Barnett Shale

Quicksilver Resources independent director named chairman

W. Yandell Rogers, an independent director on the Quicksilver Resources board since March 1999, was elected chairman at the Fort Worth-based producers board meeting Wednesday. Rogers is CEO of Priest River Ltd., described by the company as a private holding company. He replaces Thomas "Toby" Darden, 59, who remains on the board as chairman emeritus but will retire Dec. 31, the company said today. Quicksilver said Darden "will continue as an employee of the company through the end of the year, focusing on strategic transactions including the pursuit of a joint venture in the Horn River Basin in British Columbia," and "will continue to advise the company on the Horn River Basin development and other projects." 

"We deeply appreciate Toby's leadership and his many valuable contributions to the growth of Quicksilver," Rogers said in a prepared release. "We are fortunate that we will benefit from his continued counsel as a director and a consultant." In the same release, Darden said: "It has been my pleasure to serve with so many outstanding and talented employees from Quicksilver and affiliated companies over the past 38 years. Together we have produced billions of dollars of revenues and developed trillions of cubic feet of natural gas reserves. I look forward to continuing as an active director on the Board and in my advisory role as the company moves forward in our joint venture efforts in the Horn River Basin." Quicksilver's CEO is Glenn Darden, 57. He has held the post since December 1999.

-- Jim Fuquay

 

 

Texas House honors Barnett Shale pioneer George Mitchell

George P. Mitchell, whose efforts combining hydraulic fracturing and horizontal drilling led to the development of North Texas' Barnett Shale and launched a nationwide boom in shale production, was honored Monday with a joint resolution on the floor of the Texas House of Representatives. Mitchell, who turns 94 next month, was not present but was represented at the event by his daughter, Sheridan Lorenz, and Marilu Hastings, environment program director at the Cynthia and George Mitchell Foundation. According to a prepared statement from the foundation, Lorenz encouraged state leadership to "redouble its efforts to position Texas to lead the transition to a clean energy economy by modernizing existing oil and gas regulations to better manage advanced drilling technologies, to continue expanding renewable energy markets and to create incentives to use energy more efficiently." Gov. Rick Perry made a rare appearance on the House floor for the ceremony.

Mitchell in February was honored with a "History Making Texan Award" by the Texas State History Museum Foundation "in tribute to his exemplary contributions to the oil and gas industry." The House resolution also recognizes Mitchell's historic preservation work and his development of The Woodlands north of Houston.

The production techniques that Mitchell's company, Mitchell Energy, pioneered in the Barnett Shale have spawned a rush of  shale oil and gas production that has reversed a decades-long decline in U.S. output. While shale production is seemingly an overnight success, Mitchell worked for years to find the right combination that make the dense rock give up its oil and gas in economic quantities.

In 2008 at a Fort Worth event honoring his achievements, Mitchell told the Star-Telegram that success was not guaranteed. "Even my engineers told me, 'You’re wasting your money, Mitchell.' Finally we figured out you had to fracture it considerably to make it produce," Mitchell said at the time. "It took about seven wells that cost a couple of million each and a lot of experiments to figure out how to make it work," he said. He drilled his first Barnett Shale well in 1981. He drilled his first horizontal Barnett well in 1997. By 2001 Mitchell's efforts in the field were established enough to draw a $3.5 billion buyout offer from Devon Energy of Oklahoma City. Devon acquired Mitchell Energy, whose Barnett holdings are still headquartered in Bridgeport in Wise County, and remains the field's largest oil and gas producer.

-- Jim Fuquay

 

 

Quicksilver shares decline on first-quarter loss, lower revenues

Quicksilver Resources, which is working to sell assets and reduce a big debt load, announced a narrower loss for the first quarter.

The Fort Worth natural oil and gas producer said its net loss totaled $60 million, down from a restated $212 million loss in the first quarter of 2012. Revenues declined to $133 million from $166.5 million a year ago as both production and prices of natural gas, natural gas liquids and oil declined.

In March, the company announced a deal to sell 25 percent of its Barnett Shale assets to Tokyo Gas for $485 million. Proceeds from that deal were not included in the results, as the transaction did not close until April 30.

The company said its Barnett Shale production declined by 5 percent from the fourth quarter 2012, but its production in Canada's Horn River Basin was up 30 percent.

The company's Quicksilver Production Partners entity also announced that it is withdrawing its filing for an initial public offering of stock due to the sale of the Barnett Shale assets and "the persistence of challenging" pricing for natural gas liquids.

Shares of Quicksilver were off nearly 9 percent, to $2.43 cents a share, in afternoon trading after the results came up short of Wall Street expectations.

-- Steve Kaskovich

 

Pioneer Natural Resources shares jump on strong outlook

Shares in Irving-based Pioneer Natural Resources rose 6 percent in active trading Thursday following the producer's announcement Wednesday of better-than-expected earnings. In a call with financial analysts Thursday morning, company executives said Pioneer will accelerate its drilling schedule in the Midland Basin. Pioneer said it expects to produce 174,000 to 179,000 barrels of oil equivalent in the second quarter.

-- Jim Fuquay

Devon loses $1.3 billion on big impairment charge

Devon Energy, the largest producer in the Barnett Shale, said it lost $1.3 billion in the first quater after taking a $1.9 billion non-cash impairment charge related to market prices of natural gas and crude oil. After adjustments for those and other items, Devon earned $270 million, or 66 cents a share, compared to financial analysts' consensus estimate of 56 cents. The company's shares (ticker: DVN) were up in early trading. Impairments occur when a company's estimate of assets under current economic conditions falls short of the expenses it booked to acquire the assets.

Devon said total production declined slightly from a year ago to the equivalent of 687,000 barrels of oil a day. Crude oil production was up 14 percent to 162,000 barrels a day, helped by a 23 percent increase in the Permian Basin in West Texas. In the Barnett Shale Devon said it averaged 1.4 billion cubic feet of natural gas a day in the quarter, including 55,000 barrels a day of liquids, up 5 percent from a year ago.

-- Jim Fuquay

Chesapeake squeezes out first-quarter profit of $15 million

Chesapeake Energy, in its first earnings report since the departure of former CEO Aubrey McClendon on April 1, said it earned $15 million despite nearly $180 million in one-time charges. The Oklahoma City-based producer, which is the second-largest operator in the Barnett Shale, said revenues jumped $1 billion in the quarter to $3.4 billion on higher product prices and a 9 percent gain in production from a year ago. Oil production was up 56 percent from a year ago, said acting CEO Steve Dixon. After adjusting for unusual items, Chesapeake earned $183 million, or 30 cents a share, compared to Wall Street's consensus estimate of 25 cents. But the company's shares (ticker: CHK) were down in early trading.

The company said it averaged 83 drilling rigs in the quarter and spent $1.5 billion on drilling and competitions, versus just $45 million for unproved acreage. CFO Domenic Dell'Osso said Chesapeake will "devote more than 80 percent of our total capital expenditures to drilling and completion activities in 2013, as compared to an average of approximately 50 percent over the past three years." The company said it closed or signed about $2 billion worth of asset sales so far this year and expects between $4 billion and $7 billion in asset sales during 2013.

--- Jim Fuquay

Barnett rig county up one 26, U.S. rigs down

Active rigs in the Barnett Shale inched up this week to 26, just one more than the 11-year low seen the previous week, according to RigData. Wise County continued to be the busiest in the North Texas field, with six rigs working, followed by Denton and Tarrant counties with four each.

Nationally, the rig count was down four to 1,754, according to Baker Hughes. The number of rigs seeking crude oil rose by 10 to 1,381, while rigs seeking natural gas fell by 13 to 366. Seven were listed as miscellaneous. A year ago, there were 1,945 active rigs.
-- Jim Fuquay

Range Resources sets aside $35 million for Oklahoma royalty lawsuit

A class-action lawsuit in Oklahoma that seeks $160 million in alleged royalty underpayments from Range Resources led the Fort Worth-based oil and gas producer to book $35 million in potential expenses during the first quarter, according to a Securities and Exchange Commission disclosure today. "While we believe we have strong defenses to the claims made in this lawsuit," Range said in its filing, it concluded that amount was appropriate  "given our evaluation of the law in Oklahoma, the outcomes in similar litigation and our assessment of the current status of the litigation." Range also said it has appealed a Feb. 19 court ruling certifying a class.

Deductions for post-production expenses "by third parties who transport and process natural gas production" form the basis of the suit, the company said in the filing. Range said that while it believes that "current case law in Oklahoma ... allows operators to deduct value-enhancing costs for treating, compression and other post-production expenses incurred to increase the value of a marketable product," the extent of the deductions could be something a judge or jury must determine. Range generally sells its Oklahoma natural gas production to third parties "which, in many cases, do transport and process the gas," it said. Range Resources-Midcontinent, the subsidiary involved, Range said, "has substantially complied with its royalty payment obligations under its leases and we therefore intend to vigorously defend this litigation."

-- Jim Fuquay

 

 

Range Resources loses $75.6 million as production rises

Fort Worth-based Range Resources said it lost $75.6 million in the first quarter despite a 27 percent jump in revenues. A non-cash charge of $97 million on unrealized derivatives was partly to blame, but the oil and gas producer also reported $38.4 million in lawsuit settlements, which the company did not detail. After adjustments for unusual items, the company said it earned $52.9 million, or 33 cents a share, better than financial analysts' consensus estimate of 28 cents. Range said its production in the quarter rose 32 percent, with oil and condensate showing the biggest gain. Product prices after accounting for hedges  slipped 3 percent to the equivalent of $5.06 per 1,000 cubic feet (mcf) of gas before transportation costs paid to third parties. Those transportation, gathering and compression expenses came to 79 cents per mcf. The company will hold a conference call with analysts Friday morning.

-- Jim Fuquay

FracFocus falls short, Harvard study says

FracFocus, a website that posts information on hydraulic fracturing materials used in new oil and gas wells around the nation, needs more federal oversight, a new study out of the Harvard Law School says. It faults the site, a project of state regulators and agencies, for inadequate disclosure and being difficult to search. Bloomberg News has a report here.

-- Jim Fuquay

Appeals court lets Range's defamation suit against Lipsky continue

A state appeals court said Fort Worth-based Range Resources can pursue a defamation claim against Parker County landowner Steven Lipsky, but it also dismissed several of Range's other counterclaims against Lipsky, his wife and their environmental consultant. The Texas Second Court of Appeals in Fort Worth had been asked by the Lipskys and Wolf to dismiss Range's suit, which followed the Lipskys' lawsuit in 2011 that claimed Range contaminated a water well on the family's property. 

A link to the story in the Star-Telegram is here.

-- Jim Fuquay

Ex-Chesapeake CEO McClendon forms new energy company

Aubrey McClendon, who effective April 1 left Chesapeake Energy, the company he co-founded, has formed a new energy company named American Energy Partners LP, The Oklahoman reports. Citing an e-mail that the newspaper says was sent Tuesday to a number of people in the energy industry, "McClendon wrote that he has founded and serves as the chairman and CEO of American Energy Partners. McClendon said in the email that American Energy Partners is looking to acquire onshore assets in the United States," according to the report on the newspaper website. “My goal is to build a substantial E&P (exploration and production) company both through the drillbit and through acquisitions of producing properties,” McClendon says in the email. “In particular, I will be looking for deals with a lot of drilling left on them and will also consider undeveloped acreage deals — plus, I am not scared of natural gas.”

A link to The Oklahoma's report is here.

-- Jim Fuquay

Mexico oil and gas development an opportunity, Exxon CEO says

Mexico will eventually open its domestic oil production to foreign companies, Exxon Mobil CEO Rex Tillerson told a Dallas audience today. While the nationalization of Mexico's oil industry in 1938 is still celebrated there, Tillerson said that there is "growing recognition that change is needed" and outside producers should be allowed to help develop resources. "That will happen out if necessity" Tillerson said. Exxon's interest would depend on Mexico's "terms and conditions" of that participation, he said.
-- Jim Fuquay

Fort Worth independent acquires East Texas acreage from Chesapeake

Energy & Exploration Partners, a Fort Worth-based producer, said Monday it acquired 57,275 net acres and 11 producing wells in East Texas from Chesapeake Energy. The company is backed by Apollo Investment Corp. and Highbridge Principal Strategies, which were issued notes in connection with the transaction. The acreage is in Madison and Grimes counties, which are between Huntsville and College Station. Energy & Exploration Partners said it has an additional 14,600 acres in the area, and it plans to acquire 330 square miles of 3D seismic. CEO Hunt Pettit said the company plans "to commence a two-rig drilling program on the acreage acquired from Chesapeake."

According to its news release on the acquisitions, Energy & Exploration Partners said it has interests in West Texas and the Rocky Mountains.

-- Jim Fuquay

Exxon CEO Tillerson sees pay rise to $40.3 million

Rex Tillerson, chairman and CEO of Irving-based Exxon Mobil Corp., received a 15 percent pay raise in 2012 as his total compensation rose to $40.3 million, the company said in a regulatory filing Friday. Tillerson’s pay package was only partly cash: a salary of $2.57 million, a $4.59 million bonus, and $447,425 in other compensation. The biggest element was $19.6 million in restricted stock, half of which vests in five years and half in 10 years or until retirement, whichever is later, according to the disclosure, called a proxy filing.

Another large element was a $13 million increase in the present value of Tillerson’s pension. An increase in the interest rate used to calculate a lump sum payout of his pension accounted for about half the increase, and the past year’s gains in his salary, bonus and tenure at the company account for the rest. As of the end of 2012, Tillerson held rights to nearly 1.6 million Exxon shares that had not yet vested, worth $136 million at the time.

There are eight shareholder proposals that will be voted upon at the company’s annual meeting, set for May 29 in Dallas. Among the proposals are calls to split the company’s chairmanship and CEO positions, to disclose lobbying activities and political contributions, and to expressly prohibit hiring discrimination based on sexual orientation. Proposals also call for additional measures to measure the risks of natural gas development and to reduce the company’s greenhouse gas emissions. The company said it opposed all those measures.

-- Jim Fuquay

Range reports higher first-quarter production

Fort Worth-based Range Resources said today its first-quarter production was the equivalent of 876 million cubic feet of natural gas a day, a record to for the independent producer and driven by rising Marcellus Shale output. Production of crude oil and condensate  was up 52 percent, natural gas was up 34 percent and natural gas liquids were up 22 percent. That put the company's overall production at 79 percent natural gas, 14 percent NGLs and 7 percent crude oil and condensate.

The average price for all products slipped 3 percent to $5.06 per 1,000 cubic feet (mcf) equivalent. Range realized $4.09 an mcf for gas, $35.29 a barrel for NGLs and $85.46 for oil and condensate. Costs for gathering, compression and transportation were estimated at 80 cents per mcf. CEO Jeff Ventura said the company is on track for production growth of 20 to 25 percent in 2013 and "for many years" as it develops about 1 million net acres in the Marcellus in Pennsylvania.

-- Jim Fuquay

Gas exports not favored by many consumers, UT poll finds

More American think the United States should keep natural gas production for domestic use rather than export it, according to the latest University of Texas Energy Poll. The online survey, conducted March 11-20, found that 39 percent favored keeping U.S. gas production, versus 28 percent that supported exports. The rest were neutral.

Interestingly, it's not much of a partisan issue: 36 percent of self-described Democrats and 38 percent of self-described Republicans oppose exports, and an even closer 30 percent of Democrafts and 29 percent of Republicans favor exports. Independents were most likely to oppose exports, by 44 percent. The  big split was by gender. A third of men favored exports, while only 22 percent of women did.

Partisan differences on hydraulic fracturing were more defined, even as support for the production technique declined overall, from 48 percent a year ago to 45 percent in the new poll. Forty-one percent opposing fracking. But while 71 percent of Republicans favor fracking and 20 percent oppose it, that flips with Democrats as 60 percent oppose fracking and just 22 percent support it.

The poll's results are here.

-- Jim Fuquay

 

FTS lost $29.8 million in 2012

FTS International, formerly Frac Tech, swung from a hefty profit in 2011 to a loss of $29.8 million as revenues slid 18 percent. The company said it kept its 34 fleets of hydraulic fracturing equipment busy all year, doing more fracturing stages even though the number of wells fractured declined slightly. But the revenue from each of those stages fell from $136,335 to $101,905, the lowest since 2009. The Fort Worth-based company replaced its CEO in November.

On Monday, The Wall Street Journal reported that Chesapeake Energy, FTS' biggest customer and owner of about 30 percent of the company, was no longer considering selling that stake. Citing unnamed sources, the newspaper said Chesapeake's stake, which it had estimated at about $2 billion earlier, was worth less than $1 billion under common evaluation methods using its most recent earnings before taxes, interest, depreciation and amortization.

-- Jim Fuquay

Appeals court could return water contamination case to Weatherford court

The Texas Second Court of Appeals today said it may return to Parker County courts the lawsuit of Parker County landowners Steven and Shyla Lipsky against Range Resources in a water contamination case. Former State District Judge Trey Loftin had denied the motion by the Lipskys and their environmental consultant, Alisa Rich, to have Range's counter-suit against them dismissed. In its ruling today, the appeals court said that because Loftin lost his re-election bid last May, it would "abate" its jurisdiction in the case and return the case to Loftin's successor, Judge Craig Towson, if all parties agree. The appeals court gave until April 11 for the parties to tell the court what they want to do.

-- Jim Fuquay

Bigger operators safer in Pennsylvania, Wall Street Journal finds

The Wall Street Journal crunched the numbers for safety and environmental violations in Pennsylvania portions of the Marcellus Shale and concluded that larger producers generally have better records than smaller producers. It leads its report with the example of Royal Dutch Shell's violation rate of 13 percent per inspection in 2010, compared to a 63 percent rate at East Resources right before the independent sold its Marcellus assets to Shell in 2010. In another example, the newspaper said that following its acquisition by Exxon Mobil, XTO Energy's rate of safety violations "has fallen by half, even though drilling takes place in the same counties, often with the same personnel." (Anyone who has read Steve Coll's recent history of Exxon, Private Empire, will not be surprised, considering Coll's account of the zero-accidents mentality Exxon developed after the Exxon Valdez spill in Alaska.)

Bigger isn't always better. Fort Worth-based Range Resources, an early developer of the field, had a better-than-average record among mid-sized producers, the Journal reported. All operators improved their records in the past two years, according to the newspaper's analysis of state records. For example, Shell has since lowered its violation rate to 5 percent in 2012.

You'll probably run into the Journal's pay wall, but a link to the story is here.

-- Jim Fuquay

Southlake energy services firm files for IPO

Emerge Energy Services L.P. of Southlake hopes to raise $100 million with an initial public offering and a listing on the New York Stock Exchange, the company says in a Securities and Exchange Commission filing. The partnership is backed by Insight Equity, a Southlake private equity firm. Emerge Energy's operations include: Superior Silica Holdings, a provider of sand and proppants for hydraulic fracturing; Direct Fuels Partners, which operates a refinery and distribution center in Euless, and Allied Energy Co., which distributes ethanol and other fuels. The combined companies in 2012 would have had revenues of $956.9 million and net income of $27.1 million, and its earnings before interest, taxes, depreciation and amortization (EBITBA) would have been $52.3 million, according to Emerge Energy's IPO disclosure, filed March 25. According to that filing, Insight Equity, which was founded in 2002, "makes control investments in strategically viable, middle-market, asset-intensive companies across a wide range of industries. Insight Equity has committed approximately $425 million to 12 investments in North America."

-- Jim Fuquay

Investors cheer Quicksilver's Tokyo Gas deal

Investors apparently are happy with Quicksilver Resources' $485 million deal announced Friday to sell 25 percent of its Barnett Shale assets to Tokyo Gas. The Fort Worth-based producer's shares (ticker: KWK) are up about 20 percent this morning on extremely heavy trading. (U.S. stock markets were closed for Good Friday, so Monday was the first trading day following the deal's disclosure.)

Quicksilver gets about two-thirds of its production from the Barnett. The $485 million gives TG a quarter of all Quicksilver's reserves in the field, and going forward Tokyo Gas and Quicksilver will split development costs on a 25/75 basis. Quicksilver estimated proved reserves in the field at 1.2 trillion cubic feet under Securities and Exchange Commission guidelines on its fourth-quarter report, but that used 2012 average futures price of $2.76 per 1,000 cubic feet.

-- Jim Fuquay

Barnett rig count inches up one, to 33

Active drilling rigs in the Barnett Shale rose by one this week, to 33, according to RigData. Wise County continued to lead with nine rigs, followed by Montague with five, Tarrant, Jack and Denton counties with four each, and Palo Pinto with three.

Devon Energy is by far the busiest operator in the field, running eight rigs last week in Wise, Denton and Parker counties. EnerVest Operating and EOG Resources each kept three rigs busy, mostly in Montague County, an oil-rich portion of the field.

-- Jim Fuquay

Quicksilver sells 25 percent of Barnett operations to Tokyo Gas

Quicksilver Resources and Tokyo Gas on Friday announced that the Japanese utility will buy 25 percent of Quicksilver's Barnett Shale operations for $485 million. The deal comes more than a year after the Fort Worth-based producer hosted a tour of the Barnett Shale for a group of Japanese energy executives. Japan is looking for new sources of natural gas in the wake of its decision to shut down most of its nuclear reactions in the wake of the tsunami-related accident at three Fukushima reactors. For more, see today's Star-Telegram report here.

-- Jim Fuquay

 

Quicksilver names private equity advisor to board

Fort Worth-based Quicksilver Resources, which has been working to find a partner on its Barnett Shale and Horn River Basin properties, said Thursday it named Michael McGovern of Cadent Energy Partners to its board effective Wednesday. McGovern, 61, is described in Quicksilver's release as "Executive
Advisor to Cadent Energy Partners, LLC, a private equity firm investing in the energy industry." No other relationship between the two organizations is disclosed in the announcement.

In the prepared release, Quicksilver Chairman Toby Darden said McGovern's "experience across multiple disciplines in the energy sector will add depth to our team." The release says McGovern has been involved in the energy industry since 1975 and served as CEO of several public companies, including Pioneer Cos., Coho Energy, Edisto Resources, Convest Energy, Ironstone Group and American National Petroleum Co.

-- Jim Fuquay

Basic Energy Services CEO Huseman to retire at year's end

Ken Huseman, CEO of Fort Worth-based Basic Energy Services, intends to retire at the end of 2013, the company announced today. The board intends to appoint Roe Patterson, currently senior vice president and chief operating officer, to succeed Huseman, who is expected to remain a director. Patterson is expected to be named a director when he assumes the CEO post, on or about Jan. 1.

Huseman has led the company, which relocated its headquarters from Midland last fall, for more than 14 years. Patterson joined Basic in 2006 and has held his current post since March 2011.

-- Jim Fuquay

2010 Pennsylvania contamination case settled for $750,000

Court documents unsealed in a Pennsylvania lawsuit against Fort Worth-based Range Resources and others show the companies paid $750,000 for the homeowner's property, attorney fees and related claims. The records had been sealed since the July 2011 settlement but two Pennsylvania newspapers had sought to have them made public, which a judge approved on Wednesday.

The case concerns Chris and Stephanie Hallowich, who in June 2005 purchased 10 acres in Hickory, Penn., a rural area. They started building their home there in November 2006. "Unknown to the plaintiffs, the prior owner, Nancy Stewart, had subdivided the property and then sold a portion to defendant Range Resources Corp. for the purpose of drilling natural gas wells," according to court documents. Stewart also signed a mineral rights lease on the property, the documents say. By 2008 the Hallowich home was in the proximity of four natural gas wells drilled by Range, as well as a compressor station and a gas treatment facility operated by other companies, who were also defendants in the suit. The Hallowich family and another neighboring landowner soon complained of water contamination. The family sued Range, MarkWest Energy Partners, Williams Gas/Laurel Mountain Midstream and the Pennsylvania Department of Environmental Protection in 2010. The state regulator had found high concentrations of some compounds, including manganese, in the landowners' water but could not say Range or the other companies were responsible.

According to a copy of the settlement released Thursday, the companies agreed to pay a total of $750,000. Of that, $594,820.37 went to the family, including trust accounts of $10,000 for each of the couple's two small children. The settlement says the children's "alleged claims involve nuisance and personal injury. There is presently no medical evidence that support that these claims are related to any exposure to the activities of defendants as set forth in plaintiff's complaint." The family's legal counsel received 20 percent of the settlement, or $150,000, plus $5,179.63 in expenses.

Range spokesman Matt Pitzarella, in an e-mailed statement, said: "The family began building their home after several early Marcellus wells and associated infrastructure was starting to be developed near them. The family was in a unique situation and one that was not ideal for them or for Range. Range believed that the right thing to do was to allow both sides to move forward." He said the company "does not have concerns with the judge's decision, which we greatly respect, to make the court file public. This information combined with the vast public data accessible through the DEP's extensive investigations should provide the public with even greater clarity that shale gas is being developed safely and responsibly."

A link to the documents, posted online by State Impact Pennsylvania, can be found here.

-- Jim Fuquay

 

Pennsylvania contamination case to be unsealed

A Pennsylvania ruled the settlement of a water contamination case between drillers, including Fort Worth-based Range Resources, and two homeowners should be unsealed. According to a Bloomberg News report, "Chris and Stephanie Hallowich, told National Geographic magazine in 2010 that their water was polluted by the wells, pipelines, processing operations and truck traffic that came into the rural area where they had built their home. They also said they suffered burning eyes, sore throats and other symptoms when gas was released into the air."

Range spokesman Matt Pitzarella said the company, which had opposed the unsealing, is fine with it now. In an e-mail, he told Bloomberg that unsealed documents "should provide the public with even greater clarity that shale gas is being developed safely and responsibly." The National Geographic story, posted online on Oct. 17, 2010, recounts the Hallowich family's  experience buying 10 acres in southwestern Pennsylvania in 2007, then finding themselves in the middle of natural gas development.  "From a nuisance perspective, I will tell you they have a legitimate concern," the online report quotes Pitzarella as saying of the Hallowich family of four. Range drilled a well "that produces gas beneath the Hallowich site," the report says, and the "company and others say the bulk of their operations—the well sites themselves—are short-term disruptions and that the land is restored, as the state of Pennsylvania requires, within nine months after drilling is complete." It says there are unresolved disputes over water quality from a well on the family's property, which was drilled after Range commenced its own drilling operations.

Bloomberg News has a report on the judge's ruling here.

-- Jim Fuquay

Quicksilver to restate 2012 earnings

Quicksilver Resources said late Friday in a government filing that it will restate its earnings for the first, second and third quarters of 2012 "due to non-cash related errors to our derivative accounting treatment." The Fort Worth-based producer said it expects to file amended statements next week. Quicksilver said it determined that it was not eligible for a particular form of accounting for its hedges, contrary to its previous judgments.

"In total, the estimated aggregate impact to 2012 income (loss) before income taxes was to improve that amount by $199 million and to reduce the income tax benefit by $66 million, which yield an overall increase to net income of $133 million," Quicksilver said. "None of these matters impact the previously reported totals for cash flows from operating activities, investing activities or financing activities. None of the matters impact compliance with the financial covenants associated with our senior secured credit facility," it said.

-- Jim Fuquay

Landowners sue Chesapeake over royalty payments

Nearly two dozen Tarrant County landowners, including Fort Worth billionaire Ed Bass, have sued Chesapeake Energy in federal court in Dallas, claiming the producer shorted them on royalty payments. According to the suit filed Wednesday, Chesapeake Operating and Chesapeake Exploration, which hold leases on nearly 4,000 acres owned by the plaintiffs, passed on production costs in breach of their leases and imposed other costs improperly. The suit also claims the company used two affiliates to set below-market sales prices for natural gas produced from the leases. Julie Wilson, Chesapeake's vice president for urban development in the Barnett Shale, declined to comment.

For more, see the Star-Telegram's report.

-- Jim Fuquay

Barnett rig count steady at 32

Active drilling rigs in the Barnett Shale were unchanged at 32 as producers generally remain in portions of the North Texas field with more liquids, which attract better prices than natural gas. Two weeks ago the rig count hit 27, its lowest in at least a decade. Wise County led this week with nine rigs, followed by Montague and Tarrant with five each and Denton with four, according to RigData.

Nationally, the rig count slid a third straight week, to 1,752, said Baker Hughes. Rigs seeking crude oil rose by eight to 1,341, but that was offset as rigs seeking gas fell by 13, to 407, the lowest since May 1999. A year ago there were 1,973.

-- Jim Fuquay

Duke Power CEO says fracking is transforming utilities, cutting CO2

James Rogers, the longtime chairman of North Carolina-based Duke Power, said environmentalists should make their peace with natural gas and hydraulic fracturing because of its contributions to dramatic cuts in carbon dioxide emissions from power generation. Rogers said the substitution of natural gas-fired generation for coal-fired power plants has lowered U.S. CO2 emissions to 1990 levels and to 1960's levels on a per-capita basis. "Natural gas is transforming our industry," Rogers told an audience at the IHS CeraWeek energy conference in Houston. Natural gas production can be done responsibly and its contribution to lower carbon and other emissions outweigh concerns about natural gas' possible impacts on water and air in areas where it is produced.

-- Jim Fuquay

Railroad Commission rules will encourage recycling

The Texas Railroad Commission will consider adoption of rules that seek to encourage producers to recycle water used in hydraulic fracturing, agency Chairman Barry Smitherman said today at a Houston energy conference. Smitherman told the Star-Telegram that the rules are not mandatory, but will try to "streamline the process" of handling and reusing produced water, such as permits required for holding ponds and water transportation. He said he intends to vote in favor of the new rules. The agency's next scheduled public meeting is March 26.

-- Jim Fuquay

BNSF eyeing natural gas use in locomotives

Fort Worth-based Burlington Northern Santa Fe will test the use of natural gas as a substitute for more costly diesel in its locomotives, according to media reports. "This could be a transformative event for our railroad," CEO Matt Rose told The Wall Street Journal in a Wednesday report. The big railroad would use liquefied natural gas, rather than compressed natural gas used in buses and light vehicles, because it offers considerably more range. Over-the-road trucking is moving into LNG for the same reason.

-- Jim Fuquay

Exxon sees 2013 production down 1 percent

Exxon Mobil expects production to decline by about 1 percent this year due to weaker output of natural gas, the Associated Press reported. "Over the next five years, however, the oil and gas giant expects production to rise by 2 percent to 3 percent per year," AP said the Irving-based company forecast during its annual meeting with financial analysts. "CEO Rex Tillerson says global energy demand will grow 35 percent by 2040 with oil and gas accounting for more than coal, nuclear or other sources," AP reported.

-- Jim Fuquay

Efforts to reduce water use in fracturing

 Walter Dale, manager for water solutions at Halliburton, a big oilfield services company, told an industry group in Houston that the firm is working to cut water use in its hydraulic fracturing jobs by 25 percent. Water can be a significant cost of a fracturing job. Another panelist, Johan Themaat, vice president at High Sierra Water Services of Denver, said recycling is another option for improving water use by cleaning produced water just enough to be reused as fracturing fluid or even thoroughly cleaned enough to be discharged into waterways. He said service companies like Halliburton are reworking their fracturing fluids to allow the use of more brackish, or salty, water. That not only reduces new freshwater used, but also reduces the amount of fluid that must be disposed of, typically by underground injection. The Barnett Shale, however, is a difficult field for recycling because existing disposal options are relatively inexpensive, he said.

-- Jim Fuquay

CERAWeek quiz No. 1

Q. Only three nations have ever increased their crude oil production by 900,000 barrels a day or more in the space of just a year. Name them.

A. Jim Burkhard, v ice president of oil market research for IHS, sponsor of the ongoing CERAWeek energy conference in Houston, told his audience the first occasion was Saudi Arabia in 1974 following the OPEC oil embargo that quadrupled the price of oil at the time. The other was Iraq in 1991 after the end of the war following its invasion of Kuwait. The third happened in 2012, in the United States and Iraq. Shale production boosted U.S. production above 7 million barrels a day for the first time in 20 years.

-- Jim Fuquay

It didn’t take long before Craig Dickman heard something interesting about natural gas in the transportation business here at the CeraWeek energy conference, which kicked off Monday. Dickman’s company, Breakthrough Fuel, helps companies set up fleets for natural gas and other alternative fuels. What got his attention was a description of the Chinese trucking market by Xizhou Zhou, director of China Energy for IHS, the sponsor of CeraWeek. Just four or five years ago, Zhou told his audience of energy executives from around the world, China had virtually zero heavy-duty trucks running on natural gas. Now, he said, there are perhaps as many as 70,000 big rigs running on natural gas, but liquefied natural gas, not the compressed natural gas more commonly used in the United States by operators like the city buses operated by The T, Fort Worth’s local transit operation.

LNG is so much cheaper in China than diesel, Zhou said, that truckers can recover the added cost of using the fuel in less than a year. The transition is aided by between 300 and 400 LNG fueling stations built to supply those trucks. “I think people here will be underestimating, not overestimating, gas in transportation,” Dickman said. Use in the long-haul market has been limited by the lack of a large engine those vehicles use, he said, but a 12-liter version from Cummins expected by August and being adopted by manufacturers should be a big boost. PACCAR, which produces Peterbilt and Kenworth brand trucks at its Denton plant, announced last year that it would use the engine.

For more, see Tuesday's Star-Telegram, and follow Jim Fuquay's continuing coverage of CeraWeek.

 

Anti-fracking rally in Austin planned for Monday

A group holding an anti-fracking summit in Dallas this weekend also plans a rally in Austin on Monday. Organizers say they hope residents "from Texas and across the country" will meet at the state capitol "to end dangerous oil & gas extraction, to require water protections & accountability of industry and respect for local control." It's set for noon, March 4, at 11th Street and Congress Avenue. For more information, click here.

-- Jim Fuquay

New Barnett Shale study sees production through 2030

The Barnett Shale can be expected to produce about 44 trillion cubic feet over its lifetime, more than three times its production to date, and will still be a  significant producer in 2030, according to a new study by the Bureau of Economic Geology at the University of Texas at Austin. After peaking at about 2 trillion cubic feet a year in 2011, the field will see "slowly declining production" that by the year 2030 is still about 900 billion cubic feet a year. The BEG used data through 2010 from 15,000 wells in the big North Texas field and assumes future natural gas prices averaging $4 per 1,000 cubic feet.

Even though the productivity of the field varies greatly, the study found, "there are still many locations to drill in the better rock," according to a news release describing the study's findings. Scott Tinker, director of the BEG and one of the study's principal investigators, said "drilling the better rock won't last forever, but there are still a few more years of development remaining in the better rock quality areas," according to the release. The study forecasts another 13,000 wells drilled in the field through 2030 after the study's cut-off date, a figure that includes about 2,900 wells drilled in 2011 and 2012.

The BEG said its method of estimating production from shale wells "should offer a more accurate method of forecasting production declines in shale gas wells," a point of dispute between some producers and skeptics such as Houston geologist Art Berman. As the study notes, its estimate "falls in between some of the more optimistic and pessimistic predictions of production from the Barnett." The BEG's release on the study says it "reaffirms the transformative, long-term impact of shale and other unconventional reservoirs of oil and gas on U.S. energy markets." It quotes Tinker as comparing shale gas reserves development as "potentially analogous to offshore oil in terms of impact."

The BEG's release on the study is here. The Star-Telegram reported on some of the report's findings earlier, focusing not just on Tinker's forecasts but also individual well productivity . The BEG's release does not address its findings on the average Barnett well's cumulative production over its lifetime, called the estimated ultimate recovery, or EUR. A link to that report is here.

-- Jim Fuquay