EIA: Natural Gas Consumption on the Rise

July 19, 2016 Elizabeth Alford

Natural gas consumption will continue to rise through 2017, providing more opportunities for Eagle Ford midstream operations.

In their latest report, the U.S. Energy Information Administration (EIA) projects that the United States will become a net exporter of natural gas by late 2017. Analysts expect production to rise through 2016 and 2017 in response to forecast price increases and increases in liquefied natural gas (LNG) exports. Other EIA forecasts include:

U.S. total natural gas consumption averages 76.5 Bcf/d in 2016 and 77.7 Bcf/d in 2017, compared with 75.3 Bcf/d in 2015.
Electric power sector use of natural gas increases by 4.9% in 2016 and will decline by 1.4% in 2017
Industrial sector consumption of natural gas increases by 2.7% in 2016 and by 1.5% in 2017

Exports will play a big part in the surge of consumption, The report predicts LNG exports will rise to an average of 0.5 Bcf/d in 2016 and 1.3 Bcf/d in 2017.

“Natural gas pipeline exports to Mexico have risen this year, and EIA expects that growth to continue because of growing demand from Mexico’s electric power sector and because of flat natural gas production in Mexico. Gross pipeline exports are expected to increase by 0.7 Bcf/d in 2016 before falling by 0.2 Bcf/d in 2017 to an average of 5.3 Bcf/d.”

— EIA

Eagle Ford midstream companies are looking to prosper as natural gas exports overtake imports over the next 16 months. TransCanada and Spectra Energy are two producers who will receive $3.6 billion in contracts from Mexico’s state-owned Federal Electricity Commission to build 665 miles of pipelines to carry natural gas.

Other Eagle Ford companies uniquely positioned to take advantage of these markets in the coming months include:

Howard Energy Partners: With acreage in Webb County, Howard plans to build a 200-mile pipeline to deliver 600 million cubic feet of natural gas per day to Mexico
Lewis Energy: A top producer with positions inLa Salle, Webb and Dimmit Counties.
Energy Transfer Partners: ETP already has natural gas export capabilities in Webb County and the Rio Grande Valley.
Sanchez Energy: With tens of thousands of acres in the natural gas-rich lands of La Salle, Dimmit and Webb Counties, Sanchez entered a joint venture worth$115 million to bridge connections to Mexico.
Flint Hills Resources: Has petitioned the federal government to ship LNG oversees.

Eagle Ford Companies Struggle as Bankruptcies Soar

July 18, 2016 Elizabeth Alford

Two more Eagle Ford companies are showing signs of trouble as Texas oil and gas bankruptcies skyrocket.

During the past week, C&J Energy Services and Atlas Resource Partners have joined the ranks of Eagle Ford companies who are trying to stay afloat.

C&J announced it would convert $1.4 billion of its debt into new common equity shares as part of its chapter 11 restructuring.

“We are pleased to enter into this Restructuring Support Agreement, which is a significant step forward in our ongoing efforts to deliver our capital structure, strengthen our business and respond proactively to the challenging market environment. After a thorough evaluation of our options, we are confident that we have reached a deal that is highly advantageous for C&J and will provide solid financial footing to enable us to capitalize on future opportunities as the commodity pricing environment begins to recover.”

— Chief Executive Officer and Chief Operating Officer Don Gawick

Atlas Resource Partners was delisted from the New York Stock Exchange after missing a debt payment. The company annoucned it was having cash flow problems and will now be traded on a securities exchange run by the New York-based OTC Markets Group (OTCQX). Atlas currently has 22 producing wells in Atascosa County, Texas.

Texas has been hit specifically hard with industry bankruptcies. According to the law firm of Haynes and Boone, more that half (25) of the 2016 filing being initiated in Texas courts. The combined total Texas bankruptcy filings for 2015-16 is 43, representing approximately $29 billion in cumulative debt.

Energy Hunter Resources Moves into Karnes County

July 14, 2016 Elizabeth Alford

**Energy Hunter Resources Acquires Eagle Ford Assets**

Dallas-based Energy Hunter Resources has acquired Eagle Ford assets in Karnes County.

In a press release this morning, Energy Hunter Resources announced completion of a private placement of its common stock worth approximately $3.15 million. The company used a portion of the proceeds to purchase two separate lease blocks in the Eagle Ford.

The deal includes approximately 500 net acres located along the Karnes Condensate Trend in Karnes County, Texas. At this time, the company has made no drilling commitments on this acreage, but indicated the prospect for drilling in Eagle Ford Shale and the Austin Chalk in 2017. The company estimates that 14 wells can be drilled in the lower Eagle Ford formation between the two prospects, as well as an additional 10 wells in the upper Eagle Ford.

“For more than 30 years, members of the new Energy Hunter team and I have worked in and around many of these fields. We therefore used our knowledge and experience in these fields and allocated a portion of the proceeds from the private placement to acquire two lease acreage blocks in the heart of the Eagle Ford shale in Karnes County, Texas. We will continue to explore and analyze similar opportunities and provide updates as we begin development of our new acreage position in the Eagle Ford Shale.”

— Gary C. Evans, Chairman and CEO

Highlights of the deal include:

Completed private placement of 3,150,000 shares issued at a subscription price of$1.00 per share
Private placement oversubscribed by approximately 25 percent
Total gross proceeds of approximately $3.15 million
Acquired two acreage lease blocks totaling approximately 500 net acres located in the heart of the Eagle Ford shale in Karnes County, Texas along the Karnes Condensate Trend
Combined recoverable reserves estimated at 16 MMBOE
Total estimated ultimate recoveries range between 400 MBOE and 620 MBOE per well
At current strip pricing, adjacent wells have reached payout in less than one year with ROI’s greater than 80 percent

Read full press release at energyhunter.com

Abraxas to Drill in Atascosa County

July 13, 2016 Elizabeth Alford

Abraxas is moving forward to drill in the Austin Chalk without joint venture partnership.

Abraxas Petroleum Corporation announced last week it has begun the process to drill their first well that targets the Austin Chalk at Jourdanton in Atascosa County. The company spudded Bulls Eye 101H on June 16 and estimates that the well will be producing by September 2016. Executives estimate that the drilling and completion costs for this first well will be around $5.8 million, which Abraxas will shoulder alone after terminating talks for a potential joint venture on this project.

“Although we are disappointed we could not come to an agreement with this potential partner in a timely manner, drilling this well on our own will give our shareholders more upside exposure compared to the reduced working interest in the joint venture.”

— Bob Watson, President and CEO of Abraxas

Abraxas also announced it is increasing its 2016 capital expenditure budget from $25 million to between $30 million and $40 million. All of this new activity is on the heels of a change in company leadership as Lee T. Billingsley, Abraxas’ Vice President of Exploration, resigned his position at the beginning of the month.

Texas Oil & Gas Bankruptcies Lead Pack

July 12, 2016 Elizabeth Alford

**Oil & Gad Bankruptcies 2015-16 | click to enlarge**

Texas leads the country in oil and gas bankruptcies for 2015 and 2016.

The law firm of Haynes and Boone has tracked energy industry bankruptcies in North America since 2015. The firm recently issued its latest report announcing that there have been 43 producers who have filed bankruptcy since January. The combined secured and unsecured debt represented in these filings is approximately $44 billion.

“More than three-dozen North American oilfield service companies commenced Chapter 7, Chapter 11 and Canadian bankruptcy cases in 2015 involving over $5.3 billion in cumulative secured and unsecured debt. As of June, 2016, 43 oilfield service companies have filed bankruptcy so far this year, totaling over $3.9 billion in cumulative debt.”

— HaynesBoon blog

Texas has been hit specifically hard, with more that half (25) of the 2016 filing being initiated in Texas courts. The combined total Texas bankruptcy filings for 2015-16 is 43, representing approximately $29 billion in cumulative debt.

Analysts believe that the carnage isn’t over and that the industry will see more filings throughout 2016.

Below is a list of the companies who filed since 2016.

January
- Aurora Operating LLC (Southern); $2.35 million
- MOG Producing LP (Southern); $4.29 million
- Antero Energy Partners LLC (Northern); $25.45 million

February
- Emkey Resources LLC (Northern); $22.35 million
- Ginger Oil Co. (Southern); $6.47 million
- Argent Energy U.S. Holdings Inc. (Southern); $51.9 million
- Primrose La Sara LLC (Southern); $4.3 million
- DRM Sales & Supply LLC (Western); $19.18 million

March
- GreenHunter Resources Inc. (Northern); $23.7 million
- Universal Well Service Holdings Inc. (Northern); $25.15 million
- Wellhead Distributors International (Southern); $31.7 million
- RMR Operating LLC (Northern); $3.5 million
- ESP Petrochemicals Inc. (Southern); $7.4 million
- Wellflex Energy Solutions LLC (Northern); $3.9 million
- DJ Oilfield Sevices LLC (Northern); $3.01 million
- East African Drilling Ltd. (Southern); $45.35 million
- Crossfire Manufacturing LLC (Northern); $653,600
- 7711 Operating Company LLC (Northern); $532,500

April
- ATK Oilfield Transportation Inc. (Western); $34.9 million
- Sanjel Inc. (Western); $1.1 billion
- Bluff Creek Production LLC (Western); $7.09 million
- Hydrocarb Energy Corp. (Southern); $12.5 million
- Aztec Oil & Gas Inc. (Southern); $1.5 million
- Energy XXI Ltd. (Southern); $2.75 billion
- DiamoNorthern District Tank Rental Inc. (Northern); $8.92 million
- Goodrich Petroleum Corp. (Southern); $444.2 million
- FPUSA LLC (Eastern); $2.3 million
- Paladin Energy Corp. (Northern); $23.48 million
- Trinity River Resources LP (Western); $133.8 million
- West Texas Poly Pump LLC (Western); $3.7 million
- Ultra Petroleum Corp. (Southern); $3.9 billion
- Midstates Petroleum Company Inc. (Southern); $2.045 billion

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May
- CaNorthern Districtescent Well Service LLC (Western); $0
- *Linn Energy LLC (Southern); $5.962 billion
- *Berry Petroleum Company LLC (Southern); $1.733 billion
- J P S Completion Fluids Inc. (Western); $4.49 million
- SandRidge Energy Inc. (Southern); $4.19 billion
- Hawk Oilfield Service Inc. (Southern); $1.2 million
- Tall City Well Service LP (Western); $14.4 million
- Ricochet Energy Inc. (Western); $11.35 million
- Armada Water Assets Inc./Wes-Tex Vacuum Service Inc. (Southern); $24.9 million
- Mark A. Martinez LLC (Southern); $0
- Linc USA GP (Southern); $414.35 million

June
- Warren Resources Inc. (Southern); $486.3 million