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Weekly Shale Drilling Permits for PA, OH, WV: Aug 23-29
Last week both Pennsylvania and West Virginia issued permits to drill new shale wells. Ohio remained skunked for a sixth week in a row. What’s going on in Ohio? Or rather, what isn’t going on there? PA issued 15 new shale permits. Not to be outdone, WV also issued 15 new shale permits.
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Olympus Energy, the renamed Huntley & Huntley Energy Exploration (HHEX), continues to make progress in Upper Burrell Township in Westmoreland County, PA. The company currently has two well pads (Zeus and Calliope) with multiple wells drilled in Upper Burrell. Now comes word of plans for a third well pad, named the Selene Well Pad by the company. Olympus will present plans for the new pad at a hearing on Wednesday.
The federal Pipeline and Hazardous Materials Safety Administration (PHMSA) recently issued a “warning letter” to Shell concerning the company’s ethane pipeline, called the Falcon Pipeline. PHMSA claims the pipeline committed two “probable violations” by failing to place pipeline sections at a construction site in Beaver County on protective padding. PHMSA told Shell to fix it, or else.
You can’t miss the breathless headlines, many of which are misleading, that big oil and gas companies are beginning to force employees to get vaccinated for COVID-19. What’s missing from the headlines, especially those touting Chevron’s new vaccine mandate, is the all-important word “some,” as in “some” employees who work in tight quarters for long periods (like offshore platforms) are being required to get vaccinated.
A profoundly biased and inaccurate article published by Environmental Health News attempts to paint two proposed shale gas wells as an environmental disaster and existential health threat akin to a nuclear meltdown. The article is so over the top it’s laughable–but instructive nonetheless. Apex Energy has proposed drilling two wells on a pad in a rural part of Trafford, PA township, straddling Allegheny and Westmoreland counties. The location is “within one mile of Level Green Elementary School and within two miles of 12,733 residents in Penn Township and Trafford Borough (about 17 miles east of Pittsburgh).” Are the kiddies at nearby schools and residents of Trafford really in danger?
It’s been our observation since beginning to write about the shale energy space in 2009 that every year or two most drillers, at least the publicly traded drillers, issue new notes (what we call IOUs) to pay off already-issued notes coming due within a few years. And if there’s any money left over from the new tranch of notes issued, they use it to pay down other debts or “for other corporate purposes.” The latest swap-new-notes-for-old-notes comes from a major Marcellus/Utica driller, Southwestern Energy, which last week floated $1.2 billion of new notes to help pay off what amounts to $1.4 billion of older notes coming due in the next few years.
During the second quarter (May through June), ten of the largest oil and gas producers covered by S&P Global Market Intelligence saw their NGL (natural gas liquids) revenues grow substantially from the same period a year ago. Those ten companies, half of them drillers in the Marcellus/Utica region, saw NGL prices increase from 104% to as high as 261%. The extra money from NGLs made what turned out to be a down quarter financial-wise (because of bad bets on hedges) better than it would have otherwise been.
Epsilon Energy concentrates most of its effort on the Marcellus in Susquehanna County, PA. Epsilon doesn’t typically do its own drilling. The company joint venture partners with (gives money to) other companies, like Chesapeake Energy, and the other company typically does the drilling. Epsilon issued its second quarter update last Thursday. The company’s Marcellus net gas production averaged 27.6 million cubic feet per day (MMcf/d) in 2Q21, compared to 30.6 MMcf/d of net gas production in 2Q20 (a 10% decrease). However, revenues were $7.1 million in 2Q21, compared to $6.3 million in 2Q20 (a 13% increase).
When CNX Resources issued its second quarter update in July, the company revealed that it is not only “net carbon zero” right now, it has been that way–actually net carbon negative, pulling more CO2 out of the atmosphere than it puts in–since 2016 (see 
Ascent Resources, originally founded as American Energy Partners by gas legend Aubrey McClendon, is a privately-held company that focuses 100% on the Ohio Utica Shale. Ascent is Ohio’s largest natural gas producer and the 8th largest natural gas producer in the U.S. The company issued its second quarter 2021 update earlier this week. The company produced 1.95 billion cubic feet equivalent per day (Bcfe/d) during 2Q (91% natural gas). Ascent generated $38 million of free cash flow, but like other M-U drillers, hedging bets on derivatives resulted in a big loss of $617 million for the quarter.
Chesapeake announced yesterday it will buy Haynesville driller Vine Energy for $2.2 billion–mostly by trading or issuing shares of stock (payment will be 92% in stock, 8% in cash). The Reuters rumors were right: interim CEO Mike Wichterich will either go big or go bust with his mission to expand Chesapeake. We hope it’s not the latter since Chesapeake still owns a huge amount of assets in the northeastern PA Marcellus. Is Chesapeake making the same mistake it made under the leadership of Doug Lawler when Lawler got a wandering eye and purchased WildHorse Resource Development Corp in the Eagle Ford Shale (see 
Two days ago Chesapeake Energy issued its second quarter 2021 update. Yesterday the company held a conference call with analysts to discuss financial and operational performance during 2Q. As you can imagine, most of the talk was about a surprise announcement (from yesterday) that Chesapeake is buying Haynesville driller Vine Energy for $2.2 billion (see today’s lead story). During 2Q the company lost $439 million, versus losing $276 million for the same quarter last year. However, Chessy generated $300 million in free cash flow. The company produced 433,000 boe (barrels of oil equivalent) per day, of which 77% was natural gas and 23% liquids. It plans to significantly increase production.