Antero Feels Good, Increases Production Estimates for 2016
Antero Resources, one of the biggest drillers in the Marcellus, released their second quarter 2016 update in August (see Antero Resources Production Up 19% in 2Q16, but Loses $596M). As we noted at the time, Antero’s natgas production was up 19% over 2Q15. However, the company also reported production was essentially flat (the same as) production during the first quarter of 2016. So it was a mild surprise to see Antero increase it’s production “guidance” (estimate of how much production they will have) for 2016. The increase isn’t much–just 3%–but Wall Street analysts and regulators watch these kinds of statements very closely. A lot rides on the accuracy of predictions like production numbers. The reason for the optimistic increase in production guidance? Antero is using more sand in its fracking, drilling even longer horizontal (or “lateral”) wells, all while actually reducing the cost to drill each well. Result? Although Antero will still spend the same amount of money on drilling in 2016–$1.3 billion–they’ll drill more wells with that money and those wells will be a tad more productive than they thought at the beginning of the year when they made their original estimates…
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In July MDN reported that Atlas Resource Partners (ARP), a publicly-traded exploration and production master limited partnership (“MLP”) with operations in basins across the United States including the Marcellus and Utica Shale plays, filed for a bankruptcy (see 
A great article in Investor’s Business Daily explores the link between shale gas and the “explosive expansion” of the U.S. petrochemical industry. Part of the petchem supply chain is finding a cheap source of ethylene, the raw material used in making all sorts of plastics products. Manufacturers get ethylene from ethane cracker plants. The article discusses that link, and the reasons why Shell chose to locate their new multi-billion dollar ethane cracker plant near Pittsburgh. As you can guess, economics play a major role in such a decision. Here are the specific economics that convinced Shell that PA is a good bet…
One of the lowest cost producers that gets some of the highest prices for its natural gas in the Marcellus/Utica is Rice Energy. The difference between what it costs Rice to produce gas ($0.90/thousand cubic feet, or Mcf) verses what they sell it for (an average $3.12/Mcf) means Rice makes a whopping 247% internal rate of return, or IRR–which is THE most profitable driller among 10 of the largest Marcellus/Utica drillers surveyed (see today’s companion post on Hedging Gas Prices in the Marcellus/Utica). The Rice boys’ stellar performance has not gone unnoticed by analysts at investment and research firms. In fact, one such analyst, from Wolfe Research, says Rice “could be” a target for takeover/buyout by a larger competitor. Which competitor? Let’s name names…
In 2015 CONSOL Energy temporarily quit all new drilling activity. In July of this year, they said they would restart their drilling activities, targeting the Ohio Utica (see 
EXCO Resources was once a sizable player in the Marcellus. They still have 145,000 net acres in the Marcellus, with 124 horizontal Marcellus wells drilled and in production. However, EXCO, as we pointed out in March, has pretty much abandoned the Marcellus at this point (see 
It’s no secret that Marcellus and Utica drillers need new pipelines–and they need those pipelines urgently. Especially in Pennsylvania where lack of pipelines is keeping inventories high and prices for natural gas the lowest in the country. However, drillers must deal with reality as it is–today. Pipelines take time to build, and recent efforts to block pipelines are delaying important projects like the Constitution and PennEast pipeline projects. The good news is that some pipeline projects *are* being built in the northeast, some of which are almost done. Drillers like Range Resources are ramping up new drilling now, about six months in advance of when new pipelines are due to go online. That’s about how long it takes to put the pieces in motion. The other good news is that some drillers, like Cabot, are finding new markets that DON’T require new pipelines–like selling a tremendous volume of natgas to new gas-fired electric generating plants situated in close proximity to Cabot’s wells. Here’s an update on which drillers are picking up the pace with the prospect of new pipelines (or new nearby markets), and which drillers are waiting a little longer before they pick up the pace…
While many drillers across the U.S. have cut their gas drilling programs back to the bare bone, even temporarily halting new drilling, two Marcellus/Utica drillers didn’t get the memo. CONSOL Energy and Rice Energy continued to break new records for natural gas production through the first six months of this year. Even though CONSOL and Rice may spend less and drill less than they previously did, natgas production from both companies continues to increase–due to new strategies, new efficiencies, and smart people. Here’s a peak behind the curtain at what CONSOL and Rice, both currently focused on the Utica Shale, are doing to boost production…
PDC Energy, a driller in the Wattenberg Field in Colorado and the Utica in Ohio, paused their Utica drilling program in 2015 (see 
Duke University, as MDN has chronicled, has a long history of pumping out faux research that bashes fracking and fossil fuels, “research” that’s bought-and-paid-for by the Park Foundation, one of Duke’s major contributors (see 
Last week MDN told you that ratings agency Fitch Ratings had issued a “Loans of Concern” report, which is a report on loans the agency believes companies will soon default on. One of the names in the list stood out to MDN: American Energy-Marcellus (see 
We believe this bit of news is exclusive to MDN–we’ve not seen it anywhere else, yet. In early August MDN reported that the novel legal argument offered by the radical leftist PA-based group Community Environmental Legal Defense Fund (CELDF) in Grant Township (Indiana County), PA claiming to represent a local ecosystem had failed (see 
A banker, a real estate developer and a natural gas drilling company rep walk into a bar… No wait! This isn’t a joke! A banker, a real estate developer and a natgas drilling rep were panelists at seminar held yesterday, organized by the Pittsburgh Business Times. Even though there has been a major slowdown in Marcellus/Utica drilling, all three panelists were upbeat and optimistic–in no small part because of the coming Shell ethane cracker in nearby Beaver County. One comment made about the Shell cracker: “We’re not just building a facility; we’re building an industry.” That’s just how major the Shell project will be in the greater Pittsburgh area. Another comment: “The Marcellus Shale is not in the tank…It has slowed down, which is typical of industries that are sensitive to price cycles, [but] it’s consistent, affordable and is stable.” More interesting tidbits from the PBT soiree…