Matador Resources Open to Leaving Eagle Ford

August 22, 2016 Elizabeth Alford

Matador Resources is weighing opportunities to sell or trade its Eagle Ford assets.

Executives for Matador Resources reported strong results for the second quarter of 2016, highlighted by ‘milestones and achievements’ including significant production growth and operational efficiencies.

Matador’s Eagle Ford Operations

During an earnings call earlier this month, CEO Joseph Foran said that the company has done virtually no drilling in the region this year and that the area is not as strategic to the company as it has been in the past. He also revealed that the company is open to opportunities to part with some or all of its Eagle Ford assets.

Foran was careful to say that they were not being aggressive in pursuit of a deal, but that if the right opportunity came along they would entertain it. He said that, ideally, they would like to trade property for acreage in the Delaware or Haynesville Basins.

“We are just saying, look, Matador is on a good roll. We are pretty excited about things, and the best time to sell an asset is when you don’t have to. But it is not a fire sale; it is not – as we do with any assets, we do a methodical thing and want to be sure that we have signaled we are open.”

— Joseph Foran, Chairman and CEO

Second Quarter Highlights:

Record average daily production: 28,000 barrels of oil equivalent (“BOE”) per day (23,800 in Q1)
Capital expenditures during the first six months of 2016 of approximately $198 million
Net loss of $105.9 million versus a net loss of $107.7 million in Q1
Lease operating expenses (“LOE”) of $5.17 per BOE, a decrease of 28% sequentially, as compared to $7.14 per BOE in the first quarter of 2016, and a decrease of 16% year-over-year, as compared to $6.18 per BOE in the second quarter of 2015.

Karnes County Couple Sues Marathon Oil

August 18, 2016 Elizabeth Alford

One couple from Karnes County exemplify how hard mineral owners have to fight to make sure their royalty payments are correct.

John and Kelly Foster filed suit on Wednesday in order to obtain records from Marathon Oil that details the activity from their 613 acres in production. The family’s attorney said the couple is currently not seeking damages, but that a lawsuit was the only way to obtain information about how their royalty payments were calculated.

Texas has laid a heavy burden on mineral owners to make sure energy companies pay what is owed. In 2012, the Texas Supreme Court issued a decision in Shell v Ross that requires owners to do their own exhaustive audits to find out if payments are correct. If an owner suspects a problem, they have a four year time limit to request an audit. While this seems like it should be plenty of time, it isn’t always clear what operators are doing and sometimes a problem may not be obvious until it is too late.

“Not all companies are willing to share information, and not all leases have an audit provision that allows royalty owners to see the books that show how their royalties were calculated.”

— Oil and gas attorney John McFarland

Karnes county is the most prolific space in the Eagle Ford and across Texas, currently running eight rigs in their county . The Texas Railroad Commission records show that wells on the Fosters’ land have produced nearly 600,000 barrels of oil condensate and more than 4.2 billion cubic feet of natural gas over the past five years.

Sanchez Energy to Increase Upstream Spending

August 16, 2016 Elizabeth Alford

Sanchez Energy Corp. reported excellent production returns for the second quarter of 2016 and announced plans to increase upstream capital spending to between $250 million to $300 million.

During a second quarter earnings call, Sanchez’ CEO Tony Sanchez credited their results to competitive well costs, record production and improvements in the commodity price environment.

Sanchez continues to experience great results from their Eagle Ford operations including drill costs of below $3 million for wells at both Catarina and Cotulla.

“The commodities or the company’s Eagle Ford development plan remains focused on Catarina, where in conjunction with the uptick and spending plan under our updated capital plan, the company is currently running three rigs and expects to maintain an activity set of two rigs for remainder of the year.”

— Sanchez

Second quarter highlights include:

Plans to increase its 2016 upstream capital spending by up to $50 million, to a range of between $250 million to $300 million
Total production of 5.1 million barrels of oil equivalent (“MMBoe”) during the second quarter 2016, up approximately 4% over the second quarter 2015
Average production of approximately 55,900 barrels of oil equivalent per day (“Boe/d”), which exceeded the high end of the Company’s guidance of 48,000 to 52,000 Boe/d for the second quarter 2016 by over 7%
Average drilling and completion costs between $3-3.3 million per well
Revenues of approximately $111 million (up approximately 39% over Q1)
$146 million in revenue
Adjusted EBITDA of approximately $79.6 million (up 23% over Q1)

In July, Sanchez Production Partners (SPP) initiated a transaction with Sanchez Energy to acquire 50% interest in Carnero Gathering, LLC. The company expects that the $44 million deal will increase their midstream revenue and adjusted EBITDA to approximately $7 million.

Cabot to Reduce Spending in the Eagle Ford

August 15, 2016 Elizabeth Alford

Cabot Oil and Gas announced second quarter results, highlighting a 10% production increase, costs reductions of 12% and three Eagle Ford wells added to production.

During a recent earnings call, Cabot executives commented on their Eagle Ford operations, saying it is likely they will cut back on the money spent in the region for the rest of 2016. Though the company’s Eagle Ford assets assets exceed the capitol costs, the return doesn’t warrant additional spending at this time.

Cabot’s Eagle Ford Shale assets achieved net production of 14,312 barrels of oil equivalent (Boe) per day during the second quarter, an increase of 10% over the first quarter of 2016. The Company completed and placed on production three net wells during the quarter and plans to drill two Eagle Ford wells during the third quarter.

“Despite a significant reduction in our Eagle Ford operating activity, including no wells drilled and only three wells completed during the quarter, our oil volumes for the second quarter exceeded our guidance due to outperformance from the newer wells that were placed on production. We are forecasting declines in our oil production volumes for the remainder of the year (…) and our plan is to continue to allocate a minimum amount of capital to our Eagle Ford assets”

— Dan O. Dinges – Chairman, President & Chief Executive Officer

Second quarter highlights include:

Cash flow from operating activities was $85.2 million ($171.2 million for 2015)
Net loss was $62.9 million ($27.5 million for 2015)
Operating expenses decreased to $2.22 per thousand cubic feet equivalent (Mcfe), a 12% improvement

Texas Oilfield Relief Initiative Takes Shape

August 11, 2016 Elizabeth Alford

The Texas Railroad Commission is getting a facelift designed to benefit public and industry interests.

Railroad Commissioner Christi Craddick gave more details this week on the Texas Oilfield Relief Initiative, a new project designed to make the state’s energy regulatory body more efficient and effective. Craddick says that the initiative will still ensure public and environmental protections while also reducing the regulatory administrative burden on industry.

“With the current industry downturn, at stake is the survival of the state’s small producers and the oil industry’s many marginal wells, which make up 85 percent of total U.S. oil wells and 18 percent of the nation’s total oil output,” said Judy Stark, Panhandle Producers and Royalty Owners Association Executive Vice President. “During this critical time, Commissioner Craddick’s initiative will provide relief to Texas’ independent producers, the backbone of both our state and nation’s oil industry. For that, PPROA’s members are truly grateful.”

Industry officials and interest groups have been quick to praise the initiative, including representatives of the Texas Independent Producers and Royalty Owners Association, Panhandle Producers and Royalty Owners Association, Texas Alliance of Energy Producers, Permian Basin Petroleum Association and the Texas Oil and Gas Association.

Details of the Texas Oilfield Relief Initiative that will reduce adminstrative burdens include:

Identify agency reports and filings that can be reduced or eliminated

Amend rules to modify gas well deliverability reporting requirements

Reduce the need for G-10 filings except for surface commingled production

Allow a calculated well shut-in pressure to be provided when filing Form G-10 for gas wells

Amend production requirements for marginal and stripper wells

Revise “Active Oil Well” definition from ten barrels of oil (BO) per month for 3 consecutive months to five BO per month for 3 consecutive months or any reported production in each month for a consecutive 12 month period (SWR 15)

Revise “Active Gas Well” definition from 100 mcfg per month to 50 mcfg per month or any reported production in each month for a consecutive 12 month period (SWR 15)

Implement a revised internal inspection priority system

Reviewing washout factors to determine whether different washout factors should be used in certain areas of the state to calculate cement tops

Identify counties or portions of counties in which the usable quality water protection depth is constant.

Issue guidance for implementation of the Texas Environmental, Health & Safety Audit Privilege Act, permitting operators of new property to identify and remedy violations resulting previous to their ownership

Conduct an extensive review of all Railroad Commission forms required determine whether data collected is currently used or no longer necessary. Eliminate forms no longer useful to the Commission’s regulatory functions to reduce regulatory administrative burden on staff and industry.

Simplify the complete duplication of a drilling permit application with a sworn statement of no changes to the original application