Activist Investor Pressures Range to Change Board, Mgmt Structure

What constitutes an “activist investor” and what constitutes a “corporate raider?” Depends on whom you ask. We address the semantics issue below in more detail. The reason we raise it is because of some big, breaking news: Activist investor SailingStone Capital Partners is forcing Range Resources to do some things Range may not prefer to do. Nearly two years ago, in August 2016, MDN told you that investment firm SailingStone Capital had purchased 11% of Range Resources stock (see SailingStone Capital Buys 11% of Range Stock, Gets Board Seat). They got a board seat out of their investment, and the right to nudge Range in a certain direction, to some degree. Although we were suspicious, at the time it appeared SailingStone was more of a partner assisting Range rather than what we call a corporate raider. SailingStone now owns 17% of Range’s outstanding shares, and they are throwing their weight around. In an announcement made yesterday, we learn that SailingStone has pressured Range into granting them two more seats on the board–for a total of three (out of ten). Is it fair that SailingStone controls 30% of the board but only owns 17% of the company? SailingStone has also forced Range CEO Jeff Ventura to relinquish his title (and power) as Chairman of the Board, appointing a new “independent” Chairman. SailingStone is also forcing Range to hire a new outsider as executive VP, to “supplement and strengthen the management team.” Is SailingStone “helping” Range make changes that Range truly needs to make to benefit shareholders? Or is there something more nefarious going on?…
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EQT & Range Recent Cutbacks Won’t Affect Production

Sources talking to the Pittsburgh Business Times have tipped the paper that EQT recently idled something like five fracking crews, and that Range Resources recently idled a top hole drilling rig. Oh oh. Is this an early sign that the gas patch is slowing down again? Are we heading into a downturn? Don’t panic. Although there has been some scaling back, both companies say activity levels and most importantly, production levels, are not jeopardized by their actions. Instead, the moves are about “saving money” and “increasing efficiencies.” The truth is, as technology and strategies continue to improve over time, drillers don’t have to drill as many holes in order to produce the same or more than they produce now. The companies in the Marcellus/Utica patch are getting leaner–more efficient at what they do, and how they do it. Yeah, it sucks when local jobs get whacked due to “efficiencies,” but ultimately it’s a good sign. It means the companies are getting stronger and will stick around for the long term–providing jobs and economic benefits in the communities where they work for years to come…
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News from DUG East: Record-Breaking Wells, Long Laterals & More

One of two major Marcellus/Utica events that happens each year in Pittsburgh, Hart Energy’s DUG East Conference, was held this week. (The other is Shale Insight, held in the fall.) We’ve covered a variety of news coming out of the DUG East event. Unfortunately we could not be there in person this year. By all accounts, a lot of great information was shared. We spotted two articles from different sources that do a good job of rounding up highlights from this week’s DUG. Hart’s own Exploration & Production magazine chronicles news from Eclipse Resources, whose CEO (Ben Hulburt) says the company expects to break more lateral records this year. Dennis Degner from Range Resources also talked about long laterals, and strategy. Degner said Range balances other factors like pipeline takeaway capacity and service costs. Also appearing on the stage were smaller/private M-U operators, like Northeast Natural Energy, who also shared some great insights. Below is a good roundup of the news coming from DUG this week, from a couple of sources…
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Financial Checkup for Marcellus/Utica Drillers

RBN Energy, headed by founder Rusty Braziel (co-founder of Bentek Energy), is, in our opinion, the premier oil and gas analytics firm out there. Smart people working at RBN. And they offer up some amazing content on their blog site–for free! At least it’s free for a while, then it goes behind a paywall. A few days ago RBN published a blog post on the financial health for the 44 major publicly-traded U.S. exploration and production companies (drillers). RBN groups them into three categories: Oil-Weighted, Diversified, and Gas-Weighted. We found the Gas-Weighted list of 10 companies and the information revealed about them to be fascinating and worth studying. Each of the companies has major operations in the Marcellus/Utica–some of them totally focused on our region. Among the data points shared: revenue, production costs, lifting costs and more. We think of the following as a handy financial health scorecard/checkup for 10 of the biggest drillers in the M-U, including Antero Resources, Cabot Oil & Gas, Chesapeake Energy, CNX Resources, EQT, Gulfport Energy, National Fuel Gas (Seneca Resources), Range Resources, Southwestern Energy, and Ultra Petroleum…
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Lib Group Didn’t Force Range to Consider Global Warming After All

Sometimes there are happy endings! Two weeks ago MDN reported that a so-called church, the Unitarian Universalist Association (people who believe in everything, consequently they believe in nothing) had purchased $2,000 worth of Range Resources stock in order to propose a resolution to all shareholders at the annual meeting that forces Range to publish a report on how evil the company is for causing global warming (i.e. force the company to produce a report on their efforts to scale back methane emissions). We told you, based on reports, that the idiotic measure passed by 50.25% (see Liberal Groups Force Range, Anadarko to Consider Global Warming). Except it didn’t pass. The original count did not include “abstention” votes. An abstention is when someone intentionally or unintentionally does not vote. By law, abstentions are considered a “no” vote on shareholder resolutions. When the abstentions were added to the count, it tipped the scale in the other direction, meaning Range dodged a bullet–this year…
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Liberal Groups Force Range, Anadarko to Consider Global Warming

We get tired of saying it, but perhaps we should never get tired of saying that according to the most reliable methods of tracking temperatures on earth (by satellite), THERE IS NO GLOBAL WARMING. The only way global warming alarmists get away with claiming the earth is heating up is by using doctored computer algorithms. The actual testing and measurement of temps doesn’t show we’re heating up! And yet the manipulators who persist in using scare tactics that mankind is somehow causing the earth to heat up catastrophically by burning fossil fuels and leaking methane into the atmosphere, have just claimed a couple of more scalps in their efforts to shut down the fossil fuel industry. A so-called church, the Unitarian Universalist Association (people who believe in everything, consequently they believe in nothing) bought $2,000 worth of Range Resources stock and proposed a resolution to all shareholders at the annual meeting that forces Range to publish a report on how evil the company is for causing global warming (i.e. produce a report on Range’s efforts to scale back methane emissions). The measure passed by 50.25%. A group called As You Sow bought Anadarko stock and floated a resolution instructing the company to produce a report on how mythical man-made global warming will affect the company financially as it will no doubt have to scale back its exploration and production. That resolution passed by 53%. These groups, with innocent-sounding names, are NOT innocent. They are far left, liberal groups that have snookered shareholders into voting against their own best interests by harming the very companies they invest in, forcing those companies, ultimately, to stop drilling. All in the name of “climate change” (i.e. global warming)…
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Average Workers at Top Marcellus Drillers Make $100K+ Salary

The average worker who works for producers (i.e. drillers) in the Pennsylvania Marcellus makes among the highest average salaries of any industry in the state. Looking at six of the state’s top Marcellus drillers, the average worker made $113,610 last year! That’s an average taken from workers at CNX Resources, Range Resources, Chesapeake Energy, Southwestern Energy, EQT and Cabot Oil & Gas. We hasten to add not “all workers” but “average” or “median” workers–meaning there are people who make below that number and people who make well above that number. It also means the majority of Marcellus workers in those companies made at least $100,000 per year. Those working for oilfield services (OFS) companies like Halliburton, Baker Hughes and others didn’t fare quite as well, making an average of $52,000-$80,000 per year. Still, hey, it ain’t bad money! Here’s a look at the average wage for top Marcellus drillers and the OFS companies that serve them…
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Investor Owning 3% of Range Stock Voting Against Mgmt Compensation

Although the average employee at Range Resources made $123,500 last year (see today’s lead story, Average Worker at Top Marcellus Drillers Makes $100K+ Salary), those in upper management at Range made considerably more. We don’t have the 2017 number, but in 2016, Range CEO Jeff Ventura made $9.8 million (see EQT Pay Dispute – Comparing CEO Salaries for Top M-U Firms). Ventura’s salary works out to be 79 times the average Range worker’s salary–actually far better than the average for all industries which averages 140 times as much. Still, not everyone is happy with the what Range’s upper management gives themselves. A significant investor in Range, Stelliam Investment Management, which owns around 3% of all outstanding Range stock, has issued a press release and an open letter to the board to say they intend to vote against Range’s proposed management compensation plan at today’s annual meeting. Stelliam says over the past four years management compensation has “remained generous” while during the same period the company’s stock price has slipped a huge 80% in value. So who is Stelliam, and does their vote of no confidence create any issues for Range management?…
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The Different Ways Range and CNX Dealt with ME1 Pipeline Outage

Now that the Mariner East 1 (ME1) NGL (natural gas liquid) pipeline is back up and running, Marcellus/Utica producers are breathing a sigh of relief–at least, Range Resources, the primary customer for the pipeline, is. Following sinkholes that developed while Sunoco Logistics Partners was drilling for the Mariner East 2 (ME2) project, a portion of ME1 was exposed to open air in Chester County, PA, which prompted the state Public Utility Commission to shut down ME1 in early March (see PA PUC Shuts Down Mariner 1 Pipeline Due to Mariner 2 Sinkhole). Range sends 20,000 barrels a day of ethane and propane through ME1. The closure sent them scrambling for alternatives (see Range, CNX Look for Alternatives to ME1 Pipe Following Shutdown). CNX Resources is also a customer using ME1, but much less so than Range. It took two months, but the PUC finally allowed ME1 to restart last week (see Sunoco’s ME1 Pipe Restarts, ME2 Pipe Pays Another $355K in Fines). Range and CNX coped with the ME1 closure in very different ways…
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Anti Group Stirs Up Pittsburghers Against Fracking, (Ab)Uses Kids

We always find it deeply disturbing when a group of anti-fossil fueulers, like the innocent-sounding (but very radical) Moms Clean Air Force, pushes little kids in front of the cameras, getting them to hold protest signs in a sleazy attempt to play on people’s sympathy. That’s what happened yesterday in the Pittsburgh suburb of Indiana Township (Allegheny County). Hey, knock yourself out if you want to show up and protest and make some noise. But don’t bring the kids along. Don’t put your guilt trip on the kids, making them protest something they frankly don’t even understand. Don’t implant them with your irrational fears. We find it disgusting…
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EQT Pay Dispute – Comparing CEO Salaries for Top M-U Firms

In mid-March, the country’s #1 producer of natural gas, EQT, suddenly and without previous warning lost it’s President & CEO, Steven Schlotterbeck (see EQT CEO Steve Schlotterbeck Suddenly Quits, Leaves Company). Steve is the man who guided the company through its acquisition of Rice Energy last year (see EQT Buys Rice Energy in $8.2B Deal, Becomes #1 Gas Producer in US). It was a tough battle against multiple corporate raiders who didn’t want to see the deal happen, but Steve held it together and made it happen. The notice from EQT was short and sweet and said Steve had resigned immediately, due to “personal reasons.” MDN was the first to disclose what those “personal reasons” were: a pay dispute. According to Steve, the board wasn’t paying him what similar CEOs at competitors are making. So he quit. Makes you wonder how much Steve was making, and what CEOs at other large Marcellus/Utica drillers make. We spotted an article in the Pittsburgh Business Times that reveals what Steve made last year. We did some digging to find what comparable CEOs make. The numbers we discovered may surprise you…
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Range Resources 1Q18: Drills 2 Longest Marcellus Wells Ever!

Range Resources, the very first driller to sink a well in the Marcellus Shale, provided their first quarter 2018 update yesterday. And what an update it was! First thing that jumped out for us is that Range says they drilled “the two longest laterals to date by Range at 18,129 feet and 17,875 feet.” We checked, and the previous record holder for drilling the longest Marcellus well was EQT, which drilled a Marcellus well with a lateral of 17,400 feet long in Washington County last December (see EQT Drills Longest Marcellus Well Ever, Reveals 2018 Plans). Although Range isn’t claiming they’ve drilled “the longest Marcellus well ever”–they actually have! (Note to Range’s PR department–you’re missing an opportunity to toot your own horn.) Range did not say where (which county or counties) the long lateral wells were drilled–only that it was in southwestern PA. Our guess is Washington County. Range’s long laterals caught the attention of analysts on yesterday’s quarterly phone call. Range personnel were peppered with questions about the long laterals. Other news coming from yesterday’s update: The company made $49 million in profit during 1Q18, down 71% from the $170 million Range made in 1Q17. The company is still larded up with debt–$4.1 billion worth of debt. Range CEO Jeff Ventura said, “Our plan is to continue the process of high-grading our portfolio and accelerate the de-leveraging process by targeting non-core assets sales and the thoughtful monetization of under-appreciated inventory in our portfolio. We currently have processes underway, pursuing various transactions that would support our near-term goal of getting leverage below 3 times, as we ultimately move towards an investment-grade leverage profile.” Translation: We’re selling stuff as fast as we can that doesn’t make us a lot of money. Some of those sales likely will include Range’s Marcellus assets in northeastern PA…
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Range, CNX Look for Alternatives to ME1 Pipe Following Shutdown

MDN reported yesterday that due to underground horizontal direction drilling (HDD) in Chester County, PA (near Philadelphia) for the Mariner East 2 (ME2) Pipeline project, a third sinkhole had developed (see PA PUC Shuts Down Mariner 1 Pipeline Due to Mariner 2 Sinkhole). ME2 is being built close to the existing Mariner East 1 (ME1) pipeline. The sinkhole exposed a portion of the ME1 pipeline to the open air. Not a good situation, which is why the state Public Utility Commission has temporarily shut down the propane and ethane flowing through ME1. The shutdown is for 10-14 days. Problem is, both Range Resources and CNX Gas pump propane and ethane through ME1. With the shutdown, both companies are “scrambling” to find alternative means to get their NGLs to market…
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Clash of the Titans: PA Marcellus Gas Competes with TX Permian

Last week MDN editor Jim Willis attended Hart Energy’s Marcellus-Utica Midstream conference in Pittsburgh (a series of stories are coming this week from that event). One of the stray comments Jim heard at the event was this: The chief rival or competitor to the Marcellus with respect to natural gas production is not, as you might assume (we sure did) the Haynesville Shale in Louisiana. No. The chief competitor, producing more and more volumes of natgas, is…the Permian! That’s right, an oil play! Why? When you drill for oil, you get other hydrocarbons out of the ground along with the oil. Primarily methane, or natural gas. It’s called “associated gas.” Even though most of what comes out of a Permian well is oil and not gas, because there are so darned many oil wells in the Permian (with more being drilled all the time), the total volume of gas coming from the Permian is going up, dramatically. The problem is, some Marcellus/Utica gas heads to the Gulf Coast to be used by petrochemical companies or to be exported. However, gas produced right there in the region is less expensive to get to market (shorter distance), so that Permian-sourced gas is competing, and increasingly crowding out, Marcellus/Utica gas. Investors have noticed and have, in a sense, “punished” some of the biggest of the big Marcellus/Utica producers by selling their shares, leading to a loss in share value. Among the hardest hit have been Southwestern Energy, Gulfport Energy, and Range Resources. The stock price for those three companies is down, since Jan. 1st, 33%, 30% and 25% respectively. A Bloomberg article says the stocks for those companies have been “mauled.” Indeed. Here’s some insight into how the Marcellus/Utica is increasingly going up against the oil giant Permian Basin, sometimes getting mauled…
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Impressive 2018 Marcellus Growth Not So Impressive Because of DUCs?

Our lead story today is about Gulfport Energy which highlights some exciting news: This year (in 2018) Gulfport will fund their entire drilling budget out of the cash flow the company generates from selling gas/oil/NGLs (see Gulfport Energy Continues Focus on Utica for 2018, No Borrowing). Thing is, Gulfport isn’t the only Marcellus/Utica driller to advertise the fact that this year they are “living within their means” and not borrowing. Others include Range Resources, EQT and Antero Resources. Wow! We’re finally profitable!! Or are we? MDN spotted some analysis by a hedge fund manager. Writing on the Seeking Alpha investor’s website, Josh Young says (in our words) “hold on a minute” with respect to M-U drillers appearing to be able to grow production without borrowing. Why is Josh not convinced with this good news? Because when you dig deeper into the numbers, you find that “organic growth within cash flow is further from reach” because drillers are using DUCs to spend less on drilling, and grow production, than they otherwise would be. A DUC is a Drilled but UnCompleted well. Many times drillers will drill the initial hole in the ground, but then not “complete” (or frack) the well. Why do that? For a variety of reasons. The biggest reason is usually because the commodity price of gas (or oil, depending on the well) is not favorable. Rather than lose the lease (an expensive proposition), drillers will begin the process by drilling, and then leaving, the well, returning later to complete it when prices go up again. Josh’s thesis is that by using DUC inventory drillers aren’t really funding the entire budget from current year cash flow, because some of the money was spent in a previous year to drill the well. They are, in essence, still borrowing–from a different year. Josh estimates an average of 20% of the “new” wells coming online are DUCs and not truly new wells funded by current year dollars–meaning these companies aren’t as “profitable” as they may seem. Does he have a point? Is it all just financial mumbo jumbo? You decide…
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