Natural gas output may rise in Appalachia

OREANDA-NEWS. September 19, 2016. Natural gas production rates fell last month in the Appalachian region, but rates may get a boost starting this winter as drilling permits are on the rise.

Gross gas output from the Marcellus shale, the top US gas-producing field by volume, fell in August to 17.8 Bcf/d (504mn m?/d), down by about 44mn cf/d from July, the US Energy Information Administration (EIA) said. Marcellus output last month was still up by about 6pc from a year earlier.

The Utica shale produced 3.61 Bcf/d in August, down slightly from July's 3.62 Bcf/d output, according to the EIA. The agency predicts that September production will fall to an average of 3.6 Bcf/d.

But gas-focused independents in the region, including Range Resources, EQT and Cabot Oil & Gas, have pledged to step up drilling activity in response to recent higher natural gas prices. Many producers are waiting on key takeaway projects to come on line before they boost output in earnest, but Utica well permits in the state of Ohio are already on the rise, according to data from the Ohio Department of Natural Resources.

Monthly permit counts bounced off of a four-year low of 13 reached in June, rising in July to 23 and again in August to 34. August's permit count marks the first year-on-year increase since April, up from August 2015's total of 20 permits.

The number of applications processed each month varies, ranging from 22 to 79 last year. But application numbers had consistently been lower on the year so far as producers tightened capital spending and reined in output on low energy prices earlier this year.

That period of conserving capital may have ended. Summer prices on Transco's Leidy Line have averaged \\$1.45/mmBtu, up by 22pc from the average price for June to August 2015.

And at least one Appalachian producer, Antero Resources, has officially increased its production guidance for the year. The independent boosted its 2016 net guidance to 1.8 Bcf/d of natural gas equivalent (Bcfe/d), up by 5pc from its initial guidance for this year, it said last week. Antero is keeping its capital spending budget unchanged at \\$1.3bn because of improved recoveries and drilling efficiencies achieved throughout the year. The company has operated an average of six rigs in the Marcellus and one rig in the Utica so far this year, and has brought 78 wells on line.

Like many of its peers in Appalachia, Antero said it plans to increase activity late this year and into 2017, when about 5 Bcf/d of new pipeline takeaway capacity is scheduled to come on line. Range Resources, EQT, Northern Fuel Gas and Cabot Oil & Gas in recent months have all mentioned key pipeline projects that they are waiting on to improve takeaway.