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Pa. shale gas production flat in May but up 7% YOY

Pennsylvania shale gas production rose 7.4% year-over-year in May but was relatively flat for the second month in a row at 20.3 Bcf/d, according to the latest numbers from the state Department of Environmental Protection.

The state's largest five producers — EQT Corp., Chesapeake Energy Corp., Cabot Oil & Gas Corp. Range Resources Corp. and Southwestern Energy Co. — accounted for just over two-thirds of May's volumes, according to DEP's database on July 20, little changed from the preceding month despite a marked downshift in permits pulled by the big five drillers in May.

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"Gas-weighted producers, including in Appalachia, began tightening their belts and pulling back rigs in 2019 in response to overall bearish fundamentals for gas, an extended period of lower gas prices, and shrinking appetite for capital investment," RBN Energy LLC managing editor and gas analyst Sheetal Nasta said in a July 20 research note. "Then came the COVID-19 pandemic and the resulting demand destruction, including LNG export demand." All five of the largest drillers reported minor month-over-month changes in May production volumes as the publicly traded group refused to chase higher commodity prices and kept promises to investors to generate free cash flow by keeping spending down.

Producers tightened their belts even more, shifted to more NGL production and started turning production on and off to cope with 2020's low prices, RBN said.

Chesapeake saw the largest year-over-year increase in gas volumes, 24%, in May despite having spent much of the last 12 months being reorganized in bankruptcy court. The "new" Chesapeake is being sold to investors as a low-cost gas producer that will spend 95% of its capital drilling in Pennsylvania's Marcellus and Louisiana's Haynesville shales. In May, Chesapeake slowed its activity and reported a 3% decline in Pennsylvania gas volumes to just over 3 Bcf/d, making it the state's second-largest producer behind EQT.

Chesapeake's production gains came from Bradford County in the dry gas window in the northeast part of the state. The county saw a 22% increase in volumes year-over-year. Washington County, south of Pittsburgh in the liquids-rich window of the Marcellus Shale, saw a 23% increase in volumes year-over-year.

According to DEP's latest numbers, five counties in opposite corners of the state accounted for 75% of the state's total production.

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