Pennsylvania's shale gas drillers appear to be keeping their word and slowing production growth to conserve cash for shareholders, according to October production data filed with the state.
After a summer of headlong growth to fill new pipelines, production volumes that had been climbing at a double-digit pace returned to earth. Production showed just 0.5% growth in October when compared to September, according to data from the state Department of Environmental Protection. Year-over-year, shale gas volumes were up more than 23%, state data showed.
Five drillers accounted for the bulk of the 17.54 Bcf/d of gas produced in October, according to the data. Overall, activity focused on two counties south of Pittsburgh and three counties in the northeast corner of the state that accounted for 75% of the gas produced in the month.
EQT Corp., the nation's largest gas producer with operations focused in the southwest corner of Pennsylvania, and Cabot Oil & Gas Corp., with operations almost entirely within the northeast's Susquehanna County, continued to be the state's two top producers. Cabot said it was able to put nearly 1 Bcf/d of new gas on Williams Cos. Inc.'s 1.7 Bcf/d Atlantic Sunrise pipeline when it went into service Oct. 6. EQT has been able to take advantage of service nearly all year on Energy Transfer LP's 3.25 Bcf/d Rover Pipeline LLC (which was fully completed in November) and Columbia Gas Transmission LLC's 1.5 Bcf/d Leach Xpress.
Susquehanna County continued to be the largest gas producing county in the state with 22% year-over-year growth to more than 4 Bcf/d in October, the first county to break the 4 Bcf/d mark. In addition to Cabot, Susquehanna is home to dozens of wells drilled and operated by Chesapeake Energy Corp. and Southwestern Energy Co.
Marcellus pioneer Range Resources Corp., the state's other top driller, operates wells in the counties around Pittsburgh on the western edge of the state.
"Appalachian production has been on a tear in recent months, with December production averaging a record ~31.5 Bcf/d — up ~18% Y/Y and ~14% since June," the energy analysts at S&P Global Platts' PIRA Energy Group said Dec. 18. "Such robust gains in recent months is eye catching and does make a call for moderating growth somewhat unnerving. Nevertheless, when thinking through the fundamentals, i.e. stalled drilling activity, limited productivity gains, a focus on returning capital to shareholders, higher base declines, and a potential shift to wetter windows, Platts Analytics continues to see slowing production growth ahead."
EQT, in particular, has had some growing pains after its November 2017 merger with Rice Energy. The company acknowledged difficulties climbing the learning curve at drilling ultralong laterals and has replaced its production chief. EQT's difficulties have inspired two Rice family members, who are still major shareholders in EQT; to suggest they come back to work at EQT's Pittsburgh headquarters and lead the drilling effort.
The big shale gas operators are expected to detail more 2019 plans in January, once they have a better sense of how harsh this winter will be. Investors will be closely watching their reactions, Stifel Nicolaus & Co. shale oil and gas analyst Jane Trotsenko told her clients Nov. 26.
"Early indications also point to lower [year-over-year] natural gas production growth for 2019+ from the top 5 natural gas producers in the U.S. and our coverage universe," Trotsenko said.
S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.