Monthly Archives: November 2021

The State of Oil and Gas: November 15, 2021

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Gas prices are at $5.02, down from a high of $6.20. Still, that’s a good price. Oil prices are at $80.80, down from a high of $84.65. That’s very healthy for the oil and gas industry. If oil prices continue to creep down we’ll see a reduction in gasoline prices before Christmas, but maybe not before Thanksgiving.

Natural gas storage levels are at 3,644 billion cubic feet, below last year’s high and the five year average, but creeping closer to that five year average. Rig counts are up to 556, up from 543 last month. This slow, steady build is the way to go. No boom means no bust, hopefully.

Most of the production from most oil and gas companies is hedged, or in other words, presold. The price it’s sold for is the price it’s expected to sell for at a future date. You can presell production far in advance, and most companies are hedged out at least a year. EQT hedged at a much lower price than today’s actual price. Most producers did. EQT is also buying back those hedges so that it can take advantage of the higher prices we are currently seeing. There’s some risk there, as it’s possible that oil and gas prices could plummet below the hedge price, but right now it seems EQT thinks oil and gas prices are going to remain high for a while.

Winter weather will determine whether natural gas prices go up or down. Here’s what NOAA and the Farmer’s Almanac are saying. Taken together, I’m not expecting a ridiculously cold winter, but anybody pretending to be semi-accurate about weather more than a couple days out is trying to sell you something.

Natural gas prices seem to be coming back to earth, mainly because weather predictions are showing a warmer than average winter coming up.

Well, this doesn’t happen very often! OPEC+ failed to produce as much oil as it allows itself to.

And so it begins. This is the first official report I’ve seen that banks are going to start lending more money to oil and gas producers. When this happens, things are going to start to boom. Booms are always followed by busts. For the moment, though, I’m happy to see a little more money flowing into the industry. We need a little more oil and gas produced to keep up with demand, so prices don’t jump like crazy. Hope and pray that bankers don’t go crazy.

Landowners on the Atlantic Coast Pipeline are in limbo. They don’t own the property they sold to the pipeline, and the pipeline is going to be built, so nobody’s sure what will happen with the property. My clients don’t have to worry about this issue though, as we took care of it when we were negotiating our agreements.

Range Resources intends to produce about the same amount of natural gas in 2022 that it did this year. This is surprising. All the signs indicate that producers are going to ramp up production next year, and Range is bucking that trend. Keep in mind that Range is not a small producer. Not the biggest, but definitely not small, so if they’re doing this maybe some others will, too. The reason, if you dig into the earnings call linked above, is that they expect natural gas prices to fall back to $3/MMBtu next year. That’s the kind of reason that, if other producers agree, will keep everybody from adding money to their budget.

West Virginia passed a bill that changes the way oil and gas production is taxed. It seems nobody understands the bill. We suggest that you keep back a little more of your royalty check than you have in the past to pay for any additional tax that might come due, just in case your tax bill goes up.

Did you know that natural gas could be converted into gasoline? I did not until I read this article about plans to build an enormous plant in NE Pennsylvania that will do just that.

Antero’s 3Q earnings call transcript is a little interesting, but not as interesting as in some other years. They mention that they’re not serious about Utica development, that they’re very serious about paying down debt, and that they are not growing much and don’t intend to.

Chevron and Exxon are going to increase drilling next year, but not by a large amount, and OPEC+ is being slow to increase production as it attempts to keep prices up.

Tug Hill, a West Virginia natural gas producer, had an incident with gas escaping from its Knob Creek Pad in Marshall County. We support the natural gas industry, but you have to be aware that there are dangers involved with natural gas infrastructure, just like everything else in life.

David Messler wrote a succinct piece over at Oilprice.com on oil prices and the market forces driving the industry.

The Atlantic Coast Pipeline, and the Fallout

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By now everyone knows that the Atlantic Coast Pipeline is dead.

Not everyone knows that there are still issues around the pipeline, ranging from those at the corporate level that none of us will ever likely find out about, to cleanup and remediation of land where excavation was done.

Looming larger than every other issue is the question of who owns the land now that the ACP is gone? It seems like an easy question to answer at first glance. Since the company is gone and won’t be using the land, the landowner should get it back.

It’s not that simple from a legal perspective, though.

You see, all of the paperwork that the Atlantic Coast Pipeline had landowners sign was permanent. The paperwork wasn’t titled “Deed for Real Estate”, but it might as well have been. All the rights that people gave to the pipeline were given forever. The ACP still owns the rights to the land it bought.

When the Atlantic Coast Pipeline quit trying to build a pipeline it didn’t just evaporate away into the ether. The company is still around. Even if something happened to the company, such as bankruptcy or even legal dissolution, it can and will sell the land it owns to another company. Those agreements are valuable and permanent.

Is there anything that a landowner can do?

Well, the Atlantic Coast Pipeline seems to be doing the right thing in respect to landowners and making it so that that land reverts back to them. The company is reaching out to landowners to get them to sign paperwork that gives the ACP time to do remediation work on their land and in exchange they are saying that the property rights will be given back to the landowner. That won’t happen for a number of years yet, but at least it looks like there’s a chance.

I sincerely hope it happens.

It’s not outside the realm of possibility that the Atlantic Coast Pipeline could be revived, though. Some company could come along and buy the paperwork from ACP and start the construction and permitting process back up under a different name. It would be a long, hard project, bit it could happen.

So don’t get your hopes up until the deed is done.

I’m going to toot my own horn now. All of the people who came to me for help with the Atlantic Coast Pipeline were able to negotiate for a clause that said that when the pipeline was no longer in use, the pipeline right of way would revert back to the surface owner who could then remove the pipe if they wanted to. They also got specific language saying that the right of way could only be used for pipeline purposes. No converting it over to some other use, such as a power line right of way.

My clients don’t have to worry about whether they can use their property, or who is going to own it in the future. They know that once the right of way is no longer part of the pipeline, it’s theirs, outright.

The moral to this story is to go find a lawyer who knows the issues you’re facing. When you need an oil and gas attorney, a personal injury attorney just won’t do.