Energy Companies

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    Federal Judge Rules for EQT in Ohio Lease Dispute – Ramifications

    An important decision was recently made in a lease case in Ohio–a case which has implications for both drillers and landowners with Marcellus/Utica leases. Driller EQT signed a lease with Jefferson County, OH landowner Alex Cooper on Oct. 6, 2008. The initial term of the lease was for five years, with a five year extension IF EQT makes an extension payment. The lease also stipulates that EQT MUST drill a well on or before Oct 6, 2013–the end of the first term of the lease. EQT opted to extend the lease, making (or rather attempting to make) a payment to Cooper–but EQT did not drill a well by Oct 6, 2013. Cooper claimed since EQT hadn’t drilled, the lease expired on Oct 6, 2013 and he is free to lease again. The case ended up in Federal District Court for the Southern District of Ohio and U.S. District Judge Algenon Marbley decided in favor of EQT, even though the language in the lease stipulates a well MUST be drilled during the first term of the lease. How and why did Judge Marbley decide the case as he did? Below is a recap of the case, followed by a copy of the full decision from Judge Marbley…
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    Will 2016 be the Year *Somebody* Commits to Building a Cracker?

    Will somebody, somewhere PLEASE build the northeast an ethane cracker plant? Pretty please? We noticed a couple of stories that indicate 2016 is THE year that at least one company will likely pull the trigger on an FID–a Final Investment Decision to build an ethane cracker. But which company is likely to do it? Shell? PTT Global? Odebrecht? Leaving Odebrecht’s Parkersburg, WV proposed cracker aside for the moment (a project where we barely detect a pulse), both the Shell plant, planned for Beaver County, PA, and the PTT Global plant, planned for Belmont County, OH, have seen impressive signs of activity in 2015. Which of those two will likely say “yes” in 2016?…
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    Hilcorp Forms $1.24B JV with Carlyle to Shop for Shale Deals

    Smart. Everyone knows the best time to buy something, whether it’s stocks, real estate, fuel oil, whatever–is when the market is crashing and burning. Always buy in a “down” market and sell in an “up” market. Natural gas and oil selling at current historic lows qualifies as a down market. It’s about as down as it gets! So it figures those companies who have kept their debt levels low and managed themselves well are now in the catbird seat and can go shopping for bargain basement deals–while their competitors sit on the sidelines hoping to stay out of bankruptcy court. Marcellus/Utica driller Hilcorp is one of those well managed/smart companies. Hilcorp has just joined forces with energy investment firm Carlyle in a partnership to go shopping for deals…
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    Rice Family Sells 5M Shares of Rice Energy Stock to Pay Off Debt

    Yesterday the Rice family offered up for sale up to 5 million shares of stock in Rice Energy–the first time that’s happened since the Rice’s founded the company in 2007. Rice Energy was founded by Dan Rice III and his boys Dan IV, Toby and Derek. In fact Dan III, who was the most successful mutual fund manager in the U.S. for 10 years, was unceremoniously dumped by his employer BlackRock because BlackRock screwed up by not telling investors Dan was bankrolling a new company (Rice Energy) while at the same time investing in other oil and gas companies that could be construed as competitors via his mutual fund transactions (see BlackRock’s Screw-up with Dan Rice & Rice Energy). Dan was completely up front and transparent and told his bosses at BlackRock what he was doing–it was his bosses who screwed up, and then fired Dan in a blame-shifting move. Dan has been laughing his way to the bank ever since. Rice Energy has been a huge success. Until the end of last year Rice Energy was a private company–the Rices held most all of the stock. They went public last year and began to take OPM–other people’s money (see Rice Energy IPO Soars, Brings in $84M More Than Expected). As part of the IPO process, the Rices took out a loan with Morgan Stanley. Yesterday’s sale of up to 5 million shares is most definitely NOT the Rices stepping back from their own company. It’s actually meant to defend the company from financial market gyrations, as the Rices explain below…
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    Fed Court Rules PA Wrongful Death Lawsuit Against Anadarko Proceeds

    court-gavel.jpgIn May 2012 a water truck driver delivering water to an Anadarko Marcellus Shale well pad in Clinton County, PA missed a turnoff for the road he was supposed to take, at 2:30 am in the morning. A couple of miles later he crashed and tragically died because the road he was on was not marked well and not conducive to the truck he was driving. There was a sign warning the driver not to go beyond a certain point. The driver had previously–that night–already delivered to the well pad and successfully turned onto the road he was supposed to take. Why did he miss it the second time? His widow maintains that even though he worked for a subcontractor, Anadarko was the company in charge and should have had a light illuminating the “No Anadarko Traffic Beyond This Point” sign. So she sued Anadarko, and the subcontractor, for wrongful death. Lower courts threw out the lawsuit but a federal appeals court has just reinstated a civil suit against Anadarko that will go to a jury…
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    Alpha Natural Resources Does NOT Own Nearly Half of Rice Energy

    It’s not often we get to set the record straight on a story run in the financial press–but we get to this time. A story appeared yesterday on the American Banking & Market News site that coal company Alpha Natural Resources (ANR), which has a joint venture with Rice Energy to drill in the Marcellus Shale, owns 42.8% of Rice Energy’s outstanding common shares of stock. Which made our eyeballs nearly fall out. How in the world could a coal company that filed for bankruptcy earlier this year (see Alpha Natural Resources in Bankruptcy – What about Marcellus?), own that much of Rice Energy? It made no sense to us. So we went digging. The story quotes from an extensive filing by ANR with the Securities and Exchange Commission. The 13D/A filing appears to make the claim that ANR owns 54,306,610 shares of Rice Energy (see below). However, if you read it closely, the language is dense and even misleading. We believe what it means to say is that ANR along with Rice Energy Holding, Rice Energy Family Holdings, and NGP Rice Holdings–all of them together–own 54,306,610 shares of stock. NOT just ANR by itself. We think the author of the story misinterpreted what is very obscure financial language. We reached out to Rice Energy and Rice’s president Toby Rice responded that he believes (is not 100% sure) that ANR owns less than 4 million shares of stock in Rice Energy…
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    Rice Energy Sells Part Ownership in Rice Midstream for $500M

    Rice Energy announced yesterday they’ve pocketed a cool $500 million from an unnamed energy investment company in return for an ownership stake in their subsidiary Rice Midstream. Rice Energy (the mother ship) will use $375 million of that new cash to pay off debts, and the other $125 million will get used for drilling new Marcellus and Utica Shale wells…
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    Energy Investor Jennison Ups Ownership in PDC Energy

    PDC Energy, with leased acreage in the Ohio Utica Shale, paused their Utica drilling program in 2015 but recently announced plans to restart that program and drill five wells in 2016 (see PDC Energy to Restart OH Drilling in 2016, Drilling 5 Utica Wells). So when we spotted a notice that investment firm Jennison Associates had boosted its stake in PDC, we noticed. Anything that may affect a Marcellus/Utica driller is of interest to us. Jennison has upped their investment in PDC and now owns 6.95% of PDC Energy stock worth $147,721,000. That’s a far cry from the 42.8% of Rice Energy stock owned by Alpha Natural Resources (see today’s companion story about that deal). Typically when investors increase their stake to the 7-8% range, they begin asserting their influence on the company–getting a board member elected, etc. Not always, and not every investor pursues that course of action. But it’s worth watching for, which is why we bring you this news about Jennison’s investment in PDC…
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    Problem: Some Marcellus/Utica Drillers Entering 2016 Not Hedged

    A recent report issued by Standard & Poor’s Ratings Services sounds an alarm over the issue of hedging for 2016–in particular for independent producers in the Marcellus and Utica Shale region. What’s hedging and why do we care? Drillers (and others who buy and sell natural gas) often engage in a practice called hedging, which is, in a simplified explanation, a contract to sell (or buy) a commodity like natural gas at an agreed-on price at a future date. There is an element of risk in hedging. From a driller’s perspective, if you strike an agreement to sell your gas in the future and the price goes a lot higher, you have to sell your gas at the lower price you agreed to. That’s the down side. But if the price goes a lot lower in the future, you’ve covered your derriere by locking in a higher price for the gas you produce–making money when your competitors aren’t. Drillers and others who buy and sell gas use hedging as a way to guard against price swings. It’s a “risk management” function in a company. Unfortunately most of the hedges previously arranged more than a year ago are now expiring. And nobody but nobody is willing to strike a contract right now for $3 or $4/Mcf gas a year or more down the road. No one believes the price will recover that much. Which means many drillers (in our neck of the woods) are entering 2016 without their production being hedged–a very scary proposition…
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    Stone Energy 2016 Budget Released – Will They Drill in the NE?

    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 a presence in the Marcellus/Utica Shale. Earlier this year they stopped drilling in the northeast and shut in most of their Marcellus/Utica production (see Stone Energy 3Q15: Shut Down 110 Mmcfe/d of Marcellus Production). Stone has just released their 2016 capital expenditure budget. Are they planning to drill in the northeast in 2016?…
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    EXCO Resources Director Buys Another 630K Shares of Stock

    As we have previously reported, EXCO Resources board of directors member John Wilder is contractually obligated to buy $40 million worth of EXCO stock within a year of closing a deal between Wilder’s company (Bluescape Resources) and EXCO. Bluescape essentially runs EXCO. Wilder has been a busy beaver (see EXCO Resources Director Continues Stock Buying Spree). He’s just done it again. Last week Wilder purchased another 629,581 shares of EXCO Resources stock worth $579,214.52. He (and his company Bluescape) now own 14,745,961 shares of EXCO stock…
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    Gastar Deal to Lease Under the Ohio River in WV Falls Apart

    Remember the brouhaha over energy companies bidding to drill on land underneath the Ohio River in West Virginia? We told you about one such lease–Gastar won a bid on a 232-acre tract underlying the river at the border of Marshall and Wetzel counties. They paid $3,500 per acre as a signing bonus and 20% royalties in their winning bid (see Gastar Wins Lease to Drill Under Ohio River in WV). There were just a few minor details to settle before the deal closed. Guess what? Gastar never closed the deal. Since October 2014 the price of natural gas has crashed, making it uneconomical to drill in many (most?) locations, and Gastar didn’t want to part with its precious capital–so no deal was never finalized. And now the West Virginia Division of Natural Resources is about to call the deal dead and shop it again. Problem is, it’s now a buyer’s market for leases, not a seller’s market as it was in October 2014. WV won’t get anywhere near the same terms this time around, of that we’re sure…
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    PA DEP Fines CNX Gas $450K for Drawing Too Much Water Too Often

    Turns out drawing “free” water from a reservoir in Pennsylvania can cost you quite a bit. CNX Gas, the drilling division/subsidiary of CONSOL Energy, didn’t follow an agreed-upon plan for how much, and how often they withdrew water from a reservoir in North Franklin Township (Washington County), PA. The water withdrawal violations went on between 2011 and 2014 and because of it, CNX will now pay a whopping $450,750 fine. Three-fourths of the fine goes to the Dept. of Environmental Protection (DEP), and the other one-fourth goes to the PA Fish and Boat Commission (PFBC). Here’s the details from the DEP…
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    Hilcorp is to Northern Utica as Cabot is to Eastern Marcellus

    We’re always fascinated how some companies, like Cabot Oil & Gas, make money even in the lowest of low price environments with their Marcellus wells in Susquehanna County, PA (northeastern part of the state), while another driller right down the road, like WPX Energy, can’t make money and end up selling all of their wells and leases. What does Cabot do right that WPX doesn’t do? That’s the gajillion dollar question. We’ve observed a similar situation in the Utica Shale region of western PA/eastern OH. Hilcorp Energy is drilling Utica wells in Lawrence County, PA. In fact, Hilcorp is the “dominant active prospector” in the northern tier area of the Utica Shale–an area including Columbiana, Mahoning and Trumbull counties in OH and Lawrence and Mercer counties in PA. Hilcorp is strong and steady–and they’re making money. They’re also producing gas–lots of it. Lawrence County, PA produces almost as much natural gas as the far-more-drilled Columbiana County (OH). And it’s nearly all Hilcorp gas in Lawrence County. So if Hilcorp is like the Cabot of the Utica, who’s the WPX of the Utica? That would be Halcon Resources, with 140,000 acres in the northern Utica. Back in 2013 Halcon CEO Floyd Wilson famously said he wouldn’t drill any more “crappy” wells in the Utica (see Halcon CEO Says No More S***** Wells in Northern OH Utica). Halcon is desperately trying to stay afloat, Hilcorp is flourishing. Here’s more about Hilcorp and their success in the northern Utica…
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    Chesapeake Energy Faces Bankruptcy if Noteholders Don’t Cooperate

    It appears that Chesapeake Energy is having trouble convincing its noteholders with notes due in 2017/2018 to exchange those notes (IOUs), which are unsecured (no guarantees they get paid if the company goes belly up) for new secured, second-lien notes due in 2022. We told you two weeks ago that Chesapeake had embarked on a program to swap out various classes of notes, a plan to delay repaying outstanding debt (see Chesapeake Energy Floats Plan to Exchange $1.5B Worth of IOUs). Somewhere between 10%-28% of the outstanding $1.7 billion in 2017/2018 notes–those notes closest to maturity–have signed on to the plan. It’s not enough. Chesapeake has a gun to the head of its noteholders, a “prisoners’ dilemma.” If a significant number don’t go for the plan, it’s a near-certainty the company will be forced to file for bankruptcy according to finance experts, and those noteholders will get nothing because their notes are unsecured. If noteholders do go for the plan, they get less than what they signed on for, but at least they get something, and the something they get is far more assured, even if the company files for bankruptcy. If the note exchange does happen, Chesapeake is still not out of the bankruptcy woods by a long shot, and that has all of its investors, who hold debt (notes and bonds) or equity (stocks), worried…
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    Range Resources’ Executive Chairman Sells 468K Shares of Co Stock

    After serving 20 years as the CEO of Texas-based Range Resources–the first and one of the largest drillers in the Marcellus Shale–John Pinkerton retired and Jeffrey Ventura became the new Range CEO on Jan. 1, 2012 (see Range Resources Names Early Marcellus Advocate as Next CEO). Even though he retired as CEO, Pinkerton stayed on the board of directors, becoming executive chairman. Over the past two weeks Pinkerston has sold 467,521 shares of Range stock that he owns, leaving him with just 390,343 shares. The grand total of his stock sales was $10.6 million. Knowing it doesn’t look good that the executive chairman has just dumped more than half of his stock when the stock price is half what it was just three months ago, Range issued a statement to explain why Pinkerton engaged in a fire sale of his company shares…
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