Energy Companies

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    EV Energy Partners Files for Chapter 11 Bankruptcy

    In the middle of March, MDN warned readers that EV Energy Partners (EVEP), a subsidiary company of EnerVest, would soon be filing for bankruptcy (see EV Energy Partners Filing for Chapter 11 Bankruptcy in Next 2 Wks). On Monday, the company succumbed and filed. At one time (in 2012), EVEP owned more than a half million acres in the Utica Shale alone (see EnerVest Puts 539,000 Utica Shale Acres on Auction Block). We couldn’t find updated statistics for the company, but we believe they still own a significant amount of Utica (and Marcellus) acreage. Here’s the EVEP announcement that the company has entered into a prepackaged bankruptcy deal…
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    PA “Rule of Capture” Case has Power to Limit Marcellus Drilling

    As we indicated in our post yesterday, the Pennsylvania Superior Court has handed down a decision that has the power to greatly restrict, even stop, Marcellus drilling in PA (see PA Superior Court Overturns “Rule of Capture” for Marcellus Well). This is a legal issue–and MDN is not written by a lawyer. Hence our earlier misreading of the importance and facts in the Superior Court decision. The issue, in brief, is that Monday’s court decision disallows using an age-old principle called the rule of capture, which we previously described. The rule of capture works for conventional drilling where underground deposits of oil and gas are in pools and the pool may exist underneath multiple surface property owners. Whoever gets there first and sucks the oil/gas out, wins. That’s the rule of capture in a nutshell. And it makes sense. You can’t be held responsible for oil and gas moving from one place to another as it’s extracted. And who knows how much of the pool is located under your property, or your neighbor’s property? The Superior Court justices ruled that the rule of capture doesn’t work for hydraulic fracturing because gas (and oil) trapped in shale rock does not freely move from one place to another as it does in a pool. The judges say the gas would “stay forever” where it is without fracking. In the case of Briggs v. Southwestern Energy, the Briggs family (in Susquehanna County, PA) alleges that when Southwestern drilled and fracked on the Briggs’ neighbor, the fracking was done close enough to their property that some of the gas located under their property (unleased) was released and extracted through the Southwestern well–a “trepass.” Southwestern countered that IF such a “trespass” took place, it falls under the rule of capture. The ultimate issue boils down to this: How far do fractures extend from a lateral well? An expert energy attorney told MDN off the record that Monday’s decision “could change the entire Pennsylvania shale industry” in two important ways…
    Read More “PA “Rule of Capture” Case has Power to Limit Marcellus Drilling”

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    Shell Ethane Pipeline Hearing Draws Few Supporters, Many Antis

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    Last night the first of three public hearings held by the Pennsylvania Dept. of Environmental Protection for the planned Shell Falcon Ethane Pipeline project was held in Monaca (Beaver County), PA. About 100 people turned up for the hearing, which lasted an hour and a half. No signs allowed. The only people who could speak had to register first. Of the 23 who did speak, 16 of them (including out-of-town movement antis) spoke against the project, while 7 people spoke in favor. The 97-mile Falcon Ethane Pipeline system has two “legs” that will feed Shell’s mighty ethane cracker plant. Shell is not using eminent domain for any of its leases for the pipeline. Every lease is negotiated and signed with individual landowners. Antis, in large part being organized and agitated by radical groups like FracTracker Alliance, are making a concerted effort to block the pipeline, hoping they can in turn stop the multi-billion dollar cracker plant currently under construction by blocking the pipeline that feeds it…
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    New Details Emerge on Cabot’s Shale Plans in Central Ohio

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    Cabot Oil & Gas director of external affairs, George Stark, recently spoke to the Ashland Times-Gazette about the company’s plans to drill test wells in and around Ashland County, OH. As MDN previously reported, Cabot is sniffing around central Ohio, looking for “what’s next” after the Marcellus Shale. Last December we told you that Cabot has leased acreage in Ashland County (see Cabot O&G Considers Drilling in Ashland County, OH). Two weeks ago we told you that Cabot has filed for its first permit to drill a test well (see Cabot Files for Permit to Drill Below the Utica in Ashland, OH). Stark revealed, in his interview, that Cabot geologists “see something in Ohio” and that Cabot “wants to go touch it.” What, exactly, does Cabot want to touch? We originally thought it was the Utica, but Stark told MDN no, it’s not the Utica–but a layer “lower than the Utica.” However, Stark won’t say specifically which layer or layers. We now think we know. We also learn (from the article) that Cabot has acreage not only in Ashland, but in four neighboring counties too…
    Read More “New Details Emerge on Cabot’s Shale Plans in Central Ohio”

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    PA Superior Court Overturns “Rule of Capture” for Marcellus Well

    STOP PRESS: Shortly after this post was published, a MDN reader (an energy attorney) called us to alert us that our initial take on this case is not right. The case is NOT about a company stretching a lateral too far so that it trespasses under an adjoining property. Instead, the case is about the “zone of fracking”–that is, that fracking, by its nature, creates cracks that may open up and drain some of the gas under a neighboring property–even though the fracking was done properly within the boundaries of the leased property. The case (ominously) says that fracking itself can cause a trespass. Our attorney friend said this case has the potential to negatively affect Marcellus drilling in PA–in a BIG way. We will write another post on this issue tomorrow. In the meantime, just be aware that our initial take below is not correct. – Jim Willis, Editor

    The Pennsylvania Superior Court handed down an important decision yesterday that impacts both Marcellus landowners and drillers. The decision removes “rule of capture” as a way for shale drillers to drill under adjoining neighbors who haven’t specifically leased their property for drilling. The rule of capture came about with conventional (vertical only) drilling, cases in which a pool of oil or natural gas exists that runs underneath the property owned by multiple surface owners (see the image to the left). The rule of capture principle says “the first person to capture a natural resource owns that resource.” If you put a well or two or three on your property to extract the oil/gas, if it flows from the neighbor’s side to your side and up the well, it’s yours. Same for your neighbor. He/she can grab the oil and gas under your property if the pool exists under both. The principle originated in England (it’s a very old principle). However, Southwestern Energy tried to use the rule of capture principle to drill under property not leased for drilling that sits next to property that is leased–claiming the rule of capture. The molecules in shale are a whole other story than molecules sitting in a common pool. That’s what the Superiors ruled. Southwestern (and by extension, other Marcellus drillers) can’t simply extend a lateral well a few hundred feet under an un-leased neighbor, which certainly makes sense to us…
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    Blue Ridge Mountain Res. Jazzed by Utica Wells in Washington, OH

    Blue Ridge Mountain Resources is jazzed about a pair of Utica wells originally drilled in 2014, but completed this past December, located in Washington County, OH. Blue Ridge is the renamed remnant of Magnum Hunter Resources. Magnum Hunter filed for bankruptcy in December 2015, emerging from bankruptcy in May 2016 minus CEO Gary Evans (see Magnum Hunter Emerges from Bankruptcy with CEO Gary Evans Gone). Looking to shed the image of the past, the company renamed itself as Blue Ridge in January 2017 (see Magnum Hunter Changes Its Name, Leaves the Bankrupt Past Behind). Blue Ridge is 100% focused on the Marcellus and Utica Shale plays. The company’s current production is 100 million cubic feet equivalent per day (MMcfe/d). They own 119,000 acres of leases with huge potential–96% of their acreage is not yet developed (i.e. undrilled). In 2014 Magnum Hunter drilled two Utica wells in Washington County, OH but never completed them. In December Blue Ridge completed those wells. The early production results from the two wells is very encouraging and has allowed Blue Ridge to “de-risk” 6,700 surrounding acres that will support another 40-50 new wells. Translation: Washington County landowners signed with Blue Ridge can expect drilling activity soon…
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    Ascent Resources Marcellus Exits Chapter 11 Bankruptcy

    In February, MDN brought you the news that Ascent Resources Marcellus, a company founded by Aubrey McClendon after he left Chesapeake Energy, had filed for Chapter 11 bankruptcy (see Ascent Resources’ Marcellus Unit Files for Chapter 11 Bankruptcy). Ascent Marcellus is one of several companies using the Ascent name. The Ascent Marcellus piece of the pie owns 43,000 of leases and has drilled some 547 wells in West Virginia. Big operation. The good news (if there’s ever good news in bankruptcy), is that 75% of the debtholders signed onto a prepackaged bankruptcy plan. The plan worked. On March 30 Ascent announced it has officially emerged from bankruptcy with a new board of directors and the same management team as before…
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    PA Supreme Court Axes DEP $4.5M Fine in EQT Tioga Wastewater Leak

    EQT had to take their case all the way to the Pennsylvania Supreme Court, but in the end, the company was victorious over a wildly overinflated $4.53 million fine levied by the state Dept. of Environmental Protection (DEP) for a leaky wastewater impoundment in Tioga County dating back to 2014 (see PA DEP Levies Biggest Fine Ever, $4.5M Against EQT). While EQT did not say there wasn’t a problem with leaks at the site, they did say the way the DEP calculated the fine was unreasonable and arbitrary. In fact, EQT says the DEP levied the fine and took EQT to court because a few weeks prior EQT had sued the DEP over a different, unrelated matter (i.e., sour grapes on the part of the DEP). EQT appealed the fine and the case all the way to the PA Supreme Court, which heard oral arguments last November (see PA Supreme Court Hears Arguments in EQT Wastewater Leak Case). Last Wednesday the PA Supremes ruled (5-2) 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…
    Read More “PA Supreme Court Axes DEP $4.5M Fine in EQT Tioga Wastewater Leak”

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    Antero Resources Spent $1B in WV Last Year, Another $1B This Year

    Antero Resources is seriously in love with West Virginia. Antero is headquartered in Denver, CO but is totally focused on drilling for natural gas, NGLs and oil in the Marcellus/Utica. Antero owns over 484,000 net acres in the southwestern portion of the Marcellus Shale, and over 137,000 net acres in the core of the Utica Shale. Most of their acreage is in WV. Of the $1.3 billion the company spent last year, and plans to spend again this year, around $1 billion (per year) is spent on drilling in WV–close to 80%. Over the next five years, Antero says it will invest $6 billion in the Mountain State. That’s some serious love! As the technology gets better, it takes less time to drill. Antero said it used to take 30 days to drill an 8,000-foot well. Today? They can do it in one day. One of the secrets to Antero’s success in WV is their new Clearwater facility that recycles 98% of the frack wastewater (flowback and produced water) coming from Antero’s wells. Below is an article in which Antero gushes about their love (and future plans) for WV…
    Read More “Antero Resources Spent $1B in WV Last Year, Another $1B This Year”

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    Opponents Slandering Potter Co. Wastewater Facility Legally Warned

    Is it free speech to make “false, destructive and defamatory statements” about a company and the project it proposes to build? Is it OK to pretend to be a news organization when you’re really just a shill for Big Green groups, and is your “speech” protected–when it’s false? Members of the Seneca Indian tribe and faux news outlet Public Herald have been put on notice, legally, by lawyers representing the proposed Epiphany shale wastewater recycling facility in Coudersport (Potter County, PA) and driller JKLM to “cease and desist” from their slandering, smearing false statements about the Epiphany project–statements that are misleading the public. Those served the legal notice say it’s an attempt to silence their free speech rights. What do you think?…
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    A (Very) Rough Method for Calculating Royalties on Cabot Wells

    Cabot Oil & Gas, one of our favorite Marcellus drillers, has just published a new PowerPoint slide deck presentation as part of an investor’s conference they attended earlier this week (the Scotia Howard Weil Energy Conference). Normally a new slide deck isn’t all that big a deal. However, thanks to MDN friend Chris Acker who pointed it out to us, there is some new information in the deck worthy of note. Back in December MDN brought you the news that Cabot had signed a deal to sell off their Texas Eagle Ford Shale assets in order to concentrate solely on the Marcellus (see Cabot O&G Sells Texas Eagle Ford Assets for $765M, Focus on Marc.). The slide deck notes that the Eagle Ford divestiture closed on Feb. 28th (slide #3). Also in the slide deck is a mention that Cabot plans to experiment with drilling “upper Marcellus” wells in the second half of 2018 (slide #11). Most (all?) of the wells they’ve drilled to date are “lower Marcellus.” A successful program of drilling upper Marcellus certainly bodes well for existing landowners with existing lower Marcellus wells–perhaps Cabot will revisit those pads to drill new wells? Slide #11 has some great information on it. We’ve used it to create a (very) rough royalty estimation calculator for Cabot landowners…
    Read More “A (Very) Rough Method for Calculating Royalties on Cabot Wells”

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    Antero Res. Considers Mining its Own Frac Sand to Cut Costs

    If you hang around the business world long enough (as we have), you notice certain trends. One such trend from yesteryear is companies integrating up and down the supply chain. Like when a widget manufacturing company buys the company that supplies it the raw materials used to make the widgets. Example: a car manufacturer buys the company that supplies it with plastic dashboards–and then buys the chemical company that produces the plastic to make the dashboards. And then the same car company, on the other side, buys the credit union that makes the loans to buy their cars! The company becomes integrated. But then the pendulum swings and in recent years, the trend has been about dis-integrating–spinning things off into their own self-contained units. Better to focus on one thing and do it well, rather than be like GE and spread yourself around to multiple industries and specialties. In the oil and gas world, Chesapeake Energy once owned its own oilfield services company (Chesapeake Oilfield Services)–which they later sold. One thing you don’t hear much about is shale companies vertically integrating and buying suppliers. However, Antero Resources, one of the biggest and best drillers in the Marcellus/Utica, is actively considering such a move. Antero wants to buy its own frac sand company as a way of controlling costs. Is it a good idea, or a bad idea?…
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    Eclipse Resources Board Considering Either Merger or Acquisition

    Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA, has just done it again. The company has drilled another massively long onshore lateral–19,335 feet long–in the Ohio Utica. It’s not the longest onshore lateral in the world (currently the Eclipse Outlaw well, at 19,600 feet), but this one comes close. Although drilling a new super lateral is big news, there was other news that (for us) is even bigger: Eclipse issued a statement yesterday that says, in part, the company “has initiated a process to evaluate and consider a full range of potential strategic, operational and financial alternatives to maximize shareholder value.” Eclipse hired investment firm Jefferies LLC and international law firm Norton Rose Fulbright to help with the process. Both firms specialize in mergers and acquisitions (M&A). The statement also says, “There is no assurance that the review by the Board will result in a transaction or other strategic alternative,” which we interpret to mean Eclipse is looking either to buy another company (like EQT did with Rice Energy), or sell itself to another company (like Rice Energy did to EQT). That’s our take on this seemingly innocuous announcement. Big news indeed!…
    Read More “Eclipse Resources Board Considering Either Merger or Acquisition”

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    W Pike Run Antis Want 1000′ Setback to Zone Out EQT Drilling

    A debate is playing out in West Pike Run Township in Washington County, PA (near Pittsburgh) that we find interesting. A quick PA history lesson: Back in 2012 PA passed the Act 13 law to update oil and gas regulations to account for shale drilling. One of the updates was a uniform set of zoning requirements to protect residents and the environment. Unfortunately, seven selfish townships sued and eventually won (at the PA Supreme Court) challenging those regulations. So PA towns won the right to impose restrictions on drilling activities. In West Pike Run, the debate is over “setbacks”–how far does a well have to be from nearby structures, like homes and barns and businesses. State law imposes a minimum of 500 feet from the wellhead to an “occupied” structure–and 300 feet from the well to a body of water. In West Pike Run, antis want to up that number to 1,000 feet, which would effectively prevent any more drilling by EQT, the primary driller in the township. The town recently held a hearing on the proposed 1,000 foot setback, a hearing which has been continued to a future meeting on April 16…
    Read More “W Pike Run Antis Want 1000′ Setback to Zone Out EQT Drilling”

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    Monroeville Back from Edge of Insanity, Allows Some Fracking

    Common sense has broken out in Monroeville. Either that, or fear of litigation. Either way, Monroeville (Allegheny County, PA) has rolled back an overly-restrictive zoning ordinance meant to hassle Huntley & Huntley’s plans to drill wells in the township–the very same township where H&H has its headquarters. Last October, Monroeville Council passed a temporary ban on oil and gas well drilling everywhere except for those areas marked M-2 industrial zoning–a big change (see Monroeville, PA Hostile to Shale, Bans Drilling in Most Places). Previously, drilling permits were “conditional use” in Monroeville, meaning each permit was evaluated on its own merits, regardless of which zoning district it was located in. By limiting drilling to M-2, Council severely limited drilling in the municipality–but at least drilling was still allowed. Then in January, Monroeville Council advertised their new zoning ordinance to FURTHER RESTRICT any kind of oil and gas activity–not just drilling, but pipelines, compressor plants, etc.–to a 150-acre parcel located next to the city dump (see Monroeville Pushes Ban on NatGas Activity, Incl. Drilling & Plants). It would be, in essence, a total ban on shale drilling activity throughout the township. Two weeks ago Monroeville Council voted (unanimously) to withdraw the proposed new ordinance, which means the zoning ordinance from last October limiting drilling to M-2 remains the law. Still not good, but better than a total ban…
    Read More “Monroeville Back from Edge of Insanity, Allows Some Fracking”

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    EQT Pulls a Chesapeake, New Deductions from PA Leases

    Last Friday MDN editor Jim Willis had the pleasure of speaking at the National Association of Royalty Owners (NARO) Pennsylvania Chapter annual convention in State College, PA. Jim was humbled to present alongside a cast of terrific speakers, including Scott Perry, Deputy Secretary of the Office of Oil and Gas Management at the PA Dept. of Environmental Protection, Tom Murphy, Director of Penn State’s Marcellus Center of Outreach and Research (MCOR), and Scott Kurkoski, a top lawyer and head of the energy practice for Levene, Gouldin & Thompson (thanks for the ride home Scott!). One of the first attendees at the event to stop by the MDN table for a chat asked if we had heard about a letter recently sent by EQT to PA landowners. We had not. He gave us a copy (below). In the letter, EQT claims they have been “subsidizing a portion of the cost to gather the gas” produced by their PA wells, and they intend to begin claiming new deductions from royalty checks beginning this year. The way they position it in the letter is that landowners will begin “sharing” in these post-production costs. Who doesn’t like to share, right? We can tell you, not a single attendee at the event was impressed with EQT’s “sharing” letter. It smacks of the road Chesapeake Energy has gone down in robbing landowners of their royalties…
    Read More “EQT Pulls a Chesapeake, New Deductions from PA Leases”