Permits for shale gas wells in Pennsylvania dropped 57% year over year in November, according to the latest state data, continuing a decline in the state's drilling activity that began in April after the bust in the oil markets.
November's 17% decline from October's numbers was led by a drop-off in permitting activity in the wet gas counties of Greene and Washington, south of Pittsburgh. Washington County issued just two new drilling permits, to Range Resources Corp. and EQT Corp., an 89% decline from November 2019, according to the Department of Environmental Protection's database Dec. 7.
The state's top five producers — EQT, Range, Cabot Oil & Gas Corp., Chesapeake Energy Corp. and Southwestern Energy Co. — pulled 56% of the state's November permits, while publicly traded operators accounted for 78% of the month's permits.
While gas prices at the benchmark Henry Hub hovered near $3/MMBtu for the coming winter most of this year, they collapsed in November, losing roughly 50 cents/MMBtu as storage levels stayed high and demand was capped by warmer-than-normal weather.
The state's public operators have been skeptical that the $3/MMBtu mark for 2021 futures prices could be sustained and kept telling investors they would stick with drilling plans that kept production flat.
"We think a maintenance program is appropriate at this stage," Cabot Chairman, President and CEO Dan Dinges told analysts on the company's Oct. 30 third-quarter earnings conference call. "Right now, the early winter season … there is still a couple of hundred Bcf over comparison between this year's storage levels and the five-year average and last year's storage levels. … So, I think that from our perspective, and looking at what's prudent for the health of Cabot and this industry, that we are better served to stick with a maintenance capital program."
The top permit puller in November was New York integrated gas company National Fuel Gas Co., which pulled 10 permits in the north-central counties of Lycoming and Tioga. National Fuel was the only Appalachian gas driller to break from the pack and announce an increase in drilling activity and spending for fiscal 2021 when it announced its fourth-quarter results Nov. 5.
"While this increase in activity level differs from the approach taken by many of our peers, the strength of our balance sheet, our methodical approach to hedging and our significant depth of high-quality inventory allows us to take this step to accelerate value while still generating significant free cash flow," President and CEO David Bauer told analysts on National Fuel's Nov. 6 earnings call.
