Pennsylvania unconventional natural gas production surpassed 7 Tcf last year, up 3.9% from 2019, the lowest growth rate on record for a full year of production, according to the state’s Independent Fiscal Office (IFO).

Pennsylvania production

Fourth quarter production increased 2.9% year/year to 1.8 Tcf, flat with the annual growth level in the third quarter. Quarterly production growth hit a peak in 2018 of 18.6%, but decelerated for eight consecutive quarters until plateauing at 2.9% in 4Q2020. 

Activity across the Appalachian Basin has declined as producers have cut budgets and scaled back operations. Demand was hit hard last year by the Covid-19 pandemic and investors have demanded more discipline from the upstream sector. 

The IFO said 99 horizontal wells were spud in the final three months of 2020, the lowest quarterly spud count since 2Q2016. Preliminary data for 2021 also show that the number of wells spud in January and February decreased by roughly 25% from the same time last year. 

The number of horizontal producing wells, which account for more than 99% of all unconventional production, increased by 5.9% to 9,868 in the fourth quarter. The IFO also tracks results from vertical wells drilled to unconventional formations, but they account for a marginal share of quarterly volumes.

“This growth rate is the smallest year-over-year increase in quarterly horizontal producing wells on record,” the IFO said. “Decelerating growth in producing wells is due to less drilling activity and older wells being shut in or plugged.” The office added that “without a significant uptick in new wells spud, producing well growth will likely continue to decelerate.”

While Henry Hub prices declined throughout 2020, they increased in 4Q2020 by 5.6% year/year to average $2.47/MMBtu during the period, driven by winter weather and higher electricity demand. However, IFO noted that regional prices fell steeply throughout the year. In the fourth quarter, average prices in Pennsylvania declined 21.8% year/year to $1.39/MMBtu.