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Was the Marcellus Shale’s Natural Gas Production Steady?

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Marcellus Shale’s natural gas production

In its Drilling Productivity Report on June 13, 2016, the EIA (U.S. Energy Information Administration) estimated that the Marcellus Shale’s natural gas production was ~17.5 Bcf (billion cubic feet) per day in May 2016. That’s ~0.2% lower than the production level in April 2016. However, it’s 7.7% higher than production in May 2015. Month-over-month, May 2016 represented the second natural gas production decline since October 2014.

Over a longer period, natural gas production growth at the Marcellus Shale has been outstanding. Natural gas production rose from ~1.3 Bcf per day in May 2008 to 17.5 Bcf per day in May 2016.

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Rigs and monthly additions from the average rig

The number of active rigs in the Marcellus Shale declined by two to 26 in May 2016—compared to April. In May 2015, there were 67 drilling rigs in the region.

The EIA calculates that the average Marcellus Shale rig added production of ~11.0 million cubic feet of natural gas per day in May 2016—a 43% rise compared to May 2015. In the past eight years, the gain amounts to 18.0x.

What does this mean for oilfield services companies?

The lower Marcellus Shale rig count in the past year hurt oilfield equipment and service providers like Weatherford International (WFT), National Oilwell Varco (NOV), Superior Energy Services (SPN), and FMC Technologies (FTI). However, higher production and drilling productivity benefited oilfield equipment and services companies. National Oilwell Varco makes up 1.5% of the WisdomTree Dividend ex-Financials ETF (DTN). DTN tracks an index of high-dividend yielding US companies outside the financial sector.

In the next part of this series, we’ll look at drilling efficiency at the Eagle Ford Shale.

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