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GreenHunter Focused on Appalachia; Disposal Volumes Up 120%

GreenHunter Resources Inc. on Monday said its disposal volumes increased by 120% in 2013, going from 2.1 million barrels in 2012 to 4.7 million last year, driven largely by its operations in the Appalachian Basin.

Since it moved into the region in 2011 with the acquisition of a water service property in West Virginia, subsidiary GreenHunter Water LLC has become one of Appalachia's largest brine disposers.

Late last year, GreenHunter said it would switch the focus of its operations solely to the Appalachian Basin, which has provided much of its growth in recent years (see Shale Daily, Oct. 29, 2013). The company exited 2013 with more than 13,900 b/d of permitted salt water disposal in the Marcellus and Utica shale plays.

In a year-end earnings report released on Monday, the company reaffirmed that decision and said it would discontinue operations in the Eagle Ford Shale in South Texas and the Mississippian Shale in Oklahoma, where it had classified all its fixed assets as held for sale at the end of 2013.

"Calendar 2013 was a year of transition for GreenHunter Resources...management has identified up to nine specific [salt-water disposal] projects for potential growth opportunities in 2014 for the Appalachian division," said COO Kirk Trosclair. "By aggressively divesting our assets located in South Texas and Oklahoma, we are significantly improving our balance sheet and at the same time eliminating the losses we were incurring from these sub-par and underutilized assets."

In 1Q2014, GreenHunter sold two of its disposal wells and one permit in South Texas to two undisclosed buyers for $7.3 million. The company also has a contract to sell a third disposal well there for $4.7 million in cash, which is expected to close in mid-April, while negotiations are ongoing to sell more wells in Oklahoma in the hope that those sales will close in the second quarter as well.

While disposal volumes have increased in the Appalachian Basin and wastewater treatment services have also risen there, the company's underutilized assets elsewhere have dragged down its balance sheet. Although year/year revenues increased 52% in 2013 to reach $25.7 million, GreenHunter reported a loss from continuing operations of $2.5 million, or 21 cents/share, for 2013. That's down from a loss of $20.4 million, or 83 cents/share, in 2012.

Pennsylvania State University's Marcellus Center for Outreach and Research (MCOR) said in February that 5.9 billion gallons of water were used to hydraulically fracture (frack) wells in Pennsylvania last year, or about 16.3 million gallons per day. Nearly 90% of the flowback and production water produced in the state last year was treated or reused for fracking, according to MCOR (see Shale Daily, Feb. 20).

To put those numbers in context, a separate study from Duke University and Kent State University released last year said wastewater generated in the Marcellus Shale alone has increased by 570% since 2004, leading to an increase in disposal in nearby states such as Ohio, where a growing number of horizontal wells have also prompted state officials to revamp wastewater disposal and treatment regulations (see Shale Daily, July 3, 2013; Dec. 24, 2013).

In an interview withNGI's Shale Daily in February, John Jack, GreenHunter Water’s vice president of Appalachia, said the company is "sold out every day," moving 100,000 barrels of production and flowback waste per week (see Shale Daily, Feb. 6).

GreenHunter also said Monday that operations at one of its flagship projects in the region -- a $1.7 million water treatment, recycling and condensate handling logistics terminal in Wheeling, WV (see Shale Daily, May 29, 2013) -- are expected to begin this year.

Although it operates similar bulk storage and treatment facilities in Washington and Meigs counties, OH, (see Shale Daily, July 1, 2013) the Wheeling facility is expected to serve producers as far north as Pennsylvania because of a proposed barge terminal on the Ohio River and local permits. The barge terminal is pending approval by the U.S. Coast Guard (see Shale Daily, Oct. 31, 2013).

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