State of Shale 2023, Marcellus: Long Live the King

Editor’s note: This is one in an occasional series of articles examining the state of major U.S. shale plays at the end of 2022. 

Marcellus Gains Ground

At the end of 2022, the Marcellus Shale stands as the undisputed king of U.S. natural gas production, commanding $7.8 billion in merger activity and ready to extend its reach globally.  

First announced as the newest player in the shale scene by Range Resources Corp. in December 2007, the Marcellus Shale formation has now produced approximately 80 Tcf of natural gas to date.

Through development from natural gas-based producers such as EQT Corp., Southwestern Energy and Chesapeake Energy Corp., the shale play has rapidly expanded and continues to grow, with production anticipated to reach 38 Bcf/d in some areas by 2025, according to Randall Wright, president of Wright & Co. Inc.

“Production growth is on trend to meet that projection,” Wright told attendees at Hart Energy’s 2022 DUG East conference in June, sharing that earlier predictions of the play more than a decade prior were more skeptic: “If you could get 1 Bcf per 1,000 feet of lateral, it might be a viable play.”

As geopolitical turmoil takes center stage in the winter of 2022/2023, many energy leaders believe that Marcellus Shale gas could be a turning point in aiding global economies on the road to energy stability and recovery.

“The energy macro landscape remains volatile as the world continues to grapple with a structural under supply of natural gas. Thanks to American-source LNG, Europe has done a commendable job refilling its storage over the past few months,” EQT Corp. CEO Toby Rice said in his company’s third-quarter 2022 earnings call.

Top shale performers EQT Corp., Chesapeake Energy Corp., Antero Resources, Southwestern Energy and Coterra Energy produced a combined total of 2.9 MMboe/d, 30,065 bbl/d of oil and 17.3 Bcf/d of gas in the first half of 2022, according to data from advisory firm Enverus.

EQT produced a total of 859,302 boe/d from its Marcellus assets, comparable to the 939,139 boe/d it produced across all its assets in the first half of 2022. In addition, EQT reported 3,348 bbl/d in oil production, as well as 5.13 Bcf/d in natural gas production.

On Sept. 6, EQT announced the planned acquisition of THQ Appalachia I LLC (Tug Hill)’s upstream assets and THQ-XcL Holdings I LLC (XcL Midstream)’s gathering and processing assets for $5.2 billion.

“This deal checks all of the boxes of our guiding M&A principles, [has] significant industrial logics given direct offset to our existing lease sold in West Virginia and brings over 11 years of core inventory that immediately competes for capital inside and in EQT’s portfolio,” Rice said in the third-quarter earnings call.

Chesapeake produced 727,286 boe/d in the Marcellus in the first half of 2022, over half of its 1.23 MMboe/d produced across all the company’s assets. Similarly, it produced 4.36 Bcf/d of natural gas from the basin, nearly two-thirds of its total 6.89 Bcf/d natural gas production.

Prior to the Russian invasion of Ukraine spurring an uneven dealmaking market, Chesapeake started the M&A year off strong with the acquisitions of Marcellus-based Chief Oil & Gas. On Jan. 25, 2022, the company agreed to acquire Chief E&D Holdings LP, along with Tug Hill Inc.’s associated nonop interested for $2 billion cash and approximately 9.44 million common shares.

Through the acquisition, the company was able to add leasehold to the lower part of the play, CEO Nick Dell’Osso said on the company’s third-quarter 2022 earnings call.

“In the Marcellus, our synergies from the Chief acquisition continue to come to fruition,” he said. “As we’ve discussed before, we’re maximizing the capacity of the combined gathering systems.”

“And we’re looking forward to 2023, where our well design improvements of longer lateral length and enhanced completions should show up with improved productivity per well,” he added.

Antero Resources is growing in the play. In the first half of 2022, the firm produced 455,453 boe/d, 8,286 bbl/d of oil and 2.68 Bcf/d of natural gas from the Marcellus. 

Combined with the company’s Utica assets, it accounts for the majority of its total 529,343 boe/d, 12,615 bbl/d total oil production and 3.1 Bcf/d total natural gas production.

Through Antero’s organic leasing program, the company added approximately 60 new drilling locations during the first nine months of the year, chairman, president and CEO Paul Rady said in the company’s third-quarter 2022 earnings call.

“We have continued to maintain our focus on our core acreage footprint with a particular emphasis of spending capital on organic lease acquisitions,” he said. “As opposed to larger transactions that can dilute our equity, create a large overhang on the stock and lever our balance sheet, we have preferred to pick up smaller, more tailored acreage packages within our core liquids-rich position in West Virginia, where we continue to see tremendous well results.”

Approximately half of Southwestern Energy’s production—887,668 boe/d—came from the Marcellus, which produced 441,111 boe/d in the first half of 2022. The company reported in the basin 18,431 bbl/d in oil production, as well as 2.53 Bcf/d in natural gas production.

In addition, Southwestern placed 14 wells with an average lateral length of approximately 15,600 ft in the Marcellus during the third quarter of 2022, COO Clay Carrell said on the company’s earnings call.

“Our superrich area in West Virginia accounted for eight of those wells, and our Marcellus and Utica dry gas acreage in Pennsylvania and Ohio accounted for the remaining Appalachia turn-in lines,” he continued. “In the fourth quarter, based on our superrich activity and the timing of completions, we anticipate holding oil volumes flat.”

Coterra Energy’s diverse portfolio has operations sprawled across the U.S. from the combined assets of Cabot Oil & Gas and Cimarex Energy. In the Marcellus shale, it holds approximately 177,000 net acres, the company reported on its website.

In the first half of the year, Coterra reported 436,933 boe/d produced in the Marcellus, compared to the total of 758,568 boe/d produced across the Marcellus, Permian and Anadarko basins combined. Additionally, it produced 2.62 Bcf/d of natural gas in the shale, approximately two-thirds of the 3.76 Bcf/d of natural gas produced across all the company’s assets.