CNX Resources 1Q Report

Anyone checking out the 1Q report from CNX Resources today?  Their 7 year plan appears to allow for drilling only in SWPA & Eastern Ohio.   This is serious dial-back to further drilling in the CPA region and even portions of the northern tier of the SWPA core area. This has been a difficult time for E&P`s, and will they all follow a similar plan?

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Permalink Reply by farmgas on May 5, 2020 at 4:12am

How important are pipelines initially to decisions for development and new wells?   Which comes first, the wells or the pipeline?

Permalink Reply by Heidlebergman on May 5, 2020 at 2:33am

To be honest I have no idea.  I can speculate.  I was in a lot of meetings and I can tell you (not just CNX) but these companies have a new agenda about every two weeks.  I don't believe Dominion will take gas when the gate price is under $1.50.  It is hovering around there.  Remember Dominion Transmission's network was built to transport gas from shallow sandstones.  Each DTI line has a set pressure and BTU max that it can take.  I really don't know enough about CPA production maybe somebody else does.  I would say DTI has something to do with their decision.  

Permalink Reply by farmgas on May 5, 2020 at 4:29am

Just curious what contributes to these new agendas?  Is it market driven, is it driven by new vendor/material costs & availability of sub-contractors, maybe which pad or wells become available  or just who wants their plan most?  This is an interesting discussion.  Will DTI pipelines even handle the higher pressures from Utica wells? Thanks for your insights...

Permalink Reply by Heidlebergman on May 5, 2020 at 5:47am

Transmission take out has a lot to do with the development of projects.  1.  Land position 2. Transmission pipeline take out 3. Legal/title 4.Geology 5.  terrain.  Pipelines are obviously very important.  A lot what is going on now is a function of decades and decades even a century and a half of infrastructure and leasing.  Like I said DTI's pipelines were built to transport low pressure sandstone wells not high pressure shale wells.  A lot of the old HBP leases were written up to satisfy the shallow sands drilling...there are so many factors to the development of these projects.  A company may think they have a nice block of acreage to develop only to find out the title is so bad it will take them years to clean up.  

As for the Utica pressures...my understanding of the Utica (from Geologist I worked with)...it produces like a giant balloon.  It will flow and produce until it hits line pressure then it will flatten out and decline fast (a lot like those Oriskany/Huntersville Chert wells drilled in the 60s).  If you don't have sufficient take out for the Utica the production curves are so steep that over a short period of time (maybe a couple of years) they quickly become uneconomic.  I am sure there are people on this forum that understand Utica production more than I do.

As for every two weeks...yes it seemed like our plans changed every two weeks.  I think it was a part of the learning curve with a new geologic play combined with inferior management.  It was very frustrating walking into out of our bimonthly meeting knowing we had to completely redo all the work we had done the last two weeks...we could never get ahead.   

Permalink Reply by Heidlebergman on May 6, 2020 at 4:25am

I am guessing the TL-474 line has something to do with it.  Dominions South Marcellus Gate price is right at $1.50 mcf and has been below this mark for sometime until well...this month really.  DTI may have set price where they will buy the gas, the pipeline may be full or  the storage fields to the west may be full.  Maybe the BTU for the Utica is too high for the DTI line.  There is a lot that could be going on.  DTI takes the Sarbanes-Oxley Law literal....so good luck getting any information from them.  

Permalink Reply by farmgas on May 6, 2020 at 4:56am

Back in 2010 when Consol Energy purchased the E&P Division & HBP leases (shallow wells) from Dominion in PA, the word was the DTI pipeline through Armstrong, Indiana & Jefferson counties to the northeast towards the Renova gas storage area was a corridor for new drilling of Marcellus wells.  A contract was signed by Consol with Dominion for a 15 year deal to supply 250,000 dekatherms of gas per day.   That contract is still in force today.  How will CNX meet that obligation by not drilling in CPA?

Permalink Reply by farmgas on May 5, 2020 at 6:13am

Sure sounds like difficult working conditions and a lot of extra work every two weeks.  Maybe that company was more familiar with coal mining then exploring & producing natural gas.  Has the learning curve improved for gas companies now?   

Permalink Reply by Heidlebergman on May 5, 2020 at 6:41am

I hope they have.  I still have some old colleagues that still work for them, but I haven't talked to them in a couple of years.  A lot of the old guard is still there which leads me to believe that it's probably more of the same.

Permalink Reply by farmgas on May 5, 2020 at 9:20am

They seem to have lost a lot of good people over the years.  Possibly they had a similar experience as you did.

The Airport Project was a big deal in Allegheny County.  Is it completed now?  There doesn`t seem to be any news about it anymore.  Is it dependent upon completion of the Shell Cracker Plant?

Permalink Reply by farmgas on June 3, 2020 at 1:57pm

How is CNX doing with their new 7 year plan?   Are they still drilling & TIL wells in Southwest PA?

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