Low Price of O/G: Will Drilling Continue?

Seriously, does anyone think that these smaller companies will be able to wait out the low oil and gas prices? How can they drill and then wait for prices to go up? There will probably be a lot of empty hotels in Cambridge. Does anyone think the prices will ever go back up?  Fortunately, I did not go out and buy a new pick up truck.

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Permalink Reply by Philip Brutz on February 25, 2015 at 5:15am

http://seekingalpha.com/news/2323936-chesapeake-energy-makes-big-cu...

Chesapeake Energy makes big cuts to 2015 capex, rig count

Feb 25 2015, 08:18 ET | About: Chesapeake Energy Corporation (CHK) | By: Carl Surran, SA News Editor
  • Chesapeake Energy (NYSE:CHK) -4.4% premarket after reporting weaker than expected Q4 earnings and saying it will cut its 2015 spending and rig count in response to lower crude oil prices.
  • CHK says it plans total capital spending of $4B-$4.5B in 2015, 37% lower at the midpoint than the $6.7B spent in 2014, and will operate only 35-45 rigs this year, the lowest number since 2004 and down from an average of 64 rigs in 2014.
  • Even with the cutbacks, CHK forecasts 2015 oil and gas production to grow 3%-5% to 645K-655K boe/day.
  • In Q4, CHK's average production increased 12% Y/Y to 729K boe/day, while revenue rose 11% to $5.05B and driven by 47% revenue growth in its natural gas, oil and natural gas liquid segment; operating expenses fell 4.7% to $4.09B.
Permalink Reply by Philip Brutz on February 25, 2015 at 6:01am

http://investor.markwest.com/phoenix.zhtml?c=135034&p=irol-news...

Utica:
In November, MarkWest Utica EMG, a joint venture between the Partnership and The Energy & Minerals Group (EMG), commenced operations of the 200 MMcf/d Cadiz II plant to support rich-gas production from Gulfport Energy Corporation (NASDAQ: GPOR). MarkWest Utica EMG also announced the development of Cadiz IV, a 200 MMcf/d processing plant to support American Energy – Utica, LLC (AEU), an affiliate of American Energy Partners, LP. The new facility is scheduled to begin operations in the first quarter of 2016 and will increase MarkWest Utica EMG’s total processing capacity in Ohio to over 1.5 Bcf/d.
In November, the Partnership and MarkWest Utica EMG announced the development of a third fractionation facility at the Hopedale complex in Harrison County, Ohio. The new 60,000 barrels per day (Bbl/d) fractionator is scheduled to begin operations in the first quarter of 2016 and will increase total fractionation capacity for propane and heavier natural gas liquids to 283,000 Bbl/d in the Marcellus and Utica Shales.
In December, the Partnership and MarkWest Utica EMG commenced operations of a second fractionation facility at the Hopedale complex. The new facility doubled propane and heavier NGL fractionation capacity to 120,000 Bbl/d and jointly supports producers’ growing natural gas liquids (NGLs) production from the Marcellus and Utica Shales. For the fourth quarter of 2014 the C3+ fractionation capacity in the Marcellus and Utica operated at 102 percent utilization.
Today, Ohio Condensate Company, L.L.C., an entity owned by MarkWest Utica EMG Condensate, L.L.C. (MarkWest Utica EMG Condensate) and Summit Midstream Partners, LLC, is announcing the commencement of its condensate stabilization facility in Harrison County, Ohio. MarkWest Utica EMG Condensate is owned by the Partnership and EMG. The new facility consists of 23,000 Bbl/d of condensate stabilization capacity and is fully integrated with a storage and logistics terminal that is operated by a third-party and serves the facility exclusively.

Permalink Reply by Susan A Tippel on February 25, 2015 at 9:56am

Thank you, Philip.

Permalink Reply by Philip Brutz on February 25, 2015 at 2:19pm

http://seekingalpha.com/article/2951156-markwest-energy-partners-lp...

MarkWest Energy Partners LP (MWE) Frank M. Semple on Q4 2014 Results - Earnings Call Transcript

"It's also important to note that majority of our operations are located in some of the best shale plays in the U.S. Approximately 90% of our 2015 capital expenditures are in the rich gas areas of the Marcellus and the Utica shales where we process the vast majority of total production, and the drilling economics are the best in the country."

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9MjcyMDU4...

Permalink Reply by Philip Brutz on February 25, 2015 at 10:44am

http://files.shareholder.com/downloads/GPOR/4024148488x0x811873/740...

Operational Update and 2015 Outlook

Utica Shale

In the Utica Shale, Gulfport spud 85 gross (67.2 net) wells and turned-to-sales 63 gross (47.4 net) wells during 2014. During the fourth quarter, net production from Gulfport's Utica acreage averaged approximately 353.4 MMcfepd, an increase of 450% over the fourth quarter of 2013. "Our Utica Shale production for the fourth quarter of 2014 increased 55% sequentially over the third quarter of 2014, driven by the strong well performance of the 22 gross wells that were turned-to-sales during the quarter. We continue to be pleased with the results of our managed pressure program, and during the fourth quarter of 2014 we turned-to-sales our first four well pad in the dry gas phase window of play under the program. While we continue to monitor the data, the wells are performing in line with expectations," stated Mr. Moore.

At present, Gulfport has four operated horizontal rigs drilling in the play but plans to release one of these rigs by the end of the first quarter. During 2015, Gulfport has budgeted $400 million to $430 million to drill approximately 46 to 52 gross (28 to 32 net) horizontal wells and turn-to-sales 49 to 53 gross (42 to 46 net) horizontal wells in the Utica. In addition, Gulfport anticipates spending $125 million to $140 million on non-operated activities taking place on its acreage by other operators who plan to drill approximately 11 to 16 gross (4 to 6 net) horizontal wells and turn-to-sales 50 to 64 gross (7 to 9 net) horizontal wells. Mr. Moore commented, "During 2015, we currently expect all Utica Shale drilling activities to take place in the wet gas and dry gas phase windows, the highest rate of return areas of the play. We continue to see improvements on the ground and as a result of operating efficiencies and the service cost reductions we have received to date, we currently expect approximately 15% lower well costs during 2015."

Today, the Company currently has approximately 188,000 gross (184,000 net) acres under lease in the Utica Shale.

Permalink Reply by jonathan M. on February 25, 2015 at 4:11pm
Annie,

I disagree with your assessment that prices are not having impact not the area. Gulfport had 7 rigs running in the play not long ago now down to 4. The above update just confirmed they are releasing another rig so down to 3. Pdc has announced they are pulling their one and only utica rig and Carrizo just announced the same. Chesapeake announced they are to run 3-5 rigs this year in utica much less than they were running. Seems like the price is certainly having an impact...
Permalink Reply by Annie Miller on February 26, 2015 at 9:47am
It is the largest plant of its kind being built to accept the gas coming in off of four Gulfport wells that are under construction in Sunsbury Township, Monroe county Ohio. Their wells are not even fracked yet, but evidently their geologists are expecting previously unheard of high pressure volumes of gas coming out of these wells; there are four wells a mile apart in Sunsbury Township. All four went up at the same time, very quickly.
Currently they are waiting for the pipelines and reduction plant to be finished, in their thinking, no point in fracking the wells until there is the infrastructure to handle this immense volume and high pressure of gas that is expected to come out of them.
A reduction plant reduces the pressure coming off the well head to a pressure that is safe to transport through the the regular pipelines to the processing/cracker plants.
All the people that live right next to the wells, that will have the high pressure gas lines running at
prereduction pressures are nervous as all get out.
Gulfport knows what's down there, or they wouldn't have drilled so close together and so fast, or needed this huge reduction facility.
Gulfport bought up every unleased acre of ground in these parts in the past three years, right after the thumper trucks measured whatever they are looking for in the Township back then. Their geologists found something very exciting down there, from their point of view to go after.
Time will tell, and I expect every other gas company is waiting to see what comes out of those wells as well.
Permalink Reply by Philip Brutz on February 26, 2015 at 1:31pm

http://seekingalpha.com/article/2956376-gulfport-energys-gpor-ceo-m...

"In early August, when we first began our budgeting cycle for 2015, the CLF15 strip for WTI was trading near $93 per barrel, and NYMEX gas was hovering at $4 per MMBtu. At that time, Gulfport was operating 8 rigs in the Utica Shale. Following the OPEC announcement in late November and a milder-than-expected winter, today the CLF15 strip for WTI is 38% lower at $57.50 per barrel and CLF15 NYMEX gas is trading 25% lower at $3 per MMBtu.

Today, we operate half the number of rigs in Utica Shale we had running 4 months ago. While there has undoubtedly been a marked decline in commodity prices, we believe Gulfport's track record and continued dedication to capital discipline, conservative leverage and long-term value will be rewarded by this market that has undergone a fundamental shift in how to valuate investment in the E&P space.

So now let's talk about Gulfport's goals for 2015. First, we are positioning the business to weather this downturn while also taking advantage of the long-term value proposition associated with exiting the site with strength. We remain firm in our commitment to make sound return-based decisions. The Utica is an exceptional rock, and when coupled with a strong capital structure, a well thought-out marketing plan and a strategic hedging program, we can generate a very attractive return on capital, while also growing towards a brighter macro environment for natural gas."

"

Third, in balancing the compelling phase for investing in Utica, while also keeping in mind the importance of preserving our strong balance sheet, we intend to fund our 2015 activities from within cash flow and no sources of liquidity. To achieve this, capital will be allocated predominantly to drilling and completion activity in the wet and dry gas windows of Utica Shale, while limiting leasehold acquisition, nonoperated activity and noncore asset spending. The goal is simple, deliver high returns in today's commodity price environment, exiting the year strong fourth quarter 2015 over fourth quarter 2014, while protecting balance sheet strength and preserving financial flexibility.

So with these goals in mind, let's move on to the specifics of our 2015 guidance. Gulfport announced yesterday evening that our Board of Directors has approved the capital budget for 2015 of $630 million to $690 million, a decrease of approximately 40% from our 2014 budget. This budget includes approximately $545 million to $595 million in exploration and production activities, with 96% of that allocated to the Utica Shale and the remaining 4% allocated to Southern Louisiana. Our leasehold expenditures budgeted for 2015 total $85 million to $95 million, which represents a 78% lower leasehold spend than in 2014.

Gulfport has significantly dialed back spend for leasehold, as we plan to limit our expenditures to only acreage renewals and small acreage additions to blocked-up plant units in our long-term development plan. In 2015, we have carefully considered every dollar being spent. And outside of our joint development area with Rice, we have considerably limited the amount of capital allocated towards nonoperated activity during the year.

In 2015, we anticipate spending $125 million to $140 million on nonoperated activities in the Utica Shale, of which 75% is allocated towards our joint development AMI with Rice. To provide additional clarity on 2015 plans, we have opened out our Utica Shale well activity into 2 phases; drill and turn to sales. This year, we expect to drill 46 to 52 gross wells, equating to 28 to 32 net wells and turn to sales 49 to 53 gross wells, which equates to 42 to 46 net wells on our operated acreage in the Utica. In addition, we currently forecast our partners to drill the equipment of 4 to 6 net wells and turn to sales 7 to 9 net wells on our nonoperated acreage during 2015.

We enter 2015 with maximum flexibility related to rig contracts. As we stated on our prior call, of the 6 rigs we had running on January 1, 4 came up for contract renewal during the first quarter and the remaining 2 will come for renewal by mid-summer. This exploration schedule has provided optionality, as we plan for 2015, and let the team with the opportunity to negotiate lower day rates with contractors and optimize equipment packages to address the extraordinary pressures we are accounting in the southern portion of the play. When compared to fourth quarter 2014, the rig count in the Utica today has decreased only 9%, as compared to the total U.S. Land rig count, which is down 30% and continues to decline week over week. I believe this serves as a testament to the value of the Utica and its ability to generate strong returns at today's pricing. That said, with commodity prices down significantly, late last year, Gulfport began aggressively working with our vendors to negotiate service cost savings. Our purchasing department walked line by line through our AFB and to date, we have received 4 bids from vendors that represent an overall 10% reduction in service cost. Coupled with this throughout 2014, Gulfport's continued focus on operational efficiencies have resulted in a 5% overall decrease to well cost. Between reduced service cost and efficiency gains, we are now currently estimating future well cost to be 15% lower than our estimates provided last November. Despite having firm bids in hand, for purposes of timing and conservatism, our 2015 capital guidance assumes service cost reductions are not realized until beginning the second quarter of 2015 and beyond.

In the Utica, we currently have 4 operated rigs running in the play and plan to release 1 rig at the end of the contract next month. This will adjust for an average of 3 point gross operator rigs running on our acreage in the Utica during 2015. In our presentation uploaded to the website, yesterday evening in conjunction with the earnings, we have provided a map that highlights the 2015 drilled and planned units, and as you can see, all 2015 drilling activities will take place in the wet gas and dry gas space windows of the play. In addition, we currently estimate that the nonoperated activity occurring on our acreage during 2015 equates to 1/3 of a [ph] new rig running through the year in the dry gas window, bringing Gulfport's total operated and nonoperated to an average of 4 rigs running in 2015.

To better align with our planned operated rig count during 2015, we have started to slow our pace of completions. During 2014, our operations team saw a tangible benefit with the creation of well inventory with the goal of maintaining 3 to 5 pads in the inventory at all times. Although our 2015 plan forecast a reduced level of drilling activity, the goal is to maintain a similar well completion inventory and we currently forecast to exit 2015 with approximately 23 to 29 gross wells in inventory. In addition, by slowing the pace of completions, we are being strategic with our turn-in schedule throughout the year, maximizing the value of our molecules while slowing cash outflows."

Permalink Reply by Trapper on February 26, 2015 at 3:38pm
I'll be darned.....costs are falling too. Jeez,I guess capitalism works after all....;-)
Permalink Reply by Philip Brutz on February 27, 2015 at 1:43pm

Gulfport Energy: Stellar Growth Story Continues

Feb. 27, 2015 6:29 PM ET | About: Gulfport Energy Corporation (GPOR)

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More...)

Summary
•Gulfport Energy has recently released strong fourth quarter results.
•Gulfport Energy has cut 2015 CapEx by 40%, but could still post up to 100% increase in production.
•Despite weak commodity prices, the company’s growth story is not coming to an end. Here’s why.

Gulfport Energy (NASDAQ:GPOR) has been growing its production at triple digit rates. As other E&P companies dial back their drilling activity for the current year due to the weakness in commodity prices, Gulfport Energy could still post up to 100% increase in production.

Gulfport benefits from having a high-quality base. The company owns liquid rich acreage in Southern Louisiana and Grizzly Oil Sands in Alberta, Canada. But what I really like is its 184,000 net acres in Eastern Ohio's prolific Utica Shale formation which will drive its future growth. Utica is already one of the lowest cost plays in the U.S. and Gulfport has expanded this advantage by further reducing its per unit cash costs by up to 49% year-over-year by the fourth quarter of 2014. While a number of companies have significant exposure to Utica, such as Rice Energy (NYSE:RICE), Southwestern Energy (NYSE:SWN), PDC Energy (NASDAQ:PDCE), EQT Corp. (NYSE:EQT) and Chesapeake Energy (NYSE:CHK), Gulfport has greater leverage to the play than any of these companies, according to a report from Topeka Capital Market's analyst Gabriele Sorbara emailed to me.

In Utica Shale, Gulfport has largely focused on developing the liquids-rich core and the dry gas window. In Ohio, the top-tier assets are located in Belmont, Monroe and Noble Counties and this is where Gulfport owns a majority of its 98,000 net dry-gas acres.

The Oklahoma City based Gulfport released its fourth quarter results on Wednesday in which the company's equivalent gas production climbed by 281.8% from the same quarter last year to 35.1 billion cubic feet equivalents, or 381.9 million cfe/day. That's around 6% higher than the company's guidance of 358.8 million cfe/day. Around 74% of the total production was natural gas while the remaining was oil and natural gas liquids.

Like most of its peers, Gulfport suffered due to the drop in commodity prices. During the quarter, the average realized prices (before derivatives) for natural gas, oil and NGL dropped by 2.3%, 30% and 35.6% respectively. The company's net income climbed from $24.2 million last year to $110 million, but this also shows impact of several one-time items. Excluding those, the company's adjusted earnings were $10.6 million, or $0.12 per share, which was significantly higher than the adjusted earnings of $0.05 per share last year and analysts' consensus estimate of a loss of $0.01 per share, as per data compiled by TCM. The earnings beat came on the back of strong production and a better-than-expected total cost structure of $4.27 per thousand cfe.

For 2015, Gulfport has planned to reduce its capital expenditure by around 40% to between $630 million and $690 million, of which $545 million to $595 million are for exploration and production activity. Nearly all of this (96%) has been earmarked for Utica Shale. The markets on the other hand, were expecting a smaller cut to $710.2 million, as per consensus data from TCM. But what's impressive is that the company aims to grow its production to 432 million to 480 million cfe/day. This translates into 80% to 100% growth. Analysts, on the other hand, were expecting 109% production growth. So essentially, Gulfport has made a bigger cut to its annual budget than market's expectations but will still deliver strong production growth. That's partly because the company will focus on developing the most economical wells in Utica's dry and wet gas windows and will also benefit from 15% reduction in service costs.

The production growth will come on the back of a strong balance sheet and solid liquidity. Gulfport has recently increased its borrowing base to $575 million from $450 million. Consequently, the company now has a liquidity of $573 million, which includes $431 million available under the revolving credit facility and $142 million of cash reserves.

The company has just $716 million of long-term debt. Moreover, a majority of the debt ($600 million) will mature at the end of the decade. The debt equates to an annualized debt-to-adjusted EBITDA ratio of just 1.6 times and a healthy debt-to-equity ratio of 31%. Even at the current strip prices, the company estimates that it will exit 2015 with a debt-to-EBITDA of under 2.5 times, which will still be manageable.

It also helps that Gulfport has a solid hedge book that goes well into 2017. This will protect the company's future cash flows and will allow it to continue drilling at its core Utica acreage. The company has hedged around 60% of its 2015 natural gas production at weighted average price of $4.03 per thousand cf and slightly smaller volumes for 2016 at $3.77 per thousand cf.

Image source: Company presentation.

Moreover, to secure its future growth, Gulfport has signed firm takeaway capacity agreements which will allow the company to ship its production to premium markets - such as the Midwest and Gulf Coast -- at low fixed costs. Around 90% of the company's 2015 production is covered by firm commitments while it has agreements in place for 849 million and 819 million Btu/day for 2016 and 2017 respectively.

Conclusion

Despite significantly cutting its capital expenditure, Gulfport Energy could still post up to triple-digit production growth. This will come from its high-quality, low-cost Utica Shale assets. The company has a strong balance sheet and a solid hedge book which will minimize its exposure to the volatile commodity prices. The company has also secured takeaway capacity that will support its production growth while giving it access to premium markets at attractive rates.

The shares of Gulfport Energy have fallen by 21% over the last six months but have climbed more than 16% since the end of January. The company's shares are currently priced at a slight premium to its peers, but I believe they are reasonably valued given that this is a high-quality name. The company's shares are priced 11.02 times 2015 and 7.7 times 2016 EV/EBITDA multiple, as per data from Thomson Reuters. This compares against its peers' average of 10.2 times and 7.1 times for 2015 and 2016 respectively, according to TCM.

http://http://seekingalpha.com/article/2960516-gulfport-energy-stel...

Gulfport Energy: Stellar Growth Story Continues

Feb. 27, 2015 6:29 PM ET  |  About: Gulfport Energy Corporation (GPOR) by: Sarfaraz A. Khan

Permalink Reply by Philip Brutz on February 26, 2015 at 10:11am
Permalink Reply by Philip Brutz on February 27, 2015 at 2:37am

http://investors.anteroresources.com/investors-relations/press-rele...

Neal Dingmann - SunTrust

That’s very good. Thanks. And then just one second one if I could, looking to the slides that describing really talk about that massive Utica dry gas position you have in addition to your others I guess now and you mentioned I think in one of the slides, now all the operators would have seen some significant wells there and I know you guys are drilling just your thoughts on sort of how fluid your drilling plan is based on the well results, I mean obviously there is again I am looking at that slide that shows the returns between kind of the highly rich gas and the rich gas versus the dry gas and I am just wondering if you all could comment how you think those three will differ kind of going forward or based on the well results you are seeing so far you feel pretty comfortable with the economics of all three of those and how different that plan could be?

Paul Rady - Chairman and Chief Executive Officer

Well our focus is on the liquids rich drilling as we have emphasized in this call and elsewhere. So that’s liquids rich in the Utica, liquids rich in the Marcellus. We have quite a good handle on the dry gas in the Marcellus. We have drilled a lot of wells there, more than 150 wells over on the dry side and they are very good EURs per lateral foot, but they are just not as strong compared to the ones that give us the liquids rich premium. So feel quite knowledgeable about those, also feel good about the deep dry Utica we have in some of our slides, that we not only have down dry Utica in Ohio, which we have a good position. But underlying our Marcellus acreage, we have at least 160,000 acres of deep rights over in the Northwest corner that look highly prospective for the deep dry Utica.

As you know there has been a number of tests that are quite impressive along the Ohio River on both states in West Virginia and Ohio probably the closest certainly the closest to our acreage is the Magnum Hunter well that had very impressive rates, very strong bottom hole pressure, big flow rates and it didn’t require that much drawdown of the reservoir to pull that much gas out. So like our 160,000 acres of deep rights throughout that Northwest Marcellus. But when would we shift gears to develop that, you have to consider again the gathering infrastructure and the gathering infrastructure that we have built throughout that area, and that we plan on continuing to build this all designed for rich gas. We collect the rich gas. We bring it to the plants and extract the liquids. And so you wouldn’t want to put the deep dry gas into that. So it will require some infrastructure. Right now the takeaway on deep dry gas is not as favorable, but by the end of ‘16 to mid-2017, the Rover project comes on of which we have 800 million a day of firm. And so that goes right through our deep Utica dry gas fairway. So, I think probably between now and then, our focus is going to stay on the rich gas where we do some deeper dry gas once the Rover line comes on, so we can go directly into that line and into favorable markets. It’s quite possible. I don’t think we will be shifting over our entire program, but we may work some of that in. So, that’s how we are thinking about it, focus on the liquids in both the Marcellus and the Utica, but like long-term potential of the deeper dry Utica play.

 

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