Lower prices for natural gas and natural gas liquids as well as politicized resistance to required horizontal drilling will continue to thwart producers in the Marcellus and Utica basins for the unforeseen future. Despite plans to reduce spending on drilling of many major producers in the area, gas production from the basins has continued to surpass estimates.
Just last month, the US Geological Survey reported that the Appalachian basin contains an estimated mean of 214 tcf of undiscovered, technically recoverable gas in the Marcellus and Utica shale formations (OGJ Online, Oct. 14, 2019). The estimates represented a marked increase from its previous assessments of both basins, USGS said.
Gas production from the Appalachia region last month was projected to reach nearly 33,299 MMcfd in November, based on a monthly drilling productivity report from the US Energy Information Administration. Production from new wells in the area that climbed more than 1.18 bcfd month-over-month was offset by a drop in legacy production of 1.05 bcfd for a net change of 132 MMcfd, EIA reported.
Even with steady growth in gas production from the Appalachian area, many major producers reported plans in their most recent quarterly earnings statements (as OGJ went to press last week) to decrease capital expenditures and drilling.
In its second-quarter earnings statement, Chesapeake Energy Corp. reported gas production from the Marcellus reached 929 MMcfd in the second quarter from about 540,000 acres.
Based on an outlook in early August, the company reported utilizing 2 drilling rigs, placing 14 wells on production during the second quarter, and expecting to place 12 wells on production during this year’s third quarter. “The company expects to keep its gas-weighted capital spending at prudent levels in 2020, including in its Marcellus operating area,” it said. At current activity levels, Chesapeake reported about 10 years of drilling inventory at a break-even of $1.50-1.75/Mcf.
Chesapeake said it was creating free cash flow in the Marcellus shale in northeast Pennsylvania that was “driven by strong new well performance as a result of refined spacing, longer laterals, and optimized completion designs.”
Meanwhile, EQT Corp., in its third-quarter results and preliminary outlook for 2020, released Oct. 31, reported a “step change in Marcellus horizontal drilling performance, improving rate of penetration by 50%” over the second quarter.
In September, EQT announced a 23% reduction in staff (OGJ Online, Sept. 11, 2019). The company said the 196 jobs to be cut accounted for about $50 million/year of general and administrative costs. EQT shareholders reshuffled the board and replaced top executives, making Toby Rice chief executive officer after a proxy contest earlier this year (OGJ Online, July 10, 2019).
EQT reported spending plans of $1.3-1.4 billion, which is a reduction of $525 million year-over-year compared with prior guidance for 2019.
“EQT has undergone a significant operational transformation during the third quarter. New leadership was added to the organization to drive cultural change, implement the digital work environment, establish a stable master operations schedule, and execute a proven well design,” the company said.
During the quarter, EQT horizontally drilled 15 Marcellus wells in Pennsylvania, 4 Marcellus wells in West Virginia, and 3 Utica wells in Ohio. “With a fresh perspective from a new management team, drilling speeds improved by 50% in the Marcellus and 20% in the Utica, as compared to the prior quarter,” it said. EQT is currently running three horizontal rigs and plans to remain at that level through yearend, the company said.
The company completed 27 Marcellus wells in Pennsylvania and 4 Utica wells in Ohio and is currently running three frac crews and plans to remain at that level through yearend.
In its most recent quarterly report, Range Resources Corp. reported production in the third quarter averaged 2,042 MMcfd of gas equivalent from its Appalachia division—a 3% increase over this year’s second quarter.
Range Resources’ expected capital spending was reduced to $736 million, $20 million below budget. In 2019, Range plans to direct about 90% of its capital budget towards Marcellus shale development, it said.
Southwestern Energy Co., in its third-quarter results, reported total production from its southwest Appalachia operations area averaged 913 MMcfed, a 27% growth over the prior year’s third quarter. Natural gas production reached 440 MMcfd, oil production hit 15.4 million b/d, and NGL production totaled 64.2 million b/d.
During the third quarter, the company drilled 14 wells, completed 16 wells, and placed 21 wells to sales. Of the 21 wells to sales, 20 were Marcellus wells, 16 in the company’s super-rich acreage and 4 in the rich acreage.
Southwestern’s northeast Appalachia area’s total production averaged 1.3 bcfd during the third quarter, essentially flat with the same quarter in 2018.
During the third quarter, the company drilled 10 wells, completed 14 wells, and placed 13 wells to sales. Of the 9 wells online for at least 30 days, 6 were Lower Marcellus with an average 30-day rate of 15 MMcfd, 14% higher than the prior year quarter.
Antero Resources Corp. reported in its third-quarter earnings statement that it placed 33 horizontal Marcellus wells to sales. For wells that had 60 days of reported data during the quarter, the average rate per well was 21.4 MMcfed on choke. The 60-day average rate per well included 1,033 b/d of liquids, comprised of oil, C3+ NGLs, and about 30% ethane recovery, the company said.
During the period, Antero drilled 23 wells in an average of 11 total days from spudding to final rig release. Additionally, Antero drilled an average of 6,000 lateral ft/day in the quarter, achieving its highest quarterly rate in the company’s history.
Drilling costs per foot were notably lower during the quarter, Antero said, equating to a 6% reduction from the previous quarter and a 19% reduction from the prior year.
Antero said it plans to operate an average of four drilling rigs and an average of three to four completion crews for the rest of this year. For the full year, the company expects to drill 120-130 wells and place 115-125 wells online.
Antero’s accrued drilling and completion capital expenditures for the third quarter were $290 million. In addition to capital invested in drilling and completion costs, the company invested $13 million for land, resulting in a total of $303 million in capital spending for the quarter.