Encino buying Gulfport and other cast off assets in Eastern Ohio ?

So we all know Encino has appetite for the risk, buying up CHK assets. 

Doing a bit of sleuthing and speculating though - is it possible they are not done there and might be buying up some leases/minerals in Guernsey/Noble/Belmont Counties now that Montage is pulling out and Gulfport is focused only on their developed lands and more profitable areas ?

Seems like there might be a chance someone outside of Ascent is looking to do something in these areas...and it just may be the fresh cash from Encino financing it. 

Thoughts on this wild speculation ? How likely is it to come to fruition ?  How bad is it for property owners/prices ? Competition is generally a good thing for pricing - but is it really when one side is gaining a bad name in their land owner dealings. 

Countdown to Ron's spewings on Encino and how not to sign anything begins in 5...4...3...2...

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Permalink Reply by bo boboski on November 15, 2019 at 10:35am

Encheato

Permalink Reply by Dan on November 16, 2019 at 3:03am

It used to be most everyone focused on potential royalties.  I’ve never seen a royalty yet but have signed twice now and the bonus money was a blessing both times.  In today’s market climate I would focus on getting the most bonus money with Pugh and depth clauses.  If you do sign shy away from yearly payments and get as much up front as possible. Even if they drill it could be a small piece of your acreage or worse you end up in a donut hole and never get drilled.  

Permalink Reply by Shower Bath on November 17, 2019 at 4:27am

Gulfport is looking to sell its' non operating interests in the Utica due to high operating expenses vs limited revenue at today's prices. Maybe they want to sell it all in one block, or maybe they could break it up by county. If it is Harrison or Guernsey county it could be Ascent or Encino. If it's south of Harrison it would most likely be EQT (formerly Rice). They had a lot of neighboring operations in Belmont.

Permalink Reply by Soundcraft on November 18, 2019 at 1:38am

Montage is pulling out of Guernsey county?  Montage that acquired Eclipse?

Permalink Reply by djefferis on November 18, 2019 at 2:32am

Yes, Montage that is the combination of Magnum Hunter/Triad and Eclipse/Oxford.  

Montage is cutting expenses in a major way - focusing on producing properties or those that can be turned into high profit cash flows quickly and easily. 

We are in Western Belmont and Montage did not renew the 2nd term of our lease and ended in year 3 of 5 1 year options on a 2nd.  Both are within 1/4 mile of a producing field developed by Gulfport, but not currently in production. Up until last year, they indicated they were planning on staying with it - but Montage has cut down to a single drilling rig. 

EQT seems to be diversifying as well - focusing again on the profitable areas and easier money. The appetite for risk and high risk/reward plays is just not there like it was a few years ago.

Its funny...back in 2002 or so, my parents signed first least on the property with Oxford (who became Eclipse and later merged to form Montage) for $5 an acre and 12.5% royalty. At the time the thought of gas being struck on the property was laughable. Last time anyone speculated on gas in the area was turn of the 20th century. Sure - there were shallow pockets of fields to the West and South - but nothing in the area aside from methane we thought. 

2007 saw lease offers move quickly from $100 to $2500 or so. 2012 we saw offers above 5k per acre. Of course now that its mine and my parents have cashed out - the market is not as booming as it once was. I do not need or expect to make a fortune off this - but finding a lease that helps cover the cost of keeping things up would be a solid relief. 

Permalink Reply by Soundcraft on November 18, 2019 at 4:15am

Ascent is in the area trying to lease property (Millwood East/Union West).  Do you feel it might be possible Montage sells leases to Ascent?

Permalink Reply by djefferis on November 18, 2019 at 7:20am

Got to agree with Old Timer on this one.

What benefit would it be for Ascent to buy out leases in bulk from Montage. Individual leases, sure - happens all the time in most any market condition. E&P Company A holds a 65% share of land needed to complete a well - E&P Company B holds another 10% in the area - they buy leases/reach agreements all the time to make a well more profitable. 

But buying 10-20k+ acres in bulk - taking counties out of play for a company. That takes $$ and it takes the right conditions. No one wants to walk away from the table down money unless they have to. Likewise no one wants to overpay for a seat at said table. 

What advantage would Montage have in selling attractive - yet un-tapped land to a competitor, unless the price was too good to pass up. Likewise - why would Ascent - who seems to be doing everything as cost effectively as possible - overpay to get the tail end of an old lease held by Montage. 

If Montage walked away from a lease - Ascent may be the only bidder on a new lease for said acreage. Would some resist if the offers were lower than they were last go around with Montage, sure...but you do not need 100% participation. Even if they were forced to pay equal to what Montage paid last time - they would gain more time - a valuable asset in its own right on a time limited lease. Instead of buying the back half of a 5 year lease with a 5 year renewal option...they could get a fresh 5 with 5 year renewal (or 10 years) to give them time to develop things. 

Of course they could also go to lease owners directly and seek to modify terms. But its a much easier negotiation when you can simply walk away with nothing invested. Easier terms, better bonus (for the company) and perhaps a lower royalty/more favorable production cost deductions. 

Theres alot of land sitting right now and fewer well crews than there were 3 years ago drilling on it. If the trend keeps up - its going to be a deep buyers market. Of course one solid cold winter or another big demand of supply (cracker plant) could push prices back to $4 and that would start the gold rush all over again. 

Permalink Reply by farmgas on November 19, 2019 at 2:14am

I am hearing that solar energy is gaining attention in  Western PA.   Is it possible for solar energy to have a significant impact on the NG industry?   Who wants fields of solar panels on their property?    Seems to be a maintenance headache.   

Permalink Reply by farmgas on November 19, 2019 at 3:58am

What is meant by lower vs. high density sources?   Is it plausible to have solar be a secondary energy source? 

Permalink Reply by Finnbear on November 19, 2019 at 4:18am

All sorts of "secondary" energy sources are possible. They remain secondary because they are not cost effective, compared to other options available at the time.

Permalink Reply by frank speaker on November 19, 2019 at 7:28am

I heat my house with gas, run my dryer on solar, run my car on gasoline, cook steaks with charcoal,so of course.

Permalink Reply by Finnbear on November 19, 2019 at 4:15am

True. The market will always utilize the least expensive energy source available at the time. Energy is the root of our economy.

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