At the Well Weekly (v.4.12.2019)

Oil + Gas Update - Texas Supremes Tackle Duty of Executive Rights Holder.

During a quiet week, natural gas spot prices remained relatively flat since our last report while oil prices climbed slightly despite a drop in the national rig count. The pipeline scene was also relatively quiet, except for Trump's executive order that aims to prevent states from using Section 401 water quality certifications to stall or prevent pipeline projects and a new lawsuit against Sunoco urging a local court to halt Mariner East 2 construction activities. In Appalachia court news, the Sixth Circuit said the parties to a lease can share post-production costs on NGL sales in "at the well" jurisdictions unless the lease says otherwise. In other news, the Texas Supremes held that the "duty of utmost good faith" applies when the mineral estate's executive-rights holder rejects an offer to lease to the detriment of the non-executive interests in the mineral estate.

Here's your week in review...

Rig Counts, Spot Prices + Oil Prices

  • Rigs: National (-1012); Marcellus (-62); Utica/Point Pleasant (+18)

  • Brent Crude: +$71.55/bbl

  • West Texas Intermediate: +$63.89/bbl

  • NYMEX: May 2019 Contract @ +$2.700/MMBtu.

  • Spot Prices: Henry Hub (+$2.69/MMBtu); Dominion South (-$2.44/MMBtu); Tenn. Zone 4 (-$2.39/MMBtu)

("+" or "-" or blank denotes increase, decrease, or flat. )

WOPL - Appalachia

In our new section, WOPL ("waiting on pipelines"), we provide the latest news on the status of various pipeline projects in Appalachia:

  • Adelphia Project (Greater Philadelphia Region): Nothing new to report.

  • Atlantic Coast (W. Va. to Va. and NC): Nothing new to report.

  • Atlantic Sunrise (Northeastern PA to SE Pennsylvania): Nothing new to report.

  • Constitution (Northeastern PA to NY): As anticipated, President Trump signed an executive order that aims to limit the ability of states to use Section 401 water quality certifications to slow down or stop pipeline projects.

  • Empire Pipeline (NY to PA): Nothing new to report.

  • Leidy South - Benton Loop Expansion (PA): Nothing new to report.

  • Mariner East (Western PA to Eastern PA): Chester County sued Sunoco to stop construction activities on Mariner East 2.

  • Mountaineer XPress (WV): Nothing new to report.

  • Mountain Valley Pipeline (Northern WV to Southern Va. and NC): Nothing new to report.

  • NEXUS (Ohio to Michigan): Nothing new to report.

  • NFG FM100 Project (NC PA to Transco): Nothing new to report.

  • Northern Access (NW PA to Western NY): Nothing new to report.

  • PennEast (PA to Central Jersey): Nothing new to report.

  • Regional Energy Access (NE PA to PA/NJ): Nothing new to report.

  • Rover (OH, WV, PA to Michigan): Nothing new to report.

  • TransCanada Eastern Panhandle Project (PA to WV): Nothing new to report.

Headlines & Holdings - Appalachia

  • Sixth Circuit Says Lessee Can Deduct PPC from Royalties on NGL Sales. The Sixth Circuit concluded that the “at the well” rule for royalty calculations (utilizing the net-back method of calculating a wellhead royalty value) applied to NGLs such that the lessee could take deductions for post-production costs, reasoning that the royalty clause is silent as to the market place or price for the sale of NGLs and the parties did not specifically contract around the default “at the well” rule. EQT Production Co. v. Magnum Hunter Production, Inc., --- F.3d ---, No. 18-5372, 2019 WL 1556201 (6th Cir., Apr. 10, 2019).

Headlines & Holdings - Beyond Appalachia