Energy Companies

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    Southwestern Energy – Pedal to the Metal in the Marcellus/Utica

    Earlier this week MDN brought you the latest quarterly update from Southwestern Energy (see Southwestern Energy 1Q17: Production Falls 14%, Profits Soar). As we noted, production was down, but profits up. Southwestern is investing 85% of their budget in the Marcellus/Utica this year. In covering the Southwestern story, we neglected to bring you a portion of the earnings call where Jack Bergeron talks. Bergeron is Southwestern Senior Vice President for E&P Operations. He had some things to say about the company’s Marcellus/Utica drilling program that we think you’ll find interesting. What kinds of things? Like details about the company’s move from using 3,500 pounds of sand per foot to 5,000 lbs/ft. And details about the increase in Estimated Ultimate Recovery (EUR) the company is seeing–from 11 billion cubic feet per well to 15 Bcf/well–from using a new completion method. We also have more comments by Southwestern CEO Bill Way, about the number of wells the company plans to drill in Susquehanna County, PA…
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    PA Supreme Court Rejects Range Resources Well Contamination Case

    For years we’ve followed the story of Range Resources and their (former) wastewater impoundments in Washington County, PA. The PA Dept. of Environmental Protection (DEP) fined Range a whopping $4.15 million for violations in September 2014 (see PA DEP Fines Range Resources $4.15M for Wastewater Impoundments). Some of the nearby neighbors claimed that Range’s leaky impoundments (a quarter of a mile away) contaminated their water wells. One of those landowners was Loren Kiskadden, who sued Range in civil court. The problem is, the DEP determined that the nearby Yeager impoundment had not contaminated Kiskadden’s well, which led to allegations that the DEP had bungled the investigation (see Did DEP Mishandle Range Wastewater Impoundment Investigation?). Kiskadden had to press on, because if the DEP doesn’t reverse its finding, he has no civil case against Range. Press on he did (see Hearing on Range Yeager Impoundment/Water Contamination Continues). The matter was heard by the DEP’s Environmental Hearing Board (EHB). The EHB found that Kiskadden didn’t have a case–his well was not contaminated by Range’s impoundment. So Kiskadden and his lawyers asked for a re-hearing. The result of that re-hearing came in December 2015 and, we thought, finally closed the door, once and for all (see DEP Final Determination: Range Didn’t Pollute Kiskadden Water Well). But no, that was not the end. Kiskadden appealed again, and in October 2016 a Commonwealth Court appeals panel affirmed the EHB’s 2015 dismissal of Kiskadden’s appeal of the DEP 2011 ruling that Range’s Yeager site operations did not contaminate Kiskadden’s well water. Case closed, right? Nope. Kiskadden had one card left to play and he did it–filing an appeal with the PA Supreme Court (see Landowner Appeals Range Well Contamination Case to PA Supreme Crt). Earlier this week, the Supreme Court sent back the appeal marked “case denied.” The fat lady has now sung…
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    Noble Energy Sells Remaining M-U Assets for $1.2B – Who Bought?

    Yesterday Noble Energy dropped a bombshell that it has sold its 100% interest in 385,000 Marcellus/Utica acres and wells producing 415 million cubic feet equivalent of natural gas in West Virginia and Pennsylvania for $1.225 billion to “an undisclosed buyer.” That works out to be $3,181 per acre. Not included in the sale is Noble’s half operating interest in the CONE Midstream pipeline gathering system. It was just three years ago that Noble announced it would lease 138,000 feet in a new office building in Southpointe, and move in 200 employees (see Noble Energy’s Huge Vote of Confidence in the Marcellus). At the time, Noble’s CEO said the Marcellus is “the premiere gas play in the United States” and that the Marcellus figures prominently in Noble’s future plans. That was then, this is now. Noble will use the money from the sale to pay down essentially all of the debt the company incurred from its recent $2.7 billion purchase of Clayton Williams Energy–a deal that expanded Noble’s “core Delaware Basin position” (i.e. the Permian Shale in Texas, an oil play). All of the above is what you get from other news sources. The reason you read MDN is because we’ve found out who the buyer of the Noble acreage is…
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    Huntley & Huntley Targets New Drilling in Westmoreland County, PA

    Click for larger version

    It’s been a few years since MDN has written a post about seismic testing. Typically before land gets leased and drilled on, drillers will contract with seismic testing companies to conduct a mapping survey of the land. The survey does not show the surface, but rather the sub-surface–a kind of “x-ray” of what the rock layers look like deep underground. Drillers then use that information to determine the best places to drill. Seismic surveys, like every aspect of drilling, is not without controversy (see our previous stories about seismic testing here). Folks understandably have concerns. Will the survey company use dynamite charges? Will they use those big “thumper” trucks? Will it affect water wells? Sewer lines? All legitimate questions. On Monday city officials from Lower Burrell (Westmoreland County), PA asked a lot of tough questions of seismic contractors hired by Huntley and Huntley to map the township–presumably (and the point of this post) so that H&H can soon apply for permits and commence with new drilling in the town. Here’s how it went…
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    WV Supreme Court Post-Production Royalty Case Hinges on 3 Words

    Yesterday the five justices of the West Virginia Supreme Court reheard a case involving post-production deductions from royalty payments. Last week we reported that the court *might* rehear the case this week–if they didn’t grant a late-breaking motion to dismiss the rehearing (see WV Supreme Court to Rehear EQT Post Production Royalty Case, Maybe). In December MDN reported on the huge West Virginia Supreme Court decision against driller EQT that disallows EQT from deducting post-production expenses from royalty checks, even with signed contracts in place (see WV Supreme Court Rules EQT Can’t Deduct P-P Costs from Royalties). The justices, in their ruling, said that drillers can “not deduct from that (royalty) amount any expenses that have been incurred in gathering, transporting or treating the oil or gas after it has been initially extracted, any sums attributable to a loss or beneficial use of volume beyond that initially measured or any other costs that may be characterized as post-production.” A really big deal. Then in February, with a brand new justice on the bench, the WV Supreme Court agreed to rehear the case after an appeal filed by EQT–a rare and unusual step (see EQT Catches Big Break in WV Supreme Court re Royalty Deductions). Those who won the case say newly elected Supreme Court Justice Elizabeth D. Walker has conflicts of interest and should not have been allowed to vote to rehear the case in the first place (which she did). On that basis, they tried to avoid the rehearing altogether, but that failed, and yesterday the lawyers were in court arguing. As it turns out, the lawyers mainly argued over the meaning of three short words: “at the wellhead”… Read More “WV Supreme Court Post-Production Royalty Case Hinges on 3 Words”

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    CONSOL Energy 1Q17 – Posts Loss, Selling Everything in Sight

    Yesterday CONSOL Energy, one of the larger drillers in the Marcellus/Utica, released its first quarter 2017 update. The company reports losing $34 million in 1Q17. Production was down too–but just slightly at less than 2% less than 1Q16. The big news is how fast CONSOL is selling stuff. CONSOL sold $108 million worth of assets in the Marcellus/Utica in 1Q17, part of their plan to sell off a total of $400-$600 million in assets this year. According to a CONSOL statement, the company “recently closed on three asset sale transactions for total cash consideration of $108 million…One of the transactions was the sale of approximately 6,300 net undeveloped acres of the Utica-Point Pleasant Shale in Jefferson, Belmont and Guernsey counties, Ohio, for total cash consideration of approximately $77 million, or approximately $12,200 per undeveloped acre.” We have a highly placed source that tells MDN that Ascent Resources is the buyer. CONSOL CEO Nick DeIuliis said on an earnings call yesterday that the bust-up with Noble Energy last year has allowed CONSOL to sell off acreage that was previously tied up in the joint venture. Noble is doing the same (see today’s lead story). Below we have the full update from CONSOL, including financial statements, along with the latest PowerPoint presentation…
    Read More “CONSOL Energy 1Q17 – Posts Loss, Selling Everything in Sight”

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    Rex Energy Gets a New $300M Loan to Help Fund M-U Drilling

    Yesterday Rex Energy, a driller focused mainly on the Marcellus/Utica (headquartered in State College, PA), signed paperwork for a new $300 million loan–due to be paid back by April 2021. Rex immediately withdrew $144 million from the loan, to pay back other loans it owed. When all is said and done with paying back this and that, Rex says they will have $110 million they can use for their Marcellus/Utica drilling program. Rex CEO Tom Stabley said that will be enough money to help fund the company’s two-year development program, including “the potential to access the M&A market.” Curious statement. We take that to mean that Rex is potentially in the hunt to add large acreage tracts (or perhaps buy and add a small driller) to its existing operations. Here’s the company statement from yesterday…
    Read More “Rex Energy Gets a New $300M Loan to Help Fund M-U Drilling”

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    WV Forced Pooling Lite Not Dead Yet – EQT Wants Special Session

    In early April MDN reported that West Virginia’s effort to pass a law dealing with co-tenancy and joint development–what we called forced pooling lite–had gone up in pot smoke (see WV Force Pooling Lite Goes Down in Flames – Lawmakers Blame Pot). Legislators in the House go bogged down debating pot smoking and didn’t have enough time to finish debate and vote on Senate Bill (SB) 576 (for background on what the bill would do, see Analysis of New WV Bill SB 576 re Co-Tenancy & Joint Development). The West Virginia Oil & Natural Gas Association (WVONGA) pulled out all the stops to support the legislation. They organized a bus-in rally at the Capital where nearly 1,000 people showed up to support the legislation (see WVONGA Delivers ~1,000 at Rally to Support Co-Tenancy, Joint Dev.). We thought for sure it was a fait accompli, because WV’s new Governor, Jim Justice, threw his support behind the bill. But at the last minute, the bill failed–as forced pooling bills have failed five times before. However, we did say this back in early April: “So is it curtains for the sixth time on forced pooling? We’re not ready yet to declare it dead during this legislative tenure. The governor in West Virginia has the power to convene a special session. We saw it happen when Earl Ray Tomblin was governor.” It seems our words were prophetic. EQT, one of the biggest drillers in the state, is pushing hard for Gov. Justice to convene a special session and to pass SB 576. EQT is providing some not-so-subtle pressure by indicating they may reallocate some of their drilling budget elsewhere if WV doesn’t pass the law…
    Read More “WV Forced Pooling Lite Not Dead Yet – EQT Wants Special Session”

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    Cabot O&G 1Q17 – Oil Turning Cabot’s Eye Away from Marcellus

    Last week one of our favorite Marcellus drillers, Cabot Oil & Gas, issued its first quarter 2017 update. There’s lots to see and to discuss. First up, Cabot’s production was up 7% from the same quarter a year earlier. And while Cabot lost $51 million in 1Q16, the company profited $106 million in 1Q17. So production went up a little, but profits went up a lot. Perhaps the main reason why Cabot made more money in 1Q17 is that the price they got for their natural gas went up 77% over the same period last year. Two items in particular caught our attention about the update: (1) Cabot predicts Williams’ Atlantic Sunrise Pipeline will be fully permitted “by early July” and construction will begin in the third quarter. They are jazzed about shipping an extra 1 billion cubic feet (Bcf) per day on the pipeline when its fully operational in 2018. (2) Other shale plays are now catching Cabot’s eye and CEO Dan Dinges is spending $125 million THIS YEAR on buying leases and drilling test wells–in plays they aren’t yet ready to disclose. The only hint we have is “that our focus is going to be oil.” Hmmmm. We don’t much like the sound of that. Cabot has developed a wandering eye for other plays. Make no mistake, Cabot will continue to drill aggressively in the Marcellus–but they will no longer be laser focused on the Marcellus. To be fair, the company has previously fiddled around in the Eagle Ford (an oil play in Texas). But apparently the Eagle Ford is not where “the next big thing” will be found. Cabot is looking elsewhere for the next miracle, like the one they found in Susquehanna County, PA with the Marcellus. Except this time it’s in oil and not gas…
    Read More “Cabot O&G 1Q17 – Oil Turning Cabot’s Eye Away from Marcellus”

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    Southwestern Energy 1Q17: Production Falls 14%, Profits Soar

    Southwestern Energy turned in its first quarter 2017 update last week. Not widely reported is that production for the company slipped by 14% during 1Q17 over 1Q16. Why? The company shut down new drilling for a good part of last year, when prices were low. However, the company got a lot healthier last year, financially. After losing $1.1 billion in 1Q16, Southwestern made $351 million in profit in 1Q17–almost a $1.5 billion swing from red to black. Southwestern also reported a new high for their proved reserves–now over 10 trillion cubic feet. CEO Bill Way said on an earnings call that Southwestern is investing 85% of their budget in the Marcellus/Utica this year. They are, without a doubt, one of the largest (if not THE largest) active driller in the Marcellus/Utica today. Here’s more about Southwestern’s 1Q17 performance…
    Read More “Southwestern Energy 1Q17: Production Falls 14%, Profits Soar”

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    The Person Most Responsible for Luring Shell Cracker Plant to PA

    Whenever a big, important project like the Shell ethane cracker, reported to be a $6 billion investment, goes forward, a whole lotta people were involved before the decision was made. However, if there is one universal truth in business it is this: There is always a champion at the center of any important project. The one person who’s responsibility it is to propel that project forward. The person who, we like to say, has their “butt in a sling.” It is on their shoulders to ensure the projects success. When you dig down into the story of the multi-billion dollar Shell cracker plant now being built in Beaver County, PA, you will find that one person. His name is Brent Vernon. He worked for more than five years to lure Shell to the Keystone State. Vernon was senior project manager for energy for the state when he began working, full time, on the Shell project in 2011. Since then he was promoted, first to deputy director and eventually director of the Governor’s Action Team, a role he continues. Vernon is key–one of the linchpins without whom the Shell deal would not have happened…
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    Southwestern Energy Fighting Ohio County, WV Fire Dept. Fee

    Location of Ohio County, WV

    Ohio County, WV, like many rural counties, has a string of volunteer fire departments that respond to calls in their respective localities. When an industrial activity like shale drilling shows up, local volunteers need special (ongoing) training to address the unique circumstances involved with a well pad fire. There’s also all of the extra calls local fire departments get from the sheer volume of vehicle traffic related to workers coming and going, and trucks hauling all manner of materials–from pipes to equipment to water. Those vehicles sometimes get into accidents, requiring a fire truck to respond. So Ohio County passed a $5,000 per well pad fee, per year, to help defray those costs. Southwestern Energy is the only driller active in the county, currently, with some 29 well pads. For Southwestern, the fee equals $145,000 per year, year after year, going to the local fire department effort. When Ohio County sent Southwestern the bill, Southwestern didn’t pay it. Instead, they filed a lawsuit claiming the fee is “arbitrary and excessive”…
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    Chesapeake Deducts from Current Royalty Check for Old Loss in PA

    Truly maddening. A Pennsylvania farming family has had to put up with Chesapeake Energy’s lame justifications for not paying them a dime in royalties over the past two years, even though Chesapeake continues to extract gas from their property. Chesapeake claims that since 2015, their costs to extract/sell gas from Russ Forba’s land exceeded any revenue generated–by $112,000. Chesapeake promised Forba that the company would not try to recoup those “costs” from future royalties. The company just broke its promise. On Monday, Forba received a statement from Chesapeake revising the price of the gas sold (down), and revising the post-production costs claimed (up) for the month of April 2015. Chesapeake then deducted the extra $5,700 “loss” from current royalty payments to cover the difference–something they PROMISED would never happen. This is why PA landowners are incensed and calling for legislation. We don’t blame them…
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    Range Resources 1Q17: Production Soars 40%, 1st Profit in 2 Yrs

    Range Resources, one of the most prolific producers in southwestern Pennsylvania, reported its first quarter of profit in two years. Range swung from a loss of $94 million in 1Q16 to a profit of $170 million in 1Q17. After two years of cutting its capital expenditure spending, Range is once again increasing capex. This year, Range plans to spend $1.15 billion, with 65% allocated to the Marcellus Shale in PA, and the rest to the Terryville Field in LA. Production soared for the company by 40% year over year, to a new record high of 1.93 billion cubic feet equivalent (Bcfe) per day. Below we have the full Range 1Q17 update, along with the latest PowerPoint slide deck. We’ve also extracted out some interesting comments from the quarterly earnings call, which highlight Range’s program of drilling longer laterals in the Marcellus…
    Read More “Range Resources 1Q17: Production Soars 40%, 1st Profit in 2 Yrs”

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    EQT 1Q17: Production Up 6%, Revenue Up 2,829%

    EQT, one of the biggest drillers in the Marcellus/Utica, had quite a ride in 2016. A good ride! In the last 10 months EQT has added 220,000 acres to its Marcellus/Utica portfolio–by buying large tracts from other companies. One of the deals included buying the other company (Trans Energy) lock, stock and barrel (see EQT Buys Trans Energy + 60K Marc/Utica Acres in 2 Deals for $683M). EQT recently turned in its 1Q17 update. While EQT’s production went up by 6% in the first quarter, its net income went through the roof–up 2,829%! In 1Q16 EQT’s net income was $5.6 million. In 1Q17, net income was $164 million. Somebody is doing something right. On the ever-present quarterly earnings call, EQT’s newly-minted CEO, Steve Schlotterbeck, said EQT’s strategy is to consolidate “scattered acreage positions in Appalachia.” According to Steve, the companies that consolidate, “will hold a competitive advantage that will yield higher returns for their shareholders” and “further consolidation within the Marcellus core is the best path to creating a sustained competitive advantage.” Below is EQT’s full 1Q17 update, the latest PowerPoint slide deck, and select comments by Steve from the earnings call…
    Read More “EQT 1Q17: Production Up 6%, Revenue Up 2,829%”

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    Rex Energy 1Q17: Production Drops 8.5%

    As they have in previous quarters, Rex Energy released only part of their first quarter 2017 update earlier this week. Rex released an operation update on Monday, but elected to not release (yet) a financial update. Rex has struggled. They are a smaller driller focused mainly on the Marcellus/Utica–headquartered in State College, PA. In 2016, Rex lost $109 million (see Rex Energy Lost $109M in ’16, Drilling to Hold in ’17, NGLs in ’18). In company’s 2016 production was down from the previous year (see Rex Energy 4Q & 2016 Update – Production Slips from 2015). In Monday’s quarterly update, Rex reports production slipping again, down 8.5% from 1Q16. Is Rex Energy still our “little engine that could?” What’s going on with Rex? Perhaps some of the clues can be found in the quarterly production update and latest PowerPoint we could find (from March)…
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