As Rig Count Slips, U.S. Oil & Gas Production Begins to Flatten
According to analysis by John Kemp at Reuters, lower prices for oil and a slowdown in drilling activity are finally causing crude oil output to peak and turn down. In May, crude and condensates production for the Lower 48 states (excluding Gulf of Mexico production) rose by just 19,000 barrels per day compared with April. However, production was still up by more than 1 million barrels per day (+9%) compared with May 2022. What about natural gas? Like oil, gas production continued to increase in a lagged response to very high prices during the second and third quarters of 2022. As prices began to fall starting late last year, the number of drilling rigs targeting gas fell from an average of 162 in September 2022 to an average of 132 in July 2023. Gas production growth is set to slow sharply in the second half of 2023 and into the first half of 2024.
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Equitrans Midstream owns two natural gas storage wells in the Swarts Complex and Hunters Cave Storage Fields area of Greene County, PA–in Center, Franklin, Morris, and Washington Townships. CONSOL Energy, which used to be part of CNX Resources but is now a standalone company focusing on the coal industry, plans to mine coal above and around the Equitrans Hunters Cave and Swarts Natural Gas Storage Fields over the next several decades. So Equitrans is proposing to abandon its two existing storage wells (near where CONSOL needs to work) and drill two new wells in the same vicinity–just not near CONSOL’s coal mining activities.
Some disturbing news has just come to light thanks to an investigation by Fox News. According to internal Dept. of Energy (DOE) calendars obtained by Americans for Public Trust, DOE Secretary Jennifer Granholm secretly consulted China’s National Energy Administration Chairman Zhang Jianhua, a senior member of the Chinese Communist Party, on Nov. 19, 2021, and then again two days later on Nov. 21, 2021. On Nov. 23, 2021, the White House announced a release of 50 million barrels of oil from the Strategic Petroleum Reserve (SPR). After releasing the oil, Granholm’s DOE then sold millions of barrels of oil to China! In other words, Granholm sold cheap oil to China to prop up that country’s economy while making our own country less energy secure. China is America’s #1 enemy.
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National Fuel Gas Company (NFG), headquartered in Buffalo, NY, is the parent company for Marcellus/Utica driller Seneca Resources and the parent of midstream company Empire Pipeline. Yesterday, NFG issued its latest quarterly update. NFG operates on a weird fiscal year system. This latest update is for the company’s third quarter, which would be everybody else’s second quarter update. NFG said it plans to “further moderate” its Seneca drilling activity as it shifts to slower production growth in the “low single-digit” range.
Williams, one of the largest pipeline companies in the world, issued its second quarter update yesterday. The company reported 2Q23 net income of $515 million, up 5% from 2Q22. The company had record high gathering volumes of 18.03 Bcf/d. The company provided updates for two important Marcellus/Utica projects. (1) Williams continues constructing the Regional Energy Access (REA) project with partial in-service expected in 4Q23. REA beefs up the Transco pipeline in Pennsylvania and New Jersey to deliver an extra 829 MMcf/d of Marcellus gas to PA, NJ, and Maryland. (2) Williams received a FERC certificate for its Southside Reliability Enhancement Project, a project to beef up capacity along the Transco to flow an extra 423 MMcf/d of M-U gas to Piedmont Natural Gas and its customers in eastern North Carolina. But a third M-U project was mentioned not previously on our radar screen.
The U.S. Energy Information Administration (EIA) published a post noting the increase in the use of energy in the U.S. from 2020 to 2021. Energy usage increased by 25%, adjusted for inflation, in 2021. Why? In 2020 we were deep in the throes of lockdowns due to COVID. Nobody was going anywhere, pretty much, which significantly decreased the use of gasoline and diesel. Once the country emerged from the COVID pandemic, and people began to move around again, energy usage (petroleum products) soared.
When a government bureaucrat says, “We’re not coming for your gas stove,” you know what that means, right? It means just the opposite. It means they ARE coming for your gas stove. On July 26, the New Jersey Board of Public Utilities (BPU) voted in an “open” meeting to adopt new regulations to “decarbonize” buildings across the state. New Jersey’s tyrannical Governor, Phil Murphy, signed an executive order (edict) in February that sets a goal for zero-carbon-emission space heating and cooling systems in 400,000 homes and 20,000 commercial properties by 2030. The only way to do it is to force people to quit using gas stoves and gas furnaces. Yet the BPU said, following its vote, it is “not coming to take your gas stove.” LIARS.
New shale permits issued for Jul 24-30 in the Marcellus/Utica were down just a couple, but still a nice number. There were 29 new permits issued last week, down from the 31 issued the previous week. Last week’s permit tally included 22 new permits in Pennsylvania, 7 new permits in Ohio, and no new permits in West Virginia. The top permittee for the week was EQT Corporation, receiving a whopping 16 permits in Greene County, PA.
Chesapeake Energy Corporation, the country’s third largest publicly-traded natural gas producer, issued its second quarter 2023 update yesterday. The company reports a profit of $391 million in net income during 2Q23, down from $1.2 billion in 2Q22. The drop was due to lower gas prices and less production. Second quarter net production was 3,653 MMcfe per day (or 3.7 Bcfe/d, 96% natural gas, and 4% liquids), down 11% from 4,125 MMcfe per day in 2Q22. In the Marcellus, the company drilled three of the five fastest wells in company history, including the fastest well, a 10,383-foot lateral, to a total depth of 17,083 feet in less than eight days.
Gulfport Energy, the third-largest driller in the Ohio Utica Shale (by the number of wells drilled), emerged from bankruptcy in May 2021 with a new board and top management. In January of this year, the company appointed a new CEO, John Reinhart, the former President and CEO of M-U driller Montage Resources Corporation before that company was gobbled up by Southwestern Energy (see 
West Virginia’s state budget runs from July 1 through the following year’s June 30. WV’s General Revenue collections for July 2023, the first month of Fiscal Year 2024, came in at a respectable $7.7 million above estimates, with total collections of $335 million. However, that $335 million collected is 12% lower than the $381 million collected in July 2022. What seems to be a major difference is a crash in severance tax (on coal and natural gas) collections, down some 93% year over year.