Halcon Resources Put on Notice by NYSE; Refi Debt at Higher Rate
Halcon Resources, with with some 140,000 net acres in the Ohio Utica Shale, said in January they would not do any Utica drilling in 2015 (see Halcon Resources: Slashes Drilling Budget 50%, No Utica for 2015). In February on an analyst call, Halcon’s colorful CEO, Floyd Wilson, responded to a question from one of the analysts asking about the company’s Utica program by responding with a wisecrack (see Halcon CEO Floyd Wilson: “What’s the Utica?”). Halcon guessed wrong about the Utica and leased acreage in the northern part of the play where production is not as great. Also in February, Halcon appeared on David Fessler’s oil and gas company “death list” of companies that a debt ratio of 4 times or higher earnings (see 19 Oil/Gas Companies on “Death List” – 8 are in Marcellus/Utica). Halcon issued a press release yesterday to say: (a) they’ve refinanced $1.02 billion worth of outstanding IOUs with a third lien, forced to pay 13% interest on notes that previously had interest rates ranging from 8.875% to 9.75%; and (b) Halcon has been put on notice by the New York Stock Exchange that because the company’s stock has slipped below $1 per share, they are in danger of being de-listed by the exchange. That is, Halcon’s stock will have to trade on the Pink Sheets as a penny stock unless they can, in the next few months, get the average per share price above $1 again…
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A potentially troubling development in Penn Township (Westmoreland County), PA. Apex Energy had a permit from the PA Dept. of Environmental Protection to drill a Marcellus Shale well in Penn Twp. An anti-drilling group called Protect PT filed a lawsuit against the town for allowing the well to be drilled with first requiring a full environmental impact statement (EIS)–something that drives up the cost of drilling a well. The town caved to pressure and withdrew permission to drill, so Apex also sued the town. A deal has been worked out. Apex will have to pay for and conduct an EIS, and then they will be allowed to drill. Other towns populated with anti-drillers are catching wind of it and eyeing it as a potential way to slow or stop drilling in their towns…
Welcome to Friday. It’s time for a brief tutorial on “short selling” or “going short” in the stock market. Even if you don’t participate in the stock market, you need to pay attention if you work for a Marcellus driller or other publicly traded company that sells to or is part of the industry. You also need to pay attention if you are leased with a Marcellus driller. A company’s stock price is key to the value of the company–something called its market capitalization. The more a company is worth (the more “market cap” it has) the more it can borrow when it needs to for things like drilling new wells. A bigger market cap also means a company can borrow money at a lower interest rate (more collateral/value, less risk). Let’s take a look at the recent market gyrations and how those gyrations have encouraged something called short selling of Marcellus-related stocks…
Finally we know. In June Magnum Hunter Resources (MHR), majority owner of subsidiary pipeline company Eureka Hunter, said it was negotiating to sell all of its ownership of Eureka Hunter to an unnamed buyer for $600-$700 million (see 
A pipeline upgrade project in western Pennsylvania is making excellent progress. In February 2014 National Fuel Gas Company (NFG) filed an application with the Federal Energy Regulatory Commission (FERC) for the Line N West Side Expansion and Modernization Project in Washington, Allegheny, Beaver, Venango and Mercer Counties, PA. The project calls for building some 23 miles of new pipeline next to an existing NFG pipeline in Washington and Beaver counties, along with compressor station and other upgrades along other portions of the existing Line N pipeline. NFG previously signed Range Resources and NFG’s own subsidiary, Seneca Resources, as customers for an increase in capacity to flow an additional 175,000 decatherms per day, Dth/d (175 million cubic feet per day, MMcf/d). The extra capacity allows Range and Seneca to move of the Marcellus Shale gas they produce in western PA to market. Although construction is still underway, NFG has asked FERC to begin partial service now, two months ahead of schedule…
The writers at NGI–Natural Gas Intelligence–continue to pump out hit article after hit article. (Full disclosure: MDN editor Jim Willis works part time for NGI on the marketing side. But hopefully by now you know that Jim doesn’t offer false praise for friend or foe. He always calls ’em like he sees ’em.) The latest article we’re excited about is one about a potential shift among Marcellus drillers in southwestern PA and WV–a shift away from Marcellus drilling, potentially replacing it with Utica drilling. Yes, you read that right. No, not all Marcellus drilling will suddenly stop–but in a continuing low-cost gas environment where every dollar counts, drillers are rethinking their strategies and where they will spend precious capital dollars. The recent blockbuster Utica well drilled by EQT in southwestern PA is catching everyone’s attention (see 
Yesterday the Pennsylvania Dept. of Environmental Protection announced an agreement/settlement with three Marcellus drillers operating in the northeastern portion of the state. The three–Chesapeake Energy, XTO Energy and SWEPI (i.e. Shell) were fined a collective $374,481 for methane migration related to their drilling activities at three locations (three different counties) in 2011 and 2012. The bad news is that 13 private water wells between the three incidents were negatively affected, along with several local creeks. The good news is that the problems are all fixed. Methane migration is an eminently fixable condition. Here are the details for each fine, including what happened and where it happened…
There is no doubt the current stock market crash (what else can you call it?) has affected everyone and everything–including the Marcellus/Utica industry. Yesterday the price of West Texas Intermediate (WTI) crude oil closed the trading day at $38.24 per barrel–the lowest price since 2009 during the dark days of “the Great Recession”. Natural gas trading at the benchmark Henry Hub in southern Louisiana, often used as a proxy for all natural gas, closed at $2.64 per thousand cubic feet (Mcf). The Dow Jones Industrial average sunk another 588 points to close down more than 1,000 points in two trading sessions–last Friday and yesterday. At the beginning of trading yesterday, the DJIA experienced its biggest intraday (within a single day) loss ever–plunging more than 1,000 points as trading began. Thankfully it regained nearly half of that–but still, it was scary on many levels. All of that fear has affected all stocks, including the stock price for some of the biggest Marcellus/Utica drillers, who saw losses averaging 7-10% in a single day–yesterday…
An unfortunate decision in an Ohio court case may have far-reaching implications for Ohio landowners. In Armstrong v. Chesapeake Exploration, L.L.C., landowners Myron and Nikki Armstrong purchased 61 acres of land in Tuscarawas County, OH in 2003 with an existing oil and gas lease (dating back to 1972). After purchasing the property, the Armstrong’s land was pooled into a drilling unit and a well was drilled. We do not know how much (or even if) the well produced in the way of gas and oil. We don’t know if it was hooked up to a pipeline for production. We assume it was hooked up and is producing because the Armstrongs have sued to cancel the lease saying they haven’t received a single royalty check since the well was drilled. Tuscarawas County Court ruled that because there is no express provision in the original lease saying “you can cancel this lease if we don’t pay you the royalties we say we’ll pay you,” the court ruled in favor of Chesapeake and the company that owns the lease and is supposed to pay the royalties–Belden & Blake. The Armstongs appealed the decision to the Ohio Court of Appeals, Fifth Appellate District. That court has just ruled the same way–saying even though royalties haven’t been paid, that’s not a good and sufficient reason to cancel the lease…
Although MDN caught and reported on the Bloomberg article questioning Aubrey McClendon’s high roller ways (see 
It’s not often that MDN writes about natural gas drilling in Australia. This time there’s a tie-in with the Utica/Marcellus. Aubrey McClendon, former CEO of Chesapeake Energy ejected from the company he-cofounded by an evil corporate raider (Carl Icahn); Aubrey McClendon, founder of American Energy Partners and subsidiary American Energy Appalachia Holdings that has since fled and become its own company called Ascent Resources; Aubrey McClendon, who could charm a billion dollars from Satan himself and leave old Lucifer smiling at being shafted; that Aubrey McClendon has just signed a deal with an Australian company to secure the rights to drill on 21.5 MILLION acres Down Under (in Australia). This is Aubrey’s first foray outside of the United States–and boy what a splash he’s making! Never mind McClendon’s Ascent Resources is saddled with so much debt it can’t repay that Moody’s Investors Service has downgraded the company to its lowest rating level, meaning “Substantial risks – In default” (see 
Antero Resources announced yesterday it is stepping up its recycling efforts in the Marcellus/Utica by hiring Veolia Water Technologies Inc. to build a new shale wastewater recycling facility in Doddridge County, West Virginia. The new facility, which will take two years to build and cost Antero $275 million, will process 60,000 barrels of wastewater per day. Is Antero building the new facility to prove what good “green” citizens they are? Nope. They’re building it for the best of reasons: capitalism. Once the new wastewater treatment plant is up and running, Antero will save $150,000 per well on completions costs. Veolia will not only build the facility but also operate it under a 10-year contract…