Shale Energy Stories of Interest: Wed, May 13, 2020
MARCELLUS/UTICA REGION: Encino Energy supports 630 frontline workers; Wolf’s severance tax proposal is not a COVID-19 cure-all; OTHER U.S. REGIONS: Top US gas basin for LNG exports set for potential 20% output decline; NATIONAL: EIA sees natural gas prices stiffening this year, HH to average $2.89 in 2021; US LNG feedgas deliveries drop to lowest level since October 2019; Factors influencing U.S. LNG offtaker decisions to lift vs. cancel cargoes; Energy Spectrum closes $969M midstream fund.
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Chesapeake Energy issued its first-quarter 2020 update yesterday–but not in the typical fashion. They filed the required Form 10-Q with the Securities and Exchange Commission and announced they will not hold a conference call or webcast to discuss anything with anyone. No wonder. The financials for the company are dreadful. Chesapeake lost (on paper) $8.3 billion in 1Q20 due to the writedown of assets (called an impairment). It was not an out-of-pocket-cash loss, thank God. Still, it was bad enough. The 10-Q said “management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern” and there is a “likelihood of a restructuring or reorganization.”
Energy Transfer (ET), one of the largest midstream (pipeline) companies in the U.S., is making another major cut in its 2020 capital budget. The company released its first-quarter update yesterday indicating it will cut spending this year by “at least” another $400 million, with a potential extra $300-$400 million cut later in the year. So spending may dip by most of billion dollars extra during 2020.
Ascent Resources, originally founded as American Energy Partners by gas legend Aubrey McClendon, is a privately-held company that focuses 100% on the Ohio Utica Shale. Ascent is Ohio’s largest natural gas producer and the 7th largest natural gas producer in the U.S. The company issued its first-quarter 2020 update last Friday. The company flew by producing 2 billion cubic feet equivalent per day (Bcfe/d) in 1Q, a new high.
New Fortress Energy, which focuses on producing, exporting, transporting, and importing (in other countries) LNG marches to the beat of a different drummer. The company recently issued its first-quarter 2020 update. On a conference call with analysts, New Fortress founder and CEO (and billionaire) Wed Edens said his company hasn’t applied for nor accepted any government money re the COVID-19 pandemic. They also haven’t laid anyone off. In fact, New Fortress boosted the salaries of frontline fuel workers by 50% for the months of April and May in recognition of the jobs they are doing and the risks they face during the pandemic.
LNG Limited (LNGL), based in Australia, has been working on a couple of North American LNG export projects over the past half-decade or more. One of them, Magnolia LNG, is located in Louisiana will potentially export M-U molecules. Magnolia has all of its permits and is ready to build–if someone has the money to build it. It won’t be LNGL. The company recently imploded and ended up in the hands of a bankruptcy administrator who is now selling off the assets.
The Trump Administration recently fixed a problem with the recently enacted CARES Act (Coronavirus Aid, Relief, and Economic Security Act) that will close an oversight preventing some oil and gas companies from using the program. Anti-fossil fuel haters who want to punish oil and gas companies are now hopping mad that Trump “bailed out” oil and gas companies.
Chesapeake Energy’s executives, including CEO Doug Lawler, have arguably made some bad decisions about the company–for years. The executives decided to convert Chessy from a gas-focused driller to an oil-focused driller, selling off its prized Utica Shale assets in Ohio to do so in 2018 (see 
Last Friday Gulfport Energy, the third-largest (by number wells drilled) producer in the Ohio Utica Shale (210,000 acres) which concentrates its drilling in the Ohio Utica and the Oklahoma SCOOP plays, issued its first-quarter 2020 update. On paper, the company lost $517 million due to a one-time impairment charge (writing down of asset value) of $553 million. The company said on Friday it would “shut in a minimal amount production” over the next few months given the virus pandemic.
Harvest Oil & Gas completed a reverse stock split on Friday combining 10 shares of stock for one new share. Harvest’s drilling and assets are focused in Ohio, Pennsylvania, West Virginia, where they own/operate 9,787 conventional wells. The company cut a deal in March to sell off all of its Michigan assets. Who is Harvest?
One week ago the Texas Eastern Pipeline Company (TETCO) pipeline running through Kentucky exploded for the second time in a year (see 
Montage Resources, the new name for the merger of Eclipse Resources with Blue Ridge Mountain Resources a year ago, issued its first-quarter 2020 update on Friday. Montage drills exclusively in the Marcellus/Utica region. The company continues to trim its 2020 drilling budget, now down another 10% from just several weeks ago, to $130-$150 million.
Here’s an interesting aspect of the natural gas business you may not have heard about before (we hadn’t). As you may know, not all gas produced gets used immediately. Some gas gets stored, typically in underground caverns, and later extracted for use when needed. Buyers (like utility companies) contract with storage fields to park the gas they’ve purchased until they need it. What you may not know is that not 100% of the molecules that go in come back out again.