Energy Companies | Fayette County | Industrywide Issues | Pennsylvania | Range Resources Corp | Regulation | Statewide PA
PA DEP Shakes Down Range $294K for Unplugged Conventional Wells
The Pennsylvania Dept. of Environmental Protection (DEP) is once again spinning an error by a major Marcellus driller, Range Resources, as some sort of evil plot to avoid and defraud the DEP. Due to a mistake by a former employee, Range misclassified 42 old conventional wells on acreage it owns and did not plug the wells in a timely (for DEP) fashion. The DEP has just clipped the company $294,000 for the mistake.
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All three M-U states received permits to drill new shale wells last week. Pennsylvania received 22 new permits. Ohio received 2 new permits. And West Virginia received 8 new permits.
We’ve noticed a flurry of new “notes” (i.e. bonds) being offered by Marcellus/Utica companies. We call notes/bonds IOUs. Typically a company will issue new notes (a promise to pay in the future, with interest) in order to retire older notes coming due. Notes are a form of self-financing by using debt instead of issuing new shares of stock (diluting existing shares). M-U drillers Range Resources and Antero Resources both quickly sold out of their recent note offerings at higher prices than originally requested. According to S&P analysts, the Range and Antero fast sellout is proof that credit is loosening for drillers in the M-U and in other shale plays.
In a pair of announcements earlier this week, U.S. Well Services announced it has signed new long-term deals with both Range Resources and EQT to supply “electric fracking” services. We told you in February 2020 that Range had signed on with U.S. Well Services to continue using its electric fracking service (see 
The Marcellus/Utica is the #1 natural gas producing play in the country. Last month the M-U region produced 33.6 billion cubic feet per day (Bcf/d), according to the U.S. Energy Information Administration’s December Drilling Productivity Report (see 
As we entered 2020, the stock price for most Marcellus/Utica drillers was near or even at the lowest it had ever been (see 
Capital expense (capex) investments made by drillers in the Marcellus/Utica during the third quarter of 2020 were the lowest in at least six years according to a new report (full copy below) from the Institute for Energy Economics and Financial Analysis (IEEFA). The report looks at nine of the top drillers in the M-U and finds collectively they cut capex investment by more than one-third in 3Q20 over 3Q19. And yet those same nine collectively spent a half-billion dollars more during 3Q on drilling and building projects than they earned in revenue from selling oil and gas. That’s troubling.
An article in yesterday’s Wall Street Journal says there is a “split reality” emerging for U.S. shale drillers. Shale oil drillers are struggling to survive, while shale gas drillers, particularly in the Marcellus/Utica, are slowly seeing signs of financial recovery. The upshot is that you should consider investing in shale gas drillers (and not shale oil drillers).
Range Resources issued its third-quarter 2020 update on Friday. The company, the very first driller to sink a well in the Marcellus, lost $680 million in 3Q. Most of the loss was a one-time charge called “exit and termination” related to the company’s sale of their Louisiana Haynesville Shale assets in August. The update didn’t state how many new wells were drilled in the Marcellus, but it does say Range connected 19 new wells to sales in 3Q with plans to add another 7 wells to sales by the end of the year.
Range Resources is the company that started it all in the Marcellus by drilling the very first Marcellus Shale gas well back in 2004. Range also was the first to drill in the Upper Devonian and Utica layers. Over the years Range, like many other M-U drillers, has invited folks to go on tours of their drilling sites. If you’ve never been on a rig tour, take one! At least, when they begin again. Due to the coronavirus, Range, like other drillers, stopped in-person rig tours. However, Range now conducts virtual (live) rig tours instead.