American Consequences - September 2017

They also discovered that the Marcellus Shale was overpressured and had natural fractures throughout much of the formation. This meant that the natural gas wanted to get out of the rocks and that there were natural doorways for it to move. Horizontal wells and fracking seemed to be the ideal way to unlock the gas in the Marcellus Shale. Within six months, I was sitting in a boardroom with Mark Papa – EOG’s CEO and chairman at the time – and several other senior executives. I was ready to make a pitch for the company to come up with the money to buy acreage in my team’s target areas. It was going to be a hard sell. EOG was spending billions in the Barnett Shale. It was a proven winner for the company, and it was Mark kicked things off by noting that the Appalachian Basin had never been good to EOG. “Rocks 7, EOG 3,” he said... referring to the seven times EOG had failed with exploration in the region and the three times the company had succeeded. With natural gas at $9.53 per million cubic feet at the time, though, Mark realized that the company should ramp up its efforts in the space. The Marcellus Shale – and its substantial acreage – could be the key to EOG unlocking millions of dollars in profits. I had noticed that Mark had a habit of leaning back or leaning in . Leaning back meant he liked the idea and was thinking how to move forward. Leaning in meant he wasn’t sucking up all the available cash. The meeting didn’t start well...

interested. I’m not sure if Mark knew this, but the indicator never failed me. After our presentation, Mark leaned back in his chair. That was a good sign. Mark made us an offer: He would support our efforts in the Marcellus Shale if we could drill our way in. That way, EOG could avoid the costs of buying the land and instead focus on using its horizontal-drilling and fracking expertise to test our ideas. At the time, no one knew if the Marcellus Shale would produce or become a reliable, economic source of income. But at least Mark was giving us a shot. “Deal,” I said. We’d figure out a way to make it happen. Later that year, we got a big break... Seneca Resources – a subsidiary of National Fuel Gas (NFG) – revealed that it was searching for a partner to explore and develop its land in the Marcellus Shale. The company owned the mineral rights to 1 million acres across Pennsylvania and New York. After Seneca’s announcement, the race was on... Texas-based E&P companies Range Resources (RRC) and Cabot Oil & Gas (COG) put in bids. Then, Chesapeake Energy threw its name into the mix. I heard the company offered $30 million in cash. That offer would be hard to beat... Seneca likely wouldn’t turn down $30 million in cash for a five-year lease. We weren’t spending that kind of money at EOG. Not in Appalachia, at least. Instead, we needed to rely on our technical expertise – or “use the drill bit” –

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