Energy Companies

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    DEP Says Fracking at PA Utica Wells “Likely” Caused Earthquakes

    On Friday, the Pennsylvania Dept. of Environmental Protection held a hastily-called webinar to discuss findings that, frankly, aren’t all that newsworthy or surprising. After 10 months of study, the DEP has concluded that zipper fracking activities by Hilcorp in Lawrence County, PA “likely” caused a series of earthquakes in April 2016 so minor that nobody could feel them. And the DEP concluded this after 10 months of study, when a week before the DEP itself issued the permits to drill in Lawrence County, Hilcorp drilling was shut down about seven miles away, across the border in Mahoning County, Ohio, for potentially causing low-level earthquakes there (see Hilcorp Awarded Permits to Drill 7 New Wells Near Earthquake Zone). It wasn’t exactly rocket science to connect the dots and speculate that fracking over top an active fault had caused the low-level earthquakes on the PA side of the border, as it had on the OH side of the border. As we’ve stressed multiple times here on MDN, earthquakes related to shale are almost always connected with injection wells–when large amounts of liquid are injected near a fault. Earthquakes from fracking activities are rare–like under 10 times, ever, out of millions of fracked wells. Statistically zero. Still, let’s not let a good “crisis” go to waste. The DEP, in releasing a report about the incident (full copy below), said they will work up new regulations to detect and prevent such statistically zero occurrences from happening again…
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    Mountaineer Keystone Renames Itself Arsenal Resources

    In October 2014, Mountaineer Keystone, a pure play Marcellus/Utica driller headquartered in Pittsburgh, bought out PDC Mountaineer for half a billion dollars, creating a company with 181,000 net acres totally focused on the northeast (see Major New Player in the Marcellus Emerges: Mountaineer Keystone). Mountaineer Keystone got its start in 2010 when founder/CEO Rob Kozel formed the initial management team from former Texas Keystone people. In 2011 the company took a boatload of money from First Reserve, an energy investment firm. We don’t have the back story, but in November 2015, Mountaineer announced that Kozel was out as CEO, and in his place the board has selected David Wood, the current Chairman of the Board at Mountaineer Keystone (see Shake-up at the Top of Marcellus Driller Mountaineer Keystone). Last Friday Mountaineer changed its name–to Arsenal Resources…
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    DEP Concludes Hilcorp Drilling Caused Minor Earthquakes in W PA

    In April of last year (2016), MDN brought you the story of earthquakes so minor nobody could feel them in Lawrence County, PA were likely caused by fracking (see PA DEP Investigates Hilcorp Fracking in Earthquake Nobody Felt). However, seismic monitoring equipment could detect them. We have to stress that earthquakes caused by fracking is rare–like this is one of five instances we’re aware of. Far more common are earthquakes caused by deep injection wells. But fracking itself? Statistically zero percent of the time earthquakes are caused by fracking. So when it happens, it’s noteworthy. The conditions must be just right–fracking immediately overtop a fault in the rock layers. The driller in this case, Hilcorp, was ordered to stop all fracking and drilling activity at the well site, which they did. The Pennsylvania Dept. of Environmental Protection (DEP) says they have concluded their investigation and will today (on a webinar) disclose their results. Here’s the kicker: the DEP could have avoided this. Two years earlier the same driller, Hilcorp, caused minor earthquakes seven miles away–just across the border in Ohio. At that time Ohio officials stopped Hilcorp from drilling in that region. A week after the Ohio earthquakes that stopped Hilcorp, the PA DEP issued permits to drill in the same area (see Hilcorp Awarded Permits to Drill 7 New Wells Near Earthquake Zone). MDN was the only source to make that observation. We waved our little red flag and said maybe it’s not such a wise decision to grant those permits. Someone at the DEP needs to read MDN! At any rate, below is the news, as much of it as we currently know. By the time you read this, the DEP earthquake webinar will be over, but we’ve included the webinar notice as (so far) it’s the only information we have to indicate the DEP now concludes Hilcorp drilling was at fault for the earthquakes in Lawrence County…
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    Top 20 Marcellus Drillers in Southwest Pennsylvania

    The sharp folks over at the Pittsburgh Business Times have been looking through data from the Pennsylvania Department of Environmental Protection (DEP) and have compiled a list of 20 drillers who have at least a dozen shale wells in the southwest PA region. And they ranked them from lowest to highest. We’ve grabbed the list below. The interesting thing for MDN is that there is one name in the list not familiar to us, and we’ve been watching this space since 2009. Always fun to learn something new. Here’s the list of southwest PA’s “Top 20” Marcellus drillers…
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    Bankruptcy Court Approves Stone Energy’s Reorg Plan

    Stone Energy, an independent oil and natural gas exploration and production company (E&P) headquartered in Lafayette, Louisiana drills mainly in the Gulf of Mexico but also has (or rather had) a presence in the Marcellus/Utica Shale with 86,000 acres of leases. In December Stone filed for bankruptcy protection (see Stone Energy Files for Bankruptcy, Largest Shareholder Opposes). The plan, like most of these types of plans, hoses existing shareholders and hands the ownership keys of the company over to debtors instead, which Stone’s largest shareholder objected to. But apparently that shareholder getting something was better than getting nothing, and he worked out a deal with Stone, dropping his objection (see Stone Energy’s Largest Shareholder Caves, Agrees to Bankruptcy). Last week the bankruptcy court approved the sale of Stone’s Marcellus/Utica assets to EQT (see EQT Wins Bankruptcy Auction for 86K Stone Energy M-U Acres, $527M). Now comes word that the court has approved the rest of Stone’s plan…
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    Chesapeake Energy 2017: Less New Drilling in M-U, More DUC Work

    Yesterday Chesapeake Energy provided a glimpse into their plans for 2017. In Chessy’s “gudiance” for 2017, we learn that the company plans to up the number of active drilling rigs (nationwide) from 10 to 17. We also learn that last year Chessy spent ~$1.75 billion to drill 213 new wells, and place 428 wells into production–the difference between the two numbers being they finished up already-drilled wells, or DUCs. This year? They will spend ~$2.5 billion to drill ~400 new wells–essentially doubling the number of wells drilled–and place ~450 into production. The only problem (from our perspective) is that most of the drilling will happen in places other than the Marcellus/Utica. Of the new wells they plan to drill, only 10-15 new wells will get drilled in the Marcellus, and 40-50 new wells in the Utica. Chessy says they will complete and turn into production 50-60 Marcellus wells in 2017, and 70-80 Utica wells. Translation: Not a lot of new drilling in our neighborhood, with more of an emphasis on completing already-drilled wells…
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    Important Shell Ethane Cracker Webinar on Feb 27

    We want to alert you to an upcoming webinar that will be worth your time. On Feb. 27 at 2 pm, NGI (Natural Gas Intelligence) will host a webinar titled, “Cracking the Ethane Code in Appalachia,” all about the Shell ethane cracker. NGI’s ace reporter Jamison Cocklin (MDN editor Jim Willis knows Jamison and has the highest regard for his reporting and writing) will moderate. On the call will be an all-star cast: Don Rush, VP of CONSOL Energy; Jim Cooper, American Fuel & Petrochemical Manufacturers; Denise Brinley, PA Department of Community and Economic Development; and Danielle Sandusky, Level 2 Energy. The webinar will help answer questions about the size and scope of the cracker, whether (and how) the cracker will impact drilling decisions, what about competition from other crackers along the Gulf Coast, and more. Below is more information, and a link to register for this FREE webinar…
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    Noble Energy 2017: Even with 363K Acres, No New Marcellus Drilling

    Noble Energy, a driller with a significant presence in the Marcellus but with a bigger presence in other shale plays, (and operations in other countries and offshore), announced in February that of the four shale plays they operate in onshore in the U.S.–the DJ Basin, Eagle Ford, Delaware and Marcellus–in 2016 they plan to focus on the first three and scale back in the Marcellus, limiting their Marcellus activity to completing previously drilled wells (see Noble Energy Loses $2.4B in 2015; Marcellus Scale-Back in 2016). They followed through on that promise. In November 2016 Noble ended its joint venture deal with CONSOL Energy, with Noble getting 363,000 Marcellus Shale acres in the divorce settlement (see Divorce: CONSOL & Noble Dissolve M-U Joint Venture). Yesterday Noble issued their fourth quarter and full year 2016 update, along with a preview for 2017. What we learned can be summed up as this: No new Marcellus drilling in 2016, and none planned for 2017. However, Noble does plan to complete previously drilled but uncompleted (DUC) wells it has in inventory in the Marcellus…
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    Gulfport Energy’s 2016 Financial Update – Lost Nearly $1B

    Gulfport Energy, an Oklahoma City-based independent oil and natural gas exploration and production company (“driller”) that is a “top 5” driller in the Ohio Utica Shale, released their fourth quarter 2016 and full year 2016 operational update in mid-January (see Gulfport Energy 2016 Operational Update – Production Up 31%). Gulfport is part of the growing trend to drop one shoe first, then the other. The first shoe is almost always production and operational information (the good news). That doesn’t mean that the financial information is bad news–but sometimes that’s the case. Gulfport dropped the second shoe yesterday, issuing a full report for fourth quarter and full year 2016–operational and financial. On the financial front, Gulfport lost $980 million in 2016, versus losing $1.2 billion in 2015. So the loss was less, but not by much. In addition to looking back, Gulfport issued some forecasts for 2017, including a drilling budget of $1-$1.1 billion…
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    PA Landowner Wins Case Against Chesapeake re Royalty Deductions

    Paul Sidorek, an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling, is also a landowner himself. In 2009 Sidorek leased 145 acres, a lease that was eventually sold to Chesapeake Energy. Because of the troubles encountered by others, Sidorek wrote into his lease a 20% royalty and made sure the lease explicitly stated that no expenses could be deducted from the sale of the gas produced on his property. That is, NO post-production expenses could be deducted. And yet, Chesapeake disregarded the lease and deducted as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year (see Chesapeake Short-Changes PA Landowner on Royalty Checks). Sidorek fought Chesapeake in court, and ended up in arbitration. The arbitrator has just ruled–in Sidorek’s favor. The good news is that a PA landowner has gotten some justice against Chesapeake’s sleazy practice. The bad news is that it’s not a precedent and can’t be used in other court cases…
    Read More “PA Landowner Wins Case Against Chesapeake re Royalty Deductions”

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    EQT Wins Bankruptcy Auction for 86K Stone Energy M-U Acres, $527M

    Stalking horse

    Stone Energy is an independent oil and natural gas exploration and production company (E&P) headquartered in Lafayette, Louisiana, drilling mainly in the Gulf of Mexico but also has a presence in the Marcellus/Utica Shale with 86,000 acres of leases. Stone quit actively drilling in the Marcellus in 2015, and filed for bankruptcy last October. As part of the bankruptcy filing, Stone signed a deal with Tug Hill (at one time closely associated with Chief Oil & Gas) to sell those 86,000 acres to Tug Hill for $350 million (see Stone Energy Enters Bankruptcy, Sells Marc/Utica Assets for $350M). The deal with Tug Hill is called a “stalking horse bid,” which means Tug Hill would get the deal if no one else came along and bid higher. Someone did come along and bid higher–EQT. Yesterday EQT said it has won with the highest bid at $527 million ($6,128/acre) to take over all 86,000 of Stone’s Marcellus/Utica acres. The stalking horse is dead…
    Read More “EQT Wins Bankruptcy Auction for 86K Stone Energy M-U Acres, $527M”

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    PA Case Highlights Risk in Using Non-Lawyer to Negotiate Lease

    In August 2013 an extensive investigative article about a then-director for the Pennsylvania Game Commission, William A. Capouillez, appeared in the Philadelphia Inquirer (see PA Director of Game Commission Double-Dipping with Gas Leases?). The article spotlighted a potential conflict of interest between Capouillez’s day job and his moonlighting side job as an agent for property owners who lease their land for oil and gas development. The issue? He was signing private deals with the same companies that often work with his state agency. The State Ethics Commission did a lengthy investigation and three years later, the Commission levied a $75,000 fine, which Capouillez agreed to pay (see Former PA Game Commissioner Fined $75K for Lease Moonlighting). Although he paid the fine, Capouillez remained defiant and said the fine is a tiny fraction of the original fine sought–an indication of his vindication. There is new litigation involving Capouillez. One of the leases he negotiated was on behalf of the Laurel Hill Game and Forestry Club with Range Resources. The way Capouillez constructed his leases was that he would get a cut, a percentage, of any lease signing bonus and ongoing royalty payments, in return for the leases he brokered. Range never drilled on Laurel Hill’s property, but they did start to push dirt around a few hours before the lease expired as a way of holding the acreage (some would call their action a less-than-honorable practice). Laurel Hill sued Range and the lawsuit was later settled by drafting up a new lease with new terms. The new lease/terms were not brokered by Capouillez and he was cut out of the deal–so Capouillez sued both Laurel Hill and Range. The moral of the story, according to lawyers writing about the case, is to never use non-lawyers to represent you in lease negotiations…
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    Eclipse Resources 2016 & 4Q16 Update – Super Laterals Coming

    Two days ago Eclipse Resources, a Marcellus/Utica pure play driller headquartered in State College, PA that drills mostly in Ohio, released an update for fourth quarter and all of 2016. However, it was an operational and not financial update. Consider this the “good news” from 2016. Among the highlights: Production averaged 229 million cubic feet equivalent (MMcfe) per day, which was above their previous estimates of what it would be. Year-end proved reserves increased by 35% to 469 billion cubic feet equilvanet (Bcfe). Eclipse idled most of its drilling rigs in the first half of 2016 given the low price of gas, but they did drill one notable well early last year–the monster Purple Hayes well in the Ohio Utica–with a lateral (the horizontal part) that reached out 18,500 feet–an astonishing 3.5 miles (see Eclipse Res. 1Q16: Drills Longest Shale Well Ever! “Purple Hayes”). Purple Hayes and other “super lateral” wells are the theme for Eclipse in 2017. As part of the update, Eclipse offered a glimpse into what’s coming this year. Their plans involve drilling 11 super lateral Utica wells–all in excess of 15,000 feet long. Those 11 super lateral wells are part of a planned $300 million program to drill a total of 19 Utica wells in 2017…
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    CONSOL Ups Proved Reserves to 6.3 Tcfe in Marcellus/Utica

    It’s that time of year for energy companies to issue updates on just how much oil and gas they own in the ground, recoverable at current prices. Yesterday CONSOL Energy announced their total proved reserves had hit 6.3 trillion cubic feet equivalent (Tcfe), as of December 31, 2016. That number is an 11% increase compared to the previous year. The vast majority of CONSOL’s reserves (99%) are in the Marcellus and Utica Shale plays. Of the 6.3 Tcfe total proved reserves, some 423 billion cubic feet equivalent (Bcfe), or 6.8%, is in oil, condensate and other liquids. Meaning 93.2% of CONSOL’s reserves are in good ole natural gas (i.e. methane). As part of CONSOL’s update we get some interesting stats about the wells they drilled in 2016. In the Marcellus, CONSOL and its JV partner turned-in-line 47 wells with an average lateral (horizontal) length of 7,300 feet and expected ultimate recoveries (EUR) averaging 2.3 Bcfe per thousand feet. In the Utica Shale, CONSOL and their JV partner turned-in-line 15 wells with an average lateral of 8,000 feet and EURs up to 2.2 Bcfe per thousand feet. Here’s the update from CONSOL…
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    Questerre Ups Proved Reserves to 5.8 Tcfe in Quebec Utica

    Little known fact: There is a Utica Shale layer in Canada–along the St. Lawrence River Valley–in the Province of Quebec. On and off over the years we’ve mentioned it, largely in connection with an ongoing moratorium on shale drilling in Quebec (see our stories here). Quebec’s moratorium is similar to the moratorium on shale drilling in New York State–that is, a total block, but not a permanent block. After debating an environmental bill in December, the Quebec National Assembly voted to pass Bill 106, ostensibly to support Quebec’s “clean power plan.” The bill includes a section that “lays out a framework for oil and gas development” in Quebec. Fracking will not begin immediately. The bill does, however, mean that new regulations will come along early this year and after that, it’s an almost certainty that fracking will begin, in 2017, in the Canadian Utica. The main beneficiary if Questerre Energy Corporation, which owns ~350,000 acres in the Quebec Utica. Of that, Questerre is considering (for now) drilling on 36,000 acres. Given that drilling is likely to begin soon, Questerre recently commissioned an update of their proven reserves in the Quebec Utica. The last time they did so was in 2010. What did the new study find? Questerre is sitting on 5.8 trillion cubic feet equivalent (Tcfe) of oil and gas, representing some 965 million barrels of oil, a 30% increase over the numbers from 2010…
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    Titan Energy Puts 494K Appalachian Acres Up for Sale

    Titan Energy, which used to be known as Atlas Energy/Resource Partners, is today listing what appears to be the rest of the acreage they still own on the Appalachian basin–some 494,229 acres–including rights for drilling in the Marcellus/Utica. An astonishing 100% of the acreage is HBP, or held by production–meaning there are working or drilled wells. Not all of it is shale-related. We suspect a good portion of the acreage is conventional (vertical only). However, there is a significant number of acres where Marcellus/Utica drilling can be done that the sale should pique the interest of competitors. The acreage is being offered in seven states: New York, Pennsylvania, West Virginia, Ohio, Indiana, Kentucky and Tennessee. In addition to rights in the Marcellus/Utica, rights are also available in the Upper Devonian, New Albany and Chattanooga shale plays. Here is the low down on the acreage sale, along with a reminder of who Titan (nee Atlas) is, and why this is an important sale…
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