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Conventional Oil And Gas Producers Band Together To Survive

By Anya Litvak, Pittsburgh Post-Gazette (TNS)

PITTSBURGH — Stan Berdell says his company, BLX Inc., is like a barrel of water.

“It’s got a leak in it and it’s dripping every day. If we don’t do something, it’s going to be empty one day.”

Conventional oil and gas producers are experts at pessimistic metaphors. They’ve been edged off their perch by large companies tapping the Marcellus and Utica shales. Some tried drilling shale wells themselves but couldn’t compete. The price of natural gas dropped and it became uneconomical to drill shallow wells, too. They sold some shale rights to big operators. They started side businesses. They had layoffs.

Now, “We’re swinging for the fences to see what happens,” Berdell said.

For the past six months, he’s been herding a group of independent operators — Berdell puts an emphasis on “independent” to imply the challenge involved — to form Vintage Land Holdings, the latest survival strategy.

The idea is to aggregate the deep oil and gas rights of a dozen conventional operators and market them to a private equity fund.

The 40,000-acre package will be an all-or-nothing proposition which Berdell hopes will fetch between $200 million to $300 million. But the trick is convincing independent companies to give up control over what might be their last promising asset for a five-year term.

It’s not something Berdell takes lightly. His company’s future is on the line with this deal, too. In January, he hired Paul Kimmell, a landman who used to broker shale deals for major players, to help with Vintage.

“I hope this works,” Kimmell said. “This is our final fight. We’re all trying to survive.”

HARD TIMES IN THE INDUSTRY

The theme of this year’s pig roast and industry conference put on by the Pennsylvania Independent Oil & Gas Association in late July was: “Hard times — unique solutions.”

In one session, titled “Strategies a small business can use to survive a market downturn,” an attorney from Leech Tishman gave out a tip sheet for how to prepare for bankruptcy.

“It’s a good time to open up a Dairy Queen,” said Lou D’Amico, executive director of PIOGA.

It’s a running joke — running time five years now — he has with Jim Kriebel, president of Kriebel Cos.

Natural gas spot prices peaked in 2005 above $14 per million British thermal units. In June 2008 they spiked again to more than $12.

Then the recession collided with shale development, creating a supply glut. It’s difficult to make many Marcellus Shale gushers work at gas prices below $3, where they currently are, let alone conventional wells that hiccup by comparison.

STRENGTH IN NUMBERS

Aggregation deals aren’t new. Landowner groups often pool their acreage for a better negotiating position with oil and gas firms.

In 2012, Snyder Brothers, the oil and gas arm of Snyder Associated Cos., organized more than a dozen shallow well operators into a block that was marketed to shale firms. BLX was in the bunch, as was Turm Oil.

It was supposed to be an all-or-nothing proposition, said Turm Oil director Dickson “Deke” Forbes.

Instead, PennEnergy Resources, a startup founded by former Atlas Energy CEO Rich Weber and Atlas alum Greg Muse and backed by private equity group EnCap Investments LP, cherry-picked properties. Only about 10 percent of Turm Oil’s offering was sold, leaving the company with 7,000 acres.

BLX was left holding 5,000 acres.

Berdell says banding together once again is the best option. “No one’s knocking on our doors,” he said.

In 2009, he said, he got weekly offers for several thousand dollars an acre. He didn’t sell “because I’m … an independent operator,” he said, once again using the term euphemistically.

Now, he keeps thinking back to that time when a guy from one of the majors told him, “‘You’re all for sale. You just don’t know it yet.'”

VOLATILITY IS AN OPPORTUNITY

He’s met with three private equity groups so far and says all have expressed an interest in Vintage.

When it comes to energy, private equity investors view volatility as an opportunity, said Rob McCeney, a partner at PricewaterhouseCooper’s U.S. energy & infrastructure deals division.

“There’s a tremendous amount of capital committed to energy funds today that investors are trying to put to work,” he said. “Many of these investors are comfortable investing in the cycles and looking at the opportunity sets that may not be highly returning today but may be highly returning in the future.”

Ryan Devlin, a director with EnCap who brokered the PennEnergy investment, said his firm is anticipating some good pickings from companies forced to sell assets or reorganize in the continuing low commodity environment.

EnCap can wait for those opportunities to ripen. “It’s a cyclical business, we all know it,” he said.

Devlin would love to hear from Vintage. “Give him my number,” he said. “Seriously, do.”

Even if the Vintage deal succeeds, BLX — which Berdell founded in 1989 — still needs to figure out what it will look like in the future. It won’t be drilling wells, he said. The focus will shift — and this has already begun to happen — to the service side, helping other companies drill and manage their wells.

In May, Berdell co-founded a wireline company, which operates cables that bring tools in and out of wellbores. He also invested in an Albuquerque mobile water treatment firm and is hoping to sell units in the Marcellus.

He joked about taking a page from Snyder Associated Cos, which has a successful business selling mushroom spawn internationally.

“I’m thinking about getting into pork belly,” he said.

When it was suggested he might be too late with the idea, that pork belly is more of a 1980s sensation, Kimmell replied: “So is gas.”

(c)2015 Pittsburgh Post-Gazette. Distributed by Tribune Content Agency, LLC.

Stan Berdell owns an oil and gas company that’s been struggling for years to keep up with, first, booming shale, and now, the collapse in commodity prices. He is forming a new company, Vintage Land Holdings, and is going after private equity money. (Nate Guidry/Pittsburgh Post-Gazette/TNS)

With Hong Kong Protests Cleared, What Becomes Of Movement?

By Antony Dapiran and Stuart Leavenworth, McClatchy Foreign Staff (TNS)

HONG KONG — Police cleared Hong Kong’s government center Thursday of pro-democracy protesters. Now the question becomes: Is this the final chapter of the challenge to Beijing and its all-powerful control of the former British colony or just the beginning?

The police faced little resistance from demonstrators as they demolished tents and pushed out people from the city’s largest protest site, in Hong Kong’s Admiralty district. Street occupations there, surrounding Hong Kong’s government complex, have gripped and gradually dismayed the city’s residents for 75 days.

Yet as they left, protest leaders and rank-and-file demonstrators offered few clues of what might come next. Some wept. Some said they were ready to move on. Some said it was time to plan a new phase of action.

“The movement has lost the support of the people,” said a protester named Phoebe, who declined to give her surname and said she had been there every day since the protests began. “If they tried to clear earlier, maybe there would have been more resistance, but now everyone is tired.”

Others were more defiant, frustrated that more hadn’t been gained by 11 weeks of sacrifice, including clashes with police and street camping under thunderstorms. Some said more direct action could be expected — if not immediately, then in coming months.

Acting on a court order, bailiffs, police and demolition crews began removing barricades at roughly 10:30 a.m. local time outside the city’s government buildings. By late afternoon, they had cleared a vast area once occupied by hundreds of tents. By the evening, traffic was restored to some of the streets that protesters had blocked off.

Leaders of the main student protest groups, Scholarism and the Hong Kong Federation of Students, had urged protesters to comply peacefully with the removal order. The vast majority did.

A group of roughly 70 demonstrators sat down in the street and waited for police to act. The police arrested them in phases late in the afternoon and into the evening.

As most protesters left of their own accord, police checked their IDs and recorded their names for possible future prosecution. According to Hong Kong news media, two shifts of about 7,000 police officers were to be deployed in the clearance.

Students and pro-democracy activists had been protesting a decision by Beijing to screen candidates who will run in 2017 for the post of Hong Kong’s chief executive. Protesters want a system of open nominations, as opposed to candidates put forward by a committee stacked with people loyal to Beijing.

After police used tear gas on a small group of protesters Sept. 28, thousands had rushed in and started occupying the Admiralty site, as well as two other locations in the city. The demonstrations had drawn international attention, but as the weeks passed, public support waned and divisions emerged among factions of the “Umbrella Movement,” so called because of the umbrellas the protesters used to ward off the tear gas.

Fernando Cheung, a Hong Kong Legislative Council member who has been supporting the students, said the protests had highlighted the generation gap in Hong Kong, with young people much more frustrated about their prospects and much more willing to rebel against the system.

Asked what the next step is for the movement, Cheung responded: “We need to recuperate, reorganize ourselves. We need to look at other options.” One of those options, he said, is for the Legislative Council to press Chief Executive C.Y. Leung, also known as Leung Chun-ying, to seek broader reforms from Beijing.

In recent weeks, bus and taxi groups had obtained court injunctions against the street occupations, prompting bailiffs and police to act. On Thursday, a bus company employee who gave his name only as Chau expressed satisfaction as the police cleared the site.

“It is good that life is getting back to normal. Opening the roads is the most important thing,” he said. “This has brought a lot of inconvenience to a lot of people. If they go and demonstrate in a park, that is fine.”

Although the number of protesters had fluctuated over the last two months, the Admiralty site had grown into a mini-city. Demonstrators built a large covered “study center” — with tables, chairs, lights and Wi-Fi — for students to do their homework. New protest artwork popped up daily. All of that is gone now, either removed by demonstrators for safekeeping or taken down by clearance crews.

Protesters sought to preserve some of what had taken place here, including hundreds of sticky notes expressing support for the movement that had festooned what became known as “Lennon’s Wall,” named for the late John Lennon of the Beatles. On Thursday, amateur archivists took down nearly all the notes, an attempt to save them from the garbage bin.

With traffic expected to be restored to the area Friday, the debate continues on the Umbrella Movement and its impact. Has it planted the seeds of democracy in a corner of China, a former British colony? Or is it a futile effort to budge a Communist Party that has no intention of experimenting with governance that might challenge its absolute rule?

Rose Tang, a New York-based human rights activist who participated in the 1989 Tiananmen Square protests in Beijing, is one who thinks that history was made. She traveled to Hong Kong last week to witness the demonstrations.

“What this movement has achieved the most is that Hong Kongers have found their identity,” she said. “The whole movement has been incredibly creative, imaginative, romantic and humorous.”
Tang said it was the first time since Tiananmen that China’s one-party government had been openly challenged by street protests.

“This is the beginning of a great movement, of a new phase of the movement,” she added. “The seeds of the Umbrella Revolution have been buried, and when the seeds are buried, they do not disappear. They sprout and bloom.”
___

(Dapiran is a McClatchy special correspondent. Leavenworth reported from Beijing.)

Photo: A protester yells as police and demolition crews clear the main Hong Kong protest site in China on Thursday, Dec. 11, 2014. Pro-democracy protesters have occupied this site, near government headquarters, since Sept. 28. They are defying Beijing to seek a more open election system to choose Hong Kong’s chief executive in 2017. (Antony Dapiran/McClatchy DC/TNS)