Downturn in market may trigger lease acquisitions


MONROEVILLE, Pa. — If landowners are expecting oil or gas production royalties in the near future, they will probably have a longer wait than anticipated just a few years ago.

The oil and gas market is in a “definite downturn” and analysts at the 2015 Pennsylvania Independent Oil and Gas Association conference said it could be 2018 before the market starts to regain momentum.

That was the consensus shared by Enervest, Range Resources and the CNX Gas Company officials during an industry panel at the conference Oct. 27.

Market challenge

Enervest President Ken Mariani; Craig Neal, vice president of operations for the CNX Gas Company (a subsidiary of Consol Energy); and Joseph Frantz, vice president of engineering technology for Range Resources, all agreed that 2015 has been a challenge and 2016 looks to be the same for gas and oil companies.

Frantz said that until the buildout of infrastructure is completed, prices could be low for gas and oil produced in the Marcellus shale.

Many analysts and company officials at the conference said the infrastructure in place is pushing the gas produced to the market areas, but the pipelines are at capacity and more lines are needed to get it into additional market places.

Supply and demand

Neal said CNX, like other oil and gas companies, is feeling the pinch, but the laws of supply and demand are determining the price for the products. He said the prices for the next 24 months are going to be stagnant, and doesn’t look for much improvement.

Mariani said Enervest is being conservative, but acknowledges the downturn will take time to recover.

Still optimistic

All three agreed the future of the Marcellus shale is positive, it will just take time to recover.

“The market is going to take care of this. Economics will drive production in the future,” said Neal.

Frantz also the cracker plants on the drawing board in Pennsylvania and Ohio will help the gas and oil market to improve.

When they look at the futures markets, Frantz, Neal and Mariani agreed that they see them increasing, but the volume sold will remain low.

They said 2017 will show some slow relief, but no big upturns will be felt until possibly 2018.

Mariani said even if prices recover, the question for many companies will be if the oil and gas companies have the cash to ramp up production because of the cost involved in drilling new wells.

Acquisition opportunities

The question on many minds in the oil and gas industries is if the low oil and gas prices will mean consolidation among companies, and Neal expects to see consolidation in both the Utica and Marcellus shales.

“We at CNX are looking at opportunities and to consolidate,” said Neal.

Frantz said Range is not in the position to acquire any other companies at this time because of where the majority of its leaseholds are located.

“The consolidation of acreage may happen where it makes sense,” said Frantz.

Mariani said Enervest is looking at 14 opportunities and prioritizing the consolidation and acquisitions.

“It’s going to get a lot worse before it gets better in the industry, which means a lot of acquisition and development opportunities are going to happen,” said Mariani.

In regards to mergers and acquisitions, some data courtesy of Rivington Holdings and Richardson Barr highlighted how much money is involved in the shale development.

Since 2010, over $62 billion has been spent on Marcellus and Utica shale deals and over 8,000 wells have been drilled in both plays since 2008, which adds up to $64 billion spent on the drilling phase.

Drilling future

Timothy S. Knobloch, of Petroleum Consultants, and Martin Shumway of Shumway Resources, shared some data they have gathered, and voiced what they see happening with oil and gas companies in the Marcellus and Utica shales.

Knobloch’s firm expects a lot of acquisitions in the near future as oil and gas producers continue to adjust to the lower market prices.

Top operators

Knobloch and Shumway supplied data that shed light on the top three operators in Ohio, Pennsylvania and West Virginia.

In Ohio, the top three operators are Chesapeake with 471 wells; Gulfport with 125 wells and Antero Resources with 72 wells.

In Pennsylvania, the leader is Range with 842 wells; Chesapeake with 717 and Talisman with 421 total wells.

And in West Virginia, Antero leads the pack with 191 drilled wells; Chesapeake, 171 and EQT with 184 total wells.

County numbers

Data also showed the top three counties in the number of wells drilled.

In Ohio, Carroll County has 364 wells drilled; Harrison, 149; and Belmont, 89.

In Pennsylvania, Bradford County is the leader with 983; Washington, 980; and Susquehanna has 855 so far.

In West Virginia, Wetzel County has 191 wells drilled so far; Marshall has 185; and Harrison County in West Virginia has 184 wells drilled.

To find out more about permits issued for new wells or an update on the drilling progress, check out the recap of October shale permits:…illing-permits/296996.html .


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