Pennsylvania's Marcellus Shale natural gas drilling declined nearly 7% in the first five months of this year from the same period of 2011, in part as operators began moving from dry gas to wetter targets, according to data from the state Department of Environmental Protection (DEP).
According to the DEP's Office of Oil and Gas Management (OOGM), operators spud 685 wells in the Marcellus from January through May, a 6.8% decline from the 735 wells that were spud in the same period of 2011.
Five counties -- Bradford, Lycoming, Susquehanna, Tioga and Washington -- topped the list for both periods, but there was a noticeable shift from the dry counties in the northeast part of the state to the wetter southwest. During the first five months of 2011, Bradford County saw 161 wells spud, followed by Tioga County with 114 and Lycoming with 97. Washington County had 72 wells spud and Susquehanna had 61.
One year later, during the same five-month period, Lycoming County was new atop the list with 112 wells spud, while Washington County posted a 36.1% increase (98 wells spud) and climbed from fourth place to second. Meanwhile, the number of wells spud in Bradford County fell 41.6% (94 wells spud), while Susquehanna County rose 37.7% (84), and Tioga County fell 34.2% (75).
In analyzing several days in the month of June 2012 alone, NGI found that as the Marcellus rig count fell, cash market prices at Marcellus points rose. According to NGI's Shale Price Indices and NGI's Shale Daily Unconventional Rig Count, the SW PA Marcellus spot price and the NE PA Marcellus spot price increased from $2.33 and $2.25/MMBtu respectively on June 4 to $2.69 and $2.46/MMBtu on June 26, while the Marcellus rig count dropped from 136 rigs to 126 rigs over the same period.
Lycoming saw a rush on permits issued by the DEP during the first two months of 2012, while permitting in Bradford and Tioga fell (see NGI, March 26). More permits were also being issued in Clearfield, Washington and Westmoreland counties.
Not surprisingly, OOGM data showed that as energy companies shifted their attention from one part of the play to another, the list of top operators in the state also saw significant changes.
During the first five months of 2011, Chesapeake Appalachia LLC spud the highest number of wells, 113. But during the same time frame one year later, Chesapeake had only spud 82 wells, a decline of 27.4%. Talisman Energy USA Inc. saw the sharpest January-May year/year (y/y) decrease, falling to 24 wells spud in 2012 from 79 wells spud in 2011, a decrease of 69.6%.
Other major operators that saw y/y declines over the first five months included EOG Resources Inc. (down 68.0%), Chief Oil & Gas LLC (53.6%), Rex Energy Operating Corp. (47.1%), a unit of Anadarko Petroleum Corp. (40.0%), and Carrizo Marcellus LLC (38.1%).
The well spud totals posted by Anadarko, Chesapeake, EOG and Talisman weren't a complete surprise, as many of the companies had previously announced intentions to shift to more liquids-rich targets (see NGI, March 19a; Feb. 6; Jan. 16a).
Conversely, other operators are now making a bigger splash in the Marcellus. Chesapeake led the way with its 82, but SWEPI LP -- a Shell Oil Co. affiliate -- spud 81 wells during the first five months of 2012, a 170% increase from the 30 wells it spud during the same period in 2011. Southwestern Energy Production Co. posted the most impressive increase, 462.5%, when it went from eight to 45 wells spud.
Range Resources Appalachia LLC spud 78 wells from January to May of this year, but it was only an increase of 13.%. Nevertheless, the operator earned the third-highest spot over the period. Other increases were posted by Chevron Appalachia LLC (up 226.7%), Pennsylvania General Energy Co. (225.0%), CNX Gas Co. LLC (150.0%), ExxonMobil Corp. subsidiary XTO Energy Inc. (122.2%), Cabot Oil & Gas Corp. (28.6%) and EQT Production Co. (20.6%).
In January a report by Tudor, Pickering, Holt & Co. proclaimed the Marcellus as "the only basin where dry gas should be drilled," and lauded Cabot, EQT and Range for their asset management (see NGI, Jan. 16b). Two months later Chevron said it was taking a long-term approach to the play, after having made significant acreage acquisitions (see NGI, March 19b).
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