Below is a list of the top 10 most-read stories from 2020 on the MDN website. It is cliche now to say it, but we’ll say it anyway: We can’t wait for 2020 to be over and to put it behind us. We’ve made this article free and open to the public. Feel free to share the link with others who may be interested in a recap of the M-U industry for 2020! We’ve appended a postscript to each summary to update you on any key developments since that story was first published.
#10 for 2020
Biggest Rig Count Drop in 4 Years – Who’s Still Drilling? (Mar 27)
Some 47 drilling rigs were idled last week according to data provided by Enverus Drillinginfo. That’s the biggest single-week drop since the final week of December 2015–more than four years ago. The rig count stands at 766. Of the rigs idled last week, 40 of the 47 were oil drilling rigs. Of the 40 oil rigs idled, half (20) were idled in the Permian Basin. The good news is that the Marcellus Shale and the Utica Shale remain unchanged at 38 and 10 rigs, respectively. Rig counts in each basin have held steady for four weeks running. To answer the question posed in our headline, gas-focused drillers are still drilling–in the Marcellus/Utica and in the Haynesville Shale. [As a postscript to this story which we ran at the beginning of the pandemic, the Marcellus and Utica together now average around 38 rigs total, down about 10 from the beginning of the pandemic. The overall U.S. rig count dropped dramatically during 2020 and stands, as of Dec. 22, at 386 rigs. It was a tough year in the oil patch.]
#9 for 2020
EQT Stops Fracking After Worker Gets COVID-19; Suspends Dividends (Mar 27)
The Pittsburgh Business Times is reporting that a contractor working in EQT’s hydraulic fracturing (“completions”) operation who last worked at a site in Belmont County, OH has tested positive for COVID-19 coronavirus. Because that worker has been in contact with a number of other workers in EQT’s completions unit, the company has temporarily shut down all completions (fracking) operations. In a separate and unrelated announcement, EQT told investors they are (for now) suspending quarterly dividend payments and will use the money instead to pay down near-term debt. EQT found out on Wednesday about the positive coronavirus diagnosis. The worker last worked at a site (in Belmont County) on March 14. Given the incubation period is up to 14 days, EQT has halted fracking operations until March 29 (Sunday) with instructions to all workers in the completions operation to self-quarantine. So far no one else has shown symptoms. EQT plans to reevaluate and make a decision about restarting fracking operations on Sunday. [A few days later EQT did restart its completions unit with no more cases. There have been remarkably few cases (reported anyway) among M-U drillers. Shell’s cracker plant site, on the other hand, has had a number of cases–but most if not all of them were not spread at the worksite itself. Shell has done a stellar job of controlling the spread of the coronavirus at the cracker construction site.]
#8 for 2020
Kentucky Launches New Study of Rogersville Shale Potential (Jan 2)
The State of Kentucky is spending $7.4 million ($5.9 million coming from the U.S. Dept. of Energy) to study the oil and gas potential of the Rogersville Shale (and other formations) located in eastern Kentucky. Which is big news for us in light of previous failed attempts to drill in the Rogersville. The new project is called the Conasauga Shale Research Consortium and will look at the Rogersville and other layers in the 8,000-10,000 foot range. It was almost one year ago (January 7, 2019) we reported drilling results in the Rogersville were a flop. And yet, the play will now see a significant, very expensive, study to take another look at its potential. Even though the free market (i.e. drillers themselves) have already looked–and walked away. The final paragraph in the story may shed some light on this mystery: Kentucky’s U.S. Senator (and Senate Majority Leader) Mitch McConnell along with Kentucky Congressman Hal Rogers were responsible for funneling $5.9 million in taxpayer’s hard-earned money to the University of Kentucky for this new research project. Nothin’ like bringing home the bacon to help with reelection, right? [We’ve not heard or read anything in the news about this effort since first reporting on it early in the year. In a quick check we do notice the National Energy Technology Laboratory (NETL) has posted a project page with a virtual presentation made on Oct. 20. The presentation shows the bulk of the money for the study won’t be disbursed until 2022/2023, so maybe that’s why there haven’t been any updates.]
#7 for 2020
Bankrupt EdgeMarc Sells Butler, PA Assets to KeyBank for $70M (Jan 29)
EdgeMarc Energy, headquartered in Canonsburg, PA (once with 50,000 acres of Marcellus/Utica leases), filed for Chapter 11 bankruptcy last May, looking to sell all of the company’s assets. Diversified Gas & Oil picked up EdgeMarc’s Ohio Utica assets for $50 million in August 2019. And now, the balance of EdgeMarc’s assets–located in Butler County, PA–is slated to be sold too. Last week EdgeMarc filed a plan with U.S. Bankruptcy Court in Delaware to sell its ~32,000 acres plus 52 wells in Butler County, PA to one of its creditors, KeyBank, for roughly $70 million. EdgeMarc owes KeyBank $60 million, which would be wiped clean. KeyBank would pay an additional $9.7 million in cash as part of the deal, ergo the total deal is close to $70 million (or $2,177 per acre). [It was touch and go for a while as to whether EdgeMarc would be required to file for Chapter 7 (total liquidation) or Chapter 11 (live to fight another day). In June the bankruptcy judge signed off on a final Chapter 11 plan and the deal with KeyBank got done. EdgeMarc was not the only M-U driller to file for bankruptcy in 2020. The biggest M-U driller to file (drills in other plays too) was Chesapeake Energy. Gulfport Energy (Utica & Oklahoma’s SCOOP/STACK) also filed for Ch. 11. Other companies filing in 2020 included frac sand company Hi-Crush, environmental services firm Ryan Energy Services, oilfield services giant FTS International, fracking giant BJ Services, Ohio frac sand company Covia, M-U waste processor SECUR O&G, proppant company CARBO Ceramics, and from late 2019, Arsenal Resources. Many in that list operate in other shale plays too, not just the M-U. It was a tough year for everyone.]
#6 for 2020
4th Circuit Clown Judges Signal They’ll Overturn MVP Permit, Again (Dec 4)
The clown judges of the U.S. Court of Appeals for the Fourth Circuit (one of whom quotes from children’s books in her opinions) have signaled they will overturn, again (for the second time) a permit issued by the U.S. Army Corps of Engineers that allows the 92% completed Mountain Valley Pipeline (MVP) from finishing its work by installing pipe under or through some 1,000+ creeks and rivers. We have the Sierra Club to thank for the lawsuit, and colluding liberal Democrat judges to thank for continued obstruction of this legally-permitted project from finishing. Three weeks ago three judges from the 4th Circuit granted a full stay on MVP’s Nationwide Permit 12 (NWP12), a permit reissued by the Army Corps of Engineers after being reworked because of an earlier rejection by the same court. NWP12 allows the pipeline to cross creeks and rivers and wetlands. Earlier this week the clowns issued an “opinion” to explain their twisted logic for why they slapped MVP with a full stay, preventing the project from using NWP12. Their reasoning is that they expect the radicalized Sierra Club to prevail in their latest lawsuit to overturn the NWP12 permit yet again. And the clowns should know how the case will go since they’re the ones who will decide it! That’s a pretty loud and clear signal. The clowns offer up their twisted logic in the opinion from earlier this week, which we embedded in our post. We didn’t spot any references to Dr. Seuss books this time. [The problem we now face is a hostile Biden Administration. Biden will appoint more anti-fossil fuelers to the Federal Energy Regulatory Commission (FERC). It is FERC that will, once all of the legal cases are finally squared, give MVP permission to restart and complete construction through those areas authorized by the NWP12. It’s now beat-the-clock. FERC has a full five commissioners (three Republicans). In June the term for one of the Republicans, Neil Chatterjee, will expire. At that point, Biden will appoint a Democrat to replace him. When the new Dem assumes office, there will be (in our opinion) no new approvals for natural gas or oil pipelines. The Dems on FERC will, like current member Richard “Dick” Glick reject any requests based on the myth of man-made global warming. MVP must get the 3rd Circuit’s obstructions cleared in the next few months and get on with authorization to finish the project…or else face the horror of never completing it.]
#5 for 2020
Antero Resources: Layoffs & Spending Cuts Ahead in 2020 (Feb 14)
Antero Resources, one of the biggest Marcellus/Utica drillers (with major operations in West Virginia) released its fourth-quarter and full-year 2019 update yesterday, along with hosting a conference call to discuss what investors can expect for 2020. There are loads of important details to share. Production was up 19% in 2019 over 2018. The company lost $482 million in 4Q19, compared to a $122 million loss in 4Q18. However, $463 million of the loss was an impairment charge (write-down) of Antero’s ownership interest in its midstream subsidiary (i.e. paper loss). Looking forward to 2020, the company plans to cut spending by 10% this year (spending $1.15 billion) and plans to make some layoffs. Antero plans to drill 95-100 wells and complete 120-130 wells this year. [Despite the pandemic and an overall bad year for natural gas prices, Antero soldiered on. The company continues to be one of the biggest and best drillers in the M-U. They do a particularly good job with hedging, or pre-selling their NGLs and gas on contracts at attractive (above market) prices.]
#4 for 2020
TC Energy/Columbia Finally Get FERC Approval for Buckeye XPress (Jan 28)
In May 2019 the Federal Energy Regulatory Commission (FERC) finally, after a months-long delay, issued a favorable environmental assessment (EA) for the Buckeye XPress (BXP) pipeline project. In October 2019, Columbia (i.e. TC Energy) tried to goose FERC into issuing a final approval to build the project. Not until January of 2020 did FERC finally granted that approval–after a months-long delay. BXP will expand service along the Columbia Gas Transmission pipeline from Ohio (and PA and WV) to send even more Marcellus/Utica gas to the Gulf Coast via an interconnection at Leach, Kentucky. The project will use looping and beefed up compressor stations to increase capacity another 275 million cubic feet per day along the existing Columbia pipeline system. BXP includes building 66 miles of new pipeline to replace old pipeline in Ohio’s Vinton, Jackson, Gallia and Lawrence counties, as well as pipeline replacement in West Virginia’s Wayne County. In January the two Republican FERC commissioners (Chaterjee and McNamee) voted to grant Columbia permission to proceed. Predictably, Democrat FERC Commissioner Richard “Dick” Glick voted against. He ALWAYS votes against new pipeline projects. He’s a partisan hack. [The EIA maintains an Excel spreadsheet that tracks active and completed pipeline projects. That sheet shows Buckeye XPress was partially completed in mid-June. We have no further word on a status.]
#3 for 2020
Texas Eastern Pipeline Explodes in Kentucky…Again (May 5)
It pains us to report this, but there has been another explosion of Enbridge’s Texas Eastern Pipeline Company (TETCO) pipeline in Kentucky. Last August (2019) one of the TETCO lines exploded in Lincoln County, Kentucky, killing one and sending six to the hospital. Fortunately this time the TETCO explosion happened in a rural location, in Fleming County, and didn’t injure anyone. The Marcellus/Utica gas flowing through TETCO in that area has been 1.33 billion cubic feet per day (Bcf/d). It’s now dropped to zero for the foreseeable future. [There are three TETCO pipelines in that area, all laid next to each other: Line 10, Line 15 and Line 25. It was Line 10 that exploded. As near as we can tell, Lines 15 & 25 were quickly restored to service. However, we don’t believe Line 10 has returned to service. We can’t find any new information or status reports about it.]
#2 for 2020
Chesapeake Energy & Total Beat Class Action Royalty Lawsuit in OH (Mar 31)
In 2015 a group of Ohio landowners did what landowners had previously done in Pennsylvania, Texas and elsewhere–they filed a proposed class-action lawsuit against Chesapeake Energy claiming Chessy had screwed them and about 1,000 other Ohio landowners out of a collective $30 million in royalty payments. It took nearly five years with a lot of twists and turns, but yesterday the U.S. District Court for the Northern District of Ohio ruled in favor of Chesapeake, dismissing the claims against them. The lawsuit was originally filed in Columbiana County Common Pleas Court by an Akron, OH woman and the owners of two Columbiana County farms. In addition to Chesapeake, French company Total E&P USA, Pelican Energy LLC and Jamestown Resources LLC were also named in the lawsuit. The plaintiffs claimed the only allowed deduction from royalties, according to signed leases, is for taxes–not for drilling expenses, not for post-production costs, etc. The lawyers filing the lawsuit figured there are at least 1,000 landowners with 40,000 acres who have been negatively affected by Chesapeake’s royalty shenanigans. The landowners claimed Chessy should not have claimed certain post-production deductions before paying royalties. The court said the language in the original leases allows for it. [A disappointing result for landowners. Chesapeake has a history of playing fast and loose with lease language. We’ve seen multiple lawsuits against the company by landowners in other states where the company operates. Landowners signed with other companies don’t seem to have the same issues, so we don’t buy the standard line of “the price of gas is down, landowners can’t expect much in the way of royalty revenues right now” that you often hear as the excuse given for Chessy’s lowball royalty payments. With the company now in bankruptcy, perhaps the best result for landowners is if Chesapeake sells its assets to another company.]
#1 for 2020
ME2 Pipeline Worker Charged with Falsifying Welding Records (Mar 20)
A worker hired to x-ray welds on sections of the Mariner East 2 pipeline in southwestern Pennsylvania has been charged falsifying records, indicating that he performed the work when he didn’t. That’s a felony. According to one news account the worker, from Westmoreland County, PA, is expected to plead guilty and faces up to five years in prison and a fine up to $250,000. The good news is that Energy Transfer, the builder, discovered the deception and immediately reported it. ET reinspected all of the welds supposedly inspected by this worker. On March 10, the U.S. Attorney’s Office filed an “information” (which looks like an indictment to us) with the U.S. District Court for the Western District of Pennsylvania charging Joshua Springer of Scottdale, PA, with knowingly and willfully making and causing the making of a false document in connection with an interstate pipeline project. Springer was a Level II radiographic technician whose responsibilities included testing pipeline welds via x-ray and certifying their quality and integrity. Springer worked on a section of pipeline stretching from Houston, PA (in Washington County) to Delmont, PA (in Westmoreland County). Springer’s job was to develop the film (exposures), interpret the test results, and sign reader sheets, which record the results and are required by PHMSA regulations. In August 2017, Springer allegedly made and caused the making of a reader sheet that stated that a pipeline weld had been x-rayed and the resulting exposures were acceptable. In fact, the weld had not been properly x-rayed, and the exposures were neither interpreted correctly nor acceptable. Just to reassure you, federal regulations call for 10% of all pipeline welds to be x-rayed. ET x-rays ALL of them–100%–on every project. [This kind of behavior simply cannot be tolerated in our industry. And according to Energy Transfer, it isn’t. Fortunately, after reinspection, there were no faulty welds discovered.]
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