EXCO Resources 1Q16: Marcellus Production Up w/o New Drilling?
EXCO Resources, once a sizable player in the Marcellus–with 145,000 net acres in the Marcellus and having drilled and operating 124 horizontal Marcellus wells–has pretty much abandoned the Marcellus at this point (see EXCO Reaffirms No New Marcellus Drilling in 2016, Capex Cut 69%). Yesterday EXCO issued its first quarter 2016 update. The update shows the company continues to ignore the Marcellus and instead concentrate on other areas. They drilled 5 wells in Louisiana during 1Q16. EXCO did increase production in the Marcellus from 4Q15 (although down from 1Q15, year over year). The reason for more production although they didn’t drill or complete any new wells? They had been shutting in production due to low prices. The prices went up a bit, and EXCO eased off a bit on the shut-in wells, resulting in a slight bump in production. Here are select portions of yesterday’s EXCO update…
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EQT, a major Marcellus (and Utica) driller based in Pittsburgh, announced yesterday it has cut a deal to purchase all of Norwegian Statoil’s Marcellus assets in West Virginia. The deal will give EQT another 62,500 net acres and 50 million cubic feet per day (50 Mcf/d) of natgas production for $407 million. The acreage is located in Wetzel, Tyler and Harrison counties in WV. The deal includes 31 Marcellus wells and ~500 drilling locations. It bumps up EQT’s available drilling locations by a big 29% and shows the company’s continued commitment to the mighty Marcellus Shale. How will they finance it? EQT released another announcement yesterday that says they are floating 10.5 million shares of new stock, hoping to get $67 per share for a total of $700 million for this deal and for “other potential acquisitions and for general corporate purposes.” Statoil is retaining ownership of its shale assets in Ohio and (for now) it’s non-operated Marcellus assets–i.e. joint venture deals where Statoil owns a portion of the lease but doesn’t do the drilling…
Ultra Petroleum, based in Houston, TX, is an independent exploration and production (E&P) company mainly focused on drilling in the Green River Basin of Wyoming. Ultra also drills for oil in the Uinta Basin/Three Rivers area in Utah. In addition, Ultra maintains a position in the Pennsylvania Marcellus shale with leases on 184,000 gross (91,000 net) acres–no small amount. They aren’t currently drilling on their Marcellus acreage, but if prices change, they likely would. That is, if they make it through bankruptcy. On Friday Ultra filed for Chapter 11 bankruptcy protection in Houston. The company listed $1.28 billion in assets and $3.92 billion in debt. One (we would say stupid) investor owns a whopping $1.46 billion in unsecured IOUs (i.e. notes) from Ultra. Good luck with getting that paid. Here’s the low down on Ultra’s bankruptcy filing…
Reuters has written a wide ranging article on Magnum Hunter Resources (MHR) and the results of bankruptcy. The article implies MHR is nearly out of bankruptcy now (although it looks to us like a hearing in June will likely be the grande finale). The deal that MHR cut with debtors was to turn their debt into equity–note and bond holders are now stockholders. So MHR CEO Gary Evans now has a new board of directors composed of the new owners of the company. The problem is, the investors who used to hold stock in the company before bankruptcy have essentially lost their ownership–with the value of their previously issued stock now worthless. At least that’s our understanding of how this works (we’re open to being corrected on this). The Reuters article does a close-up of Gary Evans and recounts how he assured investors that a major asset sale was in the works that would save the company–shortly before he had the company file for bankruptcy. Some investors are not very happy with Mr. Evans over what they consider a deceptive practice…
Cabot Oil & Gas issued their first quarter 2016 update last Friday. The company reports losing $51 million in 1Q16 (compared to making a $40 million profit in 1Q15) because the price for natural gas slide 40% last year. Production numbers continue to impress. While they operate just a single rig in the PA Marcellus (in Susquehanna County), Cabot’s production increased 10% from 4Q15 to a whopping 1.628 million cubic feet per day average. In addition to the official update, we also selected out portions of Friday’s analyst phone call with Cabot’s top management. Among the topics discussed: the Constitution Pipeline, Cabot’s love of the PA Marcellus, “keep it in the ground” anti-drilling nutjobs and more…
A circuit court judge recently ruled on a case in West Virginia with implications for unitization or pooling. No, NOT forced pooling–or forcing landowners who haven’t signed a lease into a drilling unit, forcing drilling under their land. That’s not what this case was about. This case was about landowners with an already-signed lease for vertical wells now being used to allow that land to be pooled with other land and a horizontal well allowed to be drilled under it. The landowners, who wanted a new lease for horizontal drilling (and more money, which is reasonable in our opinion) said because the lease was silent on the matter of pooling or unitizing, it should not be allowed. The judge disagreed and found in favor of the energy company, in this case American Energy…
Range Resources, the very first driller to sink a hole in the Marcellus Shale back in 2004, issued their first quarter 2016 update yesterday. Range reports losing $92 million in 1Q16 after making $28 million in 1Q15 (not uncommon among drillers right now). The company cut production costs by 10%, always a good thing when every penny counts, and they secured a $3 billion borrowing base. During 1Q16 Range became the first U.S. driller to export ethane to Europe, a shipment that left from Marcus Hook near Philadelphia. Marcellus production was up 17% over 1Q15, and according to Range, they recently completed a new Utica well that “appears to be one of the best in the play” based on early results from the well. Range is currently operating three rigs in the Marcellus/Utica and plans to keep them busy for the rest of 2016. Here’s the full update from Range…
National Fuel Gas Company (NFG), the utility giant headquartered in Buffalo, NY and parent of Marcellus driller Seneca Resources, issued what they call their second quarter 2016 update yesterday. NFG’s second quarter is everyone else’s first quarter–it covers January through March. Seneca was negatively impacted by low prices for the natural gas it drills for. NFG’s “upstream” unit (Seneca) lost $213 million in 1Q16, even though its hedging program got the company an average of $2.99 per thousand cubic feet (Mcf) for their gas–about $1.12/Mcf above the going Nymex rate. The loss was all a paper loss–not out of pocket money–due to a writedown of assets. If you take out the writedown, Seneca actually made $17 million in profit for the quarter. NFG’s other units fared better on paper. The midstream unit (pipelines and storage) made $21.2 million in profit for 1Q16; NFG’s utility division made $32 million for the quarter; and their energy marketing unit made $3.5 million. Seneca’s production was up nearly 10% from a year ago. They continue to operate a single rig in the Marcellus/Utica region. Here’s the NFG/Seneca update…
As we reported in March, EV Energy Partners (EVEP)–an upstream master limited partnership (MLP) created by EnerVest that holds enormous acreage in the Ohio Utica Shale play–is in survival mode (see 
We have more evidence that Shell’s Monaca (Beaver County), PA cracker plant is now a go. MDN previously told you that Shell has already spent upward of half a billion dollars out of the projected $2-$3 billion it will take to build the project (see 
You can count on one hand the number of cases where fracking a shale well over top an active underground fault (never a good idea) has caused a detectable earthquake. Can we now add one more case in western PA? Officials from the PA Dept. of Environmental Protection are investigating whether or not fracking by Hilcorp in well in Lawrence County, PA caused two 1.9 earthquakes in the area on Monday. Just so you know, you can’t feel a 1.9 earthquake on the surface. The only way you know of such an earthquake is through special monitors maintained by the U.S. Geological Survey (USGS). A football stadium full of fans stomping their feet at the same time can (and has) caused earthquakes greater than 1.0 (see 
Antero Resources, one of the largest drillers in the Marcellus/Utica, continues to impress. Yesterday the company released its first quarter 2016 update and for all intents and purposes they broke even (financially) during 1Q16–they lost $5 million. Granted, they made $394 million in 1Q15, so that’s quite a swing the other way. But in a day when most drillers are racking up near billion dollar losses, Antero is a star performer. The company tweaked expected production for this year–up another 2% over their previous “guidance”. Where Antero really shines is with their hedging–a financial technique that allows them to lock in prices for natural gas they sell that are much higher than their competitors. With hedging, Antero got an average of $4.54 per Mcf in 1Q16, which is $2.45/Mcf above Nymex futures price. Crikey! Here’s the update from one of the Marcellus/Utica’s star performers…
Yesterday Hess Corporation released their first quarter 2016 update. A few years ago Hess sold off its downstream (refinery and filling station) business to Marathon Petroleum. Did you know the Hess Truck is no longer owned by Hess (see 
CONSOL Energy, once up a time a coal company that is now a natural gas driller, issued its first quarter 2016 update yesterday. CONSOL lost $97.6 million in 1Q16, nearly half of it coming from the Bailey Mine coal complex in southwestern PA. Another $29.3 million of the loss came from commodity derivative investments. And $12.6 million of the loss came from the sale of a gathering pipeline. Revenue was $558.5 million in 1Q16, down 30% from 1Q15. Natural gas revenue dropped 19% in 1Q16 while coal revenue fell 40%. On the positive side of the ledger, CONSOL’s natural gas production hit a new record high of 97.5 billion cubic feet equivalent (Bcfe), and CONSOL’s banks reaffirmed the company’s $2 billion borrowing base. Here’s the update…