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Hess Talks Utica at Investor Day – Predicts 40,000 Boe/d by 2020

Earlier this week Hess hosted an analyst/investor day to discuss the company’s plans and strategies now that it has shed its retail and transportation operations (Hess doesn’t own those green Hess gas stations any more, see Marathon Petroleum Buys the Hess Truck! What Will We Do for Xmas?). Two weeks ago we noted with interest that Hess said almost nothing about the Utica in its third quarter update (see Hess 3Q14: Says Almost Nothing About Utica Operations). That changed earlier this week. During the analyst/investor soirée, Hess had quite a bit to say about the Utica…
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Hess 3Q14: Says Almost Nothing About Utica Operations

Not long ago Hess sold off its retail (gas stations) and transportation operations, completing its transformation into an E&P-only company (see Marathon Petroleum Buys the Hess Truck! What Will We Do for Xmas?). One of the operational areas for Hess is the Utica Shale in Ohio. In May of this year, the company said it was in the process of drilling 35 Utica wells this year (see Hess Likes Early OH Utica Results, Drilling 35 Utica Wells in ’14). However, when we look at the latest quarterly update from the company, published yesterday, we find the following very brief references to the Utica…
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Marathon Petroleum Buys the Hess Truck! What Will We Do for Xmas?

Hess truck toyYou know that big green Hess truck that pulls into your local Hess gas station to fill the underground storage tanks with gasoline? Neither the truck nor the gas station belong to Hess anymore. Hess has completed its transformation to a production and exploration (E&P) company only. Hess has E&P operations around the world, including an active drilling program in Ohio’s Utica Shale. Word came last week that Marathon Petroleum Corp has completed its purchase of Hess’ retail and transportation operations (gas stations and trucking)–for a whopping $2.82 billion. The purchase will allow Hess to laser focus on finding oil and gas. The burning question is, will Marathon keep the green Hess truck toys for Christmas?…
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OH Utica Shale’s Most Productive Wells in 2Q14

Recently released production numbers from the Ohio Dept. of Natural Resources (ODNR) show a bit of a surprise. The single most productive Utica Shale well during second quarter 2014 (April – June) was from one of the smallest drillers. A well drilled by Hall Drilling (headquartered in West Virginia) in Monroe County, OH produced 1.43 billion cubic feet of natural gas during 2Q14. Other top-producing wells were drilled by Gulfport Energy, Antero Resources and Hess. Here’s some numbers…
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Hess Wins Case Against One OH Landowner, Settles with Others

Last October MDN told you about a court case that Hess lost in a lower Ohio court. Hess promised to “vigorously challenge” the decision and appeal it to a higher court (see Hess Will Challenge OH Court Decision to End Lease). The crux of the case: Hess purchased leases from Mason Dixon Energy and didn’t live up to the terms of the lease–they didn’t drill within five years and didn’t make an extra payment–then tried to make up for it at the last minute with payments to extend the leases. Three landowners won that original case, but on appeal, Hess has won against one of the landowners and it appears Hess is ready to settle with the other 300 or so landowners in the area that are affected…
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Hess Drill Rig Ruins View for Warnock Cemetery’s Dead Residents

There goes the neighborhood. Back in December MDN told you that Hess had the unmitigated gall to drill a Utica well next door to a cemetery in Belmont County, OH (see Hess Has Gall to Drill Utica Well Next Door to a Cemetery in OH). The dead folks and those visiting them have reason to complain–a “huge” drilling rig has sprouted next to the cemetery, ruining their view…
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Hess Likes Early OH Utica Results, Drilling 35 Utica Wells in ’14

smiley faceWith all of the lip-dragging this week over Williams canceling work on the Bluegrass ethane pipeline and BP quitting the Utica in Trumbull County, here’s a little happy news to brighten your Friday. Hess has 43,000 “core” net acres in a joint venture to drill in the Ohio Utica Shale. On an analyst call earlier this week, Hess’ top brass said they will continue to drill test wells this year and up to 35 full production wells, and then really ramp up the drilling program in the Ohio Utica in 2015. According to Hess, early results in the Ohio Utica are very good.

MDN has extracted out of the (long) analyst call those spots where the Utica was discussed, so you can read for yourself exactly what Hess’ top brass had to say…
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McClendon Confirms 3 New Utica Shale Deals: Hess, XTO, Paloma

Aubrey McClendonAubrey McClendon’s American Energy continues its rapid expansion. Aubrey is raising money like crazy–and spending it like crazy too. Last week Aubrey landed another half billion dollars to spend in the Utica (see McClendon’s New Company Gets Another Half Billion $ for Utica). Then he spent it! The rumor was the mystery buyer of Hess’ 74,000 Utica Shale acres they sold for $924 million last week was McClendon (see Hess Sells 74,000 OH Utica Shale Dry Gas Acres to Mystery Buyer). It’s no longer a mystery–American Energy verified it is the buyer of the Hess acreage.

But hey, that was last week. It’s a new week, so it’s time for a new deal for Aubrey and American Energy. And right on cue, we have one: XTO Energy has announced they’ve done a deal whereby American Energy will fund 100 percent of XTO’s near-term drilling costs in a “core area” of 55,000 Utica Shale acres. In return, American Energy will get ownership of 30,000 net acres of XTO’s holdings in three Ohio counties. Yesterday Aubrey said he’s cut three deals recently–Hess, XTO and Paloma Partners. Between the three deals, Aubrey says he’s picked up another 130,000 acres in the Utica in the past week. The man is on a tear…
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Hess Sells 74,000 OH Utica Shale Dry Gas Acres to Mystery Buyer

Looks like the end of 2014 came in January of 2014 for Hess. On Oct 30, 2013 Hess’ Executive VP and President of Worldwide Exploration & Production, Greg Hill, said that Hess was working on figuring out their Utica Shale acreage and where the wet gas area is located so they could make decisions about where they will and won’t drill. Hill said they would make their final decision “at the end of 2014 once we finish delineation” (see Hess Officials Talk About the Utica on 3Q13 Earnings Call). Yesterday Hess announced they have struck a deal to sell to sell 74,000 Utica Shale dry gas acres to an unnamed buyer for $924 million. End of 2014 (and Christmas) came early for Hess. Why sell now? And, who was the buyer? MDN thinks we know (we speculate below).

Hess owns a 100% interest in 95,000 Utica Shale acres, and a 50% interest (in a joint venture deal with CONSOL Energy) for another 65,000 Utica acres. In consulting the Hess map of their Utica acreage below (from a November 2013 investor presentation), you can get a pretty good idea of where the acreage they’ve sold is probably located. Much of Hess’ 100%-owned acreage is in the “dry gas” area on the map–our money is that most of that acreage is what got sold. No doubt landowners will soon receive notifications if they are among those being traded to another drilling team. Below is the Hess announcement (which is brief), the map we located which helps shed light on the brief announcement, and our speculation on why they sold now, and who purchased…
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Hess Goes All in for Shale Drilling in 2014, $550M on Utica Shale

Over the past couple of years, Hess Corporation–the company whose name you recognize because you probably have filled up your car at one of their gas stations–has been transforming itself from petroleum products marketer (like retail gas stations) to oil and gas driller. Hess still owns some of those gas stations–but not for long. They’re in the process of spinning off retail gas stations into their own company so they can sell it (see Hess Continues Transformation With Plans for Retail Spinoff). Early last year Hess’ plans to become an E&P company was challenged by one of their stockholders (see Corporate Raider Paul Singer Tries to Force Hess Out of Shale). He was obviously unsuccessful in trying to bully Hess into doing his bidding. (Note to Chesapeake: you should have followed Hess’ example.)

Yesterday Hess released their 2014 capital and exploration budget, and it shows Hess has gone “all in” for shale drilling. The Hess capex budget calls for a whopping $5.8 billion in spending–of that $2.85 billion (49%) will be spent on shale drilling. The lion’s share of Hess’ shale budget will go to drilling for oil in North Dakota’s Bakken Shale. However, they have allocated $550 million for drilling in the Utica Shale this year, with plans to sink 35 new Utica wells. Here’s the full Hess budget released yesterday…
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Hess Has Gall to Drill Utica Well Next Door to a Cemetery in OH

We just have to bring you a story so…important…we’re…outta…breath…to…tell…you. The evil drillers at Hess–drilling in Belmont County, OH (one of the best places to drill on the planet)–have the gall, the temerity, the reckless disregard to drill a Utica Shale well right next to a cemetery! I mean, don’t they know they may disturb the dead? Don’t they know that for a full 30 days or so their drilling will ruin the view from some of those graves in that cemetery. The nerve!

Never mind the same area where Hess is drilling was mined for coal in the 1970s and 80s, a much more destructive process with years of eyesores. Hey, that was then and this is now. And don’t tell anyone (double-swear promise?)–but the cemetery has leased their 2.2 acres to Hess too–so the Hess well is going to go underneath the cemetery. Yes it’s nearly two miles down, but you know, (*whispering*) ghosts live down there. Here’s arguably one of the most important stories we’ll bring you (in the next 5 seconds)…
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Hess Officials Talks About the Utica on 3Q13 Earnings Call

Yesterday the parade of third quarter earnings calls continued. One of them was held by Hess, continues to be a major player in the Utica Shale.

MDN has slogged through the transcript from yesterday’s call and selected out those portions where Hess officials talk about the Utica, their recent accomplishments and their plans going forward…
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Harrison County: Busy Courthouse, Road Use & Lease Offer by Hess

What’s going on in Harrison County, OH? When it comes to oil and gas drilling in the Utica Shale, quite a lot, including: a congested courthouse (where land records are kept); proposed road use agreements from Chesapeake Energy; and a plum offer by Hess for 21.7 acres west of the Harrison County Airport.

The details…
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Hess Will Challenge OH Court Decision to End Lease

A few weeks ago MDN told you about the court case Hess lost where they tried to tie up the leases for Ohio landowners beyond the initial 5-year term (see Hess Loses OH Court Case, May Owe Big Bucks to 300 Landowners). What it amounts to is that Hess doesn’t want to pay them more money. The landowners who sued and won–Stephen and Melissa Griffiths from Jefferson County, OH–received an initial $6,500 in bonus payments in 2007 for their 228 acres. If they were signing a lease today they would get something like $1.5 million! Hess didn’t drill on the property during the 5-year term called for in the lease, but instead claim some cockamamie extension in the lease terms allows them extra time before they drill. Sorry Charlie, the judge said no.

Hess is miffed and says they will “vigorously challenge” the court decision, tying up the Griffiths’ lease for perhaps another year while this works its way through yet another court…
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Hess Loses OH Court Case, May Owe Big Bucks to 300 Landowners

Hess has just lost a court case in Ohio that may end up costing the company dearly. Hess had purchased leases in eastern Ohio from other companies. The original leases date to 2006-2008 and in many cases the landowners were paid as little as $10 per acre for a signing bonus–absolutely peanuts compared to today’s rates for $5K or more per acre. A Jefferson County landowner sued Hess to get out of his lease agreement because the company had not drilled on his property. Hess argued provisions in the lease let them extend the lease by paying a nominal extra fee.

Hess lost, and now will have to pay that landowner (and by extension around 300 other landowners) big re-signing bonuses or risk losing the land…
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PVR Partners to Build $150M Utica Shale Pipeline System for Hess

Midstream company PVR Partners has been selected by Hess to construct 45 miles of gathering pipelines in eastern Ohio’s Utica Shale region. In an announcement issued today, PVR said the new pipelines will be built to cover Belmont, Jefferson and Harrison Counties where Hess holds a substantial acreage position. The new pipeline project will end up costing somewhere in the neighborhood of $125-$150 million and will be completed in 2015.

The PVR announcement:
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