Barnett Shale

Bigger operators safer in Pennsylvania, Wall Street Journal finds

The Wall Street Journal crunched the numbers for safety and environmental violations in Pennsylvania portions of the Marcellus Shale and concluded that larger producers generally have better records than smaller producers. It leads its report with the example of Royal Dutch Shell's violation rate of 13 percent per inspection in 2010, compared to a 63 percent rate at East Resources right before the independent sold its Marcellus assets to Shell in 2010. In another example, the newspaper said that following its acquisition by Exxon Mobil, XTO Energy's rate of safety violations "has fallen by half, even though drilling takes place in the same counties, often with the same personnel." (Anyone who has read Steve Coll's recent history of Exxon, Private Empire, will not be surprised, considering Coll's account of the zero-accidents mentality Exxon developed after the Exxon Valdez spill in Alaska.)

Bigger isn't always better. Fort Worth-based Range Resources, an early developer of the field, had a better-than-average record among mid-sized producers, the Journal reported. All operators improved their records in the past two years, according to the newspaper's analysis of state records. For example, Shell has since lowered its violation rate to 5 percent in 2012.

You'll probably run into the Journal's pay wall, but a link to the story is here.

-- Jim Fuquay

Devon Energy still No. 1 in the Barnett Shale

Last month we published an item noting that by the Texas Railroad Commission's count, Chesapeake Energy had edged past Devon Energy as the biggest  gas producer in the Barnett Shale as of June, the latest figures at the time. But both companies quickly questioned the numbers and we qualified our report, with good reason as it turns out. Gene Powell, the data dean of the Barnett Shale and publisher of Powell Shale Digest, just ran the numbers for production through October 2012, the latest available from the Railroad Commission, and Devon is still No. 1, just ahead of Chesapeake. Both are well ahead of No. 3 XTO Energy.

According to Powell's numbers, Devon in October averaged 1.495 billion cubic feet a day. Chesapeake averaged 1.375 Bcf/d and XTO averaged 826 million cubic feet a day. The difference maker is wells in the Railroad Commission's pending file, which contains wells that are backlogged or contain incomplete information. Production from those wells doesn't  show up on the Railroad Commission's Barnett Shale summary page. Based on our recent conversations with both producers, Devon last year drilled about 300 wells, vs. Chesapeake's fewer than 100, so perhaps that has something to do with it.

Powell notes that the Barnett Shale was still chugging along at 5.2 Bcf/d in October despite the sharp decline in drilling in the field. Some of that doubtless is because wells drilled in the past were finally connected to a sales line. For example, Chesapeake only last year laid an 8-inch line to its Westgate padsite on the southern edge of downtown Fort Worth, and that well was drilled in 2008 and completed in 2009. See our item here. But operators also say that despite their deserved reputation for sharp production declines in the early years, Barnett wells are proving to be pretty decent long-term producers. We've run some numbers ourselves using Powell's data and wells that are 10 years old still produce 11 percent of their peak initial production, while those 20-30 years old are still producing on average 10 percent of their peak. Of the 85 Barnett Shale wells 20 years old or older, all but four were still producing in June, the latest month we have. They averaged 99,000 cubic feet a day.

-- Jim Fuquay

Chesapeake now biggest Barnett Shale producer -- maybe?

Chesapeake Energy has overtaken Devon Energy as the largest producer in the Barnett Shale, at least through the year's first seven months, according to Texas Railroad Commission figures. (See note below.) Devon was long the leader, owing to its 2002 purchase of Barnett pioneer Mitchell Energy. But in July, Chesapeake edged out Devon in production during 2012, 285.6 billion cubic feet to 284.6 bcf. XTO Energy is third at 170.3 bcf. A link to the Railroad Commission's Barnett Shale data page, which has data on permits, wells and the top 10 producers, is here.

Editor's note: Since publishing this, we've heard from Chesapeake and Devon, who both questioned the Railroad Commission's rankings. Chesapeake says they have determined that their production is correct, but Devon has its doubts and is checking. We'll post an update when we're sure about who's No. 1 in the Barnett Shale.

-- Jim Fuquay

XTO, others sued over injection wells in Arkansas

Fort Worth-based XTO Energy, Chesapeake Energy and Southwestern Energy are named in an Arkansas lawsuit by several landowners who accuse the companies of improperly using injection wells to dispose of oilfield wastes under their property. The suit says some of the landowners have mineral rights leases with the companies, but those don't include the right to inject fluids beneath their land. Only Southwestern Energy has responded to the complaint, and it said it has agreements allowing wastewater injection. The Associated Press report is here. The online Arkansas News has a story here.

-- Jim Fuquay

Exxon not sweating low natural gas prices, XTO investment

Exxon Mobil Corp. doesn't appear to be too worried about its investment in XTO Energy or the future of natural gas, even dry natural gas.

In the company's quarterly earnings conference call with financial analysts Thursday David Rosenthal, Exxon's vice president of investor relations, was asked whether the company might write down the value of the reserves it acquired when it bought Fort Worth-based XTO in June 2010 for $25 billion.

The answer was pretty much, "No." Yes, Rosenthal said, domestic gas production was down and Exxon's was shifting most of its drilling focus in the U.S. to oil and gas fields with lots of potential for producing gas liquids.

"We are managing across the entire portfolio" and continuing to evaluate dry gas fields "while focusing on liquid areas," Rosenthal said.

But Exxon-XTO continues to drill some new dry gas wells to further evaluate and define the boundaries and potential of those fields.

Over the long term, Rosenthal said, Exxon still likes its natural gas holdings because our "outlook is that natural gas prices are not going to remain at this level."

Exxon is continuing to evaluate opportunities for exporting liquefied natural gas from its domestic U.S. fields.

- Bob Cox

XTO's Williams says industry at "decisive moment"

Low natural gas prices are lifting the U.S. economy even as "many citizens are asking questions" about environmental impacts, producing "a decisive moment" in the nation's energy policies, XTO Energy's CEO Jack Williams told an industry meeting in Fort Worth today. Industry needs to continue to pursue more disclosure, such as the FracFocus website listing chemicals used in wells around the country, further monitor wells after drilling and completion and address new issues such as earthquakes near oil and gas operations to meet those concerns, Williams said. He applauded President Barack Obama's support for an "all of the above" solution to meeting U.S. energy needs, while asserting that "sound energy policies do not pick winners and losers" or include "punitive tax policies."

Williams said a similar picture exists in much of the rest of the world, where oil and natural gas shale deposits are providing relatively common. Today's low prices present a challenge to the continued development of natural gas, he said, but XTO will continue parent Exxon Mobil's historical long-term approach to development. He said XTO has completed 16 acquisitions since Exxon bought it nearly two years ago.

-- Jim Fuquay

Fortune: "The United States of Natural Gas"

Check out the current newsstand edition of Fortune, which you might say is a gas, gas, gas. The mag gives its cover to its main feature, headlined "The United States of Natural Gas," and its online site lists three stories on the same topic (but, alas, not links to the stories themselves). We'll have to go by the headlines and blurbs listed online, which give a good idea of what's inside: "Exxon's big bet on shale gas," "Will gas crowd out wind and solar?", and "America's new job machine is heating up."  A link to the magazine's online page on the issue is here.

-- Jim Fuquay

Southlake group backs more drilling

Last year, XTO Energy and Chesapeake Energy abandoned efforts to drill in Southlake after City Council rejected one permit request and another drew a lawsuit. Now, Southlake Citizens for Property Rights, wants changes to the city's drilling ordinance that would make it easier for producers to get permits. Read the Star-Telegram's report on the group here.

-- Jim Fuquay

XTO Energy partners to build Marcellus pipeline

Fort Worth-based XTO Energy, part of Exxon Mobil Corp., teamed with NiSource Gas Transmission and Storage to build a 70-mile, $150 million natural gas gathering system in southwestern Pennsylvania. Here's a report from area media.

-- Jim Fuquay

Southlake again tables first gas well permit

Southlake’s first gas well was tabled by the City Council for the second time in two months at 12:45 a.m. Wednesday. The council will continue the public hearing for the third time at its Feb. 1 meeting. Last year, XTO Energy applied to drill up to 18 gas wells on the 52-acre Milner ranch at 651 E. Highland St. between White Chapel Boulevard and Texas 114. The proposed 2.75-acre pad site is 380 feet from Highland Street. On Tuesday and on into Wednesday morning, City Council members asked questions and negotiated with Walter Dueease, senior regulatory affairs coordinator for XTO, on the details of the application.

-- Nicholas Sakelaris