Pennsylvania’s unconventional natural gas production in the third quarter hit 1.751 Tcf, an increase of only 2% from the same period last year and the lowest annual growth rate on record as operators continued to pare activity throughout a tumultuous year.
Production increased slightly from 2Q2020 volumes of 1.717 Tcf, according to the Pennsylvania Independent Fiscal Office (IFO). Sequential production declined in the first half of the year as gas prices fell. Production has been so robust in Pennsylvania in recent years, driven by the Marcellus, Utica and Upper Devonian shales, that the IFO noted a 1.3% decline in production between September 2019 and September 2020. The office said it was the first year/year decline in monthly production since February 2017.
There were 111 horizontal wells spud in 3Q2020, down 17.8% from the year-ago period and the sixth consecutive quarter in which there was a year/year decline in new wells spud. The IFO tracks results from vertical wells drilled to unconventional formations, but they account for a marginal share of quarterly volumes.
After peaking at the highest level on record in 3Q2018, horizontal well production growth rates have declined in each of the last eight quarters. This year has been particularly difficult for Lower 48 producers given the impacts of the Covid-19 pandemic on energy consumption and the economy.
Producers have made price-related curtailments since the beginning of the year as they’ve grappled with low demand in the United States and across the world. In the Northeast, some producers have kept volumes shut-in, while others have turned production on and off throughout the year. Appalachian pure-play EQT Corp., the nation’s largest gas producer, curtailed more than 1 Bcfe/d from May to July and shut-in another 400 MMcf/d from September to October.
Across the country, gas production from seven key onshore regions is set to drop from November to December, extending a trend of falling output that has held for most of 2020, according to the Energy Information Administration’s latest Drilling Productivity Report.
Gas prices have sunk dramatically since last year, when the market was flooded with supplies, particularly in Appalachia where output is among the highest in the nation. IFO said from 2Q2019 to 3Q2020, average prices in Pennsylvania declined by 42.4%.
In 3Q2020, Henry Hub averaged $1.95/Mcf, down 16.4% year/year. Average prices in Pennsylvania were $1.23, down 31.3% over the same time, according to the IFO.
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