Category Archives: Companies

More Horizontal Oil Drilling in West Virginia

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We’ve talked about drilling for oil in West Virginia before.  The same folks who brought drilling to the Big Injun formation are introducing us to drilling to the Weir Sand formation.

Cunningham Energy has announced that it’s drilling for oil in Kanawha County, WV.  It’s currently working on another site in Clay County, WV.

It doesn’t seem like a really good time to be drilling for oil.  The Saudis have said they will produce enough to keep up with demand, and American frackers will follow the dictates of the market, so it’s impossible to tell how low oil prices will go.

Cunningham seems to think that their oil will be marketable.  They may be right.  Getting leases in that part of West Virginia will be cheap, probably in the $100-$300 per acre range when they’re dealing with knowledgeable mineral owners.  They’ll be able to pick up leases for $5-$10 per acre from people who don’t take the time to educate themselves about oil and gas.  Drilling only 2000 feet down and 4000 feet out will not present any kind of technology challenge.  The real trick will be putting systems in place to be efficient.

Chesapeake “Loses” 1.1 Billion Barrels of Oil

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magic-money-e1362106767971The drop in oil and natural gas prices doesn’t just affect the price of gas at the pump or your monthly utility bill.  It also hits energy companies awfully hard, and not in ways you might expect.  In this case, over a billion barrels of oil are going to just disappear off of Chesapeake’s books.  That’s billion with a B.  That’s disappear as in no longer exist.

How does that happen?

Oil and gas companies are allowed to give a value to their wells even before drilling them and producing gas from them.  They do that to get loans from banks. There’s a formula provided by the SEC (not the football conference) that they use to determine that value.  The formula includes the price of oil or the price of gas, depending on which the company is expecting to produce.  When the price goes down, the value of the undrilled wells goes down.  It has more to do with what’s economically producible than anything, so a lot of properties that were marginally economic are no longer considered economic, and so have no value.  Poof, $1.1 billion dollars in value just disappears.

Oil and gas is just crazy.

One Company Will Start Drilling Again in 2016

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energy-marcellus-shale05-drill-site-houses_26890_600x450PDC Energy is going to start drilling again in the first quarter of 2016.  Reading the article, it seems like the wells they have planned are mainly testing out new techniques, but they fully expect the wells to return more than their investment.  Part of that seems to be because they have hedged well, with oil hedged at $85/bbl and gas at $3.65/MCF.

Overall, we don’t see this as a sign that drilling is going to ramp up in 2016.  There will still be some leasing going on — there are always leases being taken.  We think it will be 2017 before we see anything start to really take off, and maybe even 2018.  It’s going to be lean times for anyone in the oil and gas industry.  However, those who are competent and hard-working will have something to do.

And there we go again, making predictions.  It’s so hard to not speculate about the direction of oil and gas.  Well, we’ll see whether these predictions are accurate or not in a year or so.

West Virginia Nuisance Lawsuits Against Oil and Gas Producers

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There seem to be more and more nuisance lawsuits filed in West Virginia these days.  Property owners who are affected by oil and gas development, but who aren’t benefiting from it in any way, are resorting to legal action to protect their property.

The big problem with nuisance lawsuits is that they usually don’t pay for themselves.  You can count on getting a judgment, but that judgment usually won’t even cover the cost of the attorney or law firm you hire.  You can protect your property, but it’s going to cost you.  A lot of surface owners in West Virginia simply don’t have the resources to take on that cost.  Lawyers won’t (usually) work for free.

That hasn’t stopped every West Virginian, though.  This article over at E&E Publishing covers the subject pretty well.  It’s worth a quick read.

 

Antero Resources 2Q15 Production is Huge

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Antero Resources produced awfully close to 1.5 billion cubic feet per day of natural gas in the second quarter of 2015.  That’s a big number, and an interesting number, too.  Why is it interesting?  Because that’s the same amount of gas that the Atlantic Coast Pipeline is expected to be able to transport every day.  You can go take a look at Antero’s Second Quarter Report at this link.

 

Antero’s Plans for 2015

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This article over at Natural Gas Intel includes a lot of useful information about Antero Resources’ plans for the upcoming year.  In short, they plan to scale back production for a while before ramping back up at the end of the year.  They’ll be running 11 rigs and seven completion crews.  They’re going to be holding back completion of 50 wells, waiting for prices to come back up.

This jives well with the sense that we’ve been getting about oil and gas prices and production from fracked wells, and the amount of oil and gas that is currently in storage.  Sometime this summer we’ll probably see a drop off in production from already producing wells.  That drop off in production will be offset by bringing wells that have already been drilled but not completed into production.  As the number of drilled but non-producing wells starts to decline companies will begin to see the need to start drilling more.  This need will come from completed or soon-to-be completed pipelines and energy plants.  We don’t really see that need arising as early as the end of this year, but Antero probably has better research and data available to it than we do, so we’ll trust them.  Look for drilling to pick back up at the end of this year.

EDIT: As of July of 2015 we began to see an uptick in the number of people calling the office with questions about leases.  Surprisingly, they haven’t been from Antero.  We’ve begun hearing from Mountaineer Keystone and EQT.  It seems that in preparation for drilling in 2016, and after having reviewed the first half numbers, some companies have begun taking leases again.