I’m a sucker for maps, and when you combine my job with one of my other interests, I get sucked right in. This map is an interactive map that you can zoom in on that shows all the pipelines in the United States. It doesn’t show the exact routes they take, but you get a good feel for where there is a lot of oil and gas being moved around and where there isn’t.
Stone Energy in Trouble
We have a few clients who have leased with Stone Energy over the years. Some have been drilled on, others are still waiting. Those who are waiting may still be waiting a while. Stone Energy announced that it has borrowed $385 million dollars on its line of credit. That’s the last of it, too. Stone has to keep the lights on with that money or it will have to declare bankruptcy. Seeing as how Stone lost $1 billion dollars last year, and we don’t expect gas prices to move up much until the end of 2016 or the beginning of 2017, we’re not terribly confident that $385 million dollars will keep Stone going until things get better. It will be interesting to see what creative techniques Stone’s financial and legal advisers come up with to keep operating. For the sake of our clients who have signed leases with Stone we hope that they can pull it off. Of course, if they don’t some larger company will just move in and buy up all those leases at fire sale prices during bankruptcy proceedings or when Stone puts them on the market to drum up cash. The leases won’t just disappear.
CNG and LNG in Fleet Vehicles
One use for natural gas is to power cars, trucks, buses, and other vehicles. Right now the majority of compressed natural gas vehicles are fleet vehicles, due to a lack of infrastructure. At one point in the past, some infrastructure was being built out for CNG, but when gasoline prices dropped people started moving away from CNG. Gasoline prices have again dropped, but interest in CNG doesn’t seem to be disappearing. Businesses and governments realize that this drop in prices isn’t going to last forever. It will probably last a few years, but there is also the potential for a sudden jump in prices if something catastrophic happened; say a war in the Middle East (who could imagine?) or a hurricane in the Gulf Coast (ditto).
Companies like Clean Energy are providing some of that infrastructure. So far it’s only to fleet vehicles, but someday the infrastructure will expand to us, the consumers. The sooner the better. CNG burns cleaner than gasoline and is cheaper to boot. If the infrastructure is built out and the cars are manufactured, it will happen.
Also, USPS is adding CNG and LNG trucks to its fleet. The more the merrier.
West Virginia Nuisance Lawsuits Against Oil and Gas Companies Sent Back to Mediation
There are around 200 people who have filed nuisance lawsuits against two oil and gas companies here in West Virginia. Judge Moats has ordered them back to mediation, telling the parties that fixing the problem is worth more than money. The parties previously went to mediation. Perhaps having the judge encourage the parties to settle will help mediation move along a bit. We think Judge Moats’ words were well chosen. They could be interpreted to hint that the judge is leaning either way. Perhaps it’s better to say that neither party can say that the judge is leaning toward their own side.
In related news, we have heard through the grapevine that SB 508, which would have severely limited the ability of landowners to bring nuisance lawsuits against any company operating nearby, has been defeated. It’s a little too soon to say for sure that’s the case, but the word out of Charleston is that the House Judiciary is unlikely to pass the bill out to the full House.
Legislative Update, March 1, 2016
We may be a day early to report the death of this year’s forced pooling bill, but the rumors coming out of Charleston and the news articles we’ve read sound promising. Good for McGeehan and everyone else who has worked to defeat this bill. Maybe next year they’ll come up with something that makes it easier for oil and gas companies to put together drilling units, but without taking away private property rights. Eminent domain is one of a few things the Founding Fathers got wrong.
The other good thing we’ve seen is that the bill which would have allowed pipeline companies to enter private property without permission if they were surveying for a proposed pipeline easement has been killed. The Senate voted it down by a margin of 2-1. Those are good numbers against a bad bill.
Ohio Cracker Plant Has a Website
Man, these cracker plants move sloooow. They’re awfully expensive, which is why they move slow. Even spending $100 million dollars and then pulling the plug if the deal isn’t good is a good deal when you’re talking billions of dollars. Here in West Virginia we’re hoping for a cracker plant of our own, but we don’t expect it for at least five years.
One good thing we can point at is that the cracker plant in Ohio now has a web site of its own. Web sites are cheap relative to the size of this project, but it’s another step in the right direction. Step by step by step these things will (hopefully) get built.
West Virginia Pipelines
This article in the WV Gazette is a pretty good overview of what’s going on with the gas pipelines in West Virginia. It’s not terribly long and is worth the read, so we won’t summarize it here. Enjoy!
Visualization of Active Drilling Rigs in the U.S.
Bloomberg put together a cool visualization of active oil drilling rigs in the United States over the last five years. There’s a remarkable drop in the last 18 months. What’s amazing is that oil production has increased in the same time period. Rigs and techniques are more efficient than ever. We may not ever see the number or rigs running that we saw up through the end of 2014. That’s bad news for roughnecks.
This visualization is only for oil, not for gas. It appears that they don’t have one for gas drilling rigs.
Antero Resources Land Budget for 2016
Antero Resources is arguably the biggest player in West Virginia Marcellus/Utica natural gas development, so when their 2016 guidance report came out it was worth taking a quick look at. Their overall budget has been reduced from $1.8 billion to $1.4 billion, but of greater interest to people we work with, the land budget is now $100 million. That’s down from $150 million in 2015 and down from $450 million in 2014.
Why is the land budget interesting? The land budget is the budget for the land department, and the land department is the department that buys leases, modifications, and renewals. The land department has $100 million to spend. While that’s a lot less than it has been in the past, it’s still a substantial number. We can still expect Antero Resources to buy leases and modifications, and even renew leases that are coming due. Speaking of which, it will be interesting to see how many of Antero’s leases are coming due this year, and how many of them they will be renewing.
The land budget is not down as much as we thought it might be. Rumors that Antero was not taking any more leases in Tyler County made us think that perhaps Antero was cutting way, way back on leasing. While there has definitely been a cut, it seems that Antero has shifted interests to Wetzel County, searching for the Utica dry gas that companies have realized is so prolific.
Also, the sheer number of leases may not be changing all that much. Along with the cut in budget has come a cut in bonus amounts. Property that would have commanded $4,000-$5,000 per acre last year is now being offered at $2,500-$3,000 per acre. That alone makes up a large part of the reduction in their land budget.
So while there is going to be a reduction in the amount of money paid for leases and modifications this year, it seems that the number of leases taken and the number of landmen working is likely to remain the same. The unknown is just how low the price of natural gas is going to drop. If it continues to drop throughout the year then we could see additional reductions in activity. However, if prices remain roughly the same through this year, then activity should remain about the same and might even pick up. After all, most analysts are saying that the oversupply should be over sometime in 2017. Antero will be well positioned to pick up any of that slack, and they’ll do so by
Chesapeake Sells Interests to Haymaker Resources
Chesapeake Energy needs cash, and it needs cash now, but it can’t go to J. G. Wentworth. Instead, they’re selling some of their interests in oil and gas wells to another company, Haymaker Resources.
It appears that the interests signed over to Haymaker are scattered around, not in one specific area. CHK is getting rid of what it calls “non-core” property. That means this is probably not Marcellus or Utica property, unless it’s on the outskirts of the Marcellus/Utica area. However, if you fit that description you might be receiving royalty checks from Haymaker in the future. It might be worth it to double-check.