U.S. Oil Industry: April Will be Terrible, May Will be Impossible
As the price of oil continues to crash and burn, U.S. shale oil companies are “living a nightmare.” Companies are now laying off employees by the thousands and beginning to shut-in wells. Everyone is holding their collective breath waiting for a tidal wave of bankruptcies, hoping it won’t come, fearing it will. What is it like living inside the oil price crash bubble in Texas? Believe it or not, an article in the well known fake news source New York Times does a pretty good job of describing the hell that America’s shale oil companies are now living through. A quote from one operator: “April is going to be terrible, but May is going to be impossible.” And, “I’m just living a nightmare.” That about sums it up.
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Earth Day is the day Big Green has a collective orgasm over Mom Earth and their efforts to keep her clean. We have no issue with responsible stewardship of our natural resources and keeping the environment clean. Everyone (with a brain) aspires to that. We do have a problem with worshiping the creation instead of the Creator. Worshiping the earth is what Earth Day is all about. Each year it gets nuttier than the last. This year is the 50th year so-called Earth Day (as a “thing”) has been celebrated. We celebrate Earth Day each year by celebrating the life-changing good brought to humankind by fossil fuels.
MARCELLUS/UTICA REGION: Indian Point closure puts pressure on natural gas supplies in New York; OTHER U.S. REGIONS: Texas Railroad Commission delays vote on state-mandated oil production cuts; Explainer: How does Texas have the power to curb the state’s oil output?; FERC OKs commissioning of third Cameron LNG train; NATIONAL: Democrats want to cut off support to oil and gas workers during COVID-19 pandemic; For oil and gas, the key to survival may be an old foe: government; Trump working on funding plan to preserve U.S. oilfield jobs; Yesterday’s crude price meltdown, futures contract expiration and crude storage; INTERNATIONAL: New ethane-munching microbes discovered at hot vents.
Frankly, we’re speechless. Yesterday the price of West Texas Intermediate (WTI) oil for near-term May contracts went from trading at $18.27 per barrel (bbl) to minus $37.63, a drop of $55.90 in a single day. This is the first time in history sellers of oil in the U.S. (more properly the contracts to buy oil) are paying buyers to accept it–because the sellers have no place to store physical oil should they keep the contracts. This is a complete and utter meltdown in the oil market. Trading for May contracts ends today, thank God. The June contract is (so far) showing deals trading at $15.59/bbl. That’s still a disaster, but not as bad as paying someone else to take the oil! What caused this price crash, and where does it go from here?
Although the NYMEX futures price for natural gas zoomed up to $1.92 per thousand cubic feet (Mcf) yesterday, the price for natgas didn’t go up everywhere. As you know, there is no one price for natural gas, although the most quoted price is the Henry Hub benchmark. Yesterday at the Waha trading hub in West Texas (the Permian Basin), the traded price for natgas sunk to a new, historic low: -$7.67/Mcf. It closed the day at -$5.79/Mcf. That is, sellers were paying buyers to take their gas. Why?
With yesterday’s historic crash in the price of West Texas Intermediate (WTI) oil comes a big boost in the stock price for a number of Marcellus/Utica drillers. As we’ve outlined multiple times, but will repeat here again, stock traders believe that with the crash in oil prices and U.S. shale oil drillers laying down rigs faster than we can count, the high volume of “associated gas” coming from the oilfields will vastly decrease. That means less supply in the market. With less supply and the same (or increasing) demand comes higher prices for natgas. And higher prices for natgas means more profits and likely more new drilling for Marcellus/Utica drillers. Hence, investors are snapping up stocks for M-U drilling companies.
In early 2018, the federal EPA approved a new Marcellus wastewater injection well for the Pittsburgh suburb of Plum Boro (see 
There is an ongoing question of whether or not the Ohio Marketable Titles Act (MTA), which impacts Utica shale rights, can be used to return previously severed mineral rights back to a surface landowner, or whether the MTA is superseded by Ohio Dormant Minerals Act (DMA). In February 2019, Ohio’s Seventh District Court of Appeals said the MTA *does* still apply to mineral rights (see 
Spectra Energy’s Algonquin Incremental Market (AIM) pipeline project is an $876 million expansion of the existing Algonquin pipeline system designed to carry 342 million cubic feet of natural gas per day to New England states that badly need the gas. On March 3, 2015, the Federal Energy Regulatory Commission (FERC) issued its final approval for the project, allowing the project to go forward. Construction began in 2015 and, following extreme opposition from New York State over a small portion of the project, it finally went online in 2016.
Some exciting news is chronicled in a recent post by our favorite government agency, the U.S. Energy Information Administration (EIA). Last year, in 2019, the United States exported more energy (oil, natural gas, coal, and petroleum products) than it imported. That’s the first time we’ve exported more than imported in 67 years!
Before the COVID-19 coronavirus pandemic hit, causing lockdowns and stay-at-home orders throughout much of the U.S. (and world), natural gas drillers in places like the Marcellus/Utica were hurting (due to low gas prices) but holding their own financially. Maybe not all, but a majority were doing OK. And then the bottom dropped out of everything with the virus causing demand “destruction” because people are not traveling. Right now there’s less of everything–less electricity being used (a major customer for natgas), less natgas used for heating big office buildings and factories, etc. Of course, that means less production, with shale gas drillers choosing to scale back new drilling and even shut-in some wells.
The PA Dept. of Environmental Protection (DEP) published a notice in Saturday’s Pennsylvania Bulletin that the agency is proposing changes to the Residual Waste General Permit WMGR123, which governs the processing, transfer and beneficial use of oil and gas liquid waste to develop or frack an oil and gas well. Some of the changes include defining certain terms, including “processing,” “transfer,” and “storage”; changing the application from a registration to a determination of applicability; revising sampling and analysis requirements; and revising the frequency of inspections.
On Friday Chesapeake Energy announced it has suspended payment of dividends on each series of its outstanding convertible preferred stock effective immediately. The company also made the point that suspending this type of dividend does not constitute a default (failure to pay) under any of the company’s debt instruments. The suspension comes just a few days after the company completed a reverse stock split, combining 200 shares of old stock into 1 share of new stock (see 
A federal court in Pennsylvania has just verbally slapped down THE Delaware Riverkeeper–both the umbrella Riverkeeper organization and (by name) the person who claims to be THE riverkeeper of the Delaware, Maya van Rossum, for a transparent and pathetic attempt at blocking the Mariner East 2 pipeline project with yet another frivolous lawsuit. In the decision, the judge says the litigation tactics of the Riverkeeper organization “do nothing to protect the environment.” The judge also said to impose liability against ME2 in this case “would offend basic principles of fairness and effect an absurd result” and “violate due process.” Ouch.
Last December MDN told you that investment firm Blackstone Infrastructure Partners, a major investor in pipeline company Tallgrass Energy, pursued and caught the company, tentatively convincing Tallgrass to sell its public shares of stock to Blackstone, which will take the company “private” –meaning no publicly traded shares of stock (see