Category Archives: Wetzel County

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

 

Burket Formation Data, Another Point Against Force Pooling

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Zipper Fracking

As you well know if you’ve been reading this blog for any length of time, there are more producible formations underneath West Virginia than just the Marcellus and the Utica.  The Rogersville shale, among others, over in the western part of the state is getting some interest, and the Burket formation in the northern part of the state is finally getting some real air time, too.

Wrightstone Energy Consulting has put together some data on the Burket.

It’s not a very thick formation in West Virginia, but it’s pretty close to the Marcellus shale, lying just a few hundred feet above it here in West Virginia.  It’s not a ridiculously productive formation, but when drilling from one pad to the Marcellus and Utica it makes sense to drill to the Burket as well.

The best locations for Burket drilling appear to be in Doddridge, western Harrison, western Marion, and western Monongalia counties.  There’s a little bit in Wetzel, Tyler, and Lewis counties where they border the previously named counties, too.  There may be some good production in a small strip of Upshur, Barbour, and Tucker counties as well.  We don’t anticipate much development there because it makes more sense to drill where you already have pads, but we also know that Consol/CNX/Dominion was drilling to the Burket in Barbour county a couple of years ago, so if gas prices go up a little we expect to see them pursue that activity again.

By far the most interesting aspect of the data that Wrightstone Energy presents suggests that producing the Burket with the Marcellus could yield increased production from one or the other, or even both.  Fracking the Marcellus and then coming back later to frack the Burket may result in wasted energy as the fractures may communicate with the previous Marcellus fractures, resulting in fewer new fractures.  However, if both are fracked at the same time, or “zipper fracked“, the resulting production from both formations could be significantly higher.

We hate to harp on this one subject yet again, but this is yet another reason why it is important for mineral owners to be able to say no to a lease and not have to worry about being force pooled.  If the lessee is not going to produce the Burket with the Marcellus the mineral owner should be able to say they want to wait until a producer who wants to produce both formations comes along.

 

Shocking! West Virginia Lease Prices are Stable in a Downturned Market…

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American flag flying in the wind

In November of 2014, Saudi Arabia announced that it would not cut production of oil.  This surprised everyone, as the price of oil had fallen quite a bit at that point, and Saudi Arabia’s usual move when oil prices had fallen in the past had been to cut production.  The result — oil prices fell even further.

There was a lot of speculation as to why Saudi Arabia wasn’t cutting prices.  Most people thought that it was a move to hurt Russia, Iran, and Venezuela.  Some people thought it was a move to kill fracking in the US.

More and more, people have decided that while hurting Russia, Iran, and Venezuela was a nice bonus, the real target was US fracking.

While fracking has suffered, it hasn’t died.  This article over at biznews.com explains why.  The short story — US frackers figured out how to cut costs.  A lot.  The article says that costs of various drilling services have fallen by 20 percent to 50 percent, and that some oil plays now have a break even point below $40/bbl.

That’s what entrepreneurs and CEOs do when they operate in a free market.  The Saudis didn’t count on that, and I don’t think anybody outside the US really believed it could be done.  We did it.

The fascinating thing for West Virginia oil and gas royalty and mineral rights owners is that bonus amounts and royalty amounts really haven’t changed much since November of 2014.  Royalty amounts haven’t dropped at all.  Bonus amounts have dropped some.  For instance, you can still get a lease for $2,500 per acre in Doddridge and Harrison counties, but you will have a harder time getting that for a lease in Ritchie County which was commanding even more than that at one point.  In Tyler County you can still get $4,000 per acre, and in Wetzel and Marshall counties you can get anywhere between $2,500 and $4,000 per acre.

Some counties have no development at all now, but it’s more because the formations under those counties are not expected to produce as much gas as other counties.  Those counties will be exploited (word choice purposefully made) in later months or years when gas has been fully exploited elsewhere.

The one real change that we’ve seen in West Virginia is that, while the price of an acre hasn’t dropped much, the sheer number of lease offers has.  Instead, we’re talking with more people who have been given offers to buy their mineral rights.  While we’re glad to help facilitate those sales in the right circumstances, we still recommend that people hold on to their mineral rights if they are in a position to do so.  Those mineral rights will be more valuable when the lease buyer comes knocking than when the mineral buyer comes calling.

We still think that in a few years the infrastructure for gas delivery will improve, the demand for gas will go up, and the price of gas will go up.  At that point leasing will pick up again.

For those of you thinking about whether to lease or sell, give us a call and we’ll help you decide what’s best for you.  In the meantime, celebrate the exceptionalism of the American free market over the 4th of July weekend.

And be safe.

West Virginia Oil and Gas Severance Tax Distribution

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Tax MoneyThe Intelligencer out of Wheeling, WV published an article that tells us how much severance tax the oil and gas companies paid to the State of West Virginia in 2014 and how that tax is allocated to the different counties.  There’s some pretty good detail in the article.  It also points out that Wetzel County has gone from being listed as a depressed county to, well, no longer being listed as such.  We suspect that no longer being a “depressed county” really only means that the county government is able to provide all of or most of the services that a county government is expected to provide.  It probably doesn’t mean that every citizen of the county is now rolling in the dough, so to speak.  Still, going from depressed to not depressed is always good.

Utica/Point Pleasant Formation

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EQT is going after the Utica/Point Pleasant in Greene County, PA.  That’s right across the border from our very own Marshall County, Wetzel County, and Monongalia County.  The wells aren’t close to the border, but considering that Antero is also going after Utica/Point Pleasant in Tyler County, it seems likely that the rest of that area should be interesting to producers for the Utica.