The Marcellus Shale| May 2020
The Marcellus Shale is the largest gas play onshore in the US. Located in the Northeast, it supplies the high demand markets along the East Coast. Most of the basin’s gas is produced through unconventional methods, while the little oil produced is mostly by conventional means. Some of the top formations include Onondaga and the Huntersville.
State Drilling Statistics (End of May)
Active Drilling Rigs in Basin- 28
Total Rigs in Pennsylvania- 20
Total Rigs in United States- 301
Total U.S. Rigs down 69% YTD
State Top Producers
Top Gas Producer- April Data Currently Unavailable
Financial & Economic Updates
Shale Divests From Marcellus
It has been no secret that Shell has been attempting to get out of North American shale in the past few months, but it finally divested its Appalachian assets to National Fuel Gas Co. for $541 Million. This seems to be a pretty good price for 450,000 net leasehold acres with 350 producing wells already in place, and net proved developed natural gas reserves of 710 billion cubic feet of gas in only half of that acreage. Unfortunately, National Fuel Gas is financing this deal with a mix of equity, including equity linked securities, and long term debt which could prove to be costly in the short and long term. Through this agreement, NFG has the right to issue $150 million in common equity to Shell at $38.97 per share.
Solution for Orphaned Wells and Unemployment
As discussed in last month’s news pulse, Pennsylvania was concerned with the amount of orphan wells that exist in the state. In recent weeks, many different organizations conservative and liberal have started to agree that paying oil workers to plug wells could be a viable solution. Mark Cline, President of the Pennsylvania Independent Petroleum Producers Association said, “A lot of people are going to be out of business if we don’t find some way to keep busy and make money.” Unfortunately, no money has currently been pledged, although the Center for American Progress estimated that a $2 billion dollar fund could support 14,000 to 24,000 jobs in energy-producing states. Environmental advocates fear that a cutoff in the money supply could be far too soon allowing companies to abandon their efforts before all orphan wells are accounted for.
Feds Attempt to Ease Regulations Across Industry due to COVID
In recent months, the federal government has done its best to try to accommodate oil and gas producers, after a little bit of pressure was applied of course. In a local effort senator David Argall proposed regulations could not become final, and final rules could not be enacted until 90 days after the declaration is ended by executive order or law. This was proposed in hopes of pausing regulatory processes which would allow government and lawmakers time to focus more directly on COVID. Governor Wolf vetoed saying this public policy prohibition would violate the separation of powers from legislative and executive branches. Environmental groups have praised this move, but producers within the Marcellus, especially within Pennsylvania, are beginning to sweat as prices aren’t surpassing lifting and transportation costs.
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