Held By Production

U.S. natural gas production has been essentially flat this summer as many producers curtailed, deferred or delayed drilling and well completions earlier in the year. However, some of the same producers, particularly in the Northeast, in their most recent earnings calls, indicated they expect to meet their 2015 production targets by increasing output this winter. In today’s blog, we look at how and why producers defer production and the potential impacts on the market in Q4.

Will hold-by-production (HBP) drilling by producers acting to preserve their leases for the longer term end up sending U.S. oil and gas production volumes higher when energy fundamentals and prices suggest production should slow down? This has happened before, with one of the highest profile instances in the Haynesville Shale between 2009-13, leading to even lower natural gas prices. Could it happen again in the Marcellus this year?  Today we continue our look at HBP lease provisions with a focus on the Marcellus.