Chesapeake Energy Loses $4.15 Billion

August 6, 2015 Elizabeth Alford

Chesapeake Released 2015 Q1 — Chesapeke Energy Q2 Report

Chesapeake Energy Corp reported second quarter results on Wednesday amidst speculation about the viability and future of the company.

Like many other shale drillers over the past year, Chesapeake is struggling. Prolonged crude prices and legal trouble are taking its toll and for the second straight quarter the company is reporting a huge net loss. For Q2, the loss is $4.151 billion.

Analysts are having a field day predicting whether Chesapeake will sell or find partners for its oil and gas fields, with some suggesting that the company is ripe for a takeover.

In the face of all the speculation, Doug Lawler, Chesapeake’s Chief Executive Officer, responded confidently in a conference call to investors, sharing that there are several scenarios where the company would be able to accelerate its drilling activity and production beginning in 2016.

“I believe the strength and optionality of our portfolio provides meaningful opportunities to increase our liquidity and future cash flow. As a result, we are reviewing opportunities in multiple operating areas to create additional value through strategic asset sales, joint venture agreements and participation, or farmout agreements. Options for potential transaction proceeds include additional drilling in 2016 and enhancing our capital structure.”

— Doug Lawler

Eagle Ford Highlights

Year-to-date well costs are down 12% from the 2014 average to $5.2 million per well
Production decreased by 7% this quarter to average approximately 105 thousand barrels of oil equivalent (mboe) per day. The company blamed the decrease on a facility that was out of commission for more than 60 days, but as the facility was brought back online, the company reports an all-time production high of 127,000 BOE per day in July
Chesapeake expects to spud its first upper Eagle Ford well in the 2015 third quarter
Operated rig count in the Eagle Ford averaged six rigs in the 2015 second quarter, down from 20 a year ago, and the company anticipates maintaining three operated rigs for the second half of the year.

Other Q2 Highlights

Production averaged approximately 703,000 boe per day, an increase of 13% year over year, adjusted for asset sales
Adjusted net loss of $0.11 per fully diluted share and adjusted ebitda of $600 million
2015 total production guidance increased to 667 – 677 mboe per day, up 4% from midpoint of prior guidance
2015 production and general and administrative expense guidance lowered
2015 capital guidance maintained at $3.5 – $4.0 billion
Strategic asset sales, joint ventures and participation agreements being pursued in multiple operating areas

Oil & Gas Deals in the Eagle Ford

August 5, 2015 Elizabeth Alford

As crude prices continued to decline through the month of July, businesses involved in the Eagle Ford continue to buy, sell and take advantage of all opportunities to stay afloat during this lean time.

Following is a summary of some of the Eagle Ford deals in recent weeks.

NextEra Energy Partners LP will buy seven natural gas pipelines in Texas for $2.1 billion from NET Midstream. These new assets serve power producers and municipalities in South Texas, processing plants and producers in the Eagle Ford shale play and provide natural gas transportation for shale gas being shipped to Mexico. The Eagle Ford assets include:

The NET Mexico Pipeline: a 120-mile, 42-in.-diameter pipeline that delivers low-cost natural gas from the Eagle Ford shale play to the Mexico border
The Eagle Ford Pipeline: a 158-mile, large-diameter natural gas pipeline The system's connection to the Agua Dulce Hub, with access to multiple pipeline interconnects, as well as Mexican markets, uniquely positions the system to attract additional Eagle Ford shale volumes.

Lonestar Resources Ltd. has agreed to a joint development agreement (JDA) with Dallas’ IOG Capital LP. which will add an $100 million for its Eagle Ford drilling efforts fund and develop additional farm-in opportunities such as Horned Frog, a 3,614-acre leasehold recently acquired in La Salle County, Texas

“The JDA will give Lonestar the flexibility to ‘spread its drilling capital over a larger number of wells, which should have positive benefits in terms of scale’ and up the number and size of acquisitions it can execute.”

Nustar Energy will lease space at the Port of Corpus Christi and plans to develop a private marine loading dock at its North Beach Terminal, which will expand the company’s ability to ship out more barrels of crude oil from the Eagle Ford Shale. The new dock should be completed in the second quarter of 2017 and will have the capacity to load up to 30,000 barrels per hour.

Goodrich Petroleum Corp. announced it will sell a portion of its Eagle Ford Shale leases in LaSalle and Frio Counties in a $118 million deal. The company declined to say who bought the acreage but acknowledged it will retain about 17,000 net acres of its undeveloped leases for future development or sale. The deal is expected to close on Sept. 4.

Noble Energy: $109 Million Loss in Q2

August 4, 2015 Elizabeth Alford

Noble Energy announces plans to increase Eagle Ford activity through 2018 in addition to reporting a second quarter net loss of $109 million.

Despite the huge quarterly loss, Noble reported a total sales volume that averaged 299 thousand barrels of oil MBoe/d, an increase of three percent compared to the second quarter of 2014. Liquids comprised 43 percent of second quarter 2015 sales volumes, with natural gas the remaining 57 percent.

CEO David L. Stover acknowledged the 'challenging times in the industry' but was certain that the recent move into the Eagle Ford after acquiring Rosetta Resources, would aid in the positive momentum for the company.

In a conference call last week, Noble executives revealed plans to accelerate well activity in the Eagle Ford through at least 2018 by pumping $825 million into the region.

“Our plan is to focus on the lower Eagle Ford for the next few years, increasing well lateral length to an average of around 7,000 feet. We are currently drilling our first Eagle Ford well and have already implemented improvements that have materially increased footage drilled per day.”

— Gary W. Willingham, EVP-Global Production & Supply Chain Activities

When the Rosetta deal finalized on July 20, 2015, Noble acquired approximately 50,000 net acres in the Eagle Ford Shale along with more than 1,800 gross horizontal drilling locations identified for development.

Eagle Ford Companies Eye Mexico

August 3, 2015 Elizabeth Alford

Midstream companies in south Texas have the opportunity to reap big rewards by helping Mexico expand its energy industry.

Mexico's new energy reforms launched in 2014 and unleashed a demand for billions of dollars to grow the country's infrastructure. Mexico’s state-owned company, the Comisión Federal de Electricidad (CFE), stepped up its efforts to woo Eagle Ford companies and is soliciting contract bids for $10.3 billion in new pipelines projects.

“There’s a mix of folks who have the capability to do these. It’s going to be interesting to see which ones take hold of the opportunity.”

— Glenn Pinkerton, CFE Representative

One Eagle Ford smart businessman seized on this opportunity right from the beginning. Mike Howard, owner of Howard Energy Partners, purchased a network of pipelines to move natural gas from South Texas’ Eagle Ford wells in 2011 and soon began thinking about expanding across the border. In June, his company began negotiating with Mexican natural gas buyers in order to move forward with a new 200-mile natural gas pipeline from Webb County to the manufacturing and industrial hub of Escobedo in Nuevo León, Mexico.

Wood Mackenzie predicts that Mexico’s demand for natural gas will increase by about one-third by 2020 at the same time that U.S. natural gas exports to Mexico could more than double. This will require thousands of miles of pipeline to get the product across the border and more opportunity for Eagle Ford companies.

Eagle Ford Rig Count at 111

July 31, 2015 Elizabeth Alford

The Eagle Ford Shale rig count slipped by one to 111 rigs running across our coverage area by midday Friday.

In recent Eagle Ford news, Fortress Environmental Services announced that its $9.3 million disposal facility is now open for business and can accept 25,000 barrels of produced saltwater.

Eagle Ford Oil & Gas Rigs

Natural gas rigs in the Eagle Ford fell to 23 this week and natural gas prices traded at $2.71/mmbtu, an $.12 decrease from the previous week.

The oil rig count remained at 88 as WTI oil prices dropped again to $46.91, a decrease of $1.22. A total of 102 rigs are drilling horizontal wells, zero are drilling directional wells, and nine are vertical rigs. Karnes continues to lead development this week running 20 rigs, with DeWitt (18) and Webb (14) follow closely. See the full list below in the Eagle Ford Shale Drilling by County below.

Eagle Ford Shale Drilling by County

Eagle Ford Shale News

Anadarko Waiting on Better Margins

Encana to Expand Eagle Ford Inventory

Cabot Plans to Reduce Eagle Ford Wells to One

What is the Rig Count?

The Eagle Ford Shale Rig Count is an index of the total number of oil & gas drilling rigs running across a 30 county area in South Texas. The South Texas rigs referred to in this article are for ALL drilling reported by Baker Hughes and not solely wells targeting the Eagle Ford formation. All land rigs and onshore rig data shown here are based upon industry estimates provided by the Baker Hughes Rig Count.