Category Archives: Companies

Upper Devonian Drilling

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Upper Devonian

EQT has announced that it will start drilling Upper Devonian formations along with the Marcellus shale.  This is a great move, and while I don’t like EQTs stance on post-production costs or know anybody that really likes working with them, I have to applaud it.  Here’s why.

The Upper Devonian lies just a few hundred feet above the Marcellus shale.  It produces gas, sometimes wet gas that is rich in ethane, propane, butane and the like.  It doesn’t produce as much gas as the Marcellus, though, so a lot of companies have ignored it.

If memory serves, you can improve production from any acre by about 50% if you can produce from both the Marcellus and the Upper Devonian.

However, if you develop the Marcellus without developing the Upper Devonian formations you are unlikely to be able to develop the Upper Devonian.  This is because the fractures you make in the Marcellus migrate upwards for hundreds of feet, right up to the Upper Devonian formations.  When you go back later to fracture the Upper Devonian you lose a lot of, if not all of, your fracking pressure into the existing fractures.

In order to take advantage of the Upper Devonian formations you have to frack them at the same time you do the Marcellus formations.

Anybody out there negotiating their own lease should ask the company whether they are planning to develop the Upper Devonian, and find out why they are not.  They may have good reasons, such as it simply won’t produce much gas in your area.

You probably won’t be able to convince them to change their plans unless you control all of hundreds of acres, but you could always tell them you won’t sign a lease unless there’s something in there saying they will develop the Devonian with the Marcellus.  It’s worth a shot.

 

Stone Re-opens Mary Field

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Last September Stone Energy shut-in their Mary field here in West Virginia, citing low gas prices.  Today we hear that Stone has cut a deal to begin flowing gas to Williams pipelines from the Mary field.

This is an indication of two things: prices have risen far enough that production in the Marcellus region in profitable, and at least one company thinks that gas prices are going to remain high for a while.

Production was never completely shut-in in the Mary filed.  They’re producing about 45MMcfe per day right now.  Production is expected to increase to somewhere over 60 MMcfe per day in July and to over 100 MMcfe per day in August, so more than double in the next 60 days.

Some of our clients are going to be very happy about this news.  Better royalty checks!  Look for them in a mailbox near you.

Consol Energy’s Plans

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A lot of our clients were working on deals with Consol Energy when they stopped operations here in West Virginia.  Now there are rumblings that Consol will start operations back up in the next six months.  The only caveat is that those operations are likely to be focused on the Utica, which is in the northern part of the state, and most of our clients who lost out on deals with Consol had property in the Lewis, Upshur, and Barbour county area.  So, it’s good news and bad news.

We’re keeping an eye out for everyone that was negatively affected when prices took a downturn in 2014 and 2015.  Things are looking up, but they haven’t improved immensely yet.

EQT is Buying West Virginia Leases from Statoil

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Statoil has sold their interest in leases in Wetzel, Tyler, and Harrison counties to EQT.  EQT is one of the few companies that is making money right now, and is increasing its footprint in the Marcellus/Utica sweet spot.  It’s a good move by EQT.

Anyone who had a lease with Statoil in those counties could expect to be dealing with EQT in the future.

As a heads up, EQT’s standard agreement allows EQT to deduct post-production costs from the royalties they pay, so they may try to get away with deducting post-production costs from any leases Statoil may have signed that do not allow for the deduction of post-production costs.  If you find yourself wondering why your royalty check is suddenly much smaller, check the deductions column.

Royalty Cases Against Chesapeake and Southwestern

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Some folks are suing Chesapeake and Southwestern for back royalties, among a couple other things.  The other things are not likely to be high-dollar amounts, but the royalties could add up.

There are quite a few cases against Chesapeake for back royalties in other states.  We’ve been surprised that there haven’t been more cases against Chesapeake in West Virginia.  It seems that CHK would have done the same thing to West Virginia royalty owners that they did to Ohio, PA, and Oklahoma royalty owners.

If anybody out there has a case that they’d like to take up against Chesapeake for back royalties, give us a call.  It won’t hurt and could help.  It could help a lot.

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West Virginia Nuisance Lawsuits Against Oil and Gas Companies Sent Back to Mediation

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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.

Antero Resources Land Budget for 2016

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Antero Resources

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

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Danger SybmolChesapeake 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.

Gastar Selling Marcellus/Utica Property to Tug Hill

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Just a quick FYI for any of our clients who are leased with Gastar, Gastar is selling its Marcellus/Utica property to a company called Tug Hill.  If you leased with Gastar, you will soon be working with Tug Hill.  The sale is scheduled to close on March 31, 2016.

Gastar is selling for two reasons.  One, it wants to focus on its Oklahoma holdings, and two, it can’t get a good price for the gas it produces from the Marcellus/Utica.

Northeast Natural Energy Drilling in Monongalia County, WV

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Marcellus_Shale_Gas_Drilling

Marcellus Drilling News (a great source for information about oil and gas development in  the Marcellus/Utica area) is reporting that Northeast Natural Energy has hired a new rig.  Right now, it seems that NNE is working exclusively in Monongalia County, WV, using leases that it bought from Chesapeake and leases that it is buying up itself.  NNE is going after Marcellus shale production there, which strikes me as odd because Chesapeake pulled up stakes in Monongalia County back in 2009 because it had drilled a few wells and the production was disappointing.  At least, that’s what the scuttlebutt was between the landmen that were working on the project.  With gas prices lower than they were then, it doesn’t make much sense for NNE to be drilling where CHK quit.  There must be some other factors in play that we aren’t aware of.  Nevertheless, best of luck to NNE.  We’re always glad to see that somebody is drilling and taking leases in West Virginia.