Barnett Shale

Chesapeake updates Barnett output

Chesapeake Energy said Thursday that its Barnett Shale production has reached a record 685 million cubic feet of natural gas a day and that it expects moderate annual increases in output through 2011. Oklahoma City-based Chesapeake, which has a large regional office in Fort Worth and employs about 850 people in North Texas, said it expects to operate an average of about 18 drilling rigs in the Barnett in 2010 and drill about 300 net wells.

Chesapeake, which was operating 17 rigs in the Barnett on Thursday, said in a statement that its area production will reach the equivalent of 700 million cubic feet a day by year’s end, 725 million by year-end 2010 and 760 million by year-end 2011. Chesapeake said that if it “is successful in finding a joint venture partner for some or all” of its extensive Barnett Shale lease holdings of 305,000 net acres, it “plans to significantly increase Barnett drilling activity and production in 2010 and beyond.”

-- Jack Z. Smith

For a full report, see today's Star-Telegram.

Carter Avenue drill site owners speak out

Discussions were still under way this week to move a controverisal natural gas pipeline out of a neighborhood in East Fort Worth.

Meanwhile, two of the owners of the drilling site the pipeline would serve say they’re growing impatient with the delays. Chesapeake Energy, which has leased the site, wants to bore a 16-inch pipeline beneath the front yards of more than 40 homes on Carter Avenue.

The pipeline has touched off protests and led to changes in state law. City Councilwoman Kathleen Hicks, State Rep. Lon Burnam and State Sen. Wendy Davis have met with Chesapeake officials over the last two weeks looking for an alternat route.

Tim Thomas and Diana Armstrong sent letters to city officials and to the Star-Telegram on Monday, saying the delay in connecting the pipeline is costing them money. In an interview Thursday, they said they were concerned about the impact on the neighbors, but also worried that the city might impose more delays, even if Chesapeake finds an alternate route.

“If Chesapeake does surveys and then they get that one all done, will the city come up with something else not to approve that one?” Thomas asked.

 

Watch tomorrow's Star-Telegram for the full story.

 

-- Mike Lee

 

Chesapeake announces it won't drill in New York watershed

The company has the biggest leases in the watershed, which is in the Catskills mountains. CEO Aubrey McClendon said he won't drill there because of New York state's strict drilling regulations.

Read below the jump to see the New York Times' story.

Regulation of fracturing is likely, Schlumberger CEO says

The chief of Schlumberger, the big oilfield services company, said he expects the government will regulate hydraulic fracturing, and wants to be a part of the discussions.

Hydraulic fracturing is the technology that made it feasible to recover gas from the Barnett Shale. But it has come under fire from environmentalists and some members of Congress because of concerns that it can lead to water pollution. (Read our previous coverage here:  Gas-removal method may be subject to more rules)

Fracturing also creates a disposal headache -- it takes millions of gallons of water and chemicals to fracture a single well. That's led to a debate about how best to dispose of the water. See our previous coverage here: Well plan injects pressure into wastewater dispute

 Read below the jump to see the full story from Reuters about Schlumberger CEO Andrew Gould's comments.

Chesapeake reports Barnett's largest producer

Chesapeake Energy Corp. said Thursday that its gross operated daily production in the Barnett Shale recently exceeded 1 billion cubic feet of natural gas per day, including a "monster" well in Mansfield that peaked at 16.4 million cubic feet per day.

Oklahoma City-based Chesapeake, which has a large regional operation based in Fort Worth, is the second-largest gas producer in the Barnett Shale, which underlies about 20 North Texas counties. The biggest production and heaviest drilling activity is in Tarrant and Johnson counties.

Chesapeake said the Mansfield well, off Debbie Lane and west of Texas 360, "is expected to average more than 13 million cubic feet per day in its first month." That would exceed "the previous monthly Barnett production record established by two Chesapeake-operated wells this [past] summer that averaged more than 9 million cubic feet per day," the company said.

The company’s gross operated daily production from four major shale-gas plays — the Barnett, Haynesville, Fayetteville and Marcellus shales — cumulatively exceeds more than 2 billion cubic feet per day, Chesapeake said. That includes the billion-plus in the Barnett; more than 500 million cubic feet a day in the Haynesville, in northwest Louisiana and East Texas; more than 400 million cubic feet a day in the Fayetteville, in Arkansas and eastern Oklahoma; and more than 100 million cubic feet a day in the Marcellus, which is in the Appalachian region of the Eastern U.S.

For a full report, see Friday's Star-Telegram.

-- Jack Z. Smith

NARO schedules Oct. 20 meeting for landowners

The Texas chapter of the National Association of Royalty Owners will hold a free educational meeting Tuesdayoct 20 to address questions North Texans still have about production in the Barnett Shale.
The event is set for 6 p.m. to 8 p.m. at the Marriott Hotel at Champion’s Circle, 3300 Championship Pkwy., just south of Texas Motor Speedway.

Scheduled speakers include Ken Morgan, director of the TCU Energy Institute, who will address industry conditions, and John Allen Chalk, senior partner at Whitaker, Chalk, Swindle & Sawyer, who will address landowner rights and legal issues.

-- Jim Fuquay

Construction on Carter Avenue?

UPDATE: We published a more in-depth story this morning about the plans for the Carter Avenue pipeline.

Read it here: http://www.star-telegram.com/metro_news/story/1689800.html

 

 

 

Chesapeake Energy's pipeline subsidiary may be getting ready to build the Carter Avenue pipeline.

Carter Avenue became the rallying cry for residents who are concerned about the network of gathering lines and other pipelines needed to serve natural gas wells inside the city. Chesapeake Energy is seeking to build a 16-inch pipeline connecting  two wells along Interstate 30, just east of downtown Fort Worth. The route would require a right-of-way beneath the front yards of more than homes.

The proposal led to a bill in the Texas Legislature which would make allow natural gas lines to run along Interstate freeways. Gov. Rick Perry vetoed that bill, though, in favor of one supported by the Texas Pipeline Association. It's not clear though if the bill Perry signed would allow pipelines on interstate freeways.

Meanwhile, Chesapeake has sent an analysis of alternate pipeline routes to the city planning and development department, arguing that Carter Avenue is the most reasonable route. Other alternatives, including routes on the north side of I-30, would be harder to build because of insufficient workspace or obstacles such as hills, according to a copy of the analysis.

Watch this space for more developments.

-- Mike Lee

Jack Smith has an in-depth profile today of Quicksilver Resources, based here in Fort Worth.

CEO Rob Darden said that the company's wells near Lake Arlington are expected to produce twice the average for wells in the Barnett Shale -- 5 billion cubic feet during their lifetime. The company has about 700 wells in the Barnett Shale and is also drilling in the Horn River Basin, a new natural gas play in British Columbia.

Read below the jump for the full story.

Welcome to Texas politics

There's a lot of outrage in Pennsylvania after Fort Worth-based Range Resources hired away a high-level aide to the governor to help the company with its drilling program in the Marcellus Shale.

Read below the jump for an editorial from the Philadelphia Inquirer. The Inkie also flogs Gov. Edward Rendell for flip-flopping on the state severence tax on natural gas, and sounds a warning that natural gas companies are making big campaign contributions to Pennsylvanie legislators.

This sort of thing, of course, makes Pennsylvania sound a lot like Texas. All they need in Harrisburg (the capital of Pennsylvania) is a good Tex-Mex joint. And maybe a little more sunshine.

Another shale gas play

The Barnett Shale may be the granddaddy of shale gas plays -- this is where producers worked out the technology that made it feasible to recover natural gas from unconventional formations.

But there seem to be plenty of additions to the family. The Houston Chronicle reports on the latest find, the Eagle Ford shale in South Texas. Its advantages include lower production costs, easy terrain and a local population land owners who "have grown comfortable with the industry after decades of oil drilling," the Chron reports.

There are also some interesting numbers on the break-even cost for producers.

http://www.chron.com/disp/story.mpl/business/energy/6653999.html

-- Mike Lee

The Clean Skies Alliance, a trade group that lobbies for more use of natural gas, has picked a lawyer who specializes in climate change as its new CEO.

The Clean Skies Alliance, closely affiliated with Chesapeake Energy, has lobbied against programs that would promote clean coal, and in favor of more natural gas exploration. The group has its own website, www.cleanskies.com and airs a weekly television program on a Washington, D.C., TV station.

Greg Staple, a former partner at the law firm Vinson & Elkins, before joining the Clean Skies Foundation as a policy analyst.

Read below the jump for the full press release.

Pair of studies link gas drilling to air pollution

Our colleague Chris Vaughn reported Sunday about the studies linking gas drilling to air pollution. http://www.star-telegram.com/local/story/1659163.html?storylink=pluck_recommended#

Don't expact an end to the debate, though. The drilling industry is adamant that it's not a major source of pollution; environmentalists are just as adamant that it is.

Here's a sampling of previous stories on the potential links between air pollution and natural gas drilling in the Barnett Shale, starting in 2008.

Drilling’s role in pollution examined 

Study Drilling fouls the air

Gas drilling research is disputed

http://www.star-telegram.com/news/story/1637253.html

-- Mike Lee

New York state may lift its drilling ban

New York's state moratorium on natural gas drilling may soon be lifted, now that the the state environmental agency has finished an environmental impact statement.

Upstate New York sits over the Marcellus Shale, a gigantic shale gas field that is similar to the Barnett Shale.

Pro-Publica, the non-profit investigative reporting group, reports that the state may allow drilling in New York City's watershed: http://www.propublica.org/feature/new-york-state-paves-way-for-gas-drilling-with-release-of-review-930

There are some stipulations, though, according to Pro Public:

-- Operators must disclose all the chemicals used in hydraulic fracturing, including their concentrations

-- Operators must complete a checlist and certification form before any well can be hydraulically fractured

-- Residential drinking water wells near drilling sites must be tested for contaminants priot to drilling, to establish baseline information in case an accident occurs

-- Some waste pits, which have been responsible for water contamination in other parts of the country, will be prohibited in the New York City watershed, and limited in other parts of the state. Drillers will be required to store their waste in steel tanks in some cases.

A report by Pro Publica in 2008 -- which said the state wasn't ready to cope with water use, waste disposal and other downsides of gas drilling -- convinced the state to impose a moratorium on gas drilling.

Many of the same companies that developed the Barnett Shale are operating in the Marcellus Shale, including XTO, Chesapeake Energy, Devon and Range Resources.

Here's a link to the full report from the state:

http://www.dec.ny.gov/energy/58440.html

-- Mike Lee

More eathquakes in Cleburne

Our colleague Liz Campbell has the scoop on the two small eathquakes this week in Cleburne:

http://www.star-telegram.com/local/story/1654524.html

This is the town where Chesapeake Energy shut down  disposal wells are after one of them was linked to the quakes. The company still doubts that there's a direct link.

Disposal of the drilling waste from gas drilling -- a mix of saltwater, chemicals and petroleum products -- is  one of the trickiest issues that local governments are dealing with during the Barnett Shale gas boom. There have been efforts to recycle the water, but the gas drilling industry continues to rely on deep injection wells as the most cost-effective disposal method.

-- Mike Lee 

Gas prices to rise

Gas prices are going to rise, after a precipitous fall in the last 10 months.. Jack Z. Smith has the story in today's paper: http://www.star-telegram.com/business/story/1646934.html

Air pollution in DISH

We published a story Saturday about air pollution in the tiny town of DISH (population 200). This is not the

first time that folks in DISH have raised a ruckus about the natural gas and pipeline industry.

The town sits at the intersection of several major natural gas pipelines and residents have complained that so much of their land is being taken for pipelines that the town may not get to develop much of its surface.

Mayor Calvin Tillman has pushed the state legislature to give towns more control over pipeline routes and he's kept up the pressure by writing letters to gas companies and even testing for gas himself.

This may be a place to watch as the debate over air pollution, pipelines and natural gas continues.

-- Mike Lee

Title insurance firms get a break on covering mineral rights

One more example of how the Barnett Shale has changed things: The Texas Department of Insurance settled a dispute between title insurance companies and real estate lawyers about whether the title companies have to check the ownership of mineral when they issue a title policy.

The insurance companies won, but keep an eye on the Texas Department of Insurance, which is scheduled to rule in November on whether consumers will get a discount on title insurance.  

http://www.star-telegram.com/804/story/1624915.html

Here's a previous story, with comments from more attorneys: http://www.star-telegram.com/804/story/1624915.html

-- Mike Lee

Venue fight underway as Burleson residents sue Chesapeake Energy

Chesapeake Energy, which is fighting a lawsuit filed by Burleson property owners who claim the company illegally reneged on a lease agreement that would have benefited 408 households, wants to have the case heard in a Dallas federal court. But the property owners filed the lawsuit July 20 in the 18th State District Court in Cleburne and want venue to be there. Burleson is in far northern Johnson County.

Chesapeake contends the proposed class action lawsuit should be in federal court in part because the Class Action Fairness Act authorizes such jurisdiction for class actions with more than $5 million at stake. Chesapeake, represented by the prominent Fort Worth law firm of Kelly, Hart & Hallman, notes that the lawsuit seeks nearly nearly $6.7 million just for lease bonuses.

 Another well-known Fort Worth law firm, Whitaker, Chalk, Swindle & Sawyer, represents two named plaintiffs, Leslee Dawn Ahrend and Buster Ray Williams, and wants the lawsuit to be declared a class action that would include the hundreds of Burleson properties that would have benefited from a lease agreement reached in 2008 between representatives of Chesapeake and an alliance of homeowners .

Under the agreement, property owners would have received a lucrative lease bonus of $27,200 per acre and a 25.25 percent royalty, the lawsuit states. It contends that Chesapeake was guilty of breach of contract in aborting the agreement by refusing to sign lease agreements with individual property owners based on the terms of the agreement. The plaintiffs cite a letter, dated Oct. 16, 2008, that a senior landman representing Chesapeake sent to representatives of Burleson homeowners. The landman said that, as a result of the deep economic recession and plunging natural gas prices, Chesapeake was "withdrawing previous offers to lease your minerals." The ,lawsuit contends that Chesapeake this year has offered a lease bonus of only $1,000 an acre and a 25 percent royalty.

See story in Wednesday's Star-Telegram.

--Jack  Z. Smith   

Well site near Mansfield park up for a vote tonight

Update: The Mansfield City Council approved the well site Mansfield Sports Complex by a 6-1 vote.

http://www.star-telegram.com/news/story/1613834.html

City officials in Mansfield have spent the summer debating whether and how to allow drilling next tothe Mansfield Sports Complex.

The plan would provide money for the city-owned park complex, but it's got a lot of neighbors worried about truck traffic and other downsides.

The plan is up for a Mansfield City Council vote tonight  at tonight's City Council meeting.

Watch Tuesday's Star-Telegram for the results.

-- Mike Lee

Date set for court case filed by Fort Worth resident who didn't get lease bonus

Willie Thomas will get his day in court.

A claim that the southeast Fort Worth retiree filed based on Glencrest Resources failing to pay him a bonus check for a Barnett Shale natural gas drilling lease is set to be heard at 2 p.m. Sept. 28 by a six-person jury in the court of Justice of the Peace Sidney Thompson. The court is at the Tarrant County subcourthouse at 3500 Miller Ave. in southeast Fort Worth. A visiting judge is expected to preside over the civil proceeding.

Thomas, in a recent interview with the Star-Telegram, said he should have received a bonus check of  about $2,300 for his lease, which he said he signed in 2006. The three-year lease expires in November, he said.

The late Leonard E. Briscoe Sr., who died in June, formed Glencrest Resources, but had difficulty securing funding for payment of lease bonus checks. Approximately 3,600 persons signed leases with Glencrest, About 1,300 of the leaseholders received bonuses, but only after signing new, extended lease agreements with Glencrest that gave it up to five years to drill on the leases. A substantial number of Glencrest leaseholders signed leases with other companies after failing to get a bonus check from Glencrest, which has been sued in 348th State District Court by Pamela Ellis, a Fort Worth resident who said she did not receive a bonus check after leasing her property.  For more,see story in today's Star-Telegram http://www.star-telegram.com/business/story/1610415.html

--Jack Z. Smith

   

Debate continues on frac-ing fluid

Information continues to come out about the safety of chemicals used in hydraulic fracturing. Here's an analysis by an environmental group in the Marcellus Shale.

http://www.preservethefingerlakes.com/id16.html

Closer to home, here's a Star-Telegram story about fracturing chemicals from last year:

 Gas-removal method may be subject to more rules

-- Mike Lee

Lawyers address neighborhood regarding aborted gas leases

An attorney told a southwest Fort Worth neighborhood association Tuesday night that a litigation group formed by three Dallas law firms might seek hundreds of millions of dollars in damages against energy companies that reached lease agreements with alliances of neighborhood associations, but then declined to enter into individual lease contracts with many property owners.

"The promises they (energy companies) made to Fort Worth were maybe $150 million," attorney Kip Petroff told members of the Meadows of CandleRidge Neighborhood Association who packed a meeting at a Knights of Columbus hall. Petroff said the companies could be sued for triple damages, plus attorneys' fees, under provisions of the Texas Deceptive Trade Practices Act.

The litigation group has filed a lawsuit in Dallas on behalf of an Arlington couple, Willie and Carmen Booth, that it contends is due a lease bonus of nearly $5,000 from XTO Energy as a result of an agreement that the South East Arlington Coalition of Texas, an alliance of neighborhoods, reached for lease bonuses of $26,517 per acre. The Meadows of CandleRidge association was part of the Southwest Fort Worth Alliance, which reached an agreement with Vantage Energy for lease bonuses of $27,500 per acre. Meadows of CandleRidge Association President Eva Bonilla stressed Tuesday night that the organization was not endorsing the litigation group's legal effort, but only allowing it to hold an informational session.

The energy companies sued by the Booths are expected to contend that they were not bound to pay lease bonuses negotiated with alliances of homeowner groups unless the companies had entered into binding lease contracts with individual property owners.

Read more about this in Thursday's Star-Telegram.

--Jack Z. Smith

Legal fight looms over Barnett Shale

Three Dallas law firms that have formed the North Texas Lease Litigation Group are contending that energy companies are trying to renege on drilling agreements with homeowners' association alliances in North Texas' Barnett Shale. Those agreements are binding leases, the law firms say, even if individual property owners did not sign formal lease contracts. The law firms have sued on behalf of an Arlington couple, Willie and Carmen Booth, who claim they are due a lease bonus of nearly $5,000. Read the complete story in the Star-Telegram.

Jack Z. Smith   

Shreveport holds hearings on drilling regs

Shreveport, which is in the heart of the Haynesville Shale natural gas play, is struggling with some of the same issues that Fort Worth addressed last year: How to write an ordinance that allows natural gas drilling in an urban area, while protecting air and water quality.

http://www.shreveporttimes.com/apps/pbcs.dll/article?AID=2009909020338

-- Mike Lee

Well site near Trinity Park approved

The deal to allow a high-impact natural gas well next to Trinity Park includes some extra provisions -- more noise mitigation, vibration monitoring at the historic Van Zandt Cottage, and a two-year "no drill" provision that will coincide with the opening of a planned retirement home.

Read the full story after the jump.

Drilling site next to Trinity Park scheduled for vote tomorrow

The City Council will discuss a waiver for a gas well pad on Foch Street at the edge of Trinity Park.

Chesapeake Energy's original plan for the site called for a truck route through one of the park's entrances, near the historic Zan Zandt Cottage. Councilman Joel Burns asked for a delay  at the beginning of August so that negotiation on a new route could be discussed.

UPDATE: Burns said Monday he's going to ask Chesapeake to alter its truck route to use an abandoned railroad right of way that runs along the south end of the Farrington Field parking lot. Chesapeake would pave the road and Burns says he'll ask for continuous vibration monitoring at Van Zandt Cottage to make sure there's no damage. The truck route will use Crestline Drive, which is one of the main approaches to Trinity Park, but the trucks won't actually go through the park.

The blue line on the map below is the original route, the red line is the proposed new route. The green line is the approximate park boundary.

-- Mike Lee

More on frac chemicals

Pro Publica, the non-profit investigative reporting group, has an update about the chemicals used in hydraulic fracturing. The EPA has found chemicals in people's water wells in Wyoming, which Pro Publica says might lead to more calls to regulate frac-ing.

http://www.propublica.org/feature/epa-chemicals-found-in-wyo.-drinking-water-might-be-from-fracking-825

And here's a story from December that details what chemicals are used in wells in Fort Worth:

Gas-removal method may be subject to more rules

-- Mike Lee

Devon chief says drilling slowdown will continue

Devon Energy Corp. CEO Larry Nichols said Wednesday the company is reducing its natural gas drilling in the short-term until gas prices start to rebound. “We see absolutely no reason to continue to drill at this time and bring natural gas production on at this time, any more than we need to,” Nichols said at the company’s annual shareholders meeting. “It’s better to leave that gas in the ground and sell it next year, or in future years, when we can generate a greater profit for our shareholders.”

Devon has reduced its exploration and development capital budget to between $3.5 billion and $4.1 billion this year from $8.5 billion in 2008. Nichols said that 2009 continues to be a challenging year for the industry but that the largest U.S. independent oil and natural gas producer is well-placed to weather the economic downturn.
“While last year was a great year, this year is a tough year,” Nichols said, citing a steep decline in oil and natural gas prices during the second half of 2008.

Oil prices have doubled since March with some signs that the worst of the recession may be over and were hovering around $66 a barrel Wednesday afternoon on the New York Mercantile Exchange. Natural gas for June delivery tumbled 36.2 cents to $3.758 per 1,000 cubic feet after peaking last summer at $13.69 per 1,000 cubic feet.
Nichols said that natural gas prices will take longer to recover than will oil prices because of the current oversupply of natural gas.

 

-- Associated Press

 

 

McClendon expects Haynesville to be No. 1 by 2015

The Haynesville Shale formation in the U.S. South will become the country’s largest source of natural-gas production by 2014 or 2015, Chesapeake Energy Corp. Chief Executive Officer Aubrey McClendon said.

The formation in East Texas and northwestern Louisiana will, in turn, be eclipsed by the Marcellus Shale in West Virginia, Pennsylvania and New York by 2020, McClendon said today at an investor conference in Miami sponsored by Deutsche Bank AG and broadcast on the Internet. Chesapeake is the second- largest U.S. independent gas producer behind Devon Energy Corp.

The Barnett Shale in north-central Texas is the largest non-conventional source of gas in the U.S., Chesapeake said in its first-quarter earnings statement on May 4. It yielded about 1.4 trillion cubic feet of gas last year, 5.3 percent of U.S. production of the heating and power-plant fuel, according to the Perryman Group, a financial-analysis firm based in Waco, Texas.

Haynesville Shale gas production may peak at 4 billion cubic feet a day in 2014, or about 1.46 trillion cubic feet a year, consulting firm Wood Mackenzie said in a July 2008 report.

The Marcellus Shale may contain as much as 50 trillion cubic feet of recoverable gas, equivalent to more than two years of U.S. consumption, Terry Engelder, a geosciences professor at Pennsylvania State University, estimated last year.

-- Bloomberg News

Chesapeake has bidders for Barnett Shale stake

Chesapeake Energy is in talks with four bidders for a $500 million stake in its Barnett Shale properties in North Texas, the company said Wednesday. Oklahoma City-based Chesapeake also has letters of intent to put about $1 billion of gas-processing assets into a joint venture, Chief Financial Officer Marc Rowland said at an investors conference in Austin. Rowland didn’t identify potential partners or bidders. The deals would continue a string of transactions that the company has done, all generally aimed at providing it with additional cash or reducing future expenses at a time when Chesapeake and other producers are struggling to manage low energy prices and tight credit.

Deals "imminently about to close" include a so-called volumetric production payment of $500 million on Barnett Shale properties. Volumetric production payments call for a buyer to pay a fixed price upfront for a certain amount, or volume, of production from a particular property. Last year, Chesapeake did three similar deals for a total of $1.6 billion. In addition to the volumetric production deals, Chesapeake is also about to sell $300 million of other unidentified assets, Rowland said.

For more, see Thursday's Star-Telegram.

-- Jack Z. Smith

Quicksilver sells Barnett Shale properties for $280 million

Fort Worth-based Quicksilver Resources is selling 27.5 percent of its leasehold interests in the Alliance area in Tarrant and Denton Counties to the Italian oil company Eni for $280 million in cash. Quicksilver plans to use the proceeds to pay down debt. Quicksilver announced today that it is forming a “strategic alliance” with Eni to acquire and develop Barnett Shale natural gas properties “in an area covering approximately 270,000 acres surrounding Quicksilver’s Alliance properties.” Quicksilver will be the operator for the properties. Quicksilver last year paid $1.3 billion for 13,000 acres around Alliance, using $307 million in stock and $1 billion in cash, most of it borrowed.

For a complete report, see Tuesday's Star-Telegram.

-- Jack Z. Smith

Denbury Resources selling Barnett Shale properties

Denbury Resources has agreed to sell 60 percent of its natural gas assets in the Barnett Shale in North Texas to Dallas-based Talon Oil & Gas LLC for $270 million. Plano-based Denbury said production from the properties in Tarrant, Parker and Wise counties averaged the equivalent of 45.7 million cubic feet of natural gas per day in 2008, or 16 percent of the company's 2008 production and 18 percent of its proven reserves as of Dec. 31. Denbury said selling the properties will allow it to focus on its crude oil operations, which it said are more profitable and carry less risk. It said it plans to use proceeds from the sale to pay down bank debt.
—Jack Z. Smith

Industry pressures congress over hydraulic fracturing

The oil and gas industry launched a lobbying campaign to protect hydraulic fracturing from more federal oversight.

Here's the latest, courtesy of the New York Times.

http://www.nytimes.com/gwire/2009/05/07/07greenwire-industry-campaign-targets-hydraulic-fracturing-10572.html

And here's a story from late last year about the potential downsides of hydraulic fracturing.

Gas-removal method may be subject to more rules

-- Mike Lee

Devon sees Barnett peak

Devon Energy Corp., the largest U.S. oil and natural-gas producer, said it expects output in the Barnett Shale gas formation in North Texas to “crest” in the current quarter. David Hager, executive vice president for exploration and production at Oklahoma City-based Devon, commented on Barnett Shale expectations Wednesday on a conference call with investors and analysts. Devon’s output in the formation reached an all-time high of 1.2 billion cubic feet of gas equivalent a day in the first quarter.

Devon is only the latest in a number of observers who believe that the sharp drilling slump will produce an earlier peak in the field's production than earlier predicted. XTO Energy, for example, made its forecast back in February, as we reported here.

-- Bloomberg News

Barnett rig count inches up second week

The number of rigs working in the Barnett Shale increased, just barely, for the second consecutive week, while the U.S. rig count continued to slide. In North Texas, 83 rigs were active, up one from a week earlier and up six from two weeks ago. Tarrant County increased its standing as the busiest county, with 33 rigs compared with Johnson County’s 17. Nationally, the rig count fell by 20 in the past week to 955, barely half of the year-ago total. Of those, 742 were exploring for natural gas and 202 for oil, with another 11 unclassified, Houston-based Baker Hughes said Friday. The U.S. count is down 53 percent since the end of August as weak energy demand has hampered oil-field activity. Texas, with 378 rigs, was down six.

-- Jim Fuquay

Schnurman: McClendon's deal a gusher

Star-Telegram columnist Mitch Schnurman wrote Sunday on Chesapeake Energy Chairman Aubrey McClendon's 2008 pay package. Here's his introduction:

Chesapeake’s Aubrey McClendon messed up big time. The consequences? A huge bonus.  Heads, he wins. Tails, shareholders lose. Either way, the chief executive of Chesapeake Energy makes a killing.

Aubrey McClendon, who built Chesapeake into the nation’s largest independent natural gas producer, had a terrible year in 2008. He lost 95 percent of his stake in Chesapeake, once valued at almost $2 billion, on a reckless gamble with a margin account and company stock.

Rather than reprimand the CEO for playing speculator and damaging the company’s reputation, the board gave McClendon a $77 million bonus in 2008 -- on top of $23 million in shares, salary and other perks. This after Chesapeake’s net profit fell by half and its stock price dropped 59 percent as natural gas prices collapsed. In the proxy released last week, directors defended the payout as a reward for superior performance, but it’s actually a path for rebuilding McClendon’s personal wealth. Call it a CEO bailout, with shareholders footing the bill.

Click here to read Mitch's full column.

Sell your royalties? Better think twice

First, property owners in the Barnett Shale had to decide when to lease their mineral rights and for how much. Now, with the recession pushing back drilling projects, some are being asked to sell their royalty payments. The offer: Wait for royalty checks to come in month by month -- or just to start in the first place -- or accept a one-time, lump-sum payment in exchange for the right to all those future payments. It’s not necessarily a simple decision at a time when natural gas prices have plunged, depressing royalties and putting their future value in doubt. "Now’s the time to buy," said Jerry Simmons, executive director of the National Association of Royalty Owners in Tulsa. Compared with the peaks paid last year, he said, investors face a much more favorable market to accumulate properties.

But is it time to sell? "I would be very cautious," said Bob West, a Fort Worth oil and gas attorney who has advised a number of neighborhood organizations. "This is a business we haven’t heard a lot of in Tarrant County, but I imagine we’ll be hearing more of," West said.

For the complete story in Sunday's Star-Telegram, click here.

Questions about big bonus for Chesapeake CEO

The New York times reports that a shareholder lawsuit is seeking information about a $75 million bonus paid to Chesapeake CEO Aubrey McClendon -- despite a big drop in the company's stock price.

http://www.nytimes.com/2009/03/29/business/29gret.html?_r=1&emc=eta1

Dueling air quality studies

There's been a war of words for the past six months over how much natural gas production contributes to the air pollution in the Dallas Fort Worth region.

Al Armendariz, an engineering professor at SMU, and Ramon Alvarez, a researcher with the Environmental Defense Fund, issued a study in February that said gas drilling produces more of some pollutants than all the cars and trucks in the Metroplex. Study: Drilling fouls the air

(Read the full report here: Barnett_Shale_Report )

The Barnett Shale Energy Education Council, a trade group, released a study last week questioning some of Armendariz and Alvarez' conclusions:

http://www.bseec.org/index.php/content/news_detail/air_quality_and_the_barnett_shale/storiesimportant

The debate has been going on since the fall, when Armendariz released a draft of the report:  Drilling’s role in pollution examined

The question of air pollution has come up during discussions about Fort Worth's drilling ordinance: Expert: Existing technology can reduce pollution from drilling

 and in the Legislature: New rules for gas drilling proposed

-- Mike Lee

The dish on pipeline battle in DISH

We've got the latest from Mayor Calvin Tillman, who's been fighting a running battle of letters and words with pipeline companies in the Denton County town of DISH.

Loyal readers will remember that DISH, just north of Justin, is at the crossroads of several major pipelines. Tillman says the pipeline companies have too much authority to run pipelines through towns and has been urging other towns to pass resolutions calling on the Legislature to fix the problem. 

Read  Tillman's e-mail here

Click here for the Backstory about DISH's situation