According to the U.S. Energy Information Administration (or EIA), the Marcellus Shale is the largest producing shale gas basin in the United States. Currently, it accounts for ~37% of gas production in the seven key US shales.
The Marcellus Shale runs through western Pennsylvania, eastern Ohio, and West Virginia. The resource play has a mix of oil and gas reserves.
Importance of the Marcellus Shale
Oil production in the Marcellus Shale increased from ~1.14 billion cubic feet per day (Bcf/d) in January 2007 to 15.67 Bcf/d in October 2014. That’s ~12.7 times more production in seven and a half years.
According to services company Baker Hughes, there are currently ~83 rigs operating in the Marcellus, all of which are gas-targeted. In comparison, there were ~134 natural gas rigs in October 2011.
The Henry Hub is an important distribution hub that lends its name to the pricing point for natural gas futures contracts. Natural gas prices in the northeastern US have increasingly been below the Henry Hub price. This is primarily because of the Northeast’s increased access to Marcellus natural gas production.
The EIA expects Marcellus natural gas production to continue to increase by 38,000 cubic feet per day in December compared to November.
Key stocks and exchange-traded funds (or ETFs)
Many of these producers are also part of the Energy Select SPDR ETF (or XLE) and the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).
In the next part of this series, we’ll discuss the Eagle Ford Shale and rig efficiency.