Shale Directories Conferences
8th Annual Utica Midstream
March 19, 2020
North Canton, OH
8th Annual Upstream PA 2020
April 16, 2020
State College, PA
4th Annual Appalachian Storage Hub Conference
June 4, 2020
Hilton Garden Inn
Southpointe, Canonsburg, PA
8th Annual Utica Downstream
October 15, 2020
North Canton, OH
8th Annual Midstream PA 2020
November 12, 2020
State College, PA
2nd Annual Appalachian Basin Real Estate Conference
December 10, 2020
Latest facts and a rumor from the Marcellus, Utica, and Permian, Eagle Ford Plays
Toby Rice Making Moves at EQT – Low NatGas Prices. America’s shale frackers are producing a record amount of natural gas—more than 100 billion cubic feet per day. Gas is so plentiful that in the oilfields of west Texas producers will pay pipeline companies to take it off their hands, while on average the market price of gas has sunk to $2.25 per million British thermal units.
This makes for a nerve-wracking time for Toby Rice, the 37-year-old CEO of EQT Corp., the nation’s biggest gas producer. Shares in Pittsburgh-based EQT fell 5% Monday after Moody’s downgraded $5 billion of EQT debt to junk status and the company announced a $1.8 billion charge and 20% reduction in its reserve valuations. Shares recovered 4% on Tuesday.
Rice assumed the helm of EQT (formerly known as Equitable) last July after he and his brothers teamed up with activist hedge funds D.E. Shaw and Elliott Management to fight a proxy battle against EQT’s former management, culminating in the ouster of CEO Bob McNally.
Who are these Rice brothers? Sons of Daniel Rice III, a fund manager at BlackRock, who in 2007 cofounded Rice Energy with personal money to acquire acreage in the Marcellus region of Pennsylvania. Rice entrusted it his sons Toby, Derek, Daniel IV and Ryan to run, and in 2017 they sold Rice to EQT for nearly $8 billion in cash and stock.
When they sold, EQT’s share price was about $30. By the time Toby Rice wrested control it had fallen to $16. Rice introduced a 100-day plan to transform EQT by getting smarter about where and how to drill. So far, he’s cut capital spending by a third and laid off a quarter of employees. Still on tap is the sale of noncore EQT assets like a $1 billion stake in spun-off pipeline division Equitrans, which will help refinance $1.75 billion in bonds coming due by the end of 2021.
In its update Monday, EQT said that due to low gas prices it would take a $1.8 billion noncash charge and reduce its proven reserves by 20%—the reason for the charge has to do with SEC reporting requirements that require companies to weigh their future opportunities against current commodity prices. The lower gas prices get, more marginal wells become not worth drilling and have to be removed from plans disclosed to shareholders. The company warned yesterday that getting a junk bond rating could require EQT to post $1.6 billion in letters of credit to trading counterparties, a further challenge to the balance sheet. To help keep it all straight, Rice hired a new CFO, David Khani, from Consol Energy a few weeks ago. He’s also holding on to the services of interim CFO Kyle Derham, announcing a 2-year consulting year at $720,000 a year.
The shale-ennial Rice bros have reason to be patient. EQT sits on 17.5 trillion cubic feet of Marcellus gas, enough for more than a decade of continued production even at current low prices. All that gas is why EQT’s “idiosyncratic self-help story” (as one analyst has called it) will be one to watch in the decade ahead.
China Makes $52.4 Commitment to Buy U.S. Energy. China has committed to buy an additional $52.4 billion of U.S. energy products over the next two years, but some analysts are skeptical buyers will commit to large-scale purchases with tariffs still in place.
After two years of tensions, the U.S. and China finally signed Phase 1 of the trade deal Wednesday, under which China agreed to increase its purchases of goods and services from the U.S. by $200 billion, compared to 2017 levels.
The Phase 1 deal covers trade of crude oil, liquefied natural gas (LNG), refined products and coal. China is set to spend $18.5 billion for these products this year, and $33.9 billion in 2021, Kallanish Energy reports.
‘A lot of energy’
“That’s a lot of energy,” Gavin Thompson, Wood Mackenzie Asia Pacific vice chair said Thursday. “But neither the 5% tariff on U.S. crude oil nor the 25% tariff on U.S. LNG is to be reduced or removed by China under the Phase 1 deal. For China to massively increase imports of oil and LNG from the U.S. while tariffs remain in place is going to be challenging.”
That’s because the tariffs would need to be either absorbed by the importing company, or passed through to the consumer. Wood Mackenzie experts expect Chinese national oil companies will be reluctant to commit to large-scale purchases.
To add to the challenges, in the next two years will also see a slower pace of gas demand growth in China, rising domestic production and the arrival of Russian pipeline gas, creating a more competitive gas market.
Targeting uncontracted LNG demand
Thompson forecasts U.S. offtakers will start targeting the Chinese uncontracted LNG demand, estimated at 17 million tonnes (Mmt) in 2020 and 23 Mmt in 2021. Meanwhile, LNG suppliers to China such as Shell, BP and Cheniere, could also target volumes of U.S. LNG within their existing contracts if agreed to by key buyers, including CNOOC and PetroChina.
Analysts at ING Economics noted “the reaction from energy markets was fairly muted,” with oil settling lower Wednesday. But in case flows of U.S. crude oil and LNG resumed, it would be “welcome news for U.S. producers.”
They noted U.S. crude oil exports to China have largely dried up since the start of the “trade war,” from a peak of 773,000 barrels per day (Bpd) in October 2017, to just 36,000 Bpd in October 2019. China has not imported any U.S. LNG since April 2019, they added.
“A resumption of U.S. LNG flows to China would not only be welcomed by U.S. producers, but also gas longs in Europe, which have seen increased flows of U.S. LNG cargoes into the region, helping to take EU natural gas inventories to at least 5-year highs,” ING said.
Could LNG Shipping by Train Be in the Future. Trump administration nears decision on LNG shipping by train. The US’s rich supply of natural gas may soon be transported by train, enabling energy shippers to sidestep congested pipelines in parts of the country. The federal government intends to allow liquefied natural gas (LNG) to be loaded on to rail tank cars and moved across the nation’s railway network, with the deadline for public comments on the proposal set for Monday. The US became the world’s largest gas producer after fracking revived old shale fields. But opponents have slowed new pipelines in the north-east. In the Permian Basin of Texas and New Mexico, oil producers are flaring 750m cubic feet a day of associated gas partly in the face of pipeline bottlenecks, according to Rystad Energy, a consultancy.
Gas Emissions Down in the US. US emissions are falling under Trump, thanks to fracking’s war on coal. Because of fracking, the United States reduced its greenhouse gas emissions in 2019, according to a new estimate. This comes after an increase in emissions in 2018 that happened because it was so cold. This winding course of events has led to some confused emotions among environmentalists who like to hate fracking and President Trump. Yet in 2019, the third year of the Trump presidency, the U.S. reduced its greenhouse gas emissions by 2.1% according to an early estimate by the Rhodium Group. The reason? Mostly, it’s that we’re getting our electricity in less greenhouse gas-intensive ways.
Fracking Sand Transport System Could Be Coming to the Permian. Texas company eyes Texas-New Mexico fracking sand transport system. A Texas company is seeking to build a multi-mile conveyor belt system that could bring sand for hydraulic fracturing from West Texas into southeast New Mexico. The Atlas Sand Co. wants to erect a 16.5-mile covered conveyor belt system to carry the sand from an offloading facility in Loving County, Texas, to a proposed 140-acre loadout facility near Loving, New Mexico. The company is seeking a permanent, 70-foot-wide right of way across an area managed by the Bureau of Land Management. The project was intended to reduce truck traffic in the area, the main method of transporting sand to well sites.
PA NatGas Revenues Drop 21%. Lower prices for natural gas last year will mean a 21% drop in drilling fee revenue for Pennsylvania’s state programs and county and municipal governments even as production grew from exploration in the vast Marcellus Shale reservoir, according to new state estimates. The Independent Fiscal Office projected last week that impact fee collections for 2019 will be $198 million, a nearly $54 million drop from 2018, but still above 2016’s low point of $173 million. Payments are due by July 1, and the money largely stays in drilling communities. The drop breaks two straight years of rising revenue in Pennsylvania, the nation’s No. 2 natural gas state behind Texas.
PA Legislature Trying Roll Back NatGas Regulations. Despite the looming promise of Gov. Tom Wolf’s veto, a Pennsylvania House panel has advanced a bill loosening regulations for conventional gas drillers. The bill sponsored by state Senate President Pro Tempore Joe Scarnati, R-Jefferson, cleared the House Environmental Resources and Energy Committee 16-9, with all Republicans, and one Democrat, voting in favor. The proposal rolls back an eight-year-old regulatory regime for the state’s natural gas drillers, known as Act 13, that was signed into law by former GOP Gov. Tom Corbett.
11,654 New Drilling Permits in 1-Yr. Unbelievable!! Texas processing drilling permits at record pace. For two years in a row since 2018, Railroad Commission of Texas staff have set a historic record of taking just two days on average to process standard drilling permits, one day below the legislative requirement. This efficiency helps foster the growth of energy production statewide. Standard drilling permits are permits that do not require exceptions to Commission rules such spacing or density rules. During Calendar Year 2019 the RRC processed a total of 11,654 new drilling permits.
TX Well Completions Drop 15.9% in 2019The Railroad Commission of Texas issued a total of 803 original drilling permits in December 2019, down slightly from 811 permits issued in December 2018, Kallanish Energy has learned, a drop of just under 1%.
The December 2019 total includes 743 permits to drill new oil or natural gas wells, eight to re-enter plugged wellbores and 52 for re-completion of existing wellbores. The breakdown of well types for those permits is 162 for oil, 37 for gas, 571 for oil or gas, 23 for injection and 10 “other” permits.
Last month, the state agency processed 491 oil, 98 gas, 17 injection and three other completion permits. That compares to 564 oil, 156 gas, 27 injection and three other completions in December 2018.
Total well completions for 2019 are 9,238, down from 10,986 one year earlier, a drop of 15.9%.
The most permits to drill oil and gas wells went to the Midland area with 430 permits. It also got the most permits for new oil completions (264) and the most permits for new gas completions (46).
Second in all three permit types was the San Antonio area, with 102 permits to drill oil/gas holes, 68 permits for new oil completions and 20 permits for new gas completions.
Third in all three permit categories was the Refugio area, with 92 permits for oil/gas holes. 56 permits for new oil completions and 14 for new gas completions.
Innovations Across the Permian. Spanning nearly 75,000 square miles across 52 counties in West Texas and Southeast New Mexico, the Permian Basin has room to add innovations across the entire field. During the last two years, several technology providers both large and small, established or new, and known or unknown, have brought field-specific innovation to the Permian in the areas of water, roads, wells, hydraulic fracturing fleets, sand and even outer space. After a century relying on the same downhole artificial pump system, Veretek has brought a new approach to oilfield artificial pumping. The company has created and deployed a pump designed specifically to handle high sand concentrations and erratic gas slugs.
Shale Slow Down. Shale discipline could slow U.S. oil output growth by 50% this year. U.S. oil output growth could decelerate by more than 50% next year as greater capital discipline cuts drilling rigs in America’s largest shale patch. Production is set to expand by 400,000 barrels a day, the weakest growth since at least 2017, according to the U.S. Energy Information Administration. Output is seen increasing by a little over 1 million barrels a day this year. The slowdown will be driven by austerity in the Permian Basin, America’s shale-oil engine. That’s after shares of producers were hammered for unbridled output coming at the expense of investor returns. The heads of companies including Pioneer Natural Resources Co. and Centennial Resource Development Inc. have warned of a downturn.
BLM Moving in the Permian. In Permian Basin, BLM continues oil and gas leasing on lands proposed for protections. New Mexico Political Report. Amid a Permian Basin oil and gas boom, conservation advocates worry the current levels of industry activity occurring on federally-managed lands in southeast New Mexico are unsustainable, damaging to the land, reducing habitat for wildlife and further stressing populations of fauna that are struggling against a changing climate. A 2018 policy change drastically increased the frequency of oil and gas lease sales in the state, propelling the Carlsbad Field Office, which oversees management of BLM land in portions of the Permian Basin, to become one of the busiest BLM field offices in the country.
NatGas Production Up in 2020, But Down in 2021. U.S. dry natural gas production set a new record in 2019, averaging 92.0 billion cubic feet per day (Bcf/d), with the Energy Information Administration forecasting production will rise to 94.7 Bcf/d in 2020, then decline to 94.1 Bcf/d in 2021.
Production in the Appalachian Basin drives the forecast as it shifts from growth in 2020 to declining production in 2021, EIA reported Tuesday in its January Short-Term Energy Outlook (STEO), Kallanish Energy reports.
EIA/STEO projects Henry Hub natural gas spot prices will average $2.33 per million British thermal units (MmBtu) in 2020, down from $2.57/MmBtu in 2019. EIA expects natural gas prices will then increase in 2021, reaching an annual average of $2.54/MmBtu.
U.S. coal production continues dropping in 2020 and 2021, to 597 million short tons (Mmst) in 2020, down 93 Mmst (14%) from 2019, as a result of declining domestic demand for coal in the electric power sector and lower demand for U.S. exports.
Reporting in the January (STEO), EIA said it expects coal production will again fall, by 16 Mmst (3%) in 2021, as export demand stabilizes and declines in U.S. power sector demand slow.
Record Taxes in TX. New Record: Texas Oil and Gas Industry paid $16.3 billion in taxes. According to just-released data from the Texas Oil & Gas Association (TXOGA), the Texas oil and natural gas industry paid more than $16 billion in state and local taxes and state royalties in fiscal year 2019 – the highest total in Texas history. TXOGA President Todd Staples hosted a media briefing this morning to share the new report and to provide a closer look at how Texas uses oil and natural gas tax revenue to benefit all Texans. “Despite challenges in the global marketplace, state and local taxes and state royalties paid by the Texas oil and natural gas industry shattered records last year – exceeding $16 billion,” said Staples.
Chesapeake Has Major Debt Problems. Chesapeake Energy is the very definition of a “dead man drilling.” The only reason to keep it alive is to try and pay off some of its roughly $9 billion in debt. This is working for its bankers, but not CHK stock investors.
The fact can be seen by looking at one number, its annual interest expense.
In 2016 Chesapeake paid $286 million to service its loans, on revenue of nearly $7.9 billion. Last year it paid about $518 million. In 2020 it will pay nearly $700 million. Revenue is expected to remain under $10 billion.
Most have finally figured that out. The shares fell decisively under $1 each in November and is trading around 70 cents a share.
PA Permits January 9, 2020 to January 16, 2020
County Township E&P Companies
- No New Permits.
OH Permits January 11, 2020
County Township E&P Companies
- Jefferson Ross EAP Ohio
- Jefferson Salem EAP Ohio
- Jefferson Salem EAP Ohio