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After the boom

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PennsylvaniaRoute 29 from Tunkhannock north to the New York border used to be a dismal tourof rural poverty, with collapsed barns and rusted cars in the front yards ofhouses with peeling paint.

Thestretch of highway cuts right through the heart of Susquehanna County's 1,201Marcellus Shale natural gas wells and past the pipe yards and workshops of thethird-largest gas producing county in the state.

Today,many houses are new with fresh paint and a late-model pickup out front.

: one monstershale boom that took gas production from near zero to over 3.4 Bcf/d in sevenyears.

Asthe boom built, Route 29 was jammed with tractor trailers carrying sand, waterand more drilling rigs into the county as drivers for , ,Chief Oil & Gas LLC,WPX Energy Inc.,Southwestern Energy Co.and Chesapeake Energy Corp.battled to gridlock in the small towns and along the county roads. At the peakin October 2011, they serviced 19 massive rotary rigs and six to 10 smallerrigs in Susquehanna.

Nowthere is only one operating rig, and many wonder whether Susquehanna is readyfor a bust. But people in thecounty wonder whether a bust is even in the works.

Thereis no arguing that the boom did Susquehanna County good. Between 2008 and 2014,the county's economic output increased nearly 30% from 2009 to 2011 and thenremained at that elevated level for a few years, according to numbers from theNational Association of Counties and U.S. Department of Commerce's Bureau ofEconomic Analysis. Meanwhile, per capita income increased 25% from 2008 to 2014and unemployment was 5.5% in 2015, with job growth still happening in thecounty. All this despite an estimated 700-plus out-of-state roughnecks and rigworkers moving on down the road as rigs were laid down in the gas pricedownturn.

Thefarther you are from the county, the more talk you hear that low natural gasprices are going to take away the genie that granted Susquehanna's wishes. Butin Montrose, folks are confident that prices will come back.

"Whenthe planets realign again," gas will resume making outsize contributionsto the county economy, County Commission Chairman Alan Hall said during aninterview in the Greek Revival courthouse overlooking the four-block-squaredowntown. "I think it will be back."

Buthow long will that take? There may not be much time for many of the smallbusiness owners who had invested heavily in the Marcellus Shale gas boom overthe preceding six years to haul water, chemicals and sand to well pads anotherlocal contractor probably built.

Duringthe April Upstream PA conference, BTU Analytics revealed a $3.50/MMBtulong-term price forecast, a thingruel for local contractors in places like Susquehanna County.

"Marketforces and government policies will stimulate the use of natural gas for power,"the U.S. Energy Information Administration's Michael Schaal said at theconference. But he expects prices only "to rise slightly through 2017."

BakerHughes Inc. reported that there were 16 rigs operating in Pennsylvania in theback half of April, down one from March, down 33 from a year ago and downalmost 100 — or 86% — from the 114 rigs operated in January 2012.

"Westarted with a three-rig program in January, then it was two rigs, and now it'sone rig," Rob Boulware, SenecaResources Corp.'s stakeholder relations manager, said of theproducer's deflating drilling program for 2016.

"Thereality is a lot [of businesses] have been through the ebb and flow and a lotwill end up going under when the numbers won't be sustainable," Boulwaresaid. "The boom was good. It brought a lot of people into the industry. Itwill come back."

"NortheastPennsylvania has fewer rigs operating now than when the boom started,"Cabot External Affairs Coordinator Bill desRosiers said. He said Cabot isworking to send jobs to its vendors but warned them that even when prices riseand pipelines are built, the boom of the past eight years is over and theyshould begin diversifying away from natural gas.

Cabotis one big company that is proudly sticking by the local shale.

Despitethe one-two punch of a $4.2million federal jury verdict over well water pollution and therejection of a crucial pipelinepermit by regulators in nearby New York, the driller is stillbetting its fortuneon dry gas from the county.

Itsnew regional headquarters in Dimock — the town at the center of the pollutionverdict, which Cabot said it will appeal — is metal-and-stone testimony to thecompany's plans to be a permanent part of a county where it spent more than $1billion drilling in 2014.

Cabotsays it has 3,450 more locations to drill in the county, which lies inPennsylvania's northeast corner.

Cabot'sSusquehanna County operations, B.J. Cline said Susquehanna shale is like abond: He needs to make 6% to stay in business. But if prices go higher, theshine comes back. In 2014, Cabot posted adjusted profits of $405 million whenit realized a relatively modest average price of $3.28/Mcf.

Cabot'sconfidence comes from the top. CEO Dan Dinges told analysts April 29 that theglory days will arrive sooner rather than later because of the almost completeshutdown by drillers in the county and across the region holding backproduction totals.

"Evenwhen assuming all shut-in production comes back online after the summer, we canstill see a 25% decline from year-end 2015 to year-end 2016," Dinges saidon the earnings call. "Our best estimate is … approximately 120 wells willbe completed in our area this year, and modeling suggests that that is simplynot enough activity to backfill the declining production we see. This is verypositive for Cabot."