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NewsLetters

Expo/Industry events for the next few months

Utica Midstream
June 7, 2017
Walsh University
North Canton, OH
http://www.uticasummit.com/  

Appalachian Storage Hub Conference
June 15, 2017
Hilton Garden Inn
Southpointe, PA
http://www.appastorage.com/ 

DUG East
June 20-22
David L. Lawrence Convention Center
Pittsburgh, PA
http://www.dugeast.com/  

For other events visit http://www.shaledirectories.com/site/oil-and-gas-expo-information.html

Latest facts and a rumor from the Marcellus, Utica, Permian, Eagle Ford, Bakken and Niobrara Shale Plays 

Interesting Antero RUMOR.   I attended West Virginia Manufacturers Association’s Marcellus and Manufacturing Development Conference which was very informative.  Kudos to the WVMA.

As you know at events like this, I’m always looking for rumors.  I heard an interesting one.  Antero could have 15 rigs working in the Appalachian Basin next year this time.  

Antero just did an IPO for its midstream company yesterday on Wall Street.  Antero has been aggressive in its drilling and it looks like it will continue to be.  (RUMOR)

FERC Shrinking.  One of two-still-serving commissioners on the Federal Energy Regulatory Commission is prepared to step down, Kallanish Energy reports.

Democrat Colette Honorable said she will not seek appointment after her term expires on June 30. She has served on FERC since 2014.

Her departure could leave the five-member board with only one member. President Trump named Democrat Cheryl LaFleur to lead the commission, but he has not yet nominated three people to fill FERC’s vacancies. Honorable’s departure would be the fourth opening.

The lack of a quorum of three has meant FERC cannot take action to approve interstate pipelines and other projects.

Nominations must be approved by the U.S. Senate, but that process could take months, observers have noted.

FERC chairman Norman Bay resigned last January, after Trump made LaFleur acting chairman.

Noble Pulling Out of the Appalachian Basin.  One of the region’s and state’s biggest natural gas drillers is pulling out of the Marcellus Shale, announcing Tuesday the pending sale of its entire portfolio of natural gas production in southwestern Pennsylvania and West Virginia for $1.2 billion.

Noble Energy Inc. (NYSE: NBL) confirmed it would sell all of its assets to an undisclosed buyer, receiving $1.125 billion upfront and will get three separate payments in the future for $33.3 million each depending on price conditions between 2018 and 2020. But it will retain its interest in Cone Midstream, the limited partnership with Consol Energy that owns gathering and transportation pipelines in the Marcellus Shale.

The deal is expected to close in the second quarter.

Noble expects to record a $2.2 billion loss in connection with the book value of the Marcellus Shale and another asset as well as an unspecified amount for what it called exit costs “associated with certain operating leases, including firm transportation agreements that will be retained after the transaction closes.”

The Houston-based natural gas driller, one of the biggest in the country, had been a major player in the Marcellus Shale and until last year had been in a drilling joint venture with Canonsburg-based Consol Energy Inc. (NYSE: CNX) until the JV ended in fall 2016. Noble ranked No. 6 in local shale production in the 2017 Pittsburgh Business Times Book of Lists with 125 billion cubic feet of shale gas production and 101 active wells, all in Washington County, in 2016. Noble is also the 13th-largest shale gas producer in Pennsylvania, according to the Book of Lists. But after cutting ties with the joint venture and due to the downturn in the energy industry, Noble hadn't had a rig in the Marcellus Shale on its own since at least 2015.

Its local office is at 1000 Noble Energy Drive at Southpointe in a 206,000-square-foot office building it moved into three years ago. In February 2016, the Pittsburgh Business Times reported it was looking to sublease one floor of the building during the downturn in the oil and gas industries.

In a statement, Noble said it would be shifting to other parts of its business as well as using the proceeds to pay down its debt from the April acquisition of Clayton Williams Energy, which was completed earlier this year. Noble has assets in the DJ and Permian basins, the Eagle Ford Shale in Texas, and the Gulf of Mexico.

"The Marcellus has been a strong performer for Noble Energy over the last few years, which is a direct result of the success of our employees' efforts,” said Noble Energy Chairman, President and CEO David L. Stover in a statement. “During the same time period, we have also significantly expanded the inventory of investment opportunities in our liquids-rich, higher-margin onshore assets, which has led us to now divest our Marcellus position.”

The deal includes 415 million cubic feet of production per day, 100 percent ownership in 385,000 acres in Pennsylvania and West Virginia, and proved reserves of 1.5 trillion cubic feet of natural gas equivalent. It hasn’t had any rigs running in the Marcellus Shale but the company said that several wells that have been recently completed would be producing by the middle of the year.

The deal doesn’t include Noble’s 50 percent ownership share of Cone Midstream, the limited partnership with Consol Energy that focuses on natural gas gathering and shipment by pipeline.

In its quarterly conference call with analysts Tuesday, Consol executives called the acquisition a positive and said that Cone was looking forward to working with a new customer. But they declined further comment about the deal.

Chesapeake 1st Qtr. Update.  Things Are Looking Up.  Higher commodity prices and a $997 million drop in oil and gas asset impairment charges overcame a production drop, and allowed Chesapeake Energy (CHK) to move its first-quarter bottom line to black from red.

For the quarter ended March 31, the independent producer recorded a $75 million profit, compared to a $1.11 billion net loss one year ago, Kallanish Energy calculates. Expenses dropped to $2.51 billion from $3.05 billion, while revenue jumped $800 million, to $2.75 billion.

Oil production fell 1 million barrels (MMBbl), to 8 MMBbl, while oil sales jumped to $378 million from $255 million, while natural gas sales slipped to 211 billion cubic feet (Bcf), from 276 Bcf, while sales totaled $868 million, from $663 million one year ago.

Natural gas liquids produced fell 1 MMBbl, to 5 MMBbl, but the price paid for Chesapeake’s NGLs rose to $118 million, from $74 million one year ago.

Our operational momentum continues to build in our Eagle Ford, Powder River Basin and Mid-Continent oil assets, as we remain on track to reach our production target of 100,000 barrels of oil per day by year-end,” Chesapeake CEO Doug Lawler said, in a statement. “We expect our production to grow significantly in the second half of 2017 as we place more wells to sales, and as a result, we have raised the bottom range of our 2017 production guidance.”

Oklahoma City-based Chesapeake’s total production is pegged between 197.5 million barrels of oil-equivalent (MMBOE), and 205 MMBOE, or a daily rate of 541,000 BOE (MBOE), to 562 MBOE,

Chesapeake is currently utilizing 19 drilling rigs (above the 2017 first-quarter average of 16) across its operating areas, seven in the Eagle Ford Shale, five in the Mid-Continent area, three in the Haynesville Shale, two in the Powder River Basin and two in Northeast Pennsylvania.

The producer plans to utilize an average of 17 rigs throughout the year and intends to spud and place on production roughly 400 and 450 gross operated wells, respectively, in 2017.

Higher commodity prices and a $997 million drop in oil and gas asset impairment charges overcame a production drop, and allowed Chesapeake Energy (CHK) to move its first-quarter bottom line to black from red.

Chesapeake in its 1st quarter financials mentions that it has two rigs in northeastern PA.  It stated that it will average using 17 rigs throughout the year.  There is no mention of rigs moving to OH.  We had heard a rumor earlier this year that it could be bringing 3-5 rigs into OH.  According to this financial report, it does not look like any rigs will be coming to OH.

Rice 1st Qtr. Update.  Commenting on the results, Daniel J. Rice IV, Chief Executive Officer, said, "We are off to a great start in 2017 on our continued path to create long-term value for our shareholders. With the Vantage Energy acquisition complete, we delivered solid first quarter 2017 operational results into an improving gas price environment. Looking ahead, we are focused on generating best-in-class E&P results to achieve our three-year E&P targeted growth outlook. In addition, because ROM's throughput growth and asset profile make it an ideal drop candidate, we are evaluating the sale of over one-third of ROM to RMP in the second half 2017."

Given the highly predictable nature of our 100% core asset base, we have laid out a three-year growth outlook that we believe delivers compelling economic cash flow growth on a risk-adjusted basis. We are targeting 27% - 33% compound annual Appalachia net production growth(1) from 2017 - 2019 predicated on targeted annual Appalachia net production of 1,575 - 1,675 MMcfe/d in 2018 and 2,000 - 2,200 MMcfe/d in 2019. Our three-year production targets are based on intended drilling and completion ("D&C") investments of $1.2 - $1.3 billion in 2018 and $1.3 - $1.4 billion in 2019. Highlights of our three-year E&P outlook include the following:

Daniel Rice IV commented, "I believe our target of over 2 Bcfe/d of 2019 net production offers a highly attractive risk-adjusted growth profile and executing this outlook will unlock significant value for our shareholders. We are targeting differentiated production growth and cash flow neutrality in 2019, a rare feat amongst E&P companies. This outlook is supported by core acreage, high returns, technical expertise, low leverage and significant hedges."

RMP reaffirmed its annual distribution growth target of 20% through 2023. In addition, RMP provided three-year distributable cash flow coverage and leverage targets supported by Rice Energy's long-term growth outlook.

We are on track to achieve our 2017 goal of leasing approximately 15,000 net acres during the year, as we added 2,000 net acres in the Marcellus and 2,000 net acres in the Utica during the first quarter. As of March 31, 2017, our core Appalachian acreage position totaled approximately 252,000 net acres, consisting of approximately 187,000 net Marcellus acres in Pennsylvania and approximately 65,000 net Utica acres in Ohio. In addition, we control approximately 107,000 net Utica acres in Pennsylvania.

Eclipse Resources 1st Qtr. Update.  Eclipse Resources Corporation (NYSE:ECR) (the “Company” or “Eclipse Resources”) today announced its first quarter 2017 financial and operational results, along with updated guidance for the second quarter of 2017 and full year 2017. In conjunction with this release, the Company has posted an updated investor presentation to its website at www.eclipseresources.com with additional first quarter results and operational detail. 

First Quarter 2017 Highlights: 

  • Average net daily production was 290.0 MMcfe per day, exceeding the high end of the Company’s previously issued production guidance range of 275 to 280 MMcfe per day.
  • Realized an average natural gas price, before the impact of cash settled derivatives and firm transportation expenses, of $3.17 per Mcf, a $0.15 discount to the average monthly NYMEX settled natural gas price during the quarter. 

Our second operated rig commenced drilling at the end of the first quarter 2017 and we now have a rig again focused on our Utica Condensate type curve area as our team continues to demonstrate its operational excellence in the Appalachian basin. In the Utica Condensate area, I am extremely happy to announce that we successfully drilled what we believe is the world’s longest onshore lateral ever drilled with a total measured depth of 27,400 feet and completable lateral extension of 19,300 feet, almost 1,000 feet longer than the previous record held by our Purple Hayes well. Remarkably, our team drilled this well in less than 17 days from spud to TD. We are currently drilling a direct offset to this well with a similar planned lateral extension and expect to begin completions on these exciting wells late in the third quarter of this year. 

Additionally, we have drilled the first of two planned Marcellus Condensate wells with a completable lateral extension of 10,000 feet and are currently drilling the second, along with three Utica Dry Gas wells on the same pad. Considering the catalysts we discussed at our analyst day early in the year, we are tracking at or better than planned and remain excited for continued operational improvement and value enhancements from our assets.”

Rex Gets $300 Million to Keep Drilling.  Pennsylvania-based Rex Energy on Monday announced an agreement with a lending group led by Angelo, Gordon & Co. for a new $300 million first-lien, delayed-draw term loan, Kallanish Energy reports.

It bears interest of LIBOR plus 8.75% on drawn amounts and matures in April 2021, the independent producer said.

Initial borrowings of roughly $144 million under the term loan were used to repay all outstanding loans and obligations under the company’s previous senior secured credit facility, pay fees and expenses associated with the term loan and place about $19.3 million in cash on the balance sheet, the company said.

It said the new facility also includes roughly $46.5 million for outstanding undrawn letters of credit.

Following repayment, the company will have roughly $110 million of additional capacity under the term loan which will be available to develop core assets and for general corporate use, the company said.

The term loan permits, under certain circumstances, Rex Energy to issue up to an additional $100 million in secured first-lien debt for the purposes of additional reserve development and acquisitions, it said.

“We are pleased to have completed this transaction and to have this lending group led by Angelo Gordon as a financing partner,” said president and CEO Tom Stabley, in a statement.

He added, “This transaction will further ensure the execution of our two-year development plan in the Appalachian Basin. The term loan provides Rex Energy with additional liquidity to continue to develop our high-return locations and the potential to access the M&A market.”

Angelo, Gordon & Co., an alternative investment house, is based in New York City.

Rex is active in the Marcellus and Utica Shale plays.

U.S. Shale Oil Cannot Meet World Demand.  Chevron (CNX) CEO John Watson said Monday U.S. shale oil production alone can’t meet the world's growing demand for crude.

Global oil demand is growing by more than 1 million barrels per day (MMBPD) annually, and American producers are meeting much – not all – of that growth.

"Shale can help. Certainly between now and the end of the decade, it will be a big contributor to meeting that million-barrels-of-oil-demand growth that's out there," Watson told CNBC's Brian Sullivan on “Power Lunch” on the sidelines of the Milken Global Conference in Los Angeles.

"But ultimately oilfields decline, and we're going to need all sources of supply, including the shales, but also deepwater and other sources around the world," he said.

Investment in oil exploration and development, especially expensive projects in deepwater and Canada’s oil sands, has dropped as oil companies slashed capital spending, amid a prolonged crude price slump, a number of industry watchers, including the International Energy Agency, have postulated, Kallanish Energy reports.

Still, U.S. shale oil production has rebounded as crude prices stabilize at roughly $50 a barrel, supported by output cuts by OPEC and other exporting nations like Russia, aimed at cutting global stockpiles. The recovery has also been underwritten by falling service costs – which have started to rebound — and efficiency gains in the U.S.

Watson told CNBC's Sullivan President Trump’s rollback of energy-sector regulations could kick-start the economy by removing rules and guidance that "were heaping costs on our industry with no discernible benefit."

Consol 1st Qtr. Update.  Pennsylvania-based Consol Energy reported a first quarter 2017 net less of $39 million, compared to a Q1 2016 net loss of $98 million, Kallanish Energy reports.

The company reported net cash provided by activities in Q1 was $205 million, compared to $130 million in the prior-year quarter.

During the quarter, the company operated two rigs and drilled nine wells. That included seven Utica Shale wells in Ohio’s Monroe County and two Marcellus Shale wells in Pennsylvania’s Washington County.

The company said a single rig could drill 16 dry Utica Shale wells averaging 10,000-foot laterals per year, a 14% improvement compared to Q4 2016.

Consol reported that it set a Marcellus record by drilling 7,380 feet of lateral in 24 hours on a well in Washington County in southwest Pennsylvania.

The company closed on the sale of assets totaling $108 million in the quarter. It sold 6,399 net undeveloped acres in Ohio’s Utica Shale in Jefferson, Belmont and Guernsey counties for $77 million. It sold other assets for $31 million in two smaller deals.

In Q1 2017, Consol reported production was down 3% from the 97.5 billion cubic feet-equivalent (Bcfe) a year earlier. The drop to 95 Bcfe was driven primarily by production declines in the Utica Shale, the company said.

Marcellus Shale production was up 13% from a year ago, to 58.0 Bcfe. Utica Shale production dropped 33%, to 15.3 Bcfe. Consol says it expects Utica production to grow in later 2017.

“Over the course of the quarter, the operational execution of the team has been tremendous and, as a result, we have continued to see further efficiency improvements in both drilling and completion activities,” said chief operating officer Timothy Dugan. “These improvements have led to further reductions in cycle times, resulting in the acceleration of activity in 2017.”

The company spent $100.8 million in Q1 on capital spending, compared to $30.1 million in Q4 2016.

Antero’s IPO Means Funding for Growth.  Antero Midstream announced the pricing of its initial public offering of 37.25 million common shares representing limited partner interests held by Antero Resources Investment, at $23.50 per share.

Gross proceeds total roughly $875 million.

AMGP will not receive any of the proceeds from the common shares to be sold by Antero Resources Investment, Kallanish Energy learns.

The offering underwriters have been granted a 30-day option to purchase up to an additional 5.59 million shares.

The common shares are expected to begin trading today on the New York Stock Exchange under the symbol "AMGP."  The offering is expected to close on May 9.

AMGP will own the general partner of Antero Midstream Partners and incentive distribution rights in Antero Midstream, and has elected to be classified as an entity taxable as a corporation for U.S. federal income tax purposes.

Upon closing of the offering, the public will hold a roughly 20% limited partner interest in AMGP, or an approximate 23% limited partner interest if the underwriters exercise in full their option.

Antero Resources Investment will own the remaining approximate 80% limited partner interest in AMGP, or an approximate 77% limited partner interest if the underwriters exercise in full their option.

Morgan Stanley, Barclays and J.P. Morgan are acting as joint book-running managers for the offering. Baird, Citigroup, Goldman Sachs and Wells Fargo Securities serving as book-running managers.

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Rig Count 

  • Baker Hughes Rig Count the week of May 5, 2017
     
  • PA     
    • Marcellus 33 down 1
  • Ohio 
    • Utica 22 unchanged
  • WV 
    • Marcellus 11 down 1
  • TX
    • Eagle Ford 83 unchanged
  • TX & NM
    • Permian Basin – 347 up 5
  • ND
    • Williston – 43 down 1
  • CO
    • Niobrara – 25 unchanged
       
  • TOTAL U.S. Land Rig Count 853 up 4

PA Permits April 27, to May 4, 2017

       County              Township                E&P Companies

1.    Bradford                Leroy                    Chief
2.    Greene                Aleppo                Rice
3.    Greene                Aleppo                Rice
4.    Greene                Aleppo                Rice
5.    Greene                Aleppo                Rice
6.    Greene                Aleppo                Rice
7.    Greene                Center                EQT
8.    Greene                Jefferson                EQT
9.    Greene                Jefferson                EQT
10.    Greene                Jefferson                EQT
11.    Greene                Jefferson                EQT
12.    Greene                Jefferson                EQT
13.    Greene                Jefferson                EQT
14.    Greene                Jefferson                EQT
15.    Greene                Jefferson                EQT
16.    Greene                Jefferson                EQT
17.    Greene                Jefferson                EQT
18.    Greene                Jefferson                EQT
19.    Susquehanna            Lathrop                Chief
20.    Washington            Deemston                Chevron
21.    Washington            Nottingham                Range

OH Permits for weeks April 29, 2017

       County                Township                E&P Companies

1.    Belmont                Richland                Gulfport
2.    Belmont                Richland                Gulfport
3.    Belmont                Richland                Gulfport
4.    Belmont                Richland                Gulfport
5.    Harrison                North                    Chesapeake 
6.    Harrison                North                    Chesapeake 
7.    Harrison                North                    Chesapeake 
8.    Harrison                North                    Chesapeake 
9.    Jefferson                Mt. Pleasant                Ascent


Joe Barone jbarone@shaledirectories.com 610.764.1232
Vera Anderson vera@shaledirectories.com 570.337.7149

M5 Properties