Vallourec Announces Layoffs for One-Third of its U.S. Workers

Vallourec, headquartered in Boulogne-Billancourt, France, manufactures steel pipes used in the oil and gas industry. The company employs some 19,000 people in 20 countries, including the U.S. In fact, Vallourec employs more than 750 at three Youngstown, Ohio units: Vallourec Star, VAM USA and Vallourec USA Corp. Yesterday Vallourec corporate headquarters announced it will reduce (layoff/eliminate) some 900 positions “across all plants as well as support functions.” That number, 900, represents over one-third of Vallourec’s total workforce and contractor positions in North America. The announcement implies all 900 of the positions being eliminated will happen in North America.
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M-U Condensate Prices Briefly Go Negative, Down 91% from Jan 1

The Pittsburgh Post-Gazette is reporting Marcellus/Utica condensate, produced in places like southwestern Pennsylvania and eastern Ohio, briefly touched and went below $0/barrel last week, before recovering slightly. The article says the price M-U drillers are getting for condensate is down 91% from January of this year. What’s lacking in the Post-Gazette story is context for how important (or not) condensate is as a revenue stream for M-U drillers.
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Conventional Drillers Face Tough Decisions re Stripper Wells

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Although some Marcellus/Utica drillers also own conventional (vertical-only) oil and gas wells as part of their portfolio, most conventional drillers are smaller “mom and pop” types of companies. Conventional oil well owners in the M-U, as well as across the country, face some of the same problems as shale drillers with a crash in oil prices: What to do with older wells? Thousands of older conventional oil wells produce as little as 10 barrels of oil per day. These low-producing wells are called stripper wells. With oil selling at $20/barrel, some stripper wells can still break even, but many cannot. It costs an average of $20,000-$40,000 to plug an old stripper well. Sometimes it’s more economic to simply keep a stripper pumping (and losing money) rather than pony up big bucks to close the well. It’s a conundrum.
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Chesapeake Energy & Total Beat Class Action Royalty Lawsuit in OH

In 2015 a group of Ohio landowners did what landowners had previously done in Pennsylvania, Texas and elsewhere–they filed a proposed class-action lawsuit against Chesapeake Energy claiming Chessy had screwed them and about 1,000 other Ohio landowners out of a collective $30 million in royalty payments (see OH Landowners File Royalty Class Action Lawsuit Against Chesapeake). It took nearly five years with a lot of twists and turns, but yesterday the U.S. District Court for the Northern District of Ohio ruled in favor of Chesapeake, dismissing the claims against them.
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PTT Cracker Project Reaches Tax Agreement with Belmont County, OH

Even amid the coronavirus pandemonium and economic destruction happening everywhere, important oil and gas (and petrochemical) projects continue to make progress. In particular, the PTT Global Chemical plan to build an ethane cracker plant in Belmont County, OH still shows signs of life. In February PTT’s CEO signaled that a final investment decision on whether (or not) to build a multi-billion dollar ethane cracker in Belmont County, OH is coming by “mid-year 2020” (see PTT CEO Sends Loud & Clear Signal of Positive FID on OH Cracker). While work to prep the site and get it ready is now paused, work behind the scenes continues. Last week Belmont County commissioners, Mead Township trustees and the Shadyside Board of Education approved a new deal on tax payments should the project get built. This is a major milestone.
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Will Shell Cracker Construction Delay Affect Ohio Cracker Timing?

Nearly two weeks ago Shell, at the prompting of local officials, shut down construction of the mighty ethane cracker plant the company is building in Beaver County, PA (see Shell Shuts Down SWPA Cracker Plant Construction re COVID-19). How long will construction be stopped? According to a Shell spokesman, “I have no timeline for a return at this time.” What if the work stoppage drags on for months? It could, potentially, have a domino effect on another nearby cracker project–across the river in Belmont County, Ohio.
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EQT Stops Fracking After Worker Gets COVID-19; Suspends Dividends

The Pittsburgh Business Times is reporting that a contractor working in EQT’s hydraulic fracturing (“completions”) operation who last worked at a site in Belmont County, OH has tested positive for COVID-19 coronavirus. Because that worker has been in contact with a number of other workers in EQT’s completions unit, the company has temporarily shut down all completions (fracking) operations. In a separate and unrelated announcement, EQT told investors they are (for now) suspending quarterly dividend payments and will use the money instead to pay down near-term debt.
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Equinor (Statoil) Stops All U.S. Shale Drilling, Incl. Marcellus

Oil and gas drilling giant Equinor (formerly called Statoil) is owned by the Norwegian government. Equinor/Statoil has drilled in the Marcellus/Utica for years. As recently as last June the company reported drilling 9-14 Utica wells per year (see Equinor (Statoil) Drilling Long Utica Laterals, Production Up 5X). The company also drills oil wells in the U.S., primarily in the North Dakota Bakken. All of that–both Utica and Bakken drilling–has come to a screeching halt. Yesterday the company announced it is reducing its drilling budget worldwide by $400 million and is “halting” all U.S. onshore (i.e. shale) drilling and completion activities.
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Diversified Agrees to Plug an Extra 2 Wells per Year in Ohio

Diversified Gas & Oil owns close to 8 million acres of leases with some 60,000 (mostly) conventional oil and gas wells. Their focus has been to acquire quality production and cash flow–regardless of the well or commodity type (gas or oil)–in the Appalachian Basin. They currently have over 400 Marcellus/Utica shale wells in their portfolio too. When a gas or oil well quits producing, it needs to be plugged. We were aware of deals Diversified has cut with both Pennsylvania and West Virginia to plug old, non-producing wells (see DEP and Diversified Gas & Oil Compromise on Plugging Old PA Wells and Diversified Deal in WV to Plug 730 Abandoned Wells Over 15 Years). It turns out Diversified also has a deal in place with Ohio to plug old wells, a deal that was recently modified.
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Encino Tops IP Charts with Ohio Utica Wells in 2019

Encino Acquisition Partners (aka Encino Energy) bought all of Chesapeake Energy’s Ohio assets for $2 billion in 2018 (see Stop Press: Chesapeake Sells ALL of its Ohio Utica Assets for $2B). The deal included all of Chessy’s 933,000 Ohio acres (with 320,000 net Utica acres) and 920 operated and non-operated Ohio Utica wells. Since that time Encino has quietly become one of the state’s top producers. The biggest news to come from the recently released Debrosse Memorial report is the high initial production (IP) rate for the wells Encino drilled in 2019. The IP rates are through the roof!
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OH Town Building Reservoir to Feed NatGas-Powered Electric Plant

Advanced Power Services is building a 1,100-megawatt natural gas-fired electric generation facility in Wellsville, Columbiana County. Dominion Energy is building 5 miles of new pipeline, called the West Loop Project, from western PA into Ohio to feed the Wellsville plant (see Dominion Pipeline to Feed Western PA NatGas to OH Power Plant). The new electric plant will need a lot of water. The Buckeye Water District in Wellsville voted last Thursday to move forward with bids to construct an 18-million gallon reservoir to supply water for the electric plant.
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Marcellus/Utica Keeps Drilling with COVID-19 Modifications

Many states in the northeast and in Appalachia are now in lock-down mode with most businesses shuttered to prevent the spread of COVID-19 coronavirus. However, certain activities and businesses continue to operate. They are called “life-sustaining” or “critical” or “essential.” On the list of essential businesses in both Pennsylvania and Ohio are shale drillers. Although drillers continue to work, at least one Marcellus/Utica driller, CNX Resources (we suspect others) is making changes to keep its employees and contractors protected against the virus.
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Debrosse Memorial Report: 2019 Ohio Oil Production Breaks Record

Earlier this month the Ohio Oil & Gas Association (OOGA) held its 73rd annual Winter Meeting in Columbus. One of the speakers was Martin Shumway, technical director at Locus Bio-Energy Solutions. Shumway shared details from the latest DeBrosse Memorial Report (full copy below). What does the report show for 2019? Ohio oil production hit the highest level ever in state history in 2019. There were 406 oil and gas wells completed last year, of which 351 (86%) were Utica wells. Belmont County saw the most wells drilled (80). Ascent Resources (formerly American Energy Partners) drilled the most wells last year in Ohio (104 wells), up 49% from 2018.
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Judge Blocks New Lease Sales in Ohio’s Wayne Natl Forest

Radicalized leftist groups pretending to care about the environment, including the Center for Biological Diversity, Sierra Club and Ohio Environmental Council, have struck again. In May 2017 the three groups sued the U.S. Forest Service and U.S. Bureau of Land Management (BLM) to block the sale of leases for oil and gas drilling in Ohio’s Wayne National Forest (WNF). Last week a federal judge ruled in their favor. The court has effectively blocked all future lease auctions for WNF and is considering overturning two previous auctions. This is a DIRECT attack on the property rights of private landowners.
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Ohio Cancels Forced Pooling Hearings Due to COVID-19 Virus

In Ohio forced pooling is called “unitization.” When a landowner/leaseholder owns 65% of the mineral rights under property in a given location and wants to pool other neighboring properties into an oil or gas drilling unit, that landowner/leaseholder files a request with the Ohio Dept. of Natural Resources Division of Oil and Gas Resources Management. The Division head then schedules a hearing to consider the request. All such hearings scheduled for this week are now canceled and will be rescheduled. Furthermore, the Division will only be able to accept new unitization requests on Tuesdays and Thursdays, and they will only return phone calls about unitization on Fridays. All due to the COVID-19 coronavirus.
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Ohio NGL Storage Permit Expires, Builder Says Project Still Alive

Mountaineer NGL Storage is planning to build an NGL (primarily ethane) storage operation in Monroe County, OH, located just across the river (and border) from West Virginia. Last summer David Hooker, president of Mountaineer and president of the parent company Energy Storage Ventures (located in Denver, Colo.) announced the project had received all necessary permits to begin construction, and that construction “could” begin by the end of March this year (see Mountaineer NGL Storage Says Construction Begins in OH 1Q20). One teeny tiny problem. One of the necessary permits needed for the project expired last week. What’s going on?
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