Latest facts and a rumor from the Marcellus, Utica, and Permian, Eagle Ford Plays
Chesapeake Sells Eagle Ford Assets. Chesapeake Energy Corporation (NASDAQ:CHK) today announced that it has executed an agreement to sell a portion of its remaining Eagle Ford asset to INEOS Energy for $1.4 billion.
“Today marks another important step on our path to exiting the Eagle Ford as we focus our capital on the premium rock, returns and runway of our Marcellus and Haynesville positions,” said Chesapeake President and Chief Executive Officer Nick Dell’Osso. “We are pleased to have secured an aggregate of $2.825 billion to date and remain actively engaged with other parties regarding the rest of our Eagle Ford position.”
Chesapeake has agreed to sell approximately 172,000 net acres and approximately 2,300 wells in the black oil portion of its Eagle Ford asset primarily in Dimmit, LaSalle and McMullen counties, along with related property, plant and equipment. Average net daily production from these properties was approximately 36,000 barrels of oil equivalent (boe) (81% liquid) during the fourth quarter of 2022. As of December 31, 2022, net proved reserves associated with these properties were approximately 144 million barrels of oil equivalent (mmboe).
Chesapeake expects the transaction will close in the second quarter of 2023, with an effective transaction date of October 1, 2022. The company will receive $1.175 billion upon closing, subject to customary adjustments, with the additional $225 million paid in annual installments of $56.25 million. Chesapeake anticipates the proceeds will be applied to repay borrowings under its revolving credit facility and be available for its share repurchase program.
RBC Capital Markets, Citi, and Evercore are serving as financial advisors, Haynes and Boone, LLP is serving as legal advisor, and DrivePath Advisors is serving as communications advisor to Chesapeake.
Chesapeake Cutting Rigs. Drilling giant Chesapeake cuts rigs amid plunge in U.S. gas prices. Oil Price. Chesapeake Energy will be slowing drilling for 2023 amid a sustained plunge in natural gas prices, with other operators following suit in the American shale patch. On Wednesday, Chesapeake said it would be pulling out three rigs this year, including two in the Haynesville shale and one in the Marcellus shale. Reuters cited Chesapeake CEO Nick Dell’Ossa as saying that it is “prudent” at this time to “pull back capital”, and warning that others appear to be of the same mind in Louisiana and east Texas. “We’re making money on the capital that we are investing but the margins are not nearly on a full cycle basis what they were historically,” he added, Reuters reported. For Chesapeake, the announcement that it will cut back on natural gas rigs comes as the company agrees to sell its South Texas oil assets to INEOS for $1.4 billion.
Encino Utica Update. Thanks, MDN. Wednesday morning Harrison County, OH, commissioners got a face-to-face update from Encino Energy’s director of external affairs, Jackie Stewart. You may recall that Encino bought out and took over all of Chesapeake Energy’s existing Ohio assets–both shale and non-shale–in November 2018 for $2 billion. Among the comments made, Stewart told commissioners, “Our wells are running so much more efficiently than they ever have in the past.” She also told them about work being done to drill a well under Tappan Lake in the Muskingum Watershed Conservancy District.
Repsol Could Be Expanding in the Marcellus. Thanks, MDN. Spanish-owed Repsol owns 214,000 net acres of leases in the Marcellus Shale, primarily located in northeastern Pennsylvania in Bradford, Susquehanna, and Tioga counties. Early last year (in January 2022), Repsol closed on a deal to buy Rockdale Marcellus out of bankruptcy for $222 million (see Sale of Rockdale PA Assets to Repsol Closes – $220M Cash, $2M Debt). During the company’s recent quarterly/annual update, Repsol leaders said they are eyeing a third phase of development with their Marcellus assets.
EQT Equipment to the Ukraine. EQT announced it had donated oil and gas production equipment to JSC Ukrgasvydobuvannya, Ukraine’s largest natural gas producer. The equipment will be used to restore oil and gas production facilities damaged by Russia and revive critical production in wartime conditions. Aside from the fact EQT is the largest NatGas producer in the U.S. that is 100% focused on the Marcellus/Utica, there is another connection to the M-U in this story.
O&G Mini-Slump. Oil and gas mini-slump all part of a cycle. Reuters. Oil and gas prices are in another mini-slump, nearly three years after they were hit by the first wave of the COVID-19 pandemic in North America and Western Europe. But the latest downturn is part of a cycle in manufacturing activity and energy prices that has repeated with an average duration of three to four years since the early 1990s. After adjusting for core consumer prices, the price of Brent crude has fallen by 34% from the peak in May 2022 and U.S. Henry Hub natural gas is down by 73% from the peak in August 2022. In real terms, oil prices are in the 67th percentile for all months since 1990, down from the 86th percentile in May, while U.S. gas prices have slumped to only the 3rd percentile, down from the 86th percentile in August.
Freeport Restart. Freeport gains federal approval for restart, but not before natural gas futures fall further. NGI. Fresh off a week of mostly steady declines, natural gas futures extended their losses on Monday as springlike weather blanketed much of the Lower 48. With production strong and a storage surplus set to grow in the coming weeks, the March Nymex gas futures contract settled at $2.073/MMBtu, down 20.2 cents from Friday’s close. Spot gas prices were mostly lower as well. Like throughout much of the winter, the West was an exception amid a series of storms that hit the region. NGI’s Spot Gas National Avg. ultimately climbed 14.5 cents to $2.710. With only a handful of days through early March expected to drive any meaningful gas demand outside of the West, the clock is winding down on winter – and futures traders have taken notice.
PA DEP Issues Permits for Transco Northeast Pipeline Project. Thanks, MDN. A little over a month ago, MDN brought you the good news that the Federal Energy Regulatory Commission (FERC) has approved the Williams Regional Energy Access Expansion (REAE) project, a plan to beef up the Transco pipeline in Pennsylvania and New Jersey to deliver an extra 829 MMcf/d of Marcellus gas to PA, NJ, and Maryland. We have more good news: The Pennsylvania Dept. of Environmental Protection (DEP) announced it has issued permits to Williams to allow the project to move forward with construction.
O&G Can Slash Methane Emissions by 75%. Oil and gas industry could slash methane emissions by 75% with barely a hit to income, says IEA. CNBC. The energy industry is not making sufficient efforts to reduce its methane emissions, according to a new report from the International Energy Agency. Carbon dioxide is the largest contributor to global warming. But while CO2 is 200 times more present in the atmosphere than methane and lasts a lot longer, methane’s warming effects are around 85 times as strong, and it’s contributed 30% of the rise in global temperatures since the Industrial Revolution. The energy sector is the second-largest source of human-caused methane, behind only agriculture, and was responsible for 40% of human-created methane emissions in 2022, the IEA says.
Biden Spurns U.S. O&G Industry. Biden spurns US energy producers, turns to Venezuela for millions of barrels of oil: ‘Outright hostility’. Fox News. President Biden is showing “outright hostility” to the U.S. oil industry by turning to foreign countries — including adversaries — to supply America’s energy needs rather than domestic producers, according to experts and industry insiders. The U.S. is on track to receive nearly 3 million barrels of crude oil from Venezuela this month, Reuters reported. That’s because oil producer Chevron is shipping more than 100,000 barrels per day of Venezuelan crude to the U.S. under a license from the Treasury Department. Over the course of the year, the Biden administration offered Venezuela sanctions relief and ended up easing certain sanctions related to oil, giving Chevron a greenlight to import Venezuelan crude. Last summer, the World Bank published data showing the U.S. has made great strides in reducing flaring, which is the burning of natural gas associated with oil extraction. Biden has said he wants to end the practice by 2030. Venezuela, meanwhile, is “among the worst performers, with a flaring intensity 18 times higher than that of the U.S.,” the Bank’s Global Gas Flaring Tracker Report found. Frequent oil spills in Venezuela, which often aren’t cleaned up, are also causing serious environmental damage. Experts have highlighted Venezuela’s “unsafe and careless production practices” of contaminated oil, which damages not only the environment but also the health of local communities.
LNG Projects $100 Billion. The US is already set to become the world’s largest exporter of LNG in 2023 – but it won’t stop there. Record prices and the need for energy security are driving huge momentum for US LNG projects that could see over US$100 billion invested before the end of the decade.
Our latest North American LNG benchmarking report draws on insight from Lens Upstream and Lens Gas & LNG to provide a detailed economic breakdown of ten major new projects, which would collectively at least double US capacity.
Fill out the form to get access to a complimentary extract from the report, plus our asset profile of the Plaquemines project. And read on for an introduction.
What is the outlook for US LNG over the next five years?
At 76.4 million tons, US exports of LNG in 2022 were the third highest globally, behind Australia and Qatar. But with operations at the Freeport liquefaction facility set to resume in March, the US will easily exceed that figure this year to become the world’s largest exporter of LNG.
That, however, is just the start of the story, as the chart below indicates.
Chart shows investment into US LNG projects by FID status
Over the past few years, final investment decisions (FIDs) have been taken on four new projects:
Golden Pass LNG
Plaquemines LNG Phase 1
Corpus Christi Stage 3
New Fortress Energy’s Louisiana Fast LNG project.
Together these projects will contribute almost 45 mmtpa of new US capacity from next year. For a complimentary asset profile of the Plaquemines project, fill in the form at the top of the page.
A wave of new FIDs could soon increase capacity even further. Last year saw European and Asian LNG prices hit record highs, while a challenging geopolitical environment underlined the need to invest in energy security. As a result, buyers, including portfolio players, and US producers and infrastructure companies lined up behind long-term deals with US LNG projects. A whopping 65 mmtpa of long-term contracts were signed in 2022 alone, dwarfing the 18.5 mmtpa of new contracts confirmed in the previous year.
Buoyed by this record contracting, a host of pre-FID US LNG projects have moved forward. Many are now either close to or have reached the contracted offtake threshold for raising debt. Indeed, several developers with fully permitted projects have already signed or are negotiating engineering, procurement and construction (EPC) contracts for their projects.
The likely outcome is a further series of FIDs during 2023 and 2024.
Our analysis indicates that if current momentum continues between 70 mmtpa and 190 mmtpa could be added to US LNG capacity before the end of the decade. That would more than double current exports.
NatGas Shortage Next Winter. The IEA warns of a potential natural gas shortage next winter. Oil Price. Tight production capacity for liquefied natural gas could lead to shortages next winter, the head of the International Energy Agency, Fatih Birol, has warned. As gas demand from China begins to recover, competition for LNG supply will increase, creating the risk of shortages, Birol told Reuters on the sidelines of the Munich Security Conference. The head of the IEA praised European governments for making “many correct decisions” last year to secure supply, including the construction of more LNG import terminals. He noted, however, that the mild winter had been a stroke of luck for Europe, combined with the demand drop in China amid last year’s lockdowns.
Court Still a Hurdle for MVP. Equitrans Midstream Corp. said Tuesday that the company was positioned to complete the long-delayed Mountain Valley Pipeline in 2023 but that challenges of its permits in a federal appeals court will be the “ultimate hurdle.”
The Canonsburg-based Equitrans (NYSE: ETRN) issued financial guidance for 2023 for two scenarios, one with MVP going into service in the second half of 2023 and the other without MVP, although without an outlook for net income in the latter.
PA Fights Gas Stove Ban. Republicans pass preemptions laws to prohibit Pennsylvania cities from banning gas stoves. Erie News Now. The fight over the future of gas stoves could be coming to Pennsylvania. At least one state lawmaker’s looking to head off any ban on gas stoves, before it happens. Bradford County Republican Martin Causer is looking for support for legislation that would prohibit state or local authorities from banning appliances based on the type of energy they use. In January, CNN reported that 20 states with Republican-controlled legislatures have passed so-called Preemption Laws that prohibit cities from banning natural gas. Causer’s bill comes after word came out last October that a gas stove ban was under consideration. He said quote “It’s not the role of government to be dictating to individuals and businesses what kind of appliances we are allowed to have” end quote.
PA February 13, to February 23, 2023
County Township E&P Companies
1. Lycoming Plunketts PA Gen Energy
2. Lycoming Plunketts PA Gen Energy
3. Lycoming Plunketts PA Gen Energy
4. Lycoming Plunketts PA Gen Energy
5. Susquehanna Bridgewater Coterra
6. Susquehanna Bridgewater Coterra
7. Susquehanna Bridgewater Coterra
8. Susquehanna Bridgewater Coterra
9. Susquehanna Springville Coterra
10. Susquehanna Springville Coterra
11. Susquehanna Springville Coterra
12. Susquehanna Springville Coterra
13. Tioga Gaines STL Resources
14. Tioga Gaines STL Resources
15. Tioga Gaines STL Resources
16. Washington Amwell Range
17. Washington Amwell Range
18. Westmoreland Hempfield Apex
19. Westmoreland Hempfield Apex
20. Westmoreland Hempfield Apex
21. Westmoreland Salem Apex
22. Westmoreland Salem Apex
OH Permits February 12, to February 19, 2023
County Township E&P Companies
1. No New Permits
WV Permits February 13, to February 17, 2023
1. Clay Mountain Valley
2. Doddridge Antero
3. Marshall Tug Hill
4. Tyler Jay-Bee O&G
5. Tyler Jay-Bee O&G
