Cabot 2Q17: New Production Record, Making Big $, Pipelines Coming
Late last week Cabot Oil & Gas, one of our favorite big Marcellus drillers, released their second quarter 2017 update. And man oh man, was it full of interesting items! Daily natural gas production was up 14% over the same period last year. During 2Q17, Cabot averaged 1.77 billion cubic feet (Bcf) per day of net Marcellus production (2.1 Bcf/d gross operated production). Also during 2Q17, Cabot drilled 13.7 net Marcellus wells, completed 8.0 net wells and placed 6.0 net wells on production. Financially, the company continues to be a cash-making machine, generating positive free cash flow for the fifth consecutive quarter. During the first half of this year, it cost Cabot an average of $2.01 per thousand cubic feet (Mcf) to extract and sell the gas. That’s all expenses. And Cabot made an average of $2.51/Mcf selling that gas. That’s a profit of $0.50/Mcf (or 20% profit). If we could invest $1 and get back $1.20 for every dollar invested, we’d be happy to do that all day long! Cabot is currently operating two drilling rigs and one completion crew in the Marcellus. One of the most interesting (and underreported) parts of the Cabot conference call last Friday is CEO Dan Dinges’ comments on the long-delayed Constitution Pipeline. He said, “we feel more optimistic about this project coming online in the next few years than we did say a year ago.” It seems Cabot (and Williams, the builder of the Constitution) are closely watching what happens with the Millennium Pipeline and Millennium’s request to FERC to override the New York Dept. of Environmental Conservation (DEC), which is blocking the Millennium(and the Constitution). Although the Constitution awaits a court decision from the U.S. Second Circuit Court, they are planning other strategies. Dinges also addressed the PennEast Pipeline project, now stalled in New Jersey. Below is last week’s update, excerpts from the conference call, and the Cabot slide deck full of good information…
Read More “Cabot 2Q17: New Production Record, Making Big $, Pipelines Coming”
Yesterday the Pennsylvania Senate voted 26-24 to pass a so-called compromise budget bill that adopts a Marcellus-killing severance tax. What’s most distressing about the situation is the betrayal of Senators like Gene Yaw, of northeastern PA. The bill not only raises taxes on drillers, slapping a severance tax on top of the existing impact fee, it also slaps a 5.7% gross receipt tax (GRT, or “usage tax”) on natural gas used by homes and businesses, meaning PA gas bills will go up starting August 1st (if the bill passes the House). What happens next? The bill has gone to the PA House for consideration. The pressure on the House, and Speaker Mike Turzai, is intense. The Senate has done a big disservice to the House by not getting agreement ahead of time. But we deal with the cards in our hand. What’s going to happen now?…
As part of the horrible severance tax bill the Pennsylvania Senate passed yesterday (see today’s companion story), Republican Senators placed into the bill what they hope is “an olive branch” (more like a withered twig) by including reforms to the regulatory process they say the drilling industry has been asking for. Senators included a provision to have third party contractors (people outside of the Dept. of Environmental Protection) review applications at the DEP, including permits for oil and gas drilling, when the DEP can’t review those applications in a timely manner. There’s also a provision that certain permits, like those granted to drillers for sediment and erosion, will automatically be granted if the DEP drags its feet and doesn’t grant the permit by the current, specified deadline (45 days, with a possible 15 day extension). Those permits are currently taking up to 200 days to be granted. Enough. If the DEP can’t get it done, the permit gets granted automatically or goes to someone on the outside who can get it done. There are other provisions in the severance tax bill as well. Of course these proposed changes have antis in an uproar. You see, “compromise” for antis and Democrats means “you do it all our way, and we give you nothing in return.” That Republicans actually want something in return for voting for a horrible tax bill is beyond belief for antis, who are now squealing like stuck pigs. Here’s what we’ve been able to find out about the proposed changes, the “olive branch” offered by traitorous Republicans, as part of the newly passed severance tax bill…
MDN previously reported about problems experienced in Chester County, PA (suburb of Philadelphia) with underground horizontal directional drilling (HDD) by Sunoco Logistics Partners for its Mariner East 2 Pipeline project (see 
Pennsylvania Senate Majority Leader Jake Corman and Senate President Pro Tempore Joe Scarnati have betrayed the Marcellus gas industry and should be tossed out on their rear-ends in the next election. Corman, Scarnati and other so-called Republicans in the PA Senate leadership have signed on to promote a severance tax plan to “close” the budget gap THEY CREATED by idiotically passing a bloated spending plan they couldn’t pay for. Now, caving to pressure from a tax-and-spend liberal media and tax-and-spend Democrat Party, PA Senate Republicans have opened a door that should never have been opened. PA’s Marcellus drillers already pay the equivalent of a 9.16% severance tax–highest in the country (called an impact fee). This new plan leaves the impact fee in place, AND places a severance tax on top of it, guaranteeing LESS drilling (and less tax money) for PA, not more. How utterly stupid is that? Last night 19 members of the PA Senate Appropriations Committee voted on a plan that, among other things, puts a 2 cents per thousand cubic feet severance tax on all natural gas produced, which, according to the wizards of smart in the Senate, will raise an extra $108 million. Today the package goes to the full Senate for a vote, where it is expected to pass. It then goes to the House. If a severance tax is passed (big if), Gov. Wolf can finally “check a box on a campaign promise” to give away other people’s money to teacher’s unions. Our only line of defense now is the steel backbone of PA House Speaker Mike Turzai and the House Republicans, to hold the line and reject the severance tax proposal coming from the Senate…
One would hope a $6 billion ethane cracker project like the one being built by Shell in Beaver County, PA would consist of 100% American-made parts. But alas, such is not the case. The biggest story to hit Beaver County, likely ever, keeps reporters at the Beaver County Times busy (“busy beavers”–groan). The ace reporting staff at the local newspaper noticed a job posting from Bechtel Corp., one of the major contractors on the project, on LinkedIn. The job posting advertised for a project superintendent for the Shell cracker plant–a position located in Houston and in Tampico, Mexico. The ace reporters followed it up and got confirmation that some of the components for the cracker plant will be manufactured in Mexico and shipped to PA. No doubt in an effort to tamp down what could become a firestorm, Shell quickly confirmed the Mexico connection and pointed out that “more than 80%” of the individual components for the plant will be built in the U.S. Will this news about Mexico parts make a difference in the larger scheme of things?…
Anti-fossil fuelers who irrationally hate anything to do with natural gas, including the super-safe pipelines that flow it, have found a sympathetic judge inside the Dept. of Environmental Protection’s Environmental Hearing Board to side with them in a campaign to stop the Mariner East 2 pipeline project. At least temporarily. Yesterday Environmental Hearing Board Judge Bernard Labuskes, Jr. issued an order stopping all underground horizontal directional drilling (HDD) across PA related to the ME2 project. The order affects some 55 different locations where HDD is being used. Headlines in left-leaning anti pubs like StateImpact Pennsylvania and the Pittsburgh Post-Gazette mislead people into thinking ALL construction of ME2 has stopped. That is manifestly untrue. The only thing stopped, for the next two weeks, is HDD. The other 90% (or more) of the project, which is digging trenches for the twin pipelines, continues. Only in locations where ME2 must drill underground–say under a stream or roadway–are affected by the judge’s order. The order is in response to an appeal by radical Big Green groups, including the anti-fossil fuel Clean Air Council (of Philly), THE Delaware Riverkeeper (Maya van Rossum), and Mountain Watershed Association (see 
In May 2015, MDN brought you news that UGI Energy Services, a subsidiary of northeast PA utility giant UGI Corporation, announced they will spend $60 million to build a new LNG production plant in Wyoming County, PA (see 
The lengths to which the leadership of the Democrat Party in Pennsylvania is willing to go to tax Marcellus Shale drillers is amazing. And alarming. As we have pointed out, repeatedly, PA does not have a revenue shortfall problem–it has a spending problem. Like an alcoholic you can’t reason with and convince to stop drinking, PA Dems are taxaholics–addicted to sticking their fingers in other people’s pockets to transfer money to voters who will keep them in office. That’s the sleazy, disgusting mess in Harrisburg going on right now. Republicans stupidly voted to pass a $32 billion state budget with only $30 billion of it covered by current revenue sources. So now the pressure is on to cover the “gap” between expected revenue and overspending. From the very beginning of Gov. Tom Wolf’s tenure as the most failed governor of PA in our lifetime, we pointed out Wolf’s desire and plan to pass a new tax on a single industry, the Marcellus industry, as nothing more than political payback for teacher’s unions. The unions supported and voted for Wolf, and he dearly wants to give them money via a new severance tax, as payback. The interesting/jaw-dropping thing is, the teacher’s unions admit it! They admit, openly via a recent op-ed article penned by Jerry Jordan, president of the Philadelphia Federation of Teachers, that a severance tax is needed for union members. Do Pennsylvanians not see this for what it is–theft and political graft? Jordan wants PA legislators to aim the gun of the government at the heads of drillers (and landowners), take their money, and hand it over to union members…
When huge ethane crackers like the proposed Shell cracker in Beaver County, PA use steam to “split” or “crack” ethane to form ethylene (the raw material used to make plastics), it takes a lot of energy, and there’s a lot of “leftover” energy and leftover carbon dioxide (CO2). As the mythology goes, more CO2 in the atmosphere leads to global warming (if you believe in that sort of thing). Scientists have long known of other ways to convert “heavier” hydrocarbons, like ethane, into “lighter” hydrocarbons, like ethylene, using metals via a chemical process. But the metals used are rare and expensive–things like rhodium, ruthenium and iridium. Researchers at the University of Pennsylvania say they have found a way to use cheaper, more abundant metals, like titanium, to transform natural gas, ethane and other hydrocarbons into more useful chemicals like ethylene. The big bonus? No leftover CO2 to worry about…
NGI’s Shale Daily has done it again. Ace reporter Jamison Cocklin has unearthed news that (so far) no one else has: Rice Energy has quietly, confidentially, hush-hush purchased all of the assets of LOLA Energy. The sale raises a lot of questions. But first, who is LOLA? No, not the show girl in Barry Manilow’s 1978 hit song Copacabana. LOLA Energy was birthed near the end of 2015, by former EQT executives using $250 million of private equity money from Denham Capital (see 
Radical anti-fossil fuelers with THE Delaware Riverkeeper and New Jersey Sierra Club, along with a mish mash of other fringe “environmental” groups, are becoming shrill in their demand that fracking be permanently banned in the Delaware River Basin. Riverkeeper, Sierra Club and other nutjob groups are this week delivering a petition they claim has over 63,000 signatures (many of them made up or dead) calling on the governors of the four states that are part of the Delaware River Basin Commission (DRBC) to vote to permanently ban fracking in the DRBC’s jurisdiction. Each day this week the group of, whatever you call them, are delivering the petitions in staged media events, in each state capital. These groups have wanted and lobbied for a permanent ban for years. Why push so hard for it now? What’s the urgency? Why go on the road now to demand an outright ban? There is only one reason we can think of for why these radicals are pushing so hard now: they are running scared, concerned that a lawsuit by a Wayne County landowner in federal court will go against the DRBC and finally force the issue, allowing fracking (see 
West Goshen Township, in the Philadelphia suburb of Chester County, has won a short-lived, temporary victory in their efforts to stop Sunoco Logistics’ Mariner East 2 NGL pipeline in its community. Last March MDN told you about the desperate last stand taken by liberal anti-pipeliners in West Goshen (see 
Since 2012, Pennsylvania has collected the equivalent of a severance tax from Marcellus Shale drillers via something called an impact fee. Same concept as a severance tax. You drill a well, gas comes out, you pay a tax. Except with an impact fee you pay whether or not anything comes out of the ground, meaning an impact fee is superior to a severance tax, which is based on how much comes out of the ground. The impact fee quickly started to generate hundreds of millions of dollars a year in extra revenue for Pennsylvania–60% of which goes back to the communities where drilling happens (which Philadelphia politicians hate), and 40% of which goes to the black hole of Harrisburg for redistribution (which Philadelphia politicians love). Drilling began to slow in 2014, and crashed in 2015/2016, with low low commodity prices for natgas. The impact fee doled out this year is based on revenues raised last year, in 2016, during the worst part of the downturn. So it’s no surprise that impact fees collected and distributed this year, in 2017 have been the lowest since the impact fee began (see 
Last Thursday some 450-500 supporters, oil and gas industry workers and politicians gathered at the Shadowbrook Golf Course in Wyoming County, PA to express support for Williams’ $3 billion, 198-mile Atlantic Sunrise Pipeline project, most of which will get built in northeast Pennsylvania. The event was organized and sponsored by Cabot Oil & Gas, one of the major beneficiaries of the pipeline, and Williams, which will build and operate the pipeline. The overall purpose of the event was to give a metaphorical kick in the rear-end of Gov. Tom Wolf and his Dept. of Environmental Protection (DEP), which appears to be intentionally dragging its feet with granting stream crossing permits–about the only thing left before the backhoes fire up and start digging. The event, held from noon to 2pm, began with lunch–barbecue pulled pork and chicken–followed by a series of short speeches by political leaders from the region. With people gathered at tables, and some standing, a half dozen speakers stood on a giant flatbed trailer underneath what has to be the biggest American flag MDN editor Jim Willis has ever seen, hoisted and held between two large cranes (see the pic). The upshot of the speeches can best be summarized in a single statement delivered by Alan Hall, Chairman of the neighboring Susquehanna County Board of Commissioners, when he said: “It’s time to kick the politicians in the ass and get this [pipeline] done.” There were some other great one-liners too…
Apparently under pressure from environmentalist wackos, last Friday the Pennsylvania Dept. of Environmental Protection (DEP) issued a statement that says, in essence, we’re on the back of Sunoco Logistics over problems with construction the Mariner East 2 Pipeline. Gov. Wolf and DEP Secretary McDonnell both felt it necessary to voice their “concerns” over some of the episodes that have happened with construction the twin Mariner East 2 NGL pipelines that will stretch from eastern OH to the Philadelphia area. According to the announcement, the DEP has so far issued 4 “Notices of Violation” and 1 “Consent Order and Agreement” with a fine of $87,600 for “inadvertent returns” (what we call leaks) of drilling mud and water at an underground horizontal directional drilling (HDD) location in Cumberland County, PA. To the best of our knowledge, this is the first we’ve heard of that spill. It was actually a series of spills (or leaks) over a number of different days. All told, some 160,000 gallons of drilling fluids came out of the ground at that location. In addition, the DEP released a table outlining 49 incidents–some just a few gallons, others several hundred (or several thousand) gallons of drilling fluid leaks. We have the list of 49 problem areas below, the details on the Cumberland County leaks, and the DEP announcement…