The latest batch of earnings calls reiterated producers’ plans to scale back rigs and frac crews in dry gas-focused areas in Appalachia. With gas prices widely expected to improve later this year or in 2024, Appalachian producers are looking to maintain production levels through the low-price environment yet be prepared with the production capacity to ramp up quickly in response to demand and price signals. Key themes across the spectrum were the flexibility to manage volumes in response to prices, a slower/smoother production cadence and “game-time” decisions at the well level.
Featured Articles
- Blog
I Walk the Line - The New Appalachian Gas Producer Playbook in a Pipeline-Constrained World
The Fiscal Responsibility Act (FRA) revived Mountain Valley Pipeline’s (MVP) prospects of being completed this year, but the outlook for new, large-scale natural gas takeaway projects in the Northeast beyond MVP hasn’t changed. What has changed, however, is how Appalachian natural gas-focused producers respond to pipeline constraints and lower prices. Gone are the days of drilling with abandon, crushing supply prices and assuming the necessary pipeline capacity will eventually get built. Instead, producers have demonstrated a willingness to slow drilling activity, delay completions and choke back producing wells in the short-term to manage their inventory during periods of lower gas prices. In today’s RBN blog, we lay out our view of what that shift in producer behavior will mean for Northeast supply, demand and pricing trends in the long-term.
- Blog
Just in Time - Chesapeake Counters Gas-Price Nadir With Output Slash, Innovative Inventory Build
Faced with sustained sub-$2/MMBtu natural gas prices and dim prospects for significant gas-demand growth until sometime next year, a number of major gas-focused E&Ps have been tapping the brakes on production and trimming their planned 2024 capex. But one company — Chesapeake Energy, slated to become the U.S.’s largest gas producer thanks to a recently announced acquisition — has taken a more dramatic step, implementing a novel strategy that will slash production by 25% but leave the E&P ready to quickly ramp up its output as soon as demand and prices warrant. In today’s RBN blog, we’ll review the 2024 guidance of the major U.S. gas producers and delve into the analysis of Chesapeake’s unusual approach.
- Blog
Flick of the Switch - Marcellus/Utica Gas Producers Declare Enough-is-Enough, Learn to Switch Off Wells
Natural gas economic shut-ins! Shutting off a producing well on purpose, because the market won’t take the produced volume at a reasonable price. There was a time, back before gas commodity decontrol, when shut-ins were standard operating procedure, but that practice went the way of the dodo bird 40 years ago. Until earlier this year that is, when amid crushingly low prices, Appalachian producers said: enough is enough — and shut off the spigot themselves. In the months that followed, various producers have continued to see-saw their production in response to weather-related demand and regional market prices. The behavior signals that Appalachia’s shale gas producers are increasingly employing a light-switch approach in dealing with short-term weakness in demand and prices. Today, we take a closer look at the price-driven curtailments in the Northeast and potential implications for the market.
