Facts & Rumors Newsletter #445 October 30, 2021

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

ExxonMobil Cracker Plant in PA. Many people have telling me that Exxon representatives have been in the Appalachian Basin the last few months. I just heard that Exxon is looking at the closed Bruce Mansfield Coal Plant in Shippingport, PA. Again, if anyone knows anything additional, please send me an email. (RUMOR)

Williams Makes Marcellus Purchase. Last week Williams Partners announced that it had agreed to acquire significant gathering assets in the Marcellus. “Williams Partners L.P. today announced it has agreed to acquire Caiman Energy’s wholly owned subsidiary, Caiman Eastern Midstream LLC, for approximately $2.5 billion. The acquisition will provide Williams Partners with a significant footprint and growth potential in the natural gas liquids-rich portion of the Marcellus Shale.” More: “Caiman’s existing physical assets include a gathering system, two processing facilities and a fractionator. Expansions to the gathering system, processing facilities and fractionator are currently under construction. An ethane pipeline is also planned.”

Exxon and Chevron Hit Home Runs! Exxon, Chevron amass cash as oil tops $80 a barrel. WSJ. Big oil companies are generating their biggest cash flows in years and heeding investor calls to return it to shareholders instead of using it to drill. The two largest U.S. oil companies, Exxon Mobil Corp and Chevron Corp reported on Friday their most profitable quarterly earnings since before the onset of the global pandemic. Exxon reported earnings of $6.8 billion, its best quarterly performance since 2017, and said it would launch a $10 billion share buyback program starting next year. Chevron reported $6 billion in net income, its best quarter since 2013, and said it generated $6.7 billion in free cash flow, its most ever. Note: Reuters also reports.

EQT Sells 50% of MVP Capacity. (Thanks, MDN) It’s splitsville for EQT and Equitrans Midstream, the midstream company that was once part of EQT. In releasing details about third quarter performance, EQT announced yesterday it has sold nearly half of its contracted capacity with Equitrans for the Mountain Valley Pipeline (MVP). MVP, when it goes online next year, will ship gas south. It seems EQT is looking West. In the same announcement yesterday, EQT said it has signed a new contract with the Rockies Express (REX) pipeline to ship even more of its gas to markets in the Midwest.

Range Production to Be Flat In 2022. (Thanks, MDN) For a variety of reasons, but mainly due to investor pressure, Range Resources will continue to produce about the same amount of natural gas next year as it is forecast to produce this year: right around 2.1-2.2 Bcfe/d (billion cubic feet equivalent of production every day). That was the takeaway from yesterday’s Range 3Q21 update. The company’s hedges (presales of production at a specific price) hurt the company’s finances. During Q3 Range had a $652 million derivative fair value loss due to increases in commodity prices. Range’s 3Q loss totaled $350 million vs. a $749 million loss in the same period last year–at least it’s an improvement.

Permian Basin a Third of U.S. Production. Permian Basin source of almost a third of U.S. oil production. Companies capitalize on growth. Permian Basin oil production resurged this year, bringing continued expansion in facilities throughout the region and industry aimed to accommodate the growing operations. EPIC Y-Grade announced this month that it completed a 165-mile pipeline from its Robstown, Texas fractionator to the Sweeney, Texas fractionation and storage facility. The process of fractionation involves separating natural gas liquids into distinct marketable products.

Biden Won’t Stop Flaring. Biden methane crackdown is likely to stop short of ban on flaring. The Biden administration is poised to unveil a crackdown on methane leaks from oil and gas wells that will be its most consequential action yet to reduce greenhouse gases — but is still likely to disappoint climate activists. The Environmental Protection Agency is expected within days to propose requirements for plugging leaks at hundreds of thousands of oil and gas wells, according to people familiar with the drafted proposals

Boston & New England Will Probably Buy NatGas from Russia. (Thanks, MDN) This is an avoidable tragedy and very angering. Once again it looks as though Boston and the New England region will be hit with extremely high natural gas prices and will be forced to import LNG, most likely from Russia, to meet the region’s demand for natural gas. So says the Democrat-controlled Federal Energy Regulatory Commission (FERC). Meanwhile, the Marcellus Shale in Pennsylvania sits a couple of hundred miles away with more than enough gas to meet New England’s NatGas demand, but we can’t get the gas there because pipelines have been blocked (by the Democrats who control New York and New England) and because rail shipments of LNG are blocked by executive orders from Joe Biden. We can’t even ship it there via LNG tankers because of the idiotic Jones Act.

Frackers Are in the Money. Frackers are making bigger profits as prices for drilling services climb. Inflation in the U.S. shale patch is money in the bank for fracking companies. Prices for drilling services are rising faster than the cost of labor and raw materials, Richard Hubbell, chief executive officer at pressure pumper RPC Inc., said Wednesday in an earnings statement. He echoed similar comments last week from Halliburton Co., the world’s biggest fracking provider. As a rally in crude and natural gas prices boosts explorers’ cash flow after a disastrous 2020, oilfield service providers are trying to win back pricing power.

ProFrac Buying FTS. ProFrac, FTS merging to create huge U.S. pressure pumping business. Privately held ProFrac Holdings LLC has clinched an all-cash agreement worth around $407.5 million to absorb FTS International Inc., which could create one of the largest pressure pumping companies focused in the Lower 48. ProFrac, based in Willow Park, TX, was formed in May 2016 by CEO Ladd Wilks and his brother Matthew Wilks, who is CFO.

Profits Way Up for Non-hedgers. Third-quarter profits to sparkle for shale producers without hedges. With oil and gas prices at multi-year highs, U.S. shale producers are poised to deliver the strongest earnings since the onset of the coronavirus pandemic, so long as they didn’t lock in sales tied to much lower prices. Sky-high oil and gas prices will fill energy companies’ bottom line, rewarding investors who hung on through the pandemic.

Hedging Hurts Pioneer. Pioneer Natural Resources lost $501 million on hedging in third quarter -filing. Reuters. U.S. shale oil producer Pioneer Natural Resources (PXD.N) on Monday reported it lost $501 million on oil and gas hedging in the third quarter, according to a securities filing, as energy prices have climbed to multiyear highs. U.S. crude futures are trading over $83 a barrel and natural gas contracts close to $6 per million British Thermal Units after snapping back from declines last year.

Heat or Eat: Tough Choices for Americans as Winter Energy Bills Will Cost at Least $13.6B More, CEA Analysis Finds. American consumers will pay at least $13.6 billion more for energy this winter as prices for gasoline, natural gas and propane surge due to poorly conceived energy policies, rising inflation and a political environment that discourages investment in energy production and infrastructure, according to analysis by Consumer Energy Alliance (CEA), the leading energy and environmental advocate for families and businesses.

“Heat or Eat: Skyrocketing Energy Prices to Cost Consumers at Least $13.6 Billion This Winter,” analyzes data from the U.S. Energy Information Administration’s (EIA) Winter Fuels Outlook to establish a total overall cost forecast for American families. EIA forecast a slightly colder winter this year that would lead to 30% increases in natural gas prices, 54% spikes for propane and a 43% surge in heating oil prices during the October-March winter heating season.

This price increase comes against a U.S. Census Bureau finding in August that nearly a third of Americans have had to forgo or cut back on basic household necessities like food or medicine to pay their energy bills, a reality many living in poverty or on fixed incomes must deal with on a monthly basis.

“The energy policy choices the federal government made in 2021, including hobbling U.S. energy production, killing the Keystone Pipeline and impeding construction of much-needed energy infrastructure, has left American consumers exposed with a long winter coming,” CEA President David Holt said. “Energy markets swing up and down, but nations with abundant and diverse energy resources like the U.S. can weather them and protect their vulnerable populations if they reduce dependence on foreign energy. Unfortunately, we are back to begging OPEC.”

“Inflation is rising so much that bacon prices have doubled, gasoline prices are nearly $8 a gallon in some places and oil is over $80 a barrel. It’s unconscionable that we are still considering policies to make energy even scarcer here at home when we can produce enough to send strong signals to global prices and when we have so many in dire financial straits,” he said. “The holiday season is already expected to be expensive because of global supply chain problems, and now this.”

“We hope that our elected leaders, when they go to the UN Conference on Climate Change in Glasgow, remember that we can meet our shared global climate and environmental goals at the same time as we protect citizens against unnecessarily high energy costs or electricity blackouts,” Holt said. “They need only look around at the energy crisis the United Kingdom is facing to see what that will mean for Americans if they follow the same path – a long, cold, costly winter.”

“American leadership is already showing that we can meet or exceed emission reduction goals, while producing more energy – when we are allowed to do so. America is already the world’s leader in CO2 emission reduction, while 52% of the Earth’s urban carbon emissions come from just 25 cities in China, Russia and Japan,” Holt said.

“We need practical solutions to make our environment healthier and ensure our energy supplies stay robust, such as rebuilding our supply chains by allowing the mining necessary to support America’s clean energy economy; unfreezing access to natural gas resources managed by the federal government; and allowing for the infrastructure necessary to ensure reliable, affordable transmission of energy while putting America’s unions back to work.”

Propane Armageddon. (Thanks, MDN) Three weeks ago MDN said that propane prices at both the wholesale and retail level were going through the roof. At that time wholesale prices at Mont Belvieu, Texas, the main U.S. hydrocarbon gas liquids (HGL) hub, were averaging $1.33 per gallon. It’s only gotten worse. The most recent numbers show wholesale propane prices averaging $1.63 per gallon. Edgar Ang, an IHS Markit analyst, says the setup looks like it could be “propane-market Armageddon” and that we could see shortages before the end of winter.

One of the biggest stories for propane exports in recent years comes from the Marcellus/Utica. Energy Transfer’s Marcus Hook terminal liquefies and loads propane onto tankers heading to other countries. Hence our interest in the “other” NGL known as propane. As you may know, propane, along with ethane, butane and a couple of other NGLs come out of the ground along with methane (or natural gas) in “wet gas” areas of the Marcellus/Utica. Propane sales are a good source of revenue for some M-U drillers.

Here’s the news of a possible propane price Armageddon on the way this winter:

With propane prices almost doubling this year and supplies so scarce, the market prepares for a possible “Armageddon” heading into the winter months, according to a report by Bloomberg.
In June 2021, prices for propane topped $1 per gallon for the first time seasonally since 2014 with more demand both here and overseas. An estimated six million American homes use propane.
Experts have said more people staying home during the pandemic may have played a role in higher demand, with some using the gas to heat their pools or light up their grills. The US Energy Information Administration’s latest report on propane shows a slow but steady increase in prices for the gas:
“Residential propane prices averaged more than $2.69 per gallon, more than 3 cents per gallon above last week’s price and more than 90 cents per gallon above last year’s price,” the site reported. “Wholesale propane prices averaged more than $1.63 per gallon, more than 1 cent per gallon above last week’s price and 94 cents per gallon above last year’s price.”

Edgar Ang, an IHS Markit analyst, says stockpiles of the important heating fuel may have already topped out for the year and could be stretched thin in the near winter season.

In the report by Bloomberg, Ang says prices for the first quarter of 2022 are already far above later supplies, saying, “it may indicate players are preparing for propane-market Armageddon.” He added that some areas could see outright shortages before winter ends.

To add to the stress, Poynter says some weather forecasts are already calling for a colder than normal winter, thanks to the La Nina effect. Experts call for an 87% chance of the system bringing an early and harsh winter season.

In a report by Poynter, the Energy Department said the following:

We expect that the nearly half of U.S. households that heat primarily with natural gas will spend 30% more than they spent last winter on average — 50% more if the winter is 10% colder-than-average and 22% more if the winter is 10% warmer-than-average.
We expect the 41% of U.S. households that heat primarily with electricity will spend 6% more — 15% more in a colder winter and 4% more in a warmer winter.
The 5% of U.S. households that heat primarily with propane will spend 54% more — 94% more in a colder winter and 29% more in a warmer winter.
The 4% of U.S. households that heat primarily with heating oil will spend 43% more — 59% more in a colder winter and 30% more in a warmer winter.

Household energy costs are expected to rise across the board, but propane will still take the cake on the highest price point, according to this graphic from the U.S. Energy Information Administration and Axios.

Dems Shutting Down Pipelines. Importing more NatGas. As more U.S. natural gas pipelines shut down due to climate concerns and the regulations prompted by them, the country is becoming increasingly reliant on foreign natural gas resources. One of the main importers of natural gas, Massachusetts, is reportedly increasing its liquid natural gas (LNG) imports from Trinidad and Tobago in South America over 2,300 miles away, at an estimated cost of over $8 per thousand cubic feet (MCF). The nearest American oil field, Marcellus Shale, is several hundred miles away and much cheaper: under $5 per MCF.

The Daily Wire asked one of the largest energy providers in the Northeast, Boston Gas (National Grid), about the natural gas imports. We also asked them what additional costs would be passed onto customers. Spokesman Bob Kievra didn’t offer specific answers to our inquiries. Instead, he relayed that natural gas service would be reliable and uninterrupted.

“We’re confident in our ability to deliver safe, reliable natural gas service to our customers this winter,” stated Kievra. “We have robust plans in place to ensure the gas supply needs of our customers are fully met.”

The Biden administration has moved to cut off further development of new pipeline projects while imposing increased burdens on existing ones. Immediately after President Joe Biden took office, the administration paused all new oil and gas leasing on federal lands; they are currently appealing a federal court’s ruling against those suspensions. Additionally, the Biden administration omitted any mention of pipelines in their proposed infrastructure plan fact sheet.

Climate concerns over the pipelines include the adverse effects of fracking, such as increased global warming from air pollutants, or groundwater pollution from spills. As a result, activists want the Biden administration to shut down all pipelines — not just natural gas pipelines. Several key natural gas pipelines have shut down recently: the Atlantic Coast Pipeline, PennEast Pipeline, STL Pipeline, and the Constitution Pipeline.

Those aren’t the only pipelines facing the possibility of shutting down. In May, Michigan Governor Gretchen Whitmer ordered the shutdown of Enbridge’s Line 5 pipeline over spillage concerns — though that line hasn’t had that issue in its 67-year existence. Another major pipeline, the Mountain Valley Pipeline, has been held back from completion due to costly regulations, delays, and challenges. The pipeline’s estimated cost of completion sat around $3 billion but has now increased to over $6 billion.

Toby Rice – the CEO of one of the largest natural gas producers, EQT Corporation – told The Daily Wire that this pattern of increased reliance on a foreign supply and “green” energy is leading the country down a road toward a power crisis. He emphasized that reliable energy sources are key to quality of life and to progress, and countered the emissions concerns over fossil fuels with the argument that “green” energy sources weren’t nearly as reliable.

“I think energy is probably one of the most misunderstood aspects of modern life. One thing that’s important to understand [is that] energy consumption provides for human progress,” said Rice. “Unfortunately, people miss that. There’s a lot of public negative sentiment because of the emissions profiling when using fossil fuels, and they ignore the benefits.”

Not all Americans rely on natural gas to heat their homes — a small percentage rely on heating oil. According to the Energy Information Administration (EIA), approximately 5.5 million households still relied on heating oil to heat their homes last year — about 4 percent of all households in the country. Over 81 percent of those homes were in the Northeast, concentrated in five states (ranked from highest percentage of homes who used heating oil to lowest): New York, Pennsylvania, Massachusetts, Connecticut, and Maine.

Europe is currently in the throes of an energy crisis, with natural gas prices up to over six times what they were last year. They’ve transformed their power grid to prioritize green, renewable solutions, such as solar and wind power. Over the last few months, however, there was about 20 percent less wind power produced than anticipated, leaving the continent scrambling for gas to offset the loss. One major benefactor from Europe’s energy crisis will likely be Russia.

Senator Ed Markey (D-MA) has been outspoken about the impact of pipelines and the need for transitioning to renewable energy. His office didn’t respond to The Daily Wire’s request for comment by press time.

PA Permit October 21, to October 218 2021

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