energy Partners (EVEP) is a master limited partnership, or MLP, which distributes profits to “unit holders” instead of plowing profits into more projects. They like to invest in mature, already drilled wells and pipeline companies–things that act like an annuity throwing off profit with very little risk. Over the years EVEP amassed a huge amount of acreage in Ohio–before the Utica was known–mostly for conventional (vertical only) wells. However, some of that property is in prime Utica territory–so EVEP has been looking, since 2009, to sell it. They reiterated that in November (see EVEP Selling More Ohio Utica Acreage in 2015). There’s another fleeting reference to selling more Utica leases in EVEP’s fourth quarter 2014/guidance for 2015 press release issued yesterday. The “new news” (for us) in yesterday’s announcement is that EVEP plans to sell their 21% interest in Utica East Ohio–a midstream/pipeline company operating in Ohio…
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Details on GASFRAC’s Waterless Frack Test in OH Utica

Two weeks ago MDN was (we believe) the first to call attention to a very short reference in the quarterly update from Canadian oilfield services company GASFRAC–a line that says GASFRAC had finally begun fracking a Utica Shale well using their waterless technology (see GASFRAC Begins Waterless Fracking Job in OH Utica). At the time we had no details about where the well is located, and who the exploration company is that GASFRAC is doing the work for. We now know those bits, thanks to some ace reporting by Tom Knox at Columbus Business First
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EVEP Selling More Ohio Utica Acreage in 2015

When you’ve been writing about the Marcellus and Utica since 2009, you notice some stories that just keep repeating–year after year. EV Energy Partners selling (more of) their Utica acreage is one of those stories. EVEP is still one of, if not the, largest acreage holder in the Ohio Utica Shale. The company is a master limited partnership, or “MLP”, which means it’s organized to distribute all profits to shareholders (or unit holders) instead of plowing profits back into investments and large projects. MLPs don’t make good exploration and production companies. The way MLPs are structured makes them more suited for mature, already-drilled wells and businesses like pipelines. They want less risk and more long-term revenue potential. So it’s no surprise that EVEP has, since 2012, tried to sell large swaths of their massive holdings (see EnerVest Puts 539,000 Utica Shale Acres on Auction Block). Over time they’ve sold some of that acreage, but they still hold hundreds of thousands of acres. On an analyst phone call Monday, EVEP President & CEO Mark Houser once again said “next year” the company will sell more Utica acreage. How much acreage, and where?…
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Done Deal: S Koreans Buy 34% of Cardinal Gas Services for $612M

As MDN told you a month ago, South Korea wants in on the Marcellus/Utica action and two South Korean companies had committed to buying up to a 34% stake in Cardinal Gas Services (see Total, EVEP Sell Interest in Cardinal Midstream to S Koreans for $612M). The deal is now done. Yesterday Samchully, the lead South Korean company, announced they have completed the purchase of the full 34% stake in Cardinal for $612 million…
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Total, EVEP Sell Interest in Cardinal Midstream to S Koreans for $612M

In August MDN told you that a pair of Korean companies were sniffing around Cardinal Midstream Services–looking to buy up to a 34% stake in the company (see Cardinal Gas Courts S Koreans to Invest in Utica JV). Cardinal is a midstream operator (pipelines and processing plants) in the Utica Shale. The Koreans are sniffing no more. Yesterday, one of the investor/owners of Cardinal, French oil giant Total, announced they’re selling their 25% stake in the company to two Korean companies…
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EnerVest’s Grand Experiment: Fracking Clinton Sandstone in Ohio

the grand experimentLong before the words “Marcellus” and “Utica” entered the public discourse and consciousness of Ohioans, there was the Clinton Sandstone. For years conventional drillers have been sinking wells in the Clinton, which is found 4,500 feet below the surface (the Marcellus and Utica Shale layers are deeper). The Clinton lies under 25 counties in eastern Ohio. Over the years, some 35,000 conventional (vertical) wells have tapped the Clinton Sandstone in Ohio. EnerVest, one of the largest acreage holders in the Utica Shale (and in the Clinton Sandstone), has embarked on a great experiment. What if you turned a Clinton Sandstone well horizontal, like a Utica or Marcellus well? Would it work? Could you get more gas out of the sandstone by fracking it like shale? EnerVest has drilled seven horizontal wells so far, with a permit to drill another and a request to drill a ninth. Here’s the details, along with the differences between a Clinton horizontal well and a Utica horizontal well…
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Cardinal Gas Courts S Koreans to Invest in Utica JV

Cardinal Gas Services is a midstream company (pipelines and processing plants) concentrating on the Ohio Utica Shale. Cardinal is actually a joint venture between Access Midstream (formerly Chesapeake Midstream, now being bought by Williams), the U.S. subsidiary of French driller Total, and EnerVest Energy Partners. Just when you thought it couldn’t get any more complicated, it does. Reuters is reporting the rumor that a new consortium including South Korea’s National Pension Service (NPS) and South Korean gas seller E1 Corp are making a play for 34% of Cardinal…
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Utica Shale Oil Far from Dead – EnerVest, EQT Try Again

In September 2012 EV Energy Partners/EnerVest put 539,000 Ohio Utica Shale acres on the auction block. It didn’t sell. A year ago they announced they would begin selling sections piecemeal, a strategy that has netted a few sales since then (see EnerVest Strategy: Sell Utica, Drill Vertical, Expand Midstream). However, EnerVest still retains a lot of Utica acreage–in fact they are the largest Utica acreage holder according to the NGI’s Shale Play Factbook (with 903,000 acres, more than Chesapeake!).

A recent article in the Akron Beacon Journal takes a look at EnerVest’s interest in figuring out how to get the oil that everyone knows is present in the Utica, out of the ground. The company recently got approval from the Ohio Dept. of Natural Resources to drill two Utica wells targeted at getting oil in southern Tuscarawas County. EnerVest is not the only driller who is taking another run at striking oil in the Utica…
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EVEP 2014 – Still Shifting from E&P to Midstream in the Utica

Quick: Which company holds the most combined Utica Shale acreage in OH & PA? Is it Chesapeake? Range? Chevron? Nope. It may surprise you that the #1 acreage holder, according to NGI’s Shale Play Factbook, is EV Energy Partners (EVEP). They own outright, or as part of joint ventures, interest in 903,000 Utica Shale acres (747,000 in OH and 156,000 in PA). MDN has long chronicled how this “accidental” Utica kingpin has been trying to unload their Utica acreage, first in big deals, later in smaller deals (see our EVEP category of stories here).

EVEP is certainly not leaving the Utica. They just want to unload the E&P part of their operation (drilling) and instead concentrate on the midstream (pipelines & processing plants). Yesterday the company issued their fourth quarter and full year 2013 update and management conducted the ubiquitous analyst phone call to explain where the company has been in 2013 and where they are heading in 2014. We have both the update and a portion of the phone call transcript below. Bottom line: More emphasis on midstream in 2014, continued Utica drilling (via jv partners like Chesapeake and EQT), and more sales of Utica acreage when/if buyers come along…
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EVEP’s Mark Houser Says More Utica Acreage Sales Ahead in 2014

EV Energy Partners (EVEP) recently attended the 12th Annual Wells Fargo Energy Symposium in New York City. EVEP’s CEO Mark Houser addressed the gathering and delivered a fair bit of information about EVEP’s Utica Shale drilling program. With 3/4 of a million leased acres in the Utica, when EVEP talks, people listen. You may recall that EVEP had previously put more than half a million of their Utica acres up for sale (see EVEP 3Q13: No New Land Deals to Announce). They’ve since done a small deal or two–but they retain most of their acreage. At the conference, Houser said he expects to announce more deals to sell their Utica acreage in 2014 (of course we heard the same story last year, see EV Energy Partners Utica Acreage Sale Delayed Until 2013).

Highlights of Houser’s talk at the Wells Fargo Symposium, including an update on their joint ventures with other drillers and EVEP’s view on the state of the midstream in Ohio:
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EVEP 3Q13: No New Land Deals to Announce

EV Energy Partners/EnerVest has, almost by happenstance, accumulated a huge position in the Utica Shale–760,000 acres according to NaturalGasIntel.com. They are the second largest leaseholder in the Utica, behind Chesapeake Energy (who has about 1 million acres). A little over a year ago EVEP put half a million of those acres on the auction block. No takers. They eventually sold 22,535 acres in Guernsey, Harrison and Noble counties in Ohio for $284.3 million (see EVEP/EnerVest Cuts Deal to Sell 22.5K OH Utica Acres for $284M).

On a 3Q13 analyst call earlier this week, EVEP Executive Chairman John Walker said there’s still no new deals to announce and that selling off a big slug of their acreage is “too valuable not to be patient.” Translation: Sit tight, we’re still working on it, but we won’t sell it at fire sale prices. It’s going to take more time. Here’s a transcript of John Walker’s opening comments on the analyst call:
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NiSource & M3 Do a Deal to Process/Sell NGLs in Eastern Ohio

An important announcement yesterday for drillers (and landowners) in the northern portion of the Ohio Utica Shale play: Pennant Midstream announced they are building a 38-mile natural gas liquids (NGL) pipeline from the Pennant-owned Hickory Bend cryogenic processing plant (in Mahoning County, OH) to the Utica East Ohio Midstream-owned Kensington cryogenic processing plant (in Columbiana County, OH). Pennant says initially they will ship 90,000 barrels per day through the new pipeline.

Why is Pennant with its own processing plant sending NGLs to another (competitor’s) processing plant? Good question…
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