trending Market Intelligence /marketintelligence/en/news-insights/trending/OSPhRzBw8cwjDQouS918-w2 content
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

If your company has a current subscription with S&P Global Market Intelligence, you can register as a new user for access to the platform(s) covered by your license at Market Intelligence platform or S&P Capital IQ.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *
  • We generated a verification code for you

  • Enter verification Code here*

* Required

Thank you for your interest in S&P Global Market Intelligence! We noticed you've identified yourself as a student. Through existing partnerships with academic institutions around the globe, it's likely you already have access to our resources. Please contact your professors, library, or administrative staff to receive your student login.

At this time we are unable to offer free trials or product demonstrations directly to students. If you discover that our solutions are not available to you, we encourage you to advocate at your university for a best-in-class learning experience that will help you long after you've completed your degree. We apologize for any inconvenience this may cause.

In This List

Drilling slowdown already dragging on Appalachia's gas production

Q2: U.S. Solar and Wind Power by the Numbers

Essential Energy Insights - September 17, 2020

Essential Energy Insights September 2020

Rate case activity slips, COVID-19 proceedings remain at the forefront in August


Drilling slowdown already dragging on Appalachia's gas production

Commitments from Appalachia's natural gas producers to slow drilling activity already appears to be bringing gas output down, with December production levels likely to register their first monthly decline since May.

Through Dec. 17, modeled output across the Marcellus and Utica shales has averaged 33.3 Bcf/d this month, roughly 170 MMcf/d below the November average, data from S&P Global Platts Analytics shows.

The largest decline has come from Pennsylvania's northeast dry window, where sample production has fallen by more than 160 MMcf/d in December, or about 1.4% compared with the prior-month average. The state's south dry window has witnessed a 1% retreat in sample receipts over that same period, equivalent to about 60 MMcf/d. Smaller gains and declines in output have been reported from other production areas across the region.

Lower output from Appalachia this month tracks a recent acceleration in rig cuts there. In October, Marcellus and Utica producers pulled 10 rigs from the field, or about 16% of their fleet. Enverus data shows Appalachia's aggregate rig count at 51 as of mid-December — down from 83 in March, when drilling activity stood at close to a previous multiyear high.

During the recent third-quarter earnings season, some of the largest producers from across the U.S. Northeast committed to dialing back production next year if the current low price environment persisted. Southwestern Energy Co. CEO William Way told analysts and investors that the company would slow or even halt drilling activity if needed, highlighting the company's prior cuts in 2016, which were prompted by similar market conditions. Executives from Cabot Oil & Gas Corp. and Range Resources also made commitments on recent earnings calls to keep production at maintenance levels in an effort to return more value to shareholders.

In earnings seasons past, Northeast producers highlighted their commitment to spending discipline and sustainable growth. Given the prolonged downturn in gas prices this year, though, and sustained weakness in 2020 forwards prices, a pause in Appalachia's long-standing growth trajectory now seems increasingly likely next year.

After briefly topping $4/MMBtu in March, prices at the Northeast's benchmark supply hub, Dominion South, have trended steadily downward, averaging about $1.90/MMBtu over the past eight months.

For next year, forwards markets are expecting much of the same, with the calendar 2020 curve currently priced at $1.85/MMBtu, S&P Global Platts M2MS data shows.

The current cash and forward price environment has raised serious doubts about producers' capacity to eke out a return on capital in Appalachia's dry basins. According to Platts Analytics, breakeven prices in the Marcellus this month stand at $1.80/MMBtu. In the Utica, the wellhead gas price required to break even is slightly higher at $1.94/MMBtu.

Jonathan Robinson is a reporter with S&P Global Platts. S&P Global Market Intelligence and S&P Global Platts are owned by S&P Global Inc.