Capturing the Interest of the Next Generation to Work in PA Shale

The best teachers (people) and the best teacher (method of instruction) have the same thing in common: Hands on. As in tactile, doing stuff, rather than sitting in a chair attempting to learn by information dumping. Particularly with elementary-age kiddies. Cabot Oil & Gas and Southwestern Energy recently sponsored the annual Vehicular Career Day where 400 fifth graders from school districts across Susquehanna County climbed into big rigs, buses, and emergency vehicles. The shale industry was well-represented. Needless to say, the kids loved it.
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Southwestern Energy 1Q19: Drills Longest PA Lateral – 18,683 Feet

Southwestern Energy, one of the largest drillers in the Marcellus with 480,000 acres under lease, turned in their first quarter 2019 update last week. It was the company’s first update since becoming a pure play operator, totally focused on the Marcellus/Utica region. What did it show? Net income nearly tripled to $594 million (vs. 1Q18’s $205 million). Production averaged 2.0 billion cubic feet equivalent per day (Bcfe/d), close to what the prolific Cabot produced in 1Q19.
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“Responsible Gas” Certification Expands, Gains Another Driller

Last September MDN reported that Southwestern Energy was the very first driller to earn the label of producing “responsible gas” from the Independent Energy Standards Corporation (IES)–what they call their TrustWell™ Responsible Gas Program certification (see Southwestern Sells 1st Certified “Responsible Gas” to NJ Resources). Southwestern is considering expanding the designation to more of their operations. Meanwhile, a driller in the Rockies is the second company to earn the designation.
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Landowner Asks PA Supremes to Throw Out 150-Yr-Old Rule of Capture

Last November the Pennsylvania Supreme Court agreed to hear a case, Briggs v. Southwestern Energy, that is hands-down the most important court case to ever happen regarding the Marcellus Shale in PA. And no, we’re not exaggerating. A blizzard of briefs by Southwestern and those supporting Southwestern were filed in February (see “Rule of Capture” Briefs Filed w/PA Supreme Court in Briggs Case). On Wednesday, it was the Briggs’ turn to file a brief, one in which they ask the Supremes to stop application of the 150 year-old “rule of capture” in PA when it comes to shale wells.
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Are Marcellus/Utica Shale Drillers Financially Healthy?

We read on a regular basis in mainstream media that shale companies spend more money than they bring in, and that investors are growing tired of pumping money into companies without a return on their investment. We’ve recently noticed a renewed commitment on the part of major drillers to get their financial houses in order–spend less and drill less in order to make more money. We spotted an article by Reuters on the “shale drillers aren’t profitable/healthy” meme which got us investigating the financial health (or lack thereof) for Marcellus/Utica drillers. What we found may interest you.
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Southwestern Energy Grows M-U Prod 21%, Likes WV Upper Devonian

Southwestern Energy, one of the largest Marcellus/Utica drillers, issued its 2018 (and 4Q) update last Friday. The company reports growing M-U production 21% in 2018, to 702 billion cubic feet equivalent (Bcfe). That works out to be 1.9 Bcfe per day. Quite an accomplishment when you consider those numbers happened even after Southwestern sold off their Fayetteville Shale assets last year.
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“Rule of Capture” Briefs Filed w/PA Supreme Court in Briggs Case

In November the Pennsylvania Supreme Court agreed to hear a case, Briggs v. Southwestern Energy, that is hands-down the most important court case to ever happen regarding the Marcellus Shale in PA. And no, we’re not exaggerating. A blizzard of briefs by Southwestern and those supporting Southwestern were filed earlier this week.
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Columbia Sues Southwestern Energy for Shorting Royalties in WV

Here’s an interesting twist on the theme of drillers shorting leaseholders out of royalty money. Usually such cases involve drillers claiming post-production deductions from landowner royalty checks. This time the landowner/rightsholder is Columbia Gas Transmission (pipeline company owned by midstream giant TransCanada), and the claim is that Southwestern Energy (driller) is not paying royalties for gas produced but not actually sold.
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PA Supreme Court Agrees to Hear Briggs “Rule of Capture” Case

This is big news that will impact nearly every landowner and shale driller in Pennsylvania. In April, MDN brought you the news that Pennsylvania Superior Court had handed down a decision (known as the “Briggs” case) that has the power to greatly restrict, perhaps even stop, Marcellus drilling in PA (see PA Superior Court Overturns “Rule of Capture” for Marcellus Well and PA “Rule of Capture” Case has Power to Limit Marcellus Drilling). The issue, in brief, is that a PA Superior Court decision disallows using the age-old principle called the “rule of capture” when it comes to shale drilling and fracking in PA. Southwestern Energy successfully argued in a lower court that the odd crack here and there that may slip under a neighbor’s property from fracking is permissible. The neighboring landowner, not signed with Southwestern, appealed that decision to Superior Court and won. Southwestern then appealed the case to the PA Supreme Court and the court has just announced it will hear the case. How will this affect nearly every landowner, signed or not, in shale regions of the state?
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Southwestern Energy 3Q18: Production 2.8 Bcf/d, $29M Loss

Southwestern Energy’s third quarter 2018 update on Friday showed the company hitting a new record-high for production. While Cabot Oil & Gas’ production is 100% natural gas (dry gas at that), Southwestern has a mix. The jump in production–to an average of 2.77 billion cubic feet equivalent per day (Bcfe/d)–is largely due to an increase in wet gas (NGL) production. CEO Bill Way said he expects “liquids production” will represent one-third of the revenue the company receives in 2018. Although Way says the company experienced an “outstanding quarter both financially and operationally,” we do have to point out they lost $29 million during 3Q18.
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By the Numbers – Revenue & Profitability for M-U Drillers

The expert analysts at RBN Energy have just published their “fourth and final” in a series of posts looking in detail at E&Ps (exploration & production companies, or “drillers”). One of the groups of E&Ps they examine are “gas-weighted” E&Ps–or drillers who mostly extract natural gas. In looking through the list, you immediately realize every one of them has operations in the Marcellus and/or Utica Shale region. Yes, a few also have operations in other plays, but they all have at least some operations here. The real value in the article is an accompanying spreadsheet comparing various financial metrics (apples to apples)–things like total revenue, lifting costs, production costs, and “pre-tax income,” meaning profitability. How do our drillers compare with each other?
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Is Certification Needed for Shale Producers? IES Says it Helps

Last week MDN told you that Southwestern Energy is participating in a program to get their gas “certified” (see Southwestern Sells 1st Certified “Responsible Gas” to NJ Resources). What is certified gas? Is that like “certified organic” fruits and vegetables? Actually, it is kind of like that. The Independent Energy Standards Corporation (IES) has launched what they call their TrustWell™ Responsible Gas Program certification program to certify that natural gas bearing that label is “responsibly developed.” Such a designation is meant to imply the company doing the extracting (Southwestern in this case) has followed certain guidelines and procedures to safeguard the environment. Certification is a marketing/public relations tactic to be sure. The question is, is it worth it? How much does it cost to become certified? What do you have to do to become certified? And ultimately, will such certification actually help you sell more of your gas? One thing is for certain, nutty antis won’t care–so if you’re trying to appease them with certification, you can forget it. Won’t work. But, there are others (more reasonable people) who may put stock in such a certification. Is it a trend? The next “big thing?” We don’t know. What we do know (or have) is an interview with Jory Caulkins, CEO of IES, talking about his organization’s new certification and what it can mean for drillers…
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Southwestern Sells 1st Certified “Responsible Gas” to NJ Resources

Bet you didn’t know that natural gas can be certified as “premium” and “responsible,” did you? No, we didn’t either. It was quite a surprise when we read that Southwestern Energy has, for the first time anywhere, sold natural gas to a customer (utility company New Jersey Resources) that has been certified as “responsible gas.” The certification comes from Independent Energy Standards Corporation (IES) and they call it their TrustWell™ Responsible Gas Program certification. And what does such a prestigious label certify? It certifies the gas was “responsibly developed.” As opposed to irresponsibly developed gas, which is what everybody sells. “Responsible” gas, according to IES, is gas that doesn’t leak as much methane during the extraction and transportation process, doesn’t spill as much water and chemicals on the ground, sources water from places that are, well, responsible (we suppose), and engages the community–to make them feel good about all this responsible-ness going around. Yes, you may detect a little bit of snark in our comments on this news–because we happen to think the industry at large is already doing a great job of being responsible–without having a label put on it. This is just marketing. Hey, if it floats your boat to have a “responsible” label on your gas (paying to do so), go for it. Such a designation will never impress the eco-nuts. IES says they think “in time” that some 25-50% of all gas sold in the U.S. will have such a certification/label as green-friendly. We think that’s an ambitious number, given the fact there are still only five Marcellus/Utica drillers who have gone through the rigors of receiving a certification from the Center for Sustainable Shale Development, an organization that’s been around since early 2013 and offers something similar to IES’ cert…
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Southwestern Sells Fayetteville Shale, Now Focused 100% on M-U

Some exciting news to share. Southwestern Energy, headquartered in Texas, has cut a deal to sell all of their Fayetteville Shale (Arkansas) assets to Flywheel Energy for $1.865 billion in cash. The sale makes Southwestern a pure play, 100% focused driller on the Marcellus/Utica region (i.e. Appalachia). What will Southwestern do with an extra $1.865 billion? According to their announcement: (1) Spend $900 million of it on retiring IOUs (“notes”) previously issued. That is, debt retirement. (2) Buy back up to $200 million in outstanding shares of stock. (3) Spend $600 million of it over the next two years (2019 & 2020) on more Marcellus/Utica drilling. But not just any M-U drilling. Southwestern owns acreage in both northeastern PA and the northern panhandle of WV (with a some acreage in Washington County, PA). According to Southwestern’s announcement, the extra $600 million will go to drilling in the company’s “liquids-rich Appalachia assets.” Northeastern PA is dry dry dry–no liquids. WV landowners brace yourselves–Southwestern will soon bring an extra $600 million (over half a billion dollars) worth of drilling to your area. If you’re signed with Southwestern and haven’t yet seen drilling, you now stand a much better chance! Here’s the exciting news, along with extra resources we’ve located to better help you understand the news…
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Southwestern Energy 2Q18: Marcellus Production Booming

Last week Southwestern Energy, one of the biggest drillers in the Marcellus (4th largest natgas producer in the country), issued its second quarter 2018 update. Southwestern drills in two plays: The Marcellus (i.e. Appalachia), and the Fayetteville (in Arkansas). Production in the Marcellus/Utica was 1.8 billion cubic feet equivalent per day (Bcfe/d) of natural gas in 2Q18, up from 1.4 Bcfe/d in 2Q17. Largely because of the increase in production in the Marcellus region, Southwestern is raising its full-year production “guidance” (best guess) to 955-970 Bcfe, up from the previous range of 930-965 Bcfe. During 2Q Southwestern drilled 37 new wells, completed 55 wells, and brought 43 wells online–all in the Marcellus region. No mention was made of the Briggs “rule of capture” lawsuit Southwestern appealed to the PA Supreme Court in July. Here’s the full 2Q18 update…
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