EIA March DPR: Marcellus Produces More than EIA Expected

EIAYesterday our favorite government agency, the U.S. Energy Information Administration (EIA), issued our favorite monthly report, the Drilling Productivity Report (DPR). The March 2016 report shows what the EIA predicts oil and natural gas production will be in April from the seven largest commercial shale plays in the U.S. What does the report (full copy below) show? Yes, natural gas production is down again, including the Marcellus. But in a rare move, the EIA had to revise its Marcellus production data because the play is producing more than the smart folks at EIA figured…

Total natural gas output is expected to decline for a fifth consecutive month in April to 46.3 billion cubic feet per day (bcfd), the lowest since July 2015, the EIA said. That would be down almost 0.5 bcfd from March, making it the biggest monthly decline since March 2013, it noted.

The biggest regional decline was expected to be in Eagle Ford, down 0.2 bcfd from March to 6.3 bcfd in April, the lowest level of output in the basin since April 2014, the EIA said.

In the Marcellus Formation, the biggest U.S. shale gas field, in Pennsylvania and West Virginia, April output was expected to decline by 0.1 bcfd from March to 17.3 bcfd. That would be the second monthly decline in a row and the biggest decline since July 2013. (1)

On the other hand, the Marcellus is more productive than the EIA previous thought:

America’s energy explorers have become so good at pulling natural gas out of the ground that government forecasters are having trouble figuring out exactly how much they’re producing.

This month, the Marcellus shale formation of the eastern U.S., the country’s biggest gas play, will yield almost 2 billion cubic feet more a day than the U.S. Energy Information Administration had previously forecast, estimates the agency released Monday show. It said the field’s output was revised based on more recent production data from Pennsylvania.

It’s a blow for bullish gas traders who’ve been waiting for drillers to curb output with futures trading near a 17-year low. The agency’s revision suggests that it may take longer than analysts had previously thought to slow the flow from the Marcellus, a scenario that would keep the biggest stockpile glut since 2012 expanding and prices under pressure.

The changes are also a testament to producers’ ability to “choke” the flow of gas from existing wells in response to changes in the market, Jozef Lieskovsky, a senior analyst at the agency in Washington, said in an e-mail Monday.

The revision to the EIA’s data is “unusual,” said Lieskovsky. “We believe it is not only a story of higher productivity, but also choking existing wells, and increased production after new pipeline capacity came online.”

Producers have used this process known as choking to restrict output from a well when prices are low, when there isn’t enough pipeline capacity to carry their gas to market, or to keep a well flowing for longer. They’re turning up the spigots on some wells as new pipelines are placed into service to move fuel once trapped in the Marcellus to demand centers across the U.S. (2)

Immediately below are the two charts the EIA doesn’t deign to include in the official PDF of the report (for whatever inexplicable reason). We think these are the two best charts they issue each month. Followed by the charts is a copy of the official March 2016 DPR which estimates production volumes for April.

EIA March 2016-1

EIA March 2016-2

(1) Reuters (Mar 7, 2016) – Second-biggest U.S. shale output drop seen for April: EIA

(2) Bloomberg (Mar 7, 2016) – Shale Gas Proves More Resilient Than U.S. Government Expected