Royalties Plummeting at a More Rapid Rate - EQT Improvement under Rice Mgt?

Hello. It's been a while since I've been on here but I have a question for everyone I'm really curious about. Has anyone else noticed a sudden increase in plummeting royalty payments and market prices? I'm obviously not oblivious to the fact that the market has been steadily dropping for a variety of reasons and a lot of gas companies are dialing back production due to falling prices BUT the most recent market price seems to be twice the drop - at least  in my area. We are with EQT; former Rice Energy landowners, and bought stock and fought to vote the Rice team back into management positions at EQT after abysmal performance and poor relations over the course of EQT ownership of former Rice leaseholds. We had - and still have - confidence in the Rice contingent to turn things around for EQT but are currently questioning if it will be advantageous for their existing landowners and producing units. This months' ridiculously low sales accompanied by apparent lack of interest in advancing existing producing units have brought questions to mind. We attended the EQT Land Owner meetings with Toby Rice and a lot of emphasis was placed on returning to existing pads and drilling additional laterals, thereby saving prep costs, increasing production, and lowering drilling costs. They cannot - of course - affect falling market prices, however we haven't seen any attention being paid to existing units, which seem to be being let to slowly (and lately NOT so slowly) fizzle out. Wondering if this is something others are noticing. It would seem to me - logically - that the most financially profitable would be to get the most out of existing units, thereby reducing drilling costs, during this slump in market prices, rather than going to the expense of developing new units and starting from scratch. Just not understanding what is currently happening and wondering if anyone out there has any insight or ideas. Our unit is only 3 yrs old and has had an accumulative 30% drop in royalties over the past 12 mos and a full 30% drop between just last month and this month, which was a complete shock. Curious what others are thinking, though I'm sure it's nothing good.

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Permalink Reply by Lori Huber on January 2, 2020 at 1:04am

Understand, Jeff. There have been so many mysterious cases of lack of interest in marketable properties in the gas play, particularly with EQT. They lost several after leases ran out before development, costing the company a lot because they had to be re-leased or lost. It was the kinds of things that set investors to seek out the Rice Team to try to improve operations and management at EQT. It has been bleeding cash and assets while not even trying to bandage the wound. Not sure I'm particularly satisfied with performance of new management, either, despite our past history with them, as we are seeing the worst scenarios with our lease/royalties since signing with little or no more transparency on what is going on than when former EQT operations mgt were at the helm. Landowner Relations are still virtually unattainable and landowners are - for the most part - being left in the dark on everything, which Toby promised would NOT continue. We never got Henry Hub prices, either, but were close to South Dominion Hub which is most likely where our gas in SW PA goes through. Henry Hub is in Texas and they have the infrastructure to move the gas to markets needing it. Our gas is sitting in an already glutted region, unable to get to the markets that need it. I haven't checked it recently to see if we are in their ranges now, but crowd sourced selling prices for Oct 2019 are averaging approximately $0.10 more than what we have been getting. That points at bad marketing more than the market so I can only assume the EQT sales dept is either not doing a good job or there is something happening in the final calculations of our determined royalty sale prices we're being paid for. There is SOME reason we are below everyone else. The overall mkt is down; beyond a doubt, and that isn't the gas company's fault. It's municipalities and states refusing the infrastructure necessary move the gas to markets needing it from our supplies. The Marcellus Region is glutted with gas with no way to get it to the market that needs it so prices are down. THAT I can understand. I DO watch the market regularly and KNOW the selling prices of our gas is at an all time low. What I CAN'T understand is why, in this volatile mkt, our sales team at our producer isn't making an effort to at least match the current; poor though it may be, market for selling our gas. Or, again, are they (illegally) compensating for low market prices and adjusting our royalty selling prices behind the scenes, then just issuing us an unexplained statement that says it sold for $x.xx? There is SOME reason they are selling at one of the lowest reported prices. And, seemingly all of a sudden, over a 3 month period, rather than following the overall market's gradual decline. Our statements are minimal with almost no explanation that we are expected to just accept as correct. We would never know if they weren't. There seems to be little or no regulation when it comes to royalty disclosure and pay out between producers and landowners. Yet - other than an audit - I have no clue how to find out, and an audit is a huge, expensive task, even though our lease allows for one annually. It doesn't make the Lessee responsible for paying for it. It bothers me to my core to just let it go, with all of the questions raised but with the dramatic decrease in payments, affording an audit that could well turn up nothing just isn't feasible. Could just reveal that EQT has in inefficient marketing dept. Large shareholders went to the bold move of banding together to remove the administrative and operating management team in an unprecedented vote to bring the Rice Team in when it was obvious management of EQT was inefficient and mismanaged. Unfortunately that didn't necessarily help individual landowners bearing the bottom line hit on their portion of sales of their gas. And I'm not sure what - if anything - can be done to improve the situation, short of these forums and more landowners talking and complaining and suggesting until either someone comes up with something or enough band together to be noticed by the gas company to at least encourage some dialogue and information. Good or bad - even bad news is something because it doesn't just leave us hanging. Wishing you and all landowners the best and hopes and prayers that the gates open up soon and we can get out gas to the desired markets, for both we sellers AND the consumers needing it. Perhaps continued dialogue will get to the right ears in the business and we'll get some clarity on what's going on with our end of this blight with at least some idea of what is going on and where its going. We have that right. If any EQT mgt is monitoring this forum, I implore you to take notice and understand the frustration and dissatisfaction you are putting your landowners in, without whom you'd have NOTHING. Landowners PROVIDE the gas you build your business around. We are the foundation. Good luck to you, Jeff. I can't disagree with taking advantage of a partial sale at this time but am glad you're staying the course on some, as well. Not so long ago, that shale gas wasn't worth anything because they couldn't get to it. Who knows what's ahead in the near future? Gas fired power plants, cracker plants, new transport lines all require our gas to run. Meanwhile, we just need to be treated fairly and openly for our part in the endeavor. Everyone stay in touch and update us on developments. If there's one thing that's definite it's that there is power in numbers. Look at EQT. For better or worse, it's what it took to chg mgt. Blessings to everyone out there!

Permalink Reply by Jeff Kerr on February 9, 2020 at 2:27pm

Lori Hi I just got my royalty check for 11-19  it was better 2.06 per unit  10-19 was 1.45 per and 9-19 was for 1.69 mcf  winter month pay scale 

Permalink Reply by LewPa on February 9, 2020 at 4:34pm

Jeff,

That sure beats PennEnergy in Butler Co, Pa, they paid $1.88 for Nov

Permalink Reply by RGB on February 9, 2020 at 5:29am

Lori:

Gas is tanking and will be for the next several years. Get used to it, unfortunately!

I've noticed so many mineral owners who aren't receiving production are now considering an outright sell of the oil and gas. I can't blame them when gas is selling for ~1.80m/cf BEFORE deducts and the Marcellus negative differential of ~0.70 cents. The mineral funds are sitting pretty because they don't need the return in any short time period and those who are selling look like geniuses!

Hope it gets better for you.

Permalink Reply by Lori Huber on February 9, 2020 at 10:06am

Guessing you are right, particularly in the current political climate. Lack of infrastructure to get gas out to areas who actually need it has created an over-supply in our region which inevitably leads to the market bottoming out, despite the need in distant areas. If you can't get the gas there, it doesn't matter. Pipelines are being protested and legislated against and meanwhile our plentiful gas reserves lose value daily. Meanwhile, gas companies are trying to stay afloat and doing everything they can to do it, even if it isn't in the best interests of the landowner. Sad state of affairs. Hoping it gets better for everyone, as well.

Permalink Reply by RGB on February 10, 2020 at 7:14am

Agreed! 

Permalink Reply by FRACIN MY CH4 on February 10, 2020 at 2:17am

thanks for your opinion flipper RGB.

“ those who are selling look like geniuses“ -yeah right

Permalink Reply by william Allen. Ladd on February 10, 2020 at 4:11am

Early on when the first Painter pad came on to production My wife and I were a bit disappointed that we owned a small slice of that unit. However we were also pleased that a sixteen inch pipeline had also been installed to connect, in the future, to other well sites and other units in the FLAT CASTLE area. Gas production started thru the pipeline and about a year later another well was drilled on the Painter pad. Prospects for additional units being developed west of the Painter unit looked  very good in the next several years as well as additional wells on the Painter pad. (I think there were 5 wells planned for the Painter pad. Only two wells materialized however.) 

We were told that another gas pipeline was to installed alongside of that first one. The future looked very bright. Much work had been done. A large water impoundment had been installed to supply water for these new wells to be drilled. Township roads were brought up to snuff to handle the heavy equipment to the well sites.  Most of this upgrading and planning of additional wells and units were well into the planning stage prior to Trump.  And now look at the situation.

Expectations were at a very high level for the gas and oil industry. Many smaller Landowners thought they could see a way to improve their operations and make things easier.  Promises, promises, promises!    The lucky landowners were the ones that did not go whole hog. They were able to pay off many of their long time commitments and even put a few thousand dollars aside.  Other folks found themselves worse off then before. 

A lesson to be learned here!

Keep pluggin away and make the best choices you learned from your own experiences! Do not waste your time cursing or blaming someone else for your bad decisions. 

Granddad Ladd

Permalink Reply by Lori Huber on February 10, 2020 at 7:05am

Hi Grandad. Always wise insights worth keeping in mind. Just like the big lottery winners who lose their common sense and end up bankrupt 5 yrs down the road - worse off then before they bought the ticket - making bad, poorly thought out decisions can be the downfall of anyone who doesn't at least think about the "bird in hand" philosophy. That is, if its not in your hand, don't rely on it. The natural gas industry situation can be neatly compared to both however it doesn't mean that those with a stake in the industry shouldn't be diligent and proactive, in regards to what is happening. I do not believe in sitting back and letting things play out, for better or worse, if something doesn't seem quite right or 2+2 isn't equaling 4. Those who took out loans on royalties they didn't have or spent everything with no thoughts of the possibility of not continuing to get the same checks every month are like the lottery winners and obviously not staying well informed, diligent, and proactive in regards to their stake in the wells and company drilling them that their royalties come from. Wouldn't an employee ask questions if their company started moving equipment or desks out suddenly without explanation? I certainly would, though I suppose many wouldn't, and then would be shocked when they got their pink slip. There's a reason for everything that happens and staying informed, asking questions, and making the company you have a contract with stay accountable is just good business and taking care of yourself. I have done my best to stay informed on all info I could get my hands on from day 1 of availability of black shale gas in the area. Knowledge is power and anyone's best weapon if needed. When land owners don't ask questions and hold the companies accountable, they get away with whatever they want. Do we have any control? Not of the market, that's for sure, but we DO have a voice when it comes to companies adhering to terms of contracts and no creative accounting. If you let it go, you deserve what you get, IMO. The problem in the Marcellus region remains lack of infrastructure. PA is friendly to pipelines, as are OH and WV but where they need the gas is NE, for example, but NY won't allow pipelines through. Therefore NE pays astronomical energy costs while we sit on an over-supply that we can't get there. It's the same all around us. Fractivists and other extreme left environmentalists who have been convinced by alternative energy lobbyists that natural gas extraction is bad for the environment have blockaded most avenues of delivery of our gas to where it's most needed. So, we sit on it and lose value daily. It's really asinine. As for us, I wouldn't call us "lucky" (though WOULD call us blessed) that we have such a plentiful resource under our land and that it enabled us to pay off everything including the farm mortgage and put something away, as well as retire a little early to be able to work the farm while we still can. Still running our old, antique equipment and staying frugal, and are ready if we have to put our retirement on hold and go back to work (off the farm) for a few more years. None the less, it doesn't mean we aren't staying on top of our #1 commodity: the natural gas we contracted to be extracted from our farmland. And that is exactly what it is. Bad decisions aside - like some of those big lottery winners who go crazy and end up bankrupt - it's important to remain proactive, diligent, and informed. Best of luck to everyone and hopes that some of the insanity in this country gets better before it destroys everything we hold dear. God Bless!

Permalink Reply by william Allen. Ladd on February 10, 2020 at 8:41am

Hello Lori. I just love reading your comments, what ever they might be.  I try to stay on top of the situation too as best as I am able. 

Granddad Ladd

Permalink Reply by RGB on February 10, 2020 at 7:17am

Any time, 'fracin my CH4'.

Permalink Reply by GotGas on February 10, 2020 at 10:55am

Natural gas sinks 5% to near four-year lows

Nymex March gas closed -5% at $1.766/MMBtu, the lowest settlement since March 2016 and capping a 19% YTD drop.

"With the little remainder of winter waning away, the possibility of a late-season return to colder temperatures to prop up heating demand becomes bleak," says Schneider Electric analyst Christin Redmond, noting the National Oceanic and Atmospheric Administration forecasts a high probability of warmer than normal temps across the eastern and midwestern U.S. during the coming 8-14 days.

U.S. production, which has been slowly rising though not quite at last year's rate, also is contributing to price weakness, says IHS Markit's Marshall Steeves, who adds that output has increased not just from shale but also from offshore Gulf of Mexico.

U.S. natural gas prices likely will not top $2.50/MMBtu in 2020, according to a Raymond James annual survey of E&P executives.

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