Barnett Shale

Range Resources loses $41.8 million in first quarter

Fort Worth-based Range Resources lost $41.8 million on revenues of $247 million in the year’s first quarter as several one-time write-downs more than offset gains from higher revenues and lower unit costs. After adjusting for unusual items, the largest being a $53 million non-cash charge against the value of its future hedges on oil and natural gas, Range earned $24.4 million, or 15 cents a share. That compared to an average 13 cents expected by investment analysts, who had steadily reduced their estimates as the quarter progressed. Range’s shares (ticker: RRC) rose 2.8 percent Wednesday to $60.16. The company released its earnings after the close of market, and its shares were up another 4 cents in after-hours trading.

Range sold its Barnett Shale operations in April 2011 and now has its largest presence in the Marcellus Shale in Pennsylvania and West Virginia, where it holds more than 1 million acres and gets about 70 percent of its production. Even with the sale of the Barnett holdings, Range showed higher production and revenues as it increasingly focuses on crude oil and natural gas liquids, which command much higher prices than natural gas. CEO Jeff Ventura said in a prepared statement that Range got 71 percent of its total production from areas that have oil or natural gas liquids, but natural gas still accounts for the bulk of its output. Range averaged the equivalent of 655.5 million cubic feet of gas a day for the quarter, including 512.5 million cubic feet of gas, 17,152 barrels of natural gas liquids and 6,682 barrels of oil. After settling its hedges, it averaged $5.19 per 1,000 cubic feet equivalent for the quarter, down 14 percent from a year earlier. Range got $4.01 per 1,000 cubic feet for gas, $46.20 a barrel for liquids and $83.54 for oil.

-- Jim Fuquay

 

Fire personnel investigate natural gas release

Arlington and Mansfield fire departments investigated a natural gas release this morning at Debbie Lane near Matlock Road after residents reported a loud hissing sound and a vapor cloud blanketing their neighborhoods. Arlington fire fighters arrived at the Carrizo Oil and Gas site at 1751 E. Debbie Lane in southeast Tarrant County about 7:44 a.m. and conducted air monitoring after detecting a natural gas odor, Lt. Darrel Whitfield said. The vapor released from the site was "mostly steam with some gas and at no time was anyone in danger of being harmed," according to Mansfield Fire Chief Barry Bondurant. The Arlington Fire Department did not detect measurable amounts of gas in the residential areas close to the location, according to a Mansfield Fire Department news release. The Arlington Fire Department provided the photo above.

For more, see the Star-Telegram report here, and a follow-up editorial here.

-- Jim Fuquay

Carrizo agrees to sell more Barnett properties

Carrizo Oil & Gas, a Houston-based producer among the larger operators in North Texas’ Barnett Shale, said Friday it agreed to sell $190 million worth of properties in the field to Atlas Resource Partners.Carrizo said the deal, expected to close in late April, involves 12,000 acres with 110 net producing wells in “noncore” areas. A Carrizo representative would not be more specific, but the company has previously described its Barnett Shale core as being Tarrant County, including 22 wells on the campus of the University of Texas at Arlington.

The company said it will use sales proceeds to reduce debt and help fund drilling, mostly in the Eagle Ford Shale in South Texas. Carrizo, like many other producers, says it is focusing spending on properties like the Eagle Ford and Niobrara Shale in eastern Colorado, which produce more of the oil and liquids that command much higher prices than natural gas.

Atlas, based in Philadelphia, is a master limited partnership with holdings in Appalachia and the Niobrara. Master limited partnerships generally acquire established properties on behalf of investors who are looking for steady income.Atlas CEO Edward Cohen called the deal “the first step” in a growth strategy. He said the Barnett acquisition provides “long-lived, producing assets” that will increase payouts to Atlas unitholders.

Atlas said the properties produce the equivalent of about 36 million cubic feet of natural gas daily from 277 billion cubic feet of proved reserves. It put the purchase price at 69 cents per 1,000 cubic feet and said the properties cost about 60 cents per 1,000 cubic feet to operate.In its statement, Carrizo estimated its proved reserves at 315 billion cubic feet and put production at 35 billion cubic feet a day.

Investors liked the deal, especially for Atlas.Its units (ticker: ARP) jumped more than 30 percent Friday to $28.30 on about 14 times the usual daily trading volume on the New York Stock Exchange. Carrizo’s shares (CRZO) rose 1 percent to $30.The disparity in investor reaction is likely explained by the relatively low price Atlas is paying, which comes to less than $6,000 per 1,000 cubic feet of daily production. That compares to the roughly $12,000 per 1,000 cubic feet of daily production that private equity firm KKR paid Carrizo in May 2011 for noncore Barnett properties.

-- Jim Fuquay

Fort Worth needs more study of benzene concentrations, Rep. Burnam says

State Rep. Lon Burnam said Thursday the Fort Worth City Council should look at the more stringent, federal standards for benzene rather than base its findings on the more lenient, Texas Commission on Environemental Quality one-hour sampling standards. Burnam said the city should ask ERG, the consultant who conducted the long-delayed $1 million air quality study, to "reanalyze its dispersion modeling data." In a Dec. 21 letter addressed to Mayor Betsy Price, Burnam said that ERG should also  "reevaluate the city set-back requirements." If the city doesn't consider more stringent monitoring of Barnett Shale emissions, Burnam said he will consider legislation requiring TCEQ to do so. The City Council voted down a series of changes in October to its gas drilling ordinance that were based on the findings of the air quality study. TCEQ chief toxicologist Michael Honeycutt said Thursday the state currently has seven monitoring stations in the Barnett Shale and will add nine more in the next 12-18 months. TCEQ has not seen any high benzene levels since two were recorded in Wise County two  years ago, Honeycutt said. In a statement, Price said she appreciated "Rep. Burnam sharing his concerns with us; and one thing we can agree on is that health and safety of our citizens will always take top priority." Councilman Jungus Jordan, who read Burnam's letter, said there is no reason to evaulate the air quality study further. Instead, Jordan said the city should continue to push for the latest vapor recovery technology to control Barnett Shale emissions. 

 Read the letter here

- Bill Hanna

Interest in Barnett Shale has FW Mayor headed to China

Mayor Betsy Price will be taking her first international trip since being elected when she travels to Beijing, China on Saturday. The trip is a collaboration between the U.S. Embassy in Beijing and the Ministry of Housing and Urban-Rural Development for the People's Republic of China. Sisters Cities International is also involved in putting together the trip. Price will be joined by several other U.S mayors and a representative from the Fort Worth Chamber of Commerce.

Price said today that one reason she was invited was due to the Barnett Shale natural gas drilling activity in Fort Worth and surrounding areas.

A group of 40 U.S. energy companies with interests in China are also involved in the meeting.

Price will be gone until Dec. 11 and miss next week's council meeting. The U.S. Department of Energy is covering the cost of the trip.

--Bill Hanna

Devon seeks joint venture partner on 1.2 million acres

Devon Energy, the largest producer in North Texas’ Barnett Shale, said today it is seeking a joint venture partner to develop shale oil and natural gas formations in several states. In a conference call with financial analysts following its third-quarter earnings release, CEO John Richels said the Oklahoma City-based firm would prefer one partner to participate in the development of 1.2 million acres in leases it holds in Oklahoma, Michigan, Louisiana, the Utica Shale in Ohio and the Niobrara deposit in Wyoming and Colorado. He said Devon has a well in each area and plans 40 new wells soon.

It’s possible Devon could raise $1.8 billion selling just a one-third stake in those properties, based on comparable deals, Scott Hanold, a Minneapolis-based analyst for RBC Capital Markets, told Bloomberg News today.The company is hardly cash-poor. It reported $6.8 billion in cash and equivalents as of Sept. 30, the product of big overseas asset sales last year.

Analyst Phil Adams at Gimme Credit, an independent debt researcher, said Devon’s rich cash position could help it negotiate better terms if it strikes a deal. He judged the move a positive, allowing the company to reduce risk and get a faster return of cash spent acquiring the acreage.

-- Jim Fuquay

 

Devon shares jump on higher production, revenues in third quarter

Devon Energy, the largest producer in North Texas' Barnett Shale, said today it earned $1 billion in the third quarter, down from the $2.1 billion reported a year earlier on the strength of a big asset sale. Revenues were up 25 percent to $2.1 billion on higher production and prices for natural gas and crude oil. The most recent quarter included a $642 million non-cash gain on the value of its oil and gas hedges. After adjusting for unusual items, Oklahoma City-based Devon earned $638 million, or $1.54 a share, topping analysts' consensus estimate of $1.47. The company's shares (ticker: DVN) were up about 6 percent in early trading.

Devon said total production of natural gas, natural gas liquids and crude oil rose 8  in the quarter to the equivalent of 661,000 barrels a day. That included a 17 percent rise in oil and natural gas liquids, which command better prices than natural gas in the market. Barnett Shale production was up 8 percent to the equivalent of 1.3 billion cubic feet a day, which includes 46,000 barrels a day of liquids, up 15 percent from a year earlier.

-- Jim Fuquay

 

Fort Worth air quality study finds exhaust issues at five compressor stations

Fort Worth City Councilman Jungus Jordan, who has started reviewing the city's air quality report, said the study by contractor Eastern Research Group has identified five compressor stations that have issues.

"There were five sites out of 388 tested that have some exhaust problems from compressor stations," said Jordan, who stressed that he was still making his way through the report. "We’re pretty confident that the best practices we’ve been preaching can address most, if not all, of the issues."

Best practices include vapor recovery systems, green completions  - a process used to recover gas that would otherwise be vented into the air - and low-bleed pneumatic valves that regulate gas flow and pressure.

Jordan, who is also vice chairman of the North Texas Clean Air Steering Committee, which has made recommendations to the state regarding North Texas air quality, said one possibility could be requiring use of electricity to power compressor stations.

The highly anticipated report is scheduled to be released to the public later today.

"It looks like no health alarms are identified at first blush," Jordan said. "But it is a very comprehensive report and I'm still going through it with a fine-tooth comb."

--Bill Hanna

Air quality study due today

A long-delayed air quality study, which has cost the city more than $1 million, is scheduled to be released today. But city officials weren't saying this morning what time it would be released. The study by contractor Eastern Research Group is intended to settle questions about gas drilling emissions. It was originally scheduled in March and then was scheduled to be released two weeks ago but Eastern Research asked for more time to guarantee they are providing "the highest quality report" to the city. 

Bill Hanna

Low gas prices a signal to slow drilling, Devon chairman says

For U.S. energy producers, high-priced $11 natural gas is “kind of like a Saturday night drunk,” Devon Energy Executive Chairman Larry Nichols said at the opening session of the Unconventional Gas International Conference and Exhibition on Tuesday afternoon. “It may feel good at the time,” he said, but it isn’t a sustainable high.

Just as an $11 price is too high to persist, today’s current market prices of about $3.75 are too low for the industry to thrive and maintain strong natural gas production in the long term, said Nichols, who stepped down this year from his longtime position as CEO of Oklahoma City-based Devon, the leading producer in North Texas’ gas-rich Barnett Shale.

Even in the face of low gas prices, domestic energy producers have continued to do substantial drilling, particularly in major unconventional gas plays such as the Barnett, the Eagle Ford Shale in South and Central Texas, the Haynesville Shale in Louisiana and East Texas, and the Marcellus Shale in the Appalachian regionof the eastern U.S.

By continuing to drill despite weak prices, “we’ve been ignoring the free market,” Nichols said. But today’s depressed prices represent “the free market ... sending us a very powerful signal” that there is an oversupply of gas, he said.

Read more here.

-- Jack Z. Smith