MORGANTOWN — Although COVID-19 has worsened the natural gas industry production slump, local producer Northeast Natural Energy announced some good news this week: It received “significant investment” to allow it to continue growing its operations in north-central West Virginia and Pennsylvania.
NNE President and CEO Mike John said he’s happy the investors have stepped forward. “We’re very pleased that they’re showing confidence in our team and they’re showing satisfaction in the work we’ve done so far.”
NNE is headquartered in Charleston with an office in Morgantown. It operates chiefly in north-central West Virginia – Monongalia and Marion counties – with some wells in southwestern Pennsylvania. It has wells in Morgantown Industrial Park. NNE is part of a consortium with WVU, the National Energy Technology Laboratory and Ohio State University operating the Marcellus Shale Energy and Environmental Lab at MIP and at a pad in western Mon County.
NNE announced this week that its senior lending group, led by EIG Global Energy Partners extended the maturity of its current credit instrument – $300 million – to December 2023 and received another $65 million from a group of investors that include Metalmark Capital, Wells Fargo and Prudential to fund more drilling, well completion and lease acquisitions.
NNE has just over 100 wells producing, John said, and expects to drill about 20 in the next year. “We generally maintain a steady pace,” keeping one rig running at a time, and they’ll continue that moving forward.
John talked about the slump. “This year has been so unbelievably crazy with COVID and everything else. Prior to this year this had been a tough stretch for oil and gas investments.”
For the region, lack of infrastructure to move gas to markets and low prices connected to the earlier production glut formed headwinds that made it difficult to obtain investment.
NNE, he said, has fortunate to be in a good area and operates as a dry gas producer, supplying gas for heat and power. With concerns about emissions and air and water quality, “dry natural gas is the right place to be and our investors felt that way also.”
The investors’ optimism, he said, begins with the dry gas and extends to the efficiency and cost control of NNE’s development work. “Our costs are better than anybody’s.” That’s due to the small team – about 50 people – and the small operation. “We’re really focused in a relatively small footprint.”
The investors have been pleased with the cost and operational quality of the wells drilled, he said.
“We’re a local company. Our people take a lot of pride in begin able to do what they want to do where they want to do it,” John said. “We’re happy that this reaffirmation’s occurred with our investors and we’re looking forward to being able to do more activity in and around northern West Virginia.”
Charlie Burd, executive director of the West Virginia Independent Oil and Gas Association, offered soe industry perspective.
First, he complimented NNE. “They’re just an absolutely stellar company. They have great ownership and they’re well managed.”
Statewide, he cited a drilling rig report that showed and average of seven rigs per month in operation this year compared to 13 a year ago. That’s not always an indicator, he cautioned, because longer laterals and other technological advances allow producers to produce the same or more with fewer wells.
But the lower count, he said, is likely tied to COVID-19 and extra precautions being taken; to the loss of the Atlantic Coast Pipeline that was projected to carry gas to southeast markets; and to delays with the Mountain Valley Pipeline. This week a federal appeals court ended an attempt by environmental groups to stall pipeline progress, which will allow that project to move forward again.
An economic downturn – such as the one resulting from COVID – can also reduce energy demand and, for oil, the transportation fuel demand.
“Our industry is very resilient,” he said. “Rest assured we will be here to serve the needs of the folks of West Virginia and the region. We look forward to having this pandemic solved and behind us.”
He noted that during the pandemic, IOGA members came forth with “vast amounts of public outreach,” putting money back into their communities. “We’re pretty proud of that.” One such example on the IOGA website is EQT’s donation of $210,000 to 21 volunteer fire departments in West Virginia and southwestern Pennsylvania.
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