This was posted to FERC on Monday.
FERC must consider that NEXUS’ binding shipper agreements were signed over a year ago and that FERC must evaluate the current soundness of these agreements and companies.
NEXUS must present FERC with “legally binding precedent agreements showing that the pipeline will be FULLY or NEARLY FULLY (85%) subscribed for a minimum of TEN YEARS.”http://www.naruc.org/Grants/Documents/ICF-EISPC-Gas-Electric-Infrastructure-FINAL%202014-12-08.pdf
FERC, it is doubtful that many NEXUS shippers are financially sound enough to fulfill this requirement.
Many Marcellus/Utica E&P companies are predicted to go BANKRUPT (unless they sell themselves or otherwise sell off major assets). Here is a “ DEATH LIST” report listing very RISKY companies and their unacceptably high debt-to-earnings ratios:
ANTERO Resources (4.99), EV Energy Partners (6.54), HALCON Resources (7.81), MAGNUM HUNTER Resources (52.29), REX Energy (5.06), VANTAGE Drilling (6.16), and WARREN Resources (5.50). http://www.investorvillage.com/uploads/77263/files/OXFORD19CODEBTHITLIST.pdf?cmpid=verticalcontent
RANGE RESOURCES and CHESAPEAKE Energy also have very high debt levels and are burning through their cash reserves at unsustainable rates.
Analyst predict CHESAPEAKE Energy is at high risk of bankruptcy because of a high debt-to-equity ratio (1.29) and a poor quick ratio (0.70) indicating an inability to avoid short-term cash problems.http://www.thestreet.com/story/13280330/1/chesapeake-energy-chk-stock-climbs-after-deal-to-lower-costs.html?puc=yahoo&cm_ven=YAHOO
Credit downgrades abound:
“The E&P firms ASCENT Resources-Marcellus LLC, EXCO Resources Inc. and PENN VIRGINIA Corp. were all cut one notch, to SGL-4, indicating increased risk that the companies will violate their debt covenants.” https://www.snl.com/InteractiveX/article.aspx?ID=33728071&KPLT=4
ASCENT (formerly American Energy Appalachia Holdings) was recently downgraded by Moody’s to the LOWEST (probable DEFAULT) credit rating of Caa2. (See McClendon’s Marcellus Misadventure Exposes Lenders to More Pain http://www.bloomberg.com/news/articles/2015-08-17/mcclendon-s-marcellus-misadventure-exposes-lenders-to-more-pain )
It is predicted that 5 to 13 gas and oil E&P companies will go bankrupt in the next 12 months and 3 to 7 afterwards.
“In September, banks will make one of their periodic reassessments of drillers' reserves. If the companies' assets are found to be less valuable than their outstanding debt, drillers will be forced to come up with a way to cover the gap between their reserve value and debt load. That could mean asset sales, restructurings and the like—or bankruptcies.” http://www.cnbc.com/2015/06/16/oil-and-gas-drillers-may-face-wave-of-bankruptcies-this-year.html
Low oil and natural gas prices continue to create doubt that some highly leveraged exploration and production companies will repay the billions they borrowed according to Moody's.https://www.snl.com/InteractiveX/article.aspx?ID=33626001&KPLT=4
Furthermore, oil and gas prices are expected to stay LOW for 3 years. This will put extreme “pressure on credit ratings because of inability to meet COVENANTS, limited availability on revolving credit facilities and unsustainable capital structures.”*
FERC needs to do more evaluation of the Certificates of Need policy:
“The Commission balances the public benefits against the potential adverse consequences. … the applicant's responsibility for UNSUBSCIBED capacity, the avoidance of unnecessary disruptions of the environment, and the unneeded exercise of eminent domain in evaluating new pipeline construction.” http://www.ferc.gov/legal/maj-ord-reg/PL99-3-000.pdf
Given that considerable environment, quality of life and billions of dollars are at stake, it would be a travesty for FERC to approve a pipeline that would later be greatly underutilized or ABANDONED because of your neglectful disregard of risky shipper financials.
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