Moody’s: Marcellus shale gas producers to benefit most in US

Natural gas producers in the Marcellus shale will benefit more than producers elsewhere in the US because of many favorable circumstances, even if prices were to decline to 2012 levels, Moody’s said in a recent report.

The optimism pervading the 104,000-sq-mile play spanning New York, Pennsylvania, Ohio, and West Virginia is boosted by large producing wells in the northeast section conveniently located near major markets, along with an increase in capital poured into the NGL-rich southwestern section.

Due to rapid technological advancements, production in the play has risen to 14 bcfd from 1.2 bcfd in 2007, and estimates have pegged it at 20 bcfd by 2020.

Anadarko Petroleum Corp., Southwestern Energy Co., and Chesapeake Energy Corp.—all of which entered the play early during a weak natural gas price environment—have reaped the benefits in particular, Moody’s said.

The massive totals include gas from some of Pennsylvania’s most productive counties bordering New York, where a ban on hydraulic fracturing has prevented E&P companies from procuring some of the more than 40 tcf of gas equivalent estimated recoverable reserves lying beneath the state.

Additional ethane and propane pipelines are slated to come online this year and next, facilitating timely movement of gas to major east coast markets. The excess in gas from the Marcellus also will enable the US to become a major exporter, providing supply to the LNG terminals currently under construction.

Moody’s specified, however, that an infrastructural overhaul is still needed as buyers move away from traditional production hubs such as the Haynesville and Barnett. The transition has caused a decline in credit quality for gas producers Exco Resources Inc., Forest Oil Corp., and Quicksilver Resources Inc., as well as coal producers James River Coal Co. and Arch Coal Inc., both of which have suffered from the growing availability of gas.