The pace of natural gas drilling in Pennsylvania is slowing, according to data from the Pennsylvania Department of Environmental Protection (DEP).
Through the first seven months of 2012, operators started drilling an average of 4.6 natural gas wells per day; in contrast, natural gas well starts averaged over 6 per day in both 2010 and 2011.
DEP reports that the number of natural gas wells started per month in 2012 remained fairly steady through April, but has since declined sharply. This holds particularly true for horizontal wells, which in Pennsylvania have significantly outnumbered non-horizontal (vertical) wells since 2010. Horizontal wells have been drilled primarily in sections of the Marcellus, Utica, and Geneseo/Burket shale formations located in the northeast and southwest portions of the state. On average, 5 horizontal natural gas wells were started each day in 2011. In 2012, the new horizontal well count generally remained above 4 per day through April, but has fallen steadily thereafter. In July 2012, operators began drilling, on average, only 2.5 horizontal natural gas wells each day.
Among the factors influencing Pennsylvania’s natural gas drilling activity in 2012 are low regional natural gas prices, an abundant inventory of already drilled but not yet producing natural gas wells, and constrained transportation facilities.
The Henry Hub day-ahead price registered a modest decrease for the week, dipping on Thursday and Friday before regaining ground on Monday and Tuesday, closing the week at $2.80 per MMBtu, down 0.7 percent. In the Northeast, cooler temperatures helped generate price decreases earlier this week, with a return to somewhat warmer temperatures boosting end-of-week prices in certain locations.
At the NYMEX, the September 2012 contract ended the week with a net gain, rising from $2.748 per MMBtu last Wednesday to $2.826 per MMBtu yesterday, an increase of 7.8 cents per MMBtu. Prices dropped late last week, falling to $2.719 per MMBtu on Friday, but rose steadily thereafter to finish the week up 2.8 percent. The 12-Month Strip (average of September 2012 to August 2013 contracts) closed yesterday at $3.316 per MMBtu, up 3.3 cents per MMBtu (1.0 percent) for the week.
Prices at many downstream trading locations registered overall declines, dropping on Thursday and Friday before gaining ground toward the end of the week. For example, spot prices at the Transcontinental Pipeline’s Zone 6 trading point (which serves New York City markets) declined from $2.98 per MMBtu last Wednesday to $2.77 per MMBtu on Friday, then climbed to $2.88 per MMBtu by week’s end (down 3.4 percent). At the Algonquin Citygate trading point for delivery into Boston, prices fell especially sharply, starting the week at $3.81 per MMBtu, falling to $2.97 per MMBtu on Tuesday, and then rising slightly, closing yesterday at $2.98 per MMBtu (down 21.8 percent for the week).