Wet gas is a uniquely southwestern Marcellus Shale problem. Until recently, it was a uniquely southwestern Marcellus advantage, but then natural gas liquids began losing value and the cost to separate them from dry gas, or methane, began to obscure their promise.
At least that’s how EQT Corp.’s CEO David Porges explained it during a company earnings call last month.
“What’s usually called the liquids uplift,” he said, “now we call it the liquids impact.”
Downtown-based EQT doesn’t have a lot of wet gas, a term that refers to natural gas that also contains liquids, in its production mix — less than 10 percent, according to Bloomberg Industries. But its experience is just a scaled down version of what’s happening across the shale play, said Steve Schlotterbeck, the company’s president of exploration and production.
Natural gas liquids include ethane, propane and butane. “Ethane prices are very weak, especially netted back to the wellhead,” he said. “And propane, because of the storage situation, is also quite weak.”
The latest production data submitted by operators to the Pennsylvania Department of Environmental Protection, showed that overall liquids production continued to increase in 2014, albeit at a much slower rate than during the two prior years.
Producers in Pennsylvania reported pulling 4.3 million barrels of condensate and oil out of the ground last year, a 38 percent increase over 2013. From 2012 to 2013, the growth was 73 percent.
Liquids production is concentrated in Western Pennsylvania counties, with Washington County, and its top producer, Range Resources Corp., dominating by a landslide.
The Texas-based producer boasts a diversified strategy for selling its natural gas liquids into markets that appreciate them most. For the past three years, Range has been sending propane to South America, the company said in its latest investor presentation in January. In the second half of this year, Range expects to start exporting ethane to Norway.
“Range’s portfolio of ethane solutions results in a more than 25 increase in ethane revenue, versus leaving ethane in the gas,” the company’s slide deck states.
Mercer County has been rapidly increasing its liquids output, thanks mostly to Hilcorp Energy Co., a Houston-based firm drilling in the Utica Shale formation. Butler County, where State College-based Rex Energy Corp. is among the most engaged operators, ranked third in the state for wet gas production.
In a recent earnings call with analysts, Rex’s CEO Tom Stabley said the company expects to get half of the value of a barrel of oil for a barrel of its natural gas liquids, taking hedging into account. That’s assuming a crude price of $60 per barrel, he said.
Texas-based Noble Energy Corp., whose joint venture with Consol Energy Inc. has so far centered on developing wet gas in Washington County, announced it plans to decrease the number of rigs drilling that acreage to two because of declining prices.
“This is not the time to be accelerating gas production,” said David Stover, Noble’s president and CEO, during an earnings call last week.
This article was written by Anya Litvak from Pittsburgh Post-Gazette and was legally licensed through the NewsCred publisher network.