Montage Resources 2020 Sneak Preview: More OH Marcellus Drilling
Montage Resources provided a sneak preview yesterday for what to expect in 2020. You may recall Montage is the name of the company that resulted after the merger of Eclipse Resources with Blue Ridge Mountain Resources 11 months ago (see Blue Ridge Merges with Eclipse, Renamed to Montage Resources). Montage says it will drill 65% of its 2020 wells in the Ohio Marcellus. You read that right–the Marcellus play in Ohio!
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EQT is working on a deal to sell an “overriding royalty interest” (future share of royalty revenues) generated from the company’s prolific Marcellus/Utica production in return for a cool $1 billion. That’s according to a Reuters article published on Friday.
Late last week National Fuel Gas Company (NFG), the parent company of Marcellus/Utica driller Seneca Resources, issued its first quarter (everyone else’s fourth quarter) financial and operational update. NFG CEO and President Dave Bauer proclaimed, “Our team has done a great job cracking the code on our Utica development program” in Tioga County, PA. However, because of the ongoing pricemageddon with natgas prices in the basement, Seneca President John McGinnis said the company will drop to running a single rig for the balance of 2020.
Last November MDN told you that Range Resources was testing an all-electric fracking fleet at the Ziolkowski Pad in Allegheny County (see 
CNX Resources reports losing $271 million in the fourth quarter of 2019–but it wasn’t an actual money-out-of-pocket loss. The company wrote down the value of its Marcellus Shale assets (called an impairment). The company took a $327 million impairment charge for its Marcellus assets in PA, and a $119 impairment charge for unproved gas properties in the Marcellus. Below we have details on how many Marcellus wells CNX drilled and completed in 4Q and for the full year, and what company’s top brass says about what’s ahead for CNX in 2020 and beyond.
A number of Marcellus/Utica drillers recycle most, if not all of, the flowback and produced water from the wells they drill. Produced water (from the depths) continues to pour out of wells for years after they’re drilled. Produced water is super salty, filled with minerals. If a driller can’t reuse the water, they must dispose of it–typically via an injection well (in Ohio). Range Resources not only recycles all of its own produced water but also accepts and reuses produced water from 14 other drillers!
How many times over the years has MDN made this observation, using words along these lines: Cabot Oil & Gas is the only Marcellus drilling we know that can spin gold out of straw. Meaning they make money even at some of the lowest natural gas prices in the country, found in northeastern PA. A recent post by an energy investment advisor examines Cabot’s unique ability to make money at low prices.
EnCap Investments is a venture capital investor that funds independent companies in the U.S. oil and gas industry. EnCap has its fingers in a number of pies in the Marcellus/Utica. According to a Bloomberg article, EnCap plans to use a pile of $6 billion in cash it’s sitting on to drill new oil and natural gas wells this year. EnCap currently runs 23 drilling rigs at its various portfolio companies. Two of those companies drill in the Marcellus/Utica.
There is one court case in Pennsylvania that we’ve been concerned about since April 2018. The Briggs v Southwestern Energy case had the power to block most new Marcellus Shale drilling in the state. The case, revolving around the oil and gas “rule of capture” principle, was appealed by Southwestern all the way to the PA Supreme Court. We are elated to report that yesterday the Supremes ruled supreme and found in favor of Southwestern–retaining the rule of capture in the Keystone State. This is seriously good news for both drillers and leased landowners. Below we explain what the rule of capture is, the background of the case, and what the Supremes said in yesterday’s important ruling.
Yesterday the U.S. Environmental Protection Agency announced it has reached a settlement with Gulfport Energy over alleged air emissions violations found at 17 well pad locations Gulfport operates in the Ohio Utica. The violations happened in 2015. The settlement includes Gulfport paying $1.7 million in fines and spending another $2 million in “improvements” to cut down on volatile organic compound (VOC) emissions at the 17 well pads.
Seneca Resources, the drilling arm of National Fuel Gas Company, does most of its exploration and production in central and western Pennsylvania (although it also does some drilling in California). A spokesman for Seneca recently went on the record to talk about the company’s prolific 2019 production, with a forecast for 2020 (production is going UP). However, the company plans to ax one of its three rigs in 2020.