Markets “Baffled” by “Unexpected” Cabot Merger with Cimarex
Yesterday we shared the devastating (for us) news that Cabot Oil & Gas, one of the premier drillers in the Marcellus, is merging with (being acquired by) Permian driller Cimarex (see HUGE NEWS: Permian Driller Cimarex Buying Out Cabot Oil & Gas). Now that the bombshell news has had time to sink in, it appears we were not the only ones baffled by this merger. Investors were baffled too. Cimarex shares fell 7.2% to $66.07, while Cabot’s stock fell 6.9% to $16.59. Below we have reactions to the surprise announcement.
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The judge in a lawsuit initiated by Cabot Oil & Gas against a Susquehanna County, PA landowner and his lawyers has had it up to here with the ongoing stonewalling and delay tactics by the landowner’s lawyers. “Four years we’ve been spinning our wheels on this nonsense,” the judge said. “The court is extremely frustrated, to put it politely.” The judge bordered on being impolite at a hearing last Thursday…
As we reported a month ago, a group of West Virginia landowners/rights owners filed a claim against EQT alleging the company had allowed leases to lapse, then at a later date reentered their property and drilled new wells (see 
We’re devastated. We know you’re not supposed to have favorites, but we do. Our favorite Marcellus/Utica driller for years has been Cabot Oil & Gas. We know some great folks who work for Cabot. It has been a peerless operator in the northeast Marcellus–making money when nobody else could. Cabot treats its landowners well, cares about the environment, gives big money to local nonprofit causes, and in general is the best kind of corporate citizen anybody could wish for. We suppose it was only a matter of time before Cabot became a target in this merger mania we’re currently going through. This morning Cabot announced a “merger of equals” with Cimarex, a big driller in the Permian and Midcontinent. The truth is Cimarex is buying out Cabot.
NGL (natural gas liquid) revenues for U.S. drillers soared in the first quarter of 2021–up 100% (i.e. doubled) over the same quarter in 2020, which was the quarter when COVID-19 began to seep into the public consciousness. In particular international demand for U.S. liquefied petroleum gas (LPG, or propane) helped propel NGL revenues higher in 1Q21. Guess which company posted the highest year-over-year increases for both NGL prices and revenues?
Back in March MDN told you about supposed violations by Chesapeake Energy of the federal Clean Water Act and the Pennsylvania Clean Streams Law and Dam Safety and Encroachments Act by failing to identify and protect swamps (i.e. wetlands) at a number of oil and gas well sites in Pennsylvania (see 
Last November Gulfport Energy, the third-largest driller in the Ohio Utica Shale (by the number of wells drilled), filed for a “pre-arranged” Chapter 11 bankruptcy (see 
All three M-U states received permits to drill new shale wells last week. Pennsylvania received a sizable 14 new permits (after receiving 18 permits the previous week). The majority of those permits were for wells on three pads in northeastern PA. Ohio received 3 new permits last week all in one county (Greene) for one driller (Eclipse, now owned by Southwestern Energy) on one well pad. And West Virginia received a sizable 13 new permits with 9 of them split between two well pads for different drillers (Northeast Natural Energy and Tug Hill).
We’ve seen this routine play out dozens (maybe hundreds) of times over the years: Publicly-traded drilling companies float new IOUs (notes) to pay off older notes coming due. Why they never just pay them off and get out of debt we don’t know–that’s above our understanding of high finance. We just know this is the way it always has and likely always will work. Antero Resources, the third-largest natural gas producer in the U.S. and the second-largest NGL producer, focused entirely on drilling in the M-U (mainly in West Virginia) is the latest to do the IOU refinancing thing.
Diversified Gas & Oil Company, which owns close to 8 million acres of leases with some 60,000 (mostly) conventional oil and gas wells (with over 400 Marcellus/Utica shale wells) in the Appalachian Basin, is no longer calling itself Diversified Gas & Oil Company. Instead, the company has changed its name to Diversified Energy Company. The company also changed its website URL from the old dgoc.com to 
This Wednesday the radicals of “Protect PT” (Penn Township)–a group funded with shadowy Big Green money–will try to convince the Democrats sitting on Pennsylvania’s Supreme Court to overturn legal and safe shale drilling at well pads in Penn Township (Westmoreland County, PA). Olympus Energy (formerly Huntley & Huntley) previously submitted plans to drill multiple wells on two new well pads in the township. The Zoning Hearing Board approved the plans.
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 first-quarter 2021 update earlier this week. The big announcement coming from CEO Jeff Fisher is that Ascent is pursuing (like three other M-U drillers) “certification” of its shale gas.
Chesapeake Energy issued its first quarterly update since exiting bankruptcy in February. It wasn’t the typical update most public companies issue. It’s a challenge to reconcile numbers before bankruptcy and after exiting bankruptcy. A few highlights: When combining numbers from before and after bankruptcy, we found (in digging through the SEC Form 8-K filing) that Chessy produced 2 billion cubic feet per day (Bcf/d) on natural gas, most of which was produced in the northeast PA Marcellus (1.26 Bcf/d). The company also produced an average of 80,000 barrels of oil and 22,000 barrels of NGLs (in non-Marcellus plays) in 1Q21. We also discovered the company’s strategy on where it plans to expand its shale gas drilling program (the answer may not please you)…
Last Friday National Fuel Gas Company (NFG), the parent company for Seneca Resources and Empire Pipeline, issued its latest quarterly update for the quarter ending Mar. 31 (NFG’s second fiscal quarter, everyone else’s first quarter). The company’s purchase of Shell’s Marcellus assets last year (450,000 acres, 350 producing Marcellus and Utica shale wells in Tioga County) gave Seneca a 43% boost in production in its fiscal 2Q21 over 2Q20. Seneca drilled 14 new wells in fiscal 2Q.