Energy Companies

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    New COO for Magnum Hunter Raises a Few Interesting Questions

    Magnum Hunter Resources (MHR) announced a change in upper management yesterday that caught our attention. Keith Yankowsky, 50, has been hired as Executive Vice President and Chief Operating Officer reporting to CEO Gary Evans. It caught our attention for a couple of reasons. Number one, Yankowsky was hired away from Chesapeake Energy. It was just two days ago we heard about another high level defection from Chesapeake–Aubrey McClendon hired away one of his old mates to become CFO of his new company (see McClendon’s American Energy Partners Gets a New CFO). Now we have a second very high level defection from Chesapeake with Yankowsky, who was serving as Vice President of the Appalachia South Business Unit, to join a much smaller (and financially troubled) company. Two defections does not a trend make, but we have to ask: What do they know that we don’t? Hmmmm. The second thing we notice is that this appears to be a completely new position at MHR, shifting some of the responsibility for day to day operations off from Gary Evans’ plate and onto Yankowsky’s plate. Was this Gary saying, “Hey board, I need some help,” or the board saying, “Hey Gary, you NEED some help”? Hmmmm…
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    Gulfport Energy Releases Other Half of 2Q15 Update – the Bad News

    Last week Gulfport Energy, with some 243,000 acres of Utica Shale leases, released half of their second quarter update (see Gulfport Releases Half of 2Q15 Update – The Good News Part). This week they released the full update, the other half dealing with the financial aspects of the company. Like other drillers across the country, Gulfport’s net income (after expenses, accounting this and that, taxes) took a big hit. They lost $31.3 million in 2Q15 vs making $47.9 million in 2Q14. The good news is that Gulfport remains active in the Utica–they plan to have drilled between 49-55 new Utica wells by the end of 2015…
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    Carrizo O&G 2Q15: No New Utica Drilling, but Production Goes Up

    Carrizo Oil & Gas released their second quarter update yesterday. Carrizo has operations in both the Marcellus and Utica–although the Utica seems to be where they are concentrating their efforts in the northeast. At the beginning of the year Carrizo said they would not do any new drilling in the northeast, instead concentrating on the Eagle Ford Shale in Texas (see Carrizo Cuts Budget 35%, No Drilling Planned in Utica/Marcellus in 2015). The latest update shows the company to be following that strategy. Although there has been no new drilling, Carrizo did bring several previously drilled Utica wells online for sales, boosting their production in the Utica. Carrizo’s Marcellus production was roughly flat with 1Q15 production with nothing new planned for the Marcellus. Below are the relevant portions of the update dealing with the Utica/Marcellus…
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    Gastar 2Q15: No New Marcellus/Utica Wells, Production Increased Anyway

    Gastar Exploration, with a small but meaningful drilling program in both the Marcellus and Utica Shale (~46,700 net acres leased) filed their second quarter update yesterday. As we reported after their 1Q15 update, Gastar isn’t drilling any new Marcellus wells for the balance of 2015, instead concentrating new drilling on the Midcontinent drilling program (see Gastar 1Q15: NE Production Up 5%, No New Marcellus Wells in 2015). Even though Gastar didn’t drill anything new in the northeast over the past three months, production from the Marcellus for Gastar continued to climb because of previously drilled and completed wells. Gastar, like almost all other North American drillers, took a huge net loss on income during 2Q15 largely due to assets being devalued due to the price collapse. In other words, it wasn’t actual money they lost, but money on paper. Below is the brief update from the 2Q15 update on Gastar’s Marcellus program, along with their most recent investor presentation. MDN has hacked apart the long PowerPoint to show you only those bits related to the Marcellus/Utica (and there are some good slides in there)…
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    National Fuel Gas/Seneca Res. 3Q15: Marcellus Production Down 12%

    National Fuel Gas Company, a large Buffalo-based utility with subsidiaries active in drilling and midstream, released their third quarter (everybody else’s second quarter) financial and operating results yesterday. National Fuel Gas is the parent of Marcellus driller Seneca Resources and midstream company Empire Pipeline. Sounding like a broken record, Seneca Resources, like just about every other driller in North America, had a horrible quarterly net income statement because of write-downs in the value of their assets–i.e. a paper loss (not an actual cash loss). Unlike many other drillers, Seneca’s Marcellus production was down year over year by 12%–presumably from lack of drilling and completing new wells. Below we have the scoop on National Fuel’s drilling/upstream operations (Seneca Resources), and on their pipeline/midstream operations (Empire Pipeline & National Fuel Gas Midstream), along with a snapshot of their production numbers, broken out by oil/gas and by region…
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    Stone Energy 2Q15: Increased % Ownership in Marcellus JV Wells

    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 the company released the one active Marcellus rig they were running and said they would not resume drilling in the northeast until receiving a hybrid rig in late 2015/early 2016 that can drill both Marcellus and Utica wells (see Stone Energy 1Q15: No New Marcellus Drilling, But More Production). Stone issued their second quarter 2015 results yesterday. Interestingly, some of Stone’s joint venture partners elected not to exercise rights to own more of the wells drilled by Stone, leaving Stone with a higher percentage ownership for a number of Marcellus wells. Stone said they expect production in the Marcellus region (currently 144 MMcfe per day) to tapper off over the rest of the year because they aren’t drilling or completing any new wells. Even so, they expect 2015 production to exceed 2014 production in the northeast. Despite cost-cutting measures, Stone’s net income (which includes expenses), like that of so many other drillers across the country, took a dive in 2Q15–going from $4.4 million net income in 2Q14 to minus $152.9 million in 2Q15…
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    Chesapeake Energy 2Q15: Low Prices Take Big Bite, $5.6B in Red

    red inkChesapeake Energy released their second quarter 2015 operating and financial results today. Chessy, as you know, is a big company involved in a number of shale plays–although the Ohio Utica and the Pennsylvania Marcellus are its biggest and most important areas of operation. The good news: Chessy’s OH Utica production increased by 13% from 1Q15–even while curtailing much of their Utica production. Overall, across all of their shale plays, converting oil and natural gas into barrels of oil equivalent production, Chesapeake held the line. In 2Q14 they produced 63.2 million barrels of oil equivalent per day (mmboed) of production, and 63.9 mmboed in 2Q15. The company continued to lower costs over the past year–so it stands to reason if you produce and sell the same amount but lower costs, you make more in profit, right? Wrong. Prices the company received for both oil and natural gas collapsed over the past year. In 2Q14 Chesapeake got an average $2.45 per thousand cubic feet (Mcf) for their natural gas. In 2Q15? They got a piddly $1.01/Mcf. Ouch. You can understand why net income (which includes expenses) swung from $371 million in the black for 2Q14 to $5.6 BILLION in the red (a loss) in 2Q15. No wonder Wall Street is telling Chesapeake to sell itself (see today’s companion story)…
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    Chesapeake Energy Takeover Rumors Run Rampant

    Chesapeake Energy, the largest natural gas driller (by number of wells drilled and by production) for both the Marcellus and Utica Shale plays, released their second quarter financials today. The stock market expected it to be more bad news for the natural gas giant–and indeed it was (see today’s companion story about Chesapeake’s 2Q15 update, going $5.6 billion in the red). In fact, the speculation is that the company is ripe for a takeover–thanks in no small part to current CEO Doug Lawler and his actions in slashing jobs and selling off everything but the kitchen sink. The market’s view (not our view) is that Chessy co-founder and previous CEO Aubrey McClendon left the company in a mess and Lawler has been working tirelessly to untangle that mess and put things right. Some of Lawler’s “putting it right” actions included plunging 1,200 families into economic hardship when he fired them (see Chesapeake’s CEO Celebrates Axing 1,200 People Making Carl More $). Better the peons get fired than corporate raider Carl Icahn, the man who installed Lawler, be prevented from adding a few more million (or billion) to his bank account, right? The funny thing is, if Chesapeake sells now, old Carl is hosed. He bought when the market was high and if they sell now, he’ll take a big loss. Just deserts anyone?…
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    Rex Energy Financial Update for 2Q15: Rev Down 37%

    We now have “the rest of the story” for Rex Energy for second quarter 2015. Last week Rex released a partial update for 2Q15. At the time we used the production numbers they released with the prices they received for that production to calculate simple, back-of-the-envelope numbers for revenue, predicting Rex would show a revenue slide of around 16% from 2Q14 to 2Q15 (see Rex Energy 2Q15: Production Up 61%, MDN Provides Missing Rev # s). Yesterday Rex released their financials for 2Q15. How’d we do? Seems our estimate was rather rosy. Rex’s revenue went down 37% year over year–due to the lower commodity prices they received ($72.9 million in 2Q14 to $45.8 million in 2Q15). Rex’s revenue slide is typical of drillers across the country. However, when you factor in all of Rex’s expenses, the picture becomes a bit cloudier. Rex’s net income (net loss) year over year was minus 1,990% ($8.96 million for net income in 2Q14 compared to to minus $151.8 million in 2Q15). But when you scratch beneath the surface you find Rex took a one-time “impairment” hit of $117.8 million in 2Q15. What’s that? Essentially the value of their leases and assets went down–on paper. That $117.8 million “loss” was not a cash loss–just an accounting loss on paper. If you remove the impairment charge from the mix, Rex’s net income for 2Q15 would have been minus $34.0 million, a “mere” 279% decrease year over year…
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    McClendon’s American Energy Partners Gets a New CFO

    American Energy Partners, Aubrey McClendon’s new company founded after he was unceremoniously tossed from Chesapeake Energy (the company he co-founded), continues to befuddle us. As we noted in June, some of the subsidiary companies under Aubrey’s AEP umbrella are leaving the nest–even to the point of changing their name so it’s completely dissimilar to AEP (see McClendon’s New Empire Continues to Separate and Leave). Is that Aubrey’s plan playing out? Or are people running as far and fast as they can from McClendon? Frankly, we don’t know. We tend to think it’s the later, to be honest. One of the folks who has left Aubrey behind was AEP’s Chief Financial Officer (CFO) Jennifer Grigsby. She recently left AEP to became CFO of Ascent Resources. Ascent operates in the Marcellus/Utica and used to be American Energy Appalachia Holdings. They are now 100% independent and free from AEP. So McClendon dipped into the Chesapeake talent pool and lured away an old mate he used to work with at Chessy to become the new CFO for AEP–Elliot Chambers…
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    More Trouble for EXCO Resources – NYSE Threatens to De-List Stock

    trouble ahead signEXCO Resources is an exploration and production company (an E&P or what we refer to as a “driller”) operating in East Texas/North Louisiana (the Haynesville Shale), South Texas (the Eagle Ford Shale), and in the Marcellus Shale region–in Pennsylvania and West Virginia. EXCO has a sizable Marcellus presence with 145,000 net acres in the Marcellus and having drilled and operating 124 horizontal Marcellus wells. They’re also a company facing stiff challenges. Last December the company suspended paying dividends on their stock–never a good sign (see EXCO Resources Suspends Dividend Payments to Shareholders). EXCO’s major investor, Bluescape, installed a new CEO and COO along with new board members in April (see Bluescape Pulls Strings Installs New CEO, COO at EXCO Resources). EXCO suspended their Marcellus drilling program earlier this year, until further notice (see EXCO Resources Continues Marcellus Drilling Moratorium in 1Q15). And not to throw salt into the wound, but EXCO appears on both Debtwire’s “Distressed Watchlist” (see 4 Marcellus Companies Debut on Debtwire’s Distressed Watchlist) and on David Fessler’s “The Oil Company Death List” (see 19 Oil/Gas Companies on “Death List” – 8 are in Marcellus/Utica). The latest evidence that EXCO is a company in trouble: the New York Stock Exchange sent the company a notice that EXCO’s stock is in “noncompliance” with listing standards and they have six months to get the stock price up–or the company’s stock will be pulled from the venerable NYSE and relegated to penny stock status, trading on the Pink Sheets…
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    Alpha Natural Resources in Bankruptcy – What about Marcellus?

    Virginia-based coal miner Alpha Natural Resources Inc. filed for bankruptcy protection on Monday. Thank you President Obama for driving yet another coal company into bankruptcy. But the story doesn’t end there. Alpha is not going anywhere–not yet any way. And there is an important tie-in with the natural gas industry. Alpha is also a driller in the Marcellus Shale–drilling on its own land and as part of a joint venture with Rice Energy. What does the Alpha bankruptcy mean for its Marcellus drilling program?…
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    Noble Energy to Idle Remaining Marcellus Rig Next Month

    zeroNoble Energy, a driller with a massive joint venture with CONSOL Energy on 663,350 acres of Marcellus and Utica Shale leases in the northeast, has confirmed they are “cutting back” the number of rigs they operate in the Marcellus Shale due to “the current environment.” What “cutting back” means is that they will go from operating a single rig to operating no rigs beginning in the middle of the third quarter (which means next month). Two other Marcellus rigs operated by CONSOL Energy will go off line by the fourth quarter…
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    Hess Says Harrison County, OH “Truly the Sweet Spot” of the Utica

    Last week Hess released their second quarter 2015 earnings and operations update. It didn’t really say too much at all about their drilling program in the Ohio Utica Shale. We did, however, get some color commentary from CEO John Hess on last week’s conference call with analysts. We learned from that call that Hess drilled, with joint venture partner CONSOL Energy, just 10 wells in 2Q15. They completed 15 wells (some previously drilled) and brought 9 wells online into production. Hess is dropping from 2 active rigs in the Ohio to just 1 rig for the balance of 2015 but even so, they expect to bring 25-30 new wells online for all of 2015. The interesting (kind of funny) thing to MDN was an off-the-cuff statement by Hess President & COO Greg Hill on the call. Hill said that Hess will continue to concentrate their Utica drilling in Harrison County, OH. Why? Not because that’s where most of their remaining Utica acreage is located–oh no. But because Harrison County is, according to Hill, “truly the sweet spot of the play” and “the wettest part of the play.” There you have it. Forget about Belmont, Monroe, Noble and Guernsey counties. Harrison is where it’s at…
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    New Underground Marcellus/Utica NatGas Storage Facility Proposed

    An open season–a time when customers can sign multi-year contracts with a pipeline company–begins today…but not for a pipeline. This open season connects to pipelines but is for storage of natural gas in the Marcellus/Utica region. Chestnut Ridge Storage, LLC is a proposed underground storage facility that will be built in the West Summit Field located under portions of Fayette County, PA and Monongalia and Preston counties in WV. The new facility will be able to store an initial 15 billion cubic feet (Bcf) of natural gas, and eventually 25 Bcf. The facility, if it gets approved by the Federal Energy Regulatory Commission (FERC), will not be fully operational for another three years–in 2Q18. The open season is “non-binding” meaning customers don’t yet have to sign on the dotted line. We don’t often talk about it, but a key part of the natural gas infrastructure that delivers gas to customers is storage. Not all gas can be used as soon as it’s extracted and flowed through a pipeline. There are a series of (mostly) underground storage facilities that act as a temporary rest stop along the journey to market. A very necessary and important rest stop. The interesting thing to MDN about this particular open season announcement, aside from the fact that it’s meant to store Marcellus and Utica Shale gas, is who is building it: eCORP International…
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    Shrill Opposition to Constitution Pipeline after Cabot Comment

    Flat-out, 100% lies is what best describes the claims being made by anti-pipeline groups like Stop the Pipeline in New York State in a letter sent to Gov. Andrew Cuomo, with respect to charges that the already-FERC-approved Constitution Pipeline would, if built, incite an environmental Holocaust in the state. These are the VERY SAME people who successfully pressured Cuomo into banning fracking in the state–so they’re hoping they can bully the pathetically weak Cuomo once again, this time to reject the Constitution Pipeline. The renewed and shrill campaign against the pipeline comes because last week Cabot Oil & Gas CEO Dan Dinges said he expects the NY Dept. of Environmental Conservation (DEC) to issue permits allowing the pipeline to cross streams and swamps (i.e. “wetlands”) any day now. The fact that this pipeline WILL get built is eating anti-drillers alive. They can’t stand it. So they whip up an email “letter” to Cuomo, and then get their sympathetic buddies at the Democrat Albany Times Union to run a story on their efforts, trying to manufacture the appearance that there is a groundswell of support against the pipeline–when there isn’t…
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