Energy Companies

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    San Francisco Play Exposes $18B Environmental Fraud

    A shocking and at times farcical tale of how an environmental lawsuit turned into the world’s biggest fraud is revealed in a new play. The world premiere of “The $18-Billion Prize,” based on the true story of rainforest natives and their New York lawyer “fighting for justice” against one of the world’s biggest oil companies, opens May 19 at San Francisco’s Phoenix Theatre. Performances continue through June 3. Written, or perhaps a better word is assembled, by Phelim McAleer and Jonathan Leaf, the play uses exact words from transcripts of court documents. In 1993, Steven Donziger, a Harvard-educated American lawyer, represented indigenous groups from Ecuador’s rainforest in a class action lawsuit against Chevron–a shakedown. The case received an enormous amount of media attention, including major coverage by Vanity Fair, Rolling Stone and 60 Minutes to name a few, and it drew the support of international celebrities. Chevron, to their credit, fought back. An American court found evidence of fraud and ordered Donziger to hand over his files and diaries, which exposed a massive bribery and corruption scheme. The play will make you laugh, and cry, and make you angry that such a long-running fraud could be perpetrated here in the United States…
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    Dela. Riverkeeper Suffers Major Defeat in Martian Well Case

    Nearly a year ago MDN reported that Big Green group THE Delaware Riverkeeper (aka Maya van Rossum) and the odious Philadelphia-based Clean Air Council (CAC) had suffered a crushing legal defeat in their attempt to interfere with shale drilling on the opposite side of the state from where the Delaware River and Philly is located (see Dela. Riverkeeper Loses Martian Case to Stop Rex Energy Drilling). A small group of anti-drilling parents from the Mars School District (whom we affectionately call “Martians”) in Butler County, PA, backed by money and legal help from Riverkeeper and CAC, filed frivolous lawsuit after frivolous lawsuit aimed at denying landowners in Middlesex Township revenue from legally permitted drilling. Even amid the back and forth lawsuits, at least two of the wells were permitted and drilled by Rex Energy, despite the bleatings of the Martians (see Martian Victory! 2 Wells Near Mars School Nearly Done Drilling). Following last year’s final word by PA Commonwealth Court, we thought that was the end of it. However, Riverkeeper and CAC tried one last, desperate attempt–by filing an appeal with the Environmental Hearing Board. The EHB is a special court set up to hear appeals of decisions made by the Dept. of Environmental Protection (DEP). Riverkeeper and CAC argued that the DEP abrogated their responsibilities under the PA Environmental Rights Amendment (ERA) to protect PA’s environment by issuing permits for Rex’s Martian wells. Last Friday the EHB ruled that DEP was well within its rights and did not, in fact, violate the ERA by allowing the Rex wells…
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    EQT Continues to Fight PA DEP Fine re Wastewater Impoundment

    On Wednesday, Pennsylvania Commonwealth Court (an appeals court) heard oral arguments over how to prove whether contaminants in the soil have moved into groundwater. The case dates back to 2014 when the PA Dept. of Environmental Protection (DEP) slapped EQT with a $4.53 million fine for a leaky wastewater impoundment in Tioga County (see PA DEP Levies Biggest Fine Ever, $4.5M Against EQT). EQT did not say there wasn’t a problem with leaks at the site, but they did say the way the DEP calculated the fine was unreasonable and arbitrary. EQT appealed the fine and the case all the way to the PA Supreme Court, and in early April the Supremes ruled in favor of EQT, saying that the DEP’s levied fine was excessive and that the DEP misinterpreted language in the 1937 Clean Streams Law (see PA Supreme Court Axes DEP $4.5M Fine in EQT Tioga Wastewater Leak). We thought (mistakenly) that was the end of the case. But it’s not. The Supremes ruled on “water to water” contamination in the case, but not on ground to water contamination. PA law allows for companies to be on the hook for each day a contaminant enters the water table. What lawyers argued this week was whether or not, and how, the DEP can prove contaminants in the ground, there because of EQT’s leak, can be proven to have leached into the water on any given day. DEP is calculating a revised $1.1 million fine based on assumptions about how many days the contaminants leaked out of the ground. EQT is forcing DEP to use more than just spitball estimates in calculating the fine…
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    Gulfport Energy 1Q18: “We Love SCOOP” but Spends 70% on Utica

    In April Gulfport Energy released an initial look at the company’s first quarter operations (see Gulfport 1Q18 Update: Utica Production Up 37%, SCOOP Up 198%). The April operational update did not include financial performance. Gulfport is an “independent” oil and gas driller with significant acreage positions in the Utica Shale of eastern Ohio and the SCOOP Woodford and SCOOP Springer plays in Oklahoma. Yesterday Gulfport dropped the other shoe–the financial report for 1Q18. The company reported $90 million of net income for 1Q18 vs. $154 million in 1Q17–a 42% drop. Much of the update focused on Gulfport’s activity in the Oklahoma SCOOP, which seems to have turned Gulfport’s head. However, there is continued strong activity in the Ohio Utica. Gulfport reports drilling 13 wells in the Utica in 1Q18 with an average lateral length of 9,000 feet (11% longer than 2017’s laterals). They averaged just over 1 billion cubic feet per day (Bcf/d) of production in the Utica. And Gulfport CEO Michael Moore said on an analyst conference call, in response to a question, that the company is still spending 70% of its capital budget on Utica drilling in 2018…
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    The Different Ways Range and CNX Dealt with ME1 Pipeline Outage

    Now that the Mariner East 1 (ME1) NGL (natural gas liquid) pipeline is back up and running, Marcellus/Utica producers are breathing a sigh of relief–at least, Range Resources, the primary customer for the pipeline, is. Following sinkholes that developed while Sunoco Logistics Partners was drilling for the Mariner East 2 (ME2) project, a portion of ME1 was exposed to open air in Chester County, PA, which prompted the state Public Utility Commission to shut down ME1 in early March (see PA PUC Shuts Down Mariner 1 Pipeline Due to Mariner 2 Sinkhole). Range sends 20,000 barrels a day of ethane and propane through ME1. The closure sent them scrambling for alternatives (see Range, CNX Look for Alternatives to ME1 Pipe Following Shutdown). CNX Resources is also a customer using ME1, but much less so than Range. It took two months, but the PUC finally allowed ME1 to restart last week (see Sunoco’s ME1 Pipe Restarts, ME2 Pipe Pays Another $355K in Fines). Range and CNX coped with the ME1 closure in very different ways…
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    Anti Group Stirs Up Pittsburghers Against Fracking, (Ab)Uses Kids

    We always find it deeply disturbing when a group of anti-fossil fueulers, like the innocent-sounding (but very radical) Moms Clean Air Force, pushes little kids in front of the cameras, getting them to hold protest signs in a sleazy attempt to play on people’s sympathy. That’s what happened yesterday in the Pittsburgh suburb of Indiana Township (Allegheny County). Hey, knock yourself out if you want to show up and protest and make some noise. But don’t bring the kids along. Don’t put your guilt trip on the kids, making them protest something they frankly don’t even understand. Don’t implant them with your irrational fears. We find it disgusting…
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    Rex Energy Gets 4th Extension to Delay Paying Defaulted IOU

    In early April, Rex Energy, a driller focused solely on the Marcellus/Utica driller, defaulted on payments it owes to debtholders (see Rex Energy Defaults on IOUs, Can’t File Annual Report on Time). Rex told the Securities and Exchange Commission (SEC) the company could not make a semi-annual interest payment due on senior notes on April 2. Rex said in the filing that the noteholders to whom payment is due (Angelo, Gordon & Co.) signed a temporary “forbearance” agreement that gives Rex a little breathing room, until April 16. The April 16 payment didn’t happen. Rex and Angelo signed a second forebearance agreement giving Rex another extension–until April 23–to either pay or agree to a new deal (see Rex Energy Gets 1 Extra Wk to Pay Defaulted IOU, Files Annual Report). April 23 came and went with no deal, and once again Rex and Angelo signed an agreement, the third such forbearance agreement, which gave the company until May 2 (see Rex Energy Gets 3rd Extension to Pay Defaulted IOU). May 2 came and went and (you guessed it), Rex has now signed a fourth forebearance agreement, giving the company another week–until May 9…
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    NFG/Seneca: Pursuing Plan B for Blocked NY Pipeline Project

    Last Friday National Fuel Gas Company (NFG), headquartered in Western New York State which operates drilling subsidiary Seneca Resources and pipeline subsidiary Empire Pipeline, issued its second quarter 2018 (everyone else’s first quarter) update. Via Seneca Resources, NFG drills wells in northcentral and northwestern PA. Via Empire Pipeline, they build and maintain hundreds of miles of pipelines. NFG wants to add to their pipeline portfolio by building the Northern Access Pipeline–a $455 million project with 97 miles of new pipeline along a power line corridor from northwestern PA up to Erie County, NY. Northern Access would allow Seneca to drill new wells in an area currently pipeline “constrained.” However, Northern Access construction has been blocked by the corrupt NY Dept. of Environmental Conservation (see Cuomo’s Corrupt NY DEC Blocks NFG Northern Access Pipeline Permit). During a conference call with analysts on Friday, NFG CEO Ron Tanski outlined what we call Plan B for the Northern Access. Yes, NFG still wants to build Northern Access, but they now have an alternative. NFG recently signed an agreement with Williams’ Transco Pipeline to flow 300 million cubic feet per day (MMcf/d) of Seneca natural gas to Transco Zone 6 markets. Transco is talking with other shippers before it files to expand the existing pipeline–a project that would not be online until late 2021. If by some miracle NFG could get the corrupt DEC to change its mind and authorize Northern Access, that project would be online in 2020. Other interesting bits of news coming from last week’s update: Seneca plans to drill Utica wells on some of its existing Marcellus well pads. Seneca added a second drilling rig in 2017, and plans to add a third rig any time now…
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    Eclipse 1Q18: No Comment on Process to Buy or Be Bought

    Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, issued its first quarter 2018 update last week. Eclipse has drilled the longest onshore natural gas wells in the world–in the Ohio Utica. Impressive company. In March the company announced it is looking for someone to buy, or (more likely) for someone else to buy them (see Eclipse Resources Board Considering Either Merger or Acquisition). Eclipse CEO Ben Hulburt began the quarterly analyst phone call last week by anticipating questions about the buy/be bought process. He shut down any questioning before it began by saying: “I hope you can understand, because of the nature of this process, we will not be able to address any questions relating to it or discuss it further during today’s call.” So what did Ben discuss? The company drilled 8 wells in 1Q18. They completed (fracked) the company’s first PA Utica well. And he took time to toot the company’s own horn (deservedly so). Eclipse drilled 8 of Ohio’s 10 most productive Utica oil wells in 4Q17. The company has a talent for drilling very long, and very productive wells…
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    CNX Resources 1Q18: Record High Production as Utica Skyrockets

    Yesterday CNX Resources, formerly CONSOL Energy, released its first quarter 2018 update–its first full 3-month update since separating from the coal company. CONSOL began life as a coal company 150 years ago and only in recent decades entered the oil and gas business. The company split itself into coal and oil/gas back in November (see CONSOL Energy Split Done – Meet “New” Gas Driller CNX Resources). So 1Q18 is the first full quarter as a standalone o&g company for CNX. And what a quarter it was! Production of everything–gas, NGLs and oil, called “equivalent” was 129.5 billion cubic feet equivalent (Bcfe) in 1Q18, which works out to be 1.4 Bcfe per day–an increase of 36% over 1Q17. Production from Marcellus wells (gas and liquids), which is the majority of CNX’s wells, was up 14%. However, production from CNX’s Utica wells was up a huge 184% over 1Q17. Utica volumes (43.5 Bcfe in 1Q18) are rapidly catching up to Marcellus volumes (65.9 Bcfe in 1Q18). Here’s the latest from CNX…
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    Another Look at “Rule of Capture” Case that Threatens PA Marcellus

    MDN brought you important news in April that the Pennsylvania Superior Court had handed down a decision (known as the “Briggs” case) that has the power to greatly restrict, perhaps even stop, Marcellus drilling in PA (see PA Superior Court Overturns “Rule of Capture” for Marcellus Well and PA “Rule of Capture” Case has Power to Limit Marcellus Drilling). The issue, in brief, is that the Superior Court decision disallows using an age-old principle called the “rule of capture” when it comes to shale drilling and fracking. It opens the door to a myriad of frivolous lawsuits claiming that a fracture, a crack created during fracking, is draining gas from a neighbor’s property without justly compensating the neighbor for the gas. Southwestern successfully argued in a lower court that the odd crack here and there that may slip under a neighbor’s property is permissible. The landowner appealed to Superior Court and three judges heard the case. Southwestern, following the decision, petitioned the Superior Court to have all of the sitting justices (called en banc) hear the case (see Southwestern Appeals “Trespass” Case to Entire PA Superior Court). No word yet on whether the Superiors will do it. In the meantime, we spotted an article by the ace lawyers at the Blank Rome law firm discussing the case and its implications. We can’t stress enough just how critical this case is to the future of drilling in Pennsylvania, which is why we bring you the following…
    Read More “Another Look at “Rule of Capture” Case that Threatens PA Marcellus”

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    Chesapeake Energy 1Q18: M-U Dominates with 45% of Production

    Yesterday Chesapeake Energy, now the #2 natural gas producer in the U.S. (after EQT), released its first quarter 2018 financial and operational update. The company reported 1Q18 profits of $268 million, up 257% from the $75 million in profits during 1Q17. The key for increased profits was an increase in production while lowering costs. As we scanned over the numbers, one thing stood out for us: 26% of Chesapeake’s production comes from the Marcellus Shale, and 19% comes from the Utica. Add them together (45%) and no other region comes close. M-U success is Chesapeake’s success. It shows just how key the M-U region is for the mighty Chesapeake. During 1Q18 the company drilled and placed into production 10 wells in the Ohio Utica and 6 wells in the PA Marcellus. 2Q18 plans are to drill and bring online 7 Utica wells and 17 Marcellus wells. However, Chesapeake’s head has been turned. Their primary 2018 focus appears to be the Texas Eagle Ford Shale–an oil play. The company is currently running 5 drilling rigs in the Eagle Ford. They drilled and brought online 23 Eagle Ford wells in 1Q18, with plans to drill and bring online another 50 wells in 2Q18. Chessy has fallen and fallen hard for the siren song of oil. Here’s the latest from the #2 natural-gas producing company in the U.S. that now loves oil…
    Read More “Chesapeake Energy 1Q18: M-U Dominates with 45% of Production”

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    EQT Pay Dispute – Comparing CEO Salaries for Top M-U Firms

    In mid-March, the country’s #1 producer of natural gas, EQT, suddenly and without previous warning lost it’s President & CEO, Steven Schlotterbeck (see EQT CEO Steve Schlotterbeck Suddenly Quits, Leaves Company). Steve is the man who guided the company through its acquisition of Rice Energy last year (see EQT Buys Rice Energy in $8.2B Deal, Becomes #1 Gas Producer in US). It was a tough battle against multiple corporate raiders who didn’t want to see the deal happen, but Steve held it together and made it happen. The notice from EQT was short and sweet and said Steve had resigned immediately, due to “personal reasons.” MDN was the first to disclose what those “personal reasons” were: a pay dispute. According to Steve, the board wasn’t paying him what similar CEOs at competitors are making. So he quit. Makes you wonder how much Steve was making, and what CEOs at other large Marcellus/Utica drillers make. We spotted an article in the Pittsburgh Business Times that reveals what Steve made last year. We did some digging to find what comparable CEOs make. The numbers we discovered may surprise you…
    Read More “EQT Pay Dispute – Comparing CEO Salaries for Top M-U Firms”

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    Cabot O&G 1Q18: Important New Markets Opening Up Now

    Note: A previous version of this post incorrectly stated Cabot is pumping 3.75 Bcf/d of natural gas now. The correction is that according to the CEO, the company has the capability to pump that much as soon as all pipelines are in place and existing planned wells are online–likely in 2020. We regret the error!

    One of our favorite Marcellus drillers, Cabot Oil & Gas, provided their first quarter 2018 update on Friday. Cabot never disappoints! What did we learn from the update? For one thing, when all pipeline infrastructure is in place and all planned wells are drilled and online, the company will be pumping a massive 3.75 billion cubic feet per day (Bcf/d) of natural gas out of Susquehanna County, PA. Cabot is working with Williams to increase the capacity of their gathering system to support even more gas than 3.75 Bcf/d. It would not surprise us if Cabot becomes the first 4 Bcf/d Marcellus/Utica driller in the next few years. So Cabot has plenty of production. What about demand? Lots of production with little or no demand equals prices in the basement. There was good news on the demand front too. Cabot said there are two gas-fired electric plants starting up by June 1st–both of them powered with Cabot Marcellus gas. Add to that the now-operational Cove Point LNG export plant with Cabot’s contract to sell gas to Japan–and it equals a massive increase in demand for Cabot’s gas going into the second quarter. Later this year, in the second half sometime, Atlantic Sunrise will come online increasing Cabot’s flow to new markets even more. We’d call Cabot’s Friday 1Q18 update the “stars are finally in alignment” update for Cabot. Here are some more pickings from the update, along with a copy of the full update…
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    EQT Pays PA DCNR $874,200 to Lease Under Ten Mile Creek

    This is a story that continues to bug us. The state of Pennsylvania, specifically the Dept. of Conservation and Natural Resources (DCNR), is grabbing money that we think belongs to private landowners. The DCNR has been, for years, claimed that under a centuries-old law that the state of PA “owns” the property under “navigable” waterways–including rivers and streams (see PA DCNR Publishes Lease Agreements for Deals Under Rivers/Creeks). We understand the state claiming the Delaware River, and maybe the Susquehanna River, is a “navigable” body of water. The DCNR uses the “navigable waterway” excuse to sign leases with drillers under much smaller waterways than the Delaware and Susquehanna–siphoning money that would have gone to landowners. A landowner might own the land on both sides of, say, Ten Mile Creek, as we’re sure happens. However, the land under Ten Mile Creek does not technically belong to them. In fact, certain long portions of the land under Ten Mile Creek are now leased to EQT, and EQT paid handsomely for it. The company leased 218.55 acres under Ten Mile Creek in Greene and Washington counties (southwestern PA) for $874,200, which works out to be exactly $4,000 per acre! Not to mention a whopping 20% royalty! That’s money that (in our opinion) should go to the landowners who own the land along the creek, not to the state. Until landowners sue or the legislature acts, the state will continue to pick the pockets of landowners who own land along PA’s waterways…
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    Southwestern 1Q18: New $3.5B Line of Credit, Fayetteville Not Sold

    Last Friday Southwestern Energy, one of the biggest drillers in the Marcellus (4th largest natgas producer in the country), issued its first quarter 2018 update. Southwestern drills in two plays: The Marcellus (i.e. Appalachia), and the Fayetteville (in Arkansas). In March the company signaled it wants to sell its Fayetteville Shale assets (see Southwestern 2017: $3.5B Turnaround, Shopping Fayetteville Assets). A sale hasn’t happened yet, according to Friday’s update. In fact, Southwestern CEO Bill Way gave an elaborate “no comment” (our words) on the Fayetteville “process” currently under way with the help of JPMorgan. Southwestern reported earning $205 million in 1Q18, down 27% from the $281 million they earned in 1Q17. The company has just reorganized its debt, paying off a $1.2 billion term loan and arranging a $3.5 billion line of credit. Production in the Marcellus/Utica was 2.4 billion cubic feet equivalent per day (Bcfe/d) of natural gas gross, 159 million cubic feet equivalent per day (MMcfe/d) net. Production was up 42% in southwest Appalachia and up 24% in northeast Appalachia. Across both the M-U and Fayetteville, Southwestern drilled 32 wells, completed 29 wells, and placed 33 wells online into sales. Here’s the full 1Q18 update from Southwestern Energy…
    Read More “Southwestern 1Q18: New $3.5B Line of Credit, Fayetteville Not Sold”