Energy Companies

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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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    EQT Releases Data on Biggest Utica Well Ever; Dumping UD Drilling

    changing courseOne week ago MDN brought you the news of EQT’s monster Utica Shale well drilled in Greene County, PA–the single highest producing on-shore shale well on the planet with initial production (IP) of 72.9 million cubic feet of natural gas per day (see EQT’s 1st Utica Well Shatters Record – 72.9 MMcf/d IP Rate!). Yesterday EQT provided an update on the well. It’s currently shut in while they get all of the pipelines connected and things ready to rock and roll. But before they shut it in, they flowed it for seven days and the average per day production was 27 million cubic feet per day (MMcf/d). It’s a truly astonishing well. Interestingly, this one, single well has changed the course of EQT’s drilling program. In the update (full copy below) they’ve announced the results from this well are so good, they are abandoning their Upper Devonian (UD) drilling program before it ever really got under way. They also announced they will drill a second Utica well in Greene County in August. Here’s the full update on the record-shattering Scotts Run 591340 dry Utica well and how it’s changed the direction of EQT…
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    Range Resources Chops 11% of Workforce (so Far) in 2015

    The low price drillers receive for natural gas, NGLs and oil, and the results those prices have on revenues for drillers, continues to take a big bite out of the industry. Companies, rightly or wrongly, reduce head count in order to keep the balance sheet less red than it otherwise would be. One of the easiest and quickest ways to improve finances at big companies is to cut head count. Two weeks ago CONSOL Energy laid off 10% of its workforce–some 470 people (see CONSOL Slashes 10% of Workforce – 470 Jobs Gone). Range Resources is latest to confirm company-wide layoffs. So far this year Range has cut 11% of its workforce. In May, Range laid off 41 people in the Marcellus/Utica region…
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    Antero Resources 2Q15: Production Up 67%, Continues to Bleed $$

    Antero Resources, one of the biggest drillers in the Marcellus/Utica and a company totally focused on northeast shale drilling filed its second quarter financial update yesterday. On the positive side, Antero’s natural gas production rose 67% year over year to 1.5 billion cubic feet per day equivalent (Bcfe/d) in 2Q15. Looking forward, Antero says they expect when you compare all of 2015 production with all of 2016 production you will see an increase of 25-30% for 2016. The company continues to drive down costs–9% lower in 2Q15 from a year ago. On the negative side, Antero continues to bleed (a lot of) money. In 2Q14, Antero had a net loss of $42 million. In 2Q15 that expanded to a net loss of $145 million–a 245% increase in the wrong direction, down. Antero is a company with great assets and a solid operation, but losing money. Antero, backed by Warburg Pincus LLC, has been mentioned in the past as a possible target for a takeover (by Spanish energy giant Repsol, but Repsol ended up buying Talisman Energy instead). No, we’ve not heard any recent rumors, specific or unspecific. But don’t be surprised if one of the majors makes a play for Antero. Here’s their 2Q15 update…
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    Rex Energy 2Q15: Production Up 61%, MDN Provides Missing Rev # s

    Yesterday Rex Energy issued a second quarter 2015 “production and price realization” update–the first such update we’ve seen like it. It’s sort of a cherry-picking of the data and presenting only portions–perhaps in advance of poor financial information they’ll issue for 2Q15? Rex, our “little energy company than can and does” has plenty to boast about. Production for all hydrocarbons year over year increased an impressive 61%, from 128.8 million cubic feet equivalent per day (MMcfe/d) in 2Q14 to 206.8 MMcfe/d in 2Q15. But the second part of this brief update, in chart form, shows the prices they receive by hydrocarbon. Those prices are lot lower–through no fault of Rex’s–year over year. MDN has done some arithmetic to compare Rex’s revenues in 2Q14 and 2Q15. Here’s what we found…
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    2 Pipelines Will Raise Gas Sale Price by $1 for Range Resources

    As we told you yesterday, Range Resources is excited about two pipeline projects that will go online soon–Spectra Energy’s Uniontown to Gas City (U2GC) Project and Mariner East I–Sunoco Logistics’ NGL pipeline from western PA to the Marcus Hook refinery near Philadelphia. On the quarterly analyst conference call yesterday, Range Resources CEO Jeff Ventura led off with a discussion about those two projects. To point out the importance of pipelines, these two projects will mean, according to Ventura, that Range will get $1 per Mcf more for their production once the pipelines go online. That’s a huge increase–as much as 33%–over what they receive now. Here are Ventura’s enlightening comments from yesterday’s conference call…
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    PA Court: Gas Storage Fields Lock Up Property for Drilling Too

    In some locations there are small or large underground storage fields for natural gas located in the Marcellus/Utica. We’ve covered stories in the past about one such field–the Brinker Storage Field, a 35,000 acre area in Columbiana County, Ohio that Columbia has used to store natural gas going back more than 50 years (see Some Brinker Field (OH) Leases Revised, Others in Lawsuit). More often than not these fields seem to be a flash point with respect to leases and potential drilling under them. Because the fields were leased years ago, there are disagreements about what the leases say about royalties for any gas drilled under them. Little did we know (in fact we didn’t know) there are such storage fields located in Pennsylvania too. A case went to court challenging the right of Range Resources and NiSource (their Columbia Gas subsidiary) to retain lease rights for both storing natural gas and drilling for natural gas for property partially included in a unit that includes a 14,000 underground Donegal Storage Field operated by NiSource in Washington County, PA. The landowners have just lost the case–meaning units with storage fields under them can “hold by production” undrilled land in the unit solely because there is gas stored…
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    CONSOL Drills 2nd Best Utica Well Ever in PA, Flows 61 Mmcf/d!

    2nd placeYesterday CONSOL Energy’s management team hosted their second quarter 2015 analyst and investor conference call. There was major information contained in that call. The big news is that CONSOL just hooked up and tested a new Utica Shale well in Westmoreland County, PA that is the second best initial producing Utica well ever. Just last week MDN told you about the #1 Utica well drilled so far, by EQT (see EQT’s 1st Utica Well Shatters Record – 72.9 MMcf/d IP Rate!). The EQT monster Utica well is located in Greene County, PA. The CONSOL well just brought online is located about four miles away from that well–and is initially producing and flowing at 61 million cubic feet per day! [Correction: CONSOL’s 61 MMcf/d gusher is the Gaut 4IH. CONSOL is right now drilling the GH9 well that is four miles from the big EQT monster well.] This is really big news and is the reason that Utica drilling has turned CONSOL’s head away from Marcellus drilling…
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