Northeast Natural Energy

Michael John has many reasons to be excited about the future. As president of Northeast Natural Energy (NNE), he is part of a young company that is operated by principals with a vast amount of expertise in the Appalachian Basin and the Marcellus Shale. The industry may be experiencing some commodity price fluctuations, but NNE is well-positioned in terms of acreage and knowledge.

Headquartered in Charleston, W.Va., NNE is a private oil and gas company that pursues natural gas drilling, exploration, acquisition and joint venture opportunities in the Appalachian Basin. John and his team have extensive experience in the natural gas industry in West Virginia and the northeastern U.S. A native of the state, he’s been in the industry for more than 30 years, having worked for the Columbia Gas System, Triana Energy and Chesapeake Energy. In fact, much of NNE’s core team has been together through all of those previous stops.

Time is Right
The group formed NNE in 2009 because it had a passion for natural gas exploration and production. John says the company is convinced of the importance of natural gas as a bridge fuel, and he knew the core team’s experience and familiarity with the industry and the state would be an invaluable competitive asset.

“We are a team of Appalachian folks with a lot of experience in working this basin,” John says. “We’ve been a part of a company like Chesapeake, which is on the razor’s edge of gas reserve development technology. Our ability to demonstrate and control the technological advancements needed to convert unconventional shale into viable resources combined with our Appalachian heritage sets us apart from companies coming in to the area and smaller legacy companies that control a lot of the properties.”

Today, the company has 33 employees, two offices and has accumulated 45,000 net acres of drillable Marcellus properties that it sees as highly prospective. NNE has more than 300 drill sites on its properties, which represents a potential investment of nearly $2.25 billion.

Understanding the complexities of mineral ownership in Appalachia and how to go about accumulating properties is one of NNE’s biggest strengths. The company has a firm grasp of the logistics involved in identifying areas with geological potential for production. It strives to amass contiguous properties. This allows wells to be drilled from well pads that can accommodate multiple horizontal laterals, as well as ensure that pipeline infrastructure will be efficient in terms of the cost of building pipelines and getting the product to market.

“The first thing we look for in a property is if it is in the Marcellus fairway and situated in an area where we can move gas to market,” John says.

Downward Pressure
Just in the last six months, the industry has changed dramatically. The price of the commodity has been driven down, and the company has had to shift its focus as a result. Prior to the price drop, the company would have been almost exclusively focused on developing its existing assets. Now, its focus is bifurcated.

“We are working to maintain our current assets while looking for growth of the company through acquisitions and bolt-ons,” John says. “At our core, we are long-term believers in natural gas. Natural gas will play an increasing role in our country’s energy future.”

In the near term, NNE will continue looking for acquisition and partnership opportunities. The company knows it can’t predict the future when it comes to acquisitions, but John says acquisition opportunities were plentiful before the commodity price went soft. He believes the softening commodity price will serve to increase the number of potential acquisitions.

John says he also feels the company has the ability to expand its presence on the dry gas side in this kind of a commodity price environment because many other companies prefer to be on the wet gas side.

The challenge now is to maintain the correct balance of activity to both grow and define and develop the properties the company already possesses. It is a two-year-old company that is still just getting started with drilling its Marcellus properties. It has accumulated a number of properties and recently drilled its first six wells to kick off the company’s development program.

The prior success of NNE’s core team has allowed the company to build in a way that permits the selective addition of talent. John knows the company’s main asset is the group of people it has assembled, not the properties. The company shares a vision of the role natural gas will play in supplying our country’s energy needs, and it is actively working to turn that vision into reality.

“We have to maintain harmony between drilling and property accumulation,” John says.