Facts & Rumors # 546
March 16, 2024
Latest facts and rumors from the Marcellus, Utica, and Permian, Eagle Ford Plays
Toby Buying Equitrans. U.S. natural gas producer EQT Corp. agreed to buy back former unit Equitrans Midstream Corp. for about $5.5 billion in stock, the latest in a flurry of deals in the oil and gas pipeline industry.
The transaction will give EQT control of the Mountain Valley Pipeline project. Championed by West Virginia Senator Joe Manchin but years behind schedule following legal battles and local opposition, the $7.6 billion conduit is due to be completed in the second quarter. It will take natural gas from the land-locked Marcellus shale basin in Appalachia — the biggest U.S. source of the fuel — to markets in the Southeast and, potentially, to liquefied natural gas (LNG) export terminals on the Gulf Coast.
EQT said Monday that the takeover will also help cut the break-even point at which it generates free cash flow, reduce the need for hedging and enhance its agility to cash in on increases in gas prices. After a spike in prices following Russia’s invasion of Ukraine in 2022, U.S. gas prices have tumbled, due in part to booming domestic production, and are currently trading close to a three-year low. EQT said earlier this month it will cut output in response to the price slump.
The deal will create “America’s first large-scale, fully integrated natural gas company,” EQT Chief Executive Officer Toby Rice said on a conference call with analysts.
The merged company, he added, “is going to give us the scale to be able to continue to deliver cleaner energy into markets, whether that’s domestically, replacing coal, meeting growing energy demand domestically, or internationally and servicing the burgeoning LNG market that we have.”
Rice said in October that EQT is evaluating LNG export projects along the East Coast. Gas companies in the US see great potential in LNG as exported gas typically fetches a higher price.
Equitrans was spun out of EQT in 2018 following a campaign by activist investment firm Jana Partners. The reversal of that move via Monday’s deal is the latest sign that the U.S. oil and natural gas sector may be moving back toward favoring the vertical integration of so-called upstream (production), midstream (pipeline and storage) and downstream (refining) assets. In January, gas-station owner Sunoco LP agreed to buy midstream operator NuStar Energy LP for about $6.5 billion.
Monday’s deal also adds to a string of recent transactions between midstream companies announced in North America, including ONEOK Inc.’s purchase of Magellan Midstream Partners LP in September and Energy Transfer LP’s takeover of Crestwood Equity Partners LP in November.
The acquisition of Equitrans is expected to close in the fourth quarter and will create annual cost savings of $250 million, EQT said. Equitrans shares rose 4.1% to $11.61 as of 9:33 a.m. in New York. EQT fell 7.5% to $34.70.
Each outstanding share of Equitrans will be exchanged for 0.3504 of a share of EQT, representing an implied value of $12.50 per Equitrans share. Equitrans has 436 million shares outstanding, according to data compiled by Bloomberg.
As a result of the deal, EQT shareholders are expected to own about 74% of the combined company, EQT said. Guggenheim Securities LLC is lead financial adviser to EQT on the transaction and RBC Capital Markets is financial adviser to the company. Barclays Plc and Citigroup Inc. are financial advisers to Equitrans.
Toby Will Sell MVP. Whenever this a big deal like this one, there’s bound to be rumors. We heard that Toby will sell MVP once it’s up and running. (RUMOR).
Surging Energy Demand. More NatGas Power Plants Needed. A new surge in power use is threatening U.S. climate goals. NYT. Something unusual is happening in America. Demand for electricity, which has stayed largely flat for two decades, has begun to surge. Over the past year, electric utilities have nearly doubled their forecasts of how much additional power they’ll need by 2028 as they confront an unexpected explosion in the number of data centers, an abrupt resurgence in manufacturing driven by new federal laws, and millions of electric vehicles being plugged in. Many power companies were already struggling to keep the lights on, especially during extreme weather, and say the strain on grids will only increase. To meet spiking demand, utilities in states like Georgia, North Carolina, South Carolina, Tennessee and Virginia are proposing to build dozens of power plants over the next 15 years that would burn natural gas. In Kansas, one utility has postponed the retirement of a coal plant to help power a giant electric-car battery factory.
AI Coming to Drilling. AI promises faster oil drilling and even more U.S. crude supply. Bloomberg. From a dark Houston control room, Rafael Guedes watched on a monitor as a robot took charge of a drilling rig in a North Dakota oil field, locking out the human operator. Glowing red boxes lit up the screen as an artificial intelligence program took over the distant Nabors Industries Ltd. rig, beaming instructions by satellite and making split-second decisions to drill through the rock as smoothly as possible.
CNX Slowing Down. CNX Resources Corp., Pittsburgh, will delay completions activities on three upcoming Marcellus shale pads consisting of 11 wells in response to the continued lower outlook for near term natural gas prices, the company said in a release Mar. 12.
The change, “to avoid bringing incremental volumes into the current oversupplied market,” the company said, will result in a reduction of production volumes from previously stated guidance.
CNX Resources now expects 2024 production volumes of 540-560 bcfe, a decrease of about 30 bcfe from the midpoint of the previously stated guidance range. The operator said it maintains the flexibility to return to its previously stated long term production volume target of about 580 bcfe in 2025.
Total capital expenditures for the year have been reduced by $50 million from the midpoint of the previously stated guidance range to $525-575 million.
U.S. Continues World Dominance. U.S. oil production hits record high, set to remain dominant. Yahoo Finance. For the sixth consecutive year, the United States has maintained its position as the world’s top oil producer, according to the Energy Information Administration (‘EIA’). In 2023, U.S. crude output reached a historic high, averaging 12.9 million barrels per day (‘bpd’), surpassing the previous record set in 2019. December alone saw a remarkable milestone, with production peaking at over 13.3 million bpd. This upward trajectory continues through this year, with an estimated record-breaking output of 13.21 million bpd. The primary driver behind this growth is the enhanced efficiency of well operations, reinforcing the nation’s standing as a dominant force in the global oil market.
Permian Production May Fall. Basin’s oil production record sure to fall. Odessa American. The Permian Basin has been producing a record of around six million barrels of oil per day for the past year, but can it do more and if so, what will it take? State Rep. Brooks Landgraf and Waco economist Ray Perryman say it definitely can and it will if the necessary investments are made. “Boosting state investment is the crucial catalyst to unlocking heightened production in the Permian Basin,” said Landgraf, an Odessa Republican who chairs the House Environmental Regulation Committee in Austin. “Despite the constraints imposed by Washington and the whims of Wall Street, a substantial financial commitment from Texas is absolutely pivotal in reinvigorating confidence in the industry and propelling production to unparalleled heights.
LNG Exports Do Not Lead to Increased Prices. Fact check: LNG exports don’t lead to increased domestic energy costs, reports say. Center Square. In the wake of the Biden administration announcing it was pausing pending applications for liquified natural gas (LNG) exports, industry reports from Texas challenge the administration’s reasons for doing so. “Data confirm LNG exports have had no impact on domestic natural gas prices. In fact, the real price of natural gas in America hit its lowest point in 30 years in mid-February while our LNG exports have neared record highs,” TXOGA President Todd Staples said. “The Administration’s decision to pause approvals of new LNG export facilities, citing potential to raise domestic energy prices, is baseless and another ploy to ultimately end American energy production.”
New Owner for HG Energy? Elliott bets $500 million on gas producer backed by Quantum. WSJ. Multistrategy investor Elliott Investment Management has committed more than $500 million to a continuation fund set up by private-equity firm Quantum Capital Group to extend its ownership of natural-gas producer HG Energy, betting that its value will rise once prices for the fuel rebound, according to people familiar with the matter.
Global NatGas Will See Strong Demand. Global natural gas demand set to rise 34% by 2050. Offshore Technology. A new report from the Gas Exporting Countries Forum (GECF) predicts that global demand for natural gas will rise 34% by 2050. The eighth edition of the GECF’s Global Gas Outlook 2050 report made optimistic global forecasts for the future of natural gas, projecting a rise in demand from 4.02 trillion cubic meters (tcm) in 2022 to 5.36tcm in 2050. Total global production is also forecasted to grow by 33% to reach 5.3tcm by 2050.
Tighter Oil Market In 2024. Oil prices climb as revised IEA outlook signals tighter market. Reuters. Oil prices rose on Thursday to settle at four-month highs as the International Energy Agency predicted a tighter market in 2024 and raised its view on oil demand growth this year. Brent crude oil futures for May climbed $1.39, or 1.7%, to settle at $85.42 a barrel, the highest close since Nov. 6. U.S. West Texas Intermediate (WTI) crude for April rose $1.54, or 1.9%, to end at $81.26, also its highest since early November.
PA Permits March 4, to March 14, 2024
County Township E&P Companies
1. Bradford Wysox Chesapeake
2. Bradford Wysox Chesapeake
3. Bradford Wysox Chesapeake
4. Lycoming Lewis Range
5. Tioga Middlebury Seneca
6. Tioga Middlebury Seneca
7. Tioga Middlebury Seneca
8. Washington Chartiers Range
9. Washington Chartiers Range
10. Washington Chartiers Range
11. Washington Chartiers Range
OH Permits March 4, to March 9, 2024
County Township E&P Companies
1. NO NEW PERMITS
WV Permits March 4, to March 8, 2024
1. Brooke SWN
2. Brooke SWN
3. Brooke SWN
4. Brooke SWN
5. Lewis HG Energy
6. Lewis HG Energy
7. Lewis HG Energy
8. Lewis HG Energy
9. Lewis HG Energy
10. Lewis HG Energy
11. Taylor Arsenal
12. Taylor Arsenal
13. Taylor Arsenal
14. Taylor Arsenal
15. Taylor Arsenal
