Facts & Rumors Newsletter #332 April 27, 2019
by Joe Barone, Shale Directories in Facts & Rumors Newsletter
Shale Directories Conferences
Appalachian Storage Hub Conference
Southpointe, Canonsburg, PA
www.appastorage.com
Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, and Bakken Shale Plays
Appalachian Development Group (ADG) is Drilling Along Ohio River. ADG is drilling along the Ohio River from Parkesburg to Wheeling, WV. It's looking for the best location for the underground storage hub. (RUMOR)
Rice Brothers Taking Action. (Thank you, MDN) On Monday, Toby and Derek Rice filed a proxy statement with the Securities and Exchange Commission and sent EQT shareholders a package and special proxy card (for voting) in an effort to elicit votes for their slate of nine board members at the upcoming July annual meeting–so they can take control of the company. Normally proxy statements are pretty dry affairs. Not this one! There are bombshell accusations in the proxy statement made by the Rice boys against EQT's current management.
Occidental Makes a Run at Anadarko. Occidental Petroleum Corp. is starting a bidding war for Anadarko Petroleum Corp., making a $38 billion counteroffer in attempt to break up the proposed takeover by Chevron Corp. Occidental said Wednesday its offering $76 per share in cash and stock, a premium of about 20 percent over Chevron's April 12 agreement to buy The Woodlands, Texas-based Anadarko. That compares with the $33 billion, or about $65 a share, agreement that Chevron announced two weeks ago. In a letter to Anadarko's board of directors, Occidental Chief Executive Officer Vicki Hollub said her company has made three bids since late March. Occidental said it has completed its due diligence on the deal and has financing lined up with Bank of America Merrill Lynch and Citigroup Inc. Anadarko's assets include operations in the Permian Basin in West Texas and New Mexico. The world's fast-growing oil major patch, the Permian has helped to turn the U.S. into a net exporter and become a bigger producer than Saudi Arabia. Chevron earlier this year unveiled ambitious growth plans for the basin. The deal was meant to boost Chevron into the upper leagues of oil companies, with output and sales approaching or beating Exxon Mobil Corp.'s.
Stop PA's Nuclear Bailout. This bailout will be disastrous for the NatGas industry. There's talk that bill would divide energy generation as follows:
Nuclear 50%
NatGas 30%
Renewables and coal 20%
Stop the this insanity
I encourage all PA residents to tell the Governor and legislators what this means to the everyday person and your livelihoods.
The nuclear power industry does not need the support of PA residents. In 2018 and 2019, nuclear power generators in Pennsylvania are projected to make more than a billion dollars ($1,000,000,000) in profits, according to data from PJM Interconnection's Independent Market Monitor.
Even though there is no need for a bailout tax, House Bill 11 was recently introduced and would force Pennsylvanians to pay higher electricity rates to subsidize corporations that are already profitable.
According to a 2018 poll, Pennsylvanians do not support paying higher electricity costs to bail out the nuclear industry.
63 percent are not willing to pay more for electricity to keep uncompetitive nuclear plants profitable and in operation.
73 percent of voters agree that competition and consumers should determine Pennsylvania's electricity market.
52 percent of voters are less likely to vote for candidates for governor, state senator or state representative if they support legislation requiring ratepayers to subsidize nuclear power generators. (Only 12 percent said they would be more likely.)
You have to act NOW!
Chevron – Anadarko Deal. Chevron announced plans Friday to acquire oil and gas exploration and production company Anadarko Petroleum in a cash and stock deal valued at $33 billion.
The transaction will expand the second biggest U.S. energy company's operations in shale oil and gas production, offshore drilling and liquefied natural gas exports.
Mariner East 1 pipeline restarted April 22. The builders of a natural gas pipeline told state investigators that they intend to restart the pipeline. The Pennsylvania Public Utility Commission said it received notice on Sunday from Sunoco Pipeline LP of the company's intent to restart the Mariner East 1 pipeline. The pipeline has been out of service since Jan. 20, when engineers from the pipeline safety division began monitoring efforts to fix a sinkhole that exposed a small segment of the pipeline along Lisa Drive in West Whiteland Township, Chester County. The Mariner East 1, 2 and 2X pipelines are designed to carry natural gas liquids from the Utica and Marcellus shale formations to ports on the East Coast. Sunoco, also known as Energy Transfer Partners, and I&E have agreed to several additional safety measures that Sunoco needs to undertake related to the sinkhole issue.
Range 1st Qtr. Update. It Could Be Exporting Butane. Range Resources announced Tuesday its "positioned" a portion of its butane volumes for export from a new and unnamed East Coast liquids terminal, Kallanish Energy reports.
That will give butane "another outlet for accessing premium international markets," Range said.
At present, Range and others ship liquids via the Mariner East 2 pipelines to Marcus Hook, Pennsylvania, for export. The new terminal was mentioned in one sentence in the company's earnings report and no further details were provided.
Efforts to contact company officials for additional comment were unsuccessful.
New terminal could be at old site
It is possible that the new terminal could result from turning an existing facility near Marcus Hook into a separate liquids hub.
Range also reported it's interested in a number of asset sales, although no details were provided. "Range is actively pursuing multiple assets sales as we remain committed to accelerating our debt reduction time line," said CEO Jeff Ventura, in the earnings release.
The company reported net income in the first quarter of 2019 of $1.4 million, compared to net income of $49.2 million in Q1 2018. It also had non-GAAP net income of $90.7 million, down 19% from a year ago.
Reduced corporate debt
The Texas-based company also generated $48 million in free cash flow, used to reduce corporate debt. The independent producer had GAAP cash flow from operating activities of $261 million and non-GAAP cash flow of $269 million. In Q1 2018, the company had $370.5 million in GAAP cash flow and $323.2 million in non-GAAP cash flow.
Its GAAP revenue for Q1 2019 totaled $748 million, a 1% increase from a year ago, and non-GAAP revenue of $835 million, up 8% from Q1 2018.
First-quarter earnings also showed a $61.7 million derivative loss due to increases in future commodity prices.
'A great start'
"Range is off to a great start in 2019, exceeding production guidance for the first quarter and paying down $48 million in debt on organically-generated free cash flow," Ventura said.
He added, "Importantly, we remain on track to deliver on our annual production target while spending at or below budget for the year."
Production in the first quarter 2019 averaged 2.26 billion cubic feet-equivalent per day (Bcfe/d), of which 31% was liquids, Range said. That represents a 3% production jump from Q1 2018's 2.19 Bcfe/d.
Range drilled 26 wells in Q1 2109: 20 in southwest Pennsylvania's dry gas window and three in the super-rich window. It also drilled three wells in Louisiana. It plans to drill a total of 96 wells in 2019.
Production in the Appalachian Basin was 2.03 net Bcfe/d, a 12% increase from the year-ago quarter. The southwest portion of the basin averaged 1.92 net Bcfe/d in 1Q 2019, a 14% increase over Q1 2018.
The northeast Marcellus Shale properties averaged 112 net million cubic feet-equivalent per day (Mmcfe/d) including 15 Mmcf/d net of legacy acreage production in first quarter of 2019.
The company's average prices were $3.18 per Mcf for natural gas, $48.56 per barrel for crude oil, and $20.58/Bbl for natural gas liquids.
Robots in the Permian. Chevron Corp.'s $33 billion takeover of Anadarko Petroleum Corp. shows how some of the world's super-major oil companies are investing in the Permian Basin oil field as a hedge against a future clouded by climate change. The deal, announced April 12, will leave Chevron with about 2.4 million acres in the Permian Basin, an area almost the size of Delaware and Rhode Island combined. Its biggest rival, Exxon Mobil Corp., has 1.6 million acres. If the companies' plans work out, the whole enterprise — from the oil well to the refinery — will be largely automated to make it as efficient and profitable as possible, using artificial intelligence and cloud computing to squeeze every drop of oil from the rock. Shale drilling is faster and cheaper than exploring for oil offshore or overseas.
Permian's Longest Lateral. Moss Creek Resources Holdings said last week the company has drilled what's believed to be the longest lateral in the Permian Basin, Kallanish Energy reports.
The Medusa Unit C 28-09 3AH was successfully drilled to a total-measured-depth of 24,592 feet (total vertical depth of 7,102 feet).
This well was drilled 100% in the Wolfcamp A with a total horizontal displacement of 17,935 feet (3.4 miles).
This is the longest known lateral in the Permian Basin based on the IHS Markit and Drilling info databases, according to Moss Creek.
The project was executed in 18 days from surface to total depth utilizing conventional mud motor and measurement-while-drilling (Mwd) technology.
Moss Creek's parent, Houston-based independent producer Surge Energy U.S. Holdings partnered with Latshaw Drilling & Exploration's Rig 10 and Pro Directional for directional services on the well.
The well is expected to be completed and brought online later in 2019.
$74 Billion Invested in OH. Total investment in the Utica Shale in eastern Ohio since 2011 has reached $74 billion, according to a new study by Cleveland State University.
The study, released Monday, was prepared for Jobs Ohio, the state's private job-creation agency, Kallanish Energy reports. The study represents the most recent data available and covers shale investments through the first half of 2018.
The study from Cleveland State's Energy Policy Center at the Maxine Goodman Levin College of Urban Affairs showed drilling activity slowed, but remained significant in Ohio from January to June 2018.
During the first half of last year, investment in Ohio's upstream, midstream, and downstream operations totaled $4.6 billion. Upstream activities, such as drilling or royalties, accounted for more than $3.3 billion of this total.
According to the Ohio Department of Natural Resources, 157 wells were listed as "drilled, drilling or producing" in Ohio, with Belmont, Monroe, and Jefferson counties representing the most active areas.
Here is the estimated upstream Utica investment in the first half of 2018: Lease renewals and new leases, $793.4 million; drilling, $1.59 billion; roads, $9.4 million; lease operating expenses, $191.1 million; and royalties, $787 million. Total upstream investment: $3.37 billion.
Total estimated midstream investment in first half of 2018: Gathering lines, $5.79 million; gathering system compression and dehydration, $229.6 million; fractionation plants, $168 million; natural gas liquids storage, $1 million; transmission lines, $98.1 million; and rail transloading facilities, $3 million. Total estimated midstream investment: $505.5 million.
Total estimated downstream investment, first half 2018: Manufacturing/industrial plants with natural gas as key feedstock, $700 million; petrochemical plants, $17.5 million; and natural gas refueling stations, $1 million. Total estimated downstream investment: $718.5 million.
"The landscape for American energy looks vastly different now than it did just 5 or 10 years ago, and that is largely due to the resources being unlocked in the Ohio Valley," said Matt Cybulski, director of energy and chemicals at JobsOhio, in a statement.
"Whether you are directly involved in the oil and gas value chain, a petrochemical company, or an energy-intensive manufacturer looking for a new home, it is impossible to ignore what these abundant, low-cost feedstocks can do for your business," he said.
U.S. Continues World Leadership. The American Petroleum Institute's latest monthly statistical report showed that the U.S. sustained its position as the world's leading oil producer, continuing a pace of 12.1 MMbopd, matching February 2019. In addition, petroleum demand in March was the strongest for that month in more than a decade at 20.7 MMbopd. "Robust and record levels of U.S. natural gas and oil production continue to lead the world and have played a predominant role in meeting increased global demand for gasoline, distillate and jet fuel," said API Chief Economist Dean Foreman.
Bad News for PA. Pa. might follow Calif. on cap and trade. E&E News. Pennsylvania regulators are considering a petition to institute an economy wide cap-and-trade program; a move that immediately thrusts the Keystone State to the forefront of national conversations over how to curb greenhouse gas emissions. The proposal under consideration by the Department of Environmental Protection is notable in both its ambition and scope. The Pennsylvania plan goes beyond the cap-and-trade program instituted by its Northeastern neighbors, which is limited to the power sector, and would apply to all sectors of the economy. It is modeled after California's cap-and-trade program and would enable Pennsylvania to participate in the Golden State's carbon-cutting regimen. The impact to emissions would be considerable. Among states, only California and Texas emit more carbon. Under the proposal, Pennsylvania emissions would be capped at 2016 levels.
Kinder Looking at 3rd Pipeline in the Permian. Pipeline giant Kinder Morgan, already building two pipelines to flow natural gas from the Permian Basin to the U.S. Gulf Coast, confirmed Wednesday it's in discussions to build a third, Kallanish Energy reports.
Houston-based Kinder Morgan is the lead developer for the Gulf Coast Express Pipeline and the Permian Highway Pipeline, two projects that will move a combined 4.1 billion cubic feet per day (Bcf/d) of natural gas from the Permian to Corpus Christi and Houston. Combined, the projects will cost $3.75 billion.
Gulf Coast Express is expected to come online in October and the Permian Highway one year later, but Kinder Morgan CEO Steve Kean told investors during its Wednesday afternoon earnings call the company is in talks to build a third natural gas line in the West Texas shale play.
"The demand to get out of the Permian continues to grow and the desire to be able to unlock the value that's in oil, natural gas liquids and natural gas continues to put pressure on the need for additional takeaway capacity," Kean said.
Kinder Morgan believes demand for gas takeaway capacity could grow by 2 Bcf/d annually over the next few years, he said.
The discussions for the company to build a third natural gas pipeline come at a time of record production in the Permian. Associated gas, produced as operators drill for crude, totals roughly 14.1 Bcf/d, Energy Information Administration data shows.
"I don't know that it's going to be at that pace (2 Bcf/d), but there is certainly interest in pipeline three," Kean said.
Gulfport Reports Production Drop. Oklahoma-based Gulfport Energy reported first-quarter 2019 net production of 1.26 billion cubic feet-equivalent per day (Bcfe/d), Kallanish Energy reports.
That is a production drop of just under 2% from the 1.29 Bcf/d produced in Q1 2018.
That production was 90% natural gas, 7% natural gas liquids and 3% oil, from the Utica Shale in eastern Ohio and the Scoop play in Oklahoma.
"Gulfport's first quarter of 2019 production came in as expected following a muted level of activity during the fourth quarter of 2018, and we remain on track to deliver on our previously announced 2019 production guidance of 1.36 billion to 1.40 Bcfe/d," said CEO and president David M. Wood, in a statement.
He said the company in the first quarter was operating with an average of 3.4 horizontal drilling rigs and 4.4 completion crews in Ohio and Oklahoma.
Wood added, "We forecast this robust level of activity will lead to an active turn-in-line schedule in the coming months, as we expect to turn-to-sales in excess of 30 wells in the second quarter of 2019, leading to strong quarter-over-quarter production growth in both the second quarter and third quarter of 2019."
The company said it drilled 6 gross (5.6 net) operated wells in the Utica Shale and four gross (3.1 net) operated wells in the Scoop in the first quarter. It also had three gross wells in various stages of drilling at the end of the quarter.
During the first three months of 2019, Gulfport completed 25 gross and net operated wells in the Utica, and 7 gross (6.7 net) operated wells in the Scoop. The company turned to sales 6 gross and net operated wells in the Utica Shale and 3 gross (2.8 net) operated wells in the Scoop during the quarter.
Gulfport said its average realized prices in Q1 2019 were $2.70 per Mcf of natural gas, $53.10 per barrel of oil and 58 cents per gallon of Ngls. Its total equivalent price was $3.00 per thousand cubic feet-equivalent (Mcfe). Those prices are before derivatives and include transportation costs.
Gulfport will release its quarterly financials on May 3.
The Permian Is Cranking Up. Industry discourse suggests that the Permian Basin is powering U.S. shale oil and gas output. In fact, the hydrocarbon rich basin between western Texas and southeastern New Mexico is rarely out of energy market chatter these days. According to the U.S. Energy Information Administration (EIA), the Permian may experience the biggest boost in production levels in the entire country. It is forecast to climb by 42,000 barrels per day (bpd) to 4.136 million bpd in May. In 2018, the basin accounted for 20% of the total U.S. oil production and at the same time accounted for 7% of the country's dry natural gas. Getting the maximum bang for bucks spent on the latter is what is once again worrying exploration and production (E&P) companies. This abundance could turn out to be a pricing curse, according to Moody's.
U.S. Energy Consumption Hits All-Time Record. Energy consumption in the United States reached an all-time high last year, data from the Lawrence Livermore National Laboratory showed. According to the laboratory, the United States consumed 101.2 quadrillion British thermal units of energy, or quads, last year, up on the previous record of 101 quads, reached in 2007. Yet the 2018 figure also represents the highest annual increase since 2010, at 3.6 percent. The figures reflect a similar surge in energy demand globally. In its latest Global Energy & CO2 Report, the International Energy Agency said last year saw a 2.3-percent jump on the year, which was twice as high as the average demand increase rate for the last decade. This increase was the result of a growing global economy, the authority said, as well as greater heating and cooling needs in some parts of the world.
TX Drilling Permits Down in March. In March 2019, the Railroad Commission of Texas issued 1,137 original drilling permits, Kallanish Energy reports, down 6.8% from the 1,220 permits issued in March 2018. The March 2019 total included 1,005 permits to drill new oil or gas wells, 14 to re-enter plugged well bores, and 118 for re-completions of existing well bores. The breakdown of well types is 315 oil, 69 gases, 688 oil or gas, 56 injections, one service and eight "other" permits. Last March, the state agency also issued 665 completion permits, a drop of 23.3% from the 867 completion permits issued in March 2018. The new permits included 493 oil, 127 gas, 43 injection and two other completions. Total well completions in 2019 are 2,469, down from 2,712 in the same period of 2018, a drop of nearly 9%. The top regions for oil/gas permits to drill were: Midland area, with 569; the San Antonio area, 132; and the Refugio area, with 116 permits. For new oil completions, the Midland area was No. 1, with 119, followed by the San Antonio area with 110, and the San Angelo area with 66.
Permian Basin water disposal volumes expected to double by 2022. Oilfield wastewater disposal volumes are expected to double in the Permian Basin within the next two to three years, a new analysis from global energy intelligence firm Wood Mackenzie shows. As drilling activity continues to expand in the arid region between West Texas and southeastern New Mexico, hydraulic fracturing has resulted in growing challenges in sourcing water and what to do with wastewater from completed wells. Wastewater disposal costs can account for a third of total lease operating expenses in the Permian Basin, Wood Mackenzie Director of Upstream Consulting Matthias Bloennigen said in a statement. "Even with 100 percent water reuse for further completions, which is unlikely, the current saltwater disposal infrastructure is expected to hit capacity in the near future," Bloennigen said. "As Permian operators continue to focus on boosting production output, they will need to develop and refine their water strategies."
Mexico Importing More U.S. Energy. Amid the differences between the U.S. and Mexico recently, including different views over immigration and trade, relations in the energy patch continues to expand. In fact, energy trade represented 12 percent of the value of all U.S. exports to Mexico and 5 percent of all U.S. imports from Mexico in 2018, the U.S. Energy Information Administration (EIA) said on Monday in a new report. Moreover, when looking at the numbers, a major pivot is apparent. Historically, the bulk of the energy trade between Mexico and the U.S. consisted of Mexican crude oil imports as U.S. oil production (mostly conventional) continued to decline. It was also marked by U.S. net exports of refined petroleum products to Mexico. Through 2014, U.S. imports of crude oil from Mexico were the most valuable component of this bilateral energy trade, the EIA said. Starting in 2015, however, the value of U.S. energy exports to Mexico, including rapidly growing volumes of both petroleum products and natural gas, exceeded the value of U.S. energy imports from Mexico as volumes of Mexican crude oil sold to its giant neighbor to the North declined.
PA Permits April 11, to April 25 2019
County Township E&P Companies
Bradford Overton Chesapeake
Bradford Wilmot Chesapeake
Butler Penn XTO
Greene Aleppo EQT
Greene Jackson EQT
Susquehanna Harford Cabot
Susquehanna New Milford SWN
Tioga Liberty PA Gen Energy
Washington Morris Range
Wyoming Washington BKV OPR LLC
OH Permits for week of April 13, & 20 2019
Belmont Richland Ascent
Belmont Pease Ascent
Harrison Cadiz Ascent
Jefferson Smithfield Ascent
Jefferson Ross EAP OHIO
Joe Barone