How O&G Companies Survive & Thrive During Low Prices
Regina Mayor is leader of energy and natural resources for the consulting firm KPMG. She’s located in Houston. However, she recently made a trip to California to speak at the Stanford University Precourt Institute for Energy. Her topic? “How Energy CEOs are Adapting in the Downturn.” We have a video of her full talk below. It’s compelling. Mayor recounts how oil and gas companies had to figure out how to make money in a low price environment. She also observes that all sectors of the energy industry are pumped on Trump: “Everyone in the industry seems to think that they’re going to be a winner under this administration. The wind and solar guys and gals, the coal folks, the gas, the upstream, the downstream, everyone believes that they’re going to win…where I come from, you always know that that can’t be the case. Logic tells you that can’t be the case. But I do find the level of optimism quite fascinating.” Below is a summary of her talk, and the video…
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The “best of the rest” – stories that caught MDN’s eye that you may be interested in reading. In today’s lineup: Fewer rigs, wells and less spending show in OH’s shale production for 2016; activists gather in Mass. to protest natural gas pipelines; Cheniere gets FERC permit to start Sabine Pass LNG Train 3; a new controversy over Dakota Access Pipeline – who will pay for protesters’ mess; conflict groups identify new boogeyman – pipelines; repeal of Obama drilling rule stalls in the Senate due to RINO dung; big oil’s plan to buy into shale; Saudis falter; and more!
The Ohio Dept. of Natural Resources (ODNR) has just issued production numbers for the fourth quarter of 2016. The bad news is that oil production continued to slide in 4Q16, down 44% from the same quarter in 2015. The good news continues to be natural gas production, which was up 14% over the same period in 2015. The even better news: Natural gas production in Ohio for all of 2016 was 1.37 trillion cubic feet, vs. 955.61 billion cubic feet in 2015. Awesome! Ascent Resources (formerly Aubrey McClendon’s American Energy) continued to dominate in natural gas production. Ascent had the top producing well in 4Q16, as they did in 3Q16. In fact, Ascent had 9 of the top 10 producing natural gas wells in Ohio during 4Q16. Gulfport Energy was the only other producer to break the top 10, with one well. Over on the oil side of the isle, Eclipse Resources once again had the top producing oil well with their Purple Hayes well–currently the longest horizontal well drilled in the United States at 3.5 miles long (located in Guernsey County). Purple Hayes is the gift that keeps on giving, quarter after quarter! Below we have the ODNR’s high level overview of the numbers, along with MDN’s own exclusive analysis showing: the top 25 producing gas wells, the top 25 producing oil wells, and then the top 25 gas and oil wells as ranked by average production per day. There is a difference…
Last May, Range Resources sold its portion of a joint venture in northeast Pennsylvania (see 
We find it kind of amusing. Anti-drillers and Democrats (usually one and the same) in Pennsylvania bellyache and moan and groan that PA is “the only oil and gas state without a severance tax” and how life would be SO much better if only PA had a severance…blah blah blah. They point out that Ohio has a severance tax. West Virginia has a severance tax. EVERYBODY has a severance tax. Of course they conveniently ignore (or lie about) the fact that PA has an impact fee, or an impact tax, if you will. The impact fee levies a charge on new wells for a number a years on a sliding scale. Think of the impact fee like a property tax, and a severance tax like a sales tax on goods sold. The beauty of the impact fee is that 60% of it stays in the communities where drilling actually happens. Impact fee revenue goes to local municipalities to offset the “impacts” of drilling in those communities, money used for things like fire departments, police, roads, etc. An impact fee is superior to a severance tax in many ways. While OH and WV’s severance tax revenue went over a cliff when the price of natural gas went over a cliff, PA’s impact fee was far less affected. But the point of this post is not in the relative merits in the type of taxation. The point is that legislators in Ohio want to reallocate some of their severance tax revenue to be used in communities where Utica drilling happens. That is, they want to convert some of the OH severance tax into, essentially, an impact fee. So while PA bellyaches about having an impact fee and not a severance tax, states (like OH) that actually have a severance tax, would rather have an impact fee!…
TransCanada, one of Canada’s leading midstream/pipeline companies, cooked up a deal last year to pipe natural gas from Canada’s West Coast to the East Coast in order to fend off cheap supplies of Marcellus/Utica gas that will flow into Canada when/if the NEXUS and Rover pipelines get built (see 
A press release announcing fourth quarter and full year 2016 results for Empire Energy Group caught our eye. The release talks about assets owned by Empire in the Marcellus/Utica region–specifically in Pennsylvania and New York. When we got digging, we found some interesting information. First off, Empire has operations in both Australia and (primarily) here in the U.S. One interesting observation is that Empire sold some of its considerable leases in Australia to Aubrey McClendon back in 2015 (see 
A Bloomberg article caught our eye. It says natural gas being exported by Cheniere Energy (in southern Louisiana) is being sold to counties like Mexico, Japan and Jordan for over $7 per thousand cubic feet (Mcf). Why is that significant and how is it related to the Marcellus/Utica? It’s significant because gas right now is selling in the U.S. for an average of around $3/Mcf. In some places, like the Marcellus/Utica region, it sells for much less. Yesterday gas sold at the Tennessee Gas Pipeline Zone 4 Marcellus trading hub sold for $2.61/Mcf. If producers can sell their gas overseas at double the price–happy days are here again! How does that relate to the Marcellus/Utica? Some of the gas being sold by Cheniere comes from the Marcellus/Utica. And later this year, Dominion will have finished and will power up their massive LNG export facility in Cove Point, Maryland. When that happens, 100% of the gas exported will go to two countries: Japan and India. And it will likely be sold for prices like Cheniere is seeing–around $7/Mcf. That is really good news for the producers who have signed contracts with Cove Point…
It sure seems like it’s taking a long time for President Trump and his team to announce and put forward his nominees for the Federal Energy Regulatory Commission (FERC). Shortly after taking office, Trump elevated one of the three sitting, Democrat Commissioners, Cheryl LaFleur to be Acting Chairman of the agency. That ticked off the then-current Chairman, Norman “crybaby” Bay, who promptly resigned (see 
A disappointing setback for the much-needed Constitution Pipeline–a $683 million, 124-mile pipeline due to run from Susquehanna County, PA to Schoharie County, NY carrying Marcellus gas. As you may recall, in April 2016, New York’s anti-drilling governor, Andrew Cuomo, decided he would cave to pressure from radical environmentalists and block the building of the federally-approved Constitution Pipeline (see 
There were early signs that Maryland’s newly elected “Republican” governor was weak on the subject of fracking, as we pointed out in 2015 when we said that then-new Gov. Larry Hogan, who was elected on a platform of supporting shale drilling, had decided to let a two-year moratorium on shale drilling become law without his signature (see 
Earlier this month MDN brought you a list of the existing and/or planned natural gas-fired electric generating plants in Ohio (see 
What if a landowner leased his or her land decades ago and a driller drilled a conventional natural gas well on the property, and that well has produced commercial volumes of natural gas for years–and still does. And what if the lease gives that driller the right to drill (or not drill) in any given rock lawyer. And what if that driller is content to simply let that conventional well keep producing and not drill further down, into the now commercially viable Utica (or Marcellus) shale layer? Does the landowner, whose land is located where the Utica/Marcellus exists, have any case for taking back the rights to the deeper shale layers the conventional driller refuses to go after? That’s a case that has now worked its way all the way to the Ohio Supreme Court. The question turns on whether or not “reasonable development” in a lease includes unexplored, deep formations…
For some time we’ve tracked the progress of an LNG export plant planned for the eastern shore of Nova Scotia, the Bear Head LNG project. Of all the Canadian LNG export projects, Bear Head seems to have the most momentum. The project has received most of the necessary permits it needs to proceed. But it’s not been without its bumps along the way (see