Exploding Marcellus Has More in the Tank — COG, EQT, RRC, SWN — Investing Daily

Just Hype?

The shale gas boom has a lot of critics, both from an environmental perspective and from an economic and/or sustainability perspective. One frequent criticism is that shale gas wells deplete rapidly in the first year or so, and therefore more and more wells must be drilled just to make up for what has been depleted. This is absolutely correct, as can be seen in the following graphics from the EIA:

Source: Marcellus Region Drilling Productivity Report

The graphics clearly show that cumulative legacy production falls rapidly (and for individual wells the decline is even steeper), but to date this has been more than offset by production from new wells. This of course can’t go on forever, and when the drilling sites are saturated the region will likely see gas production decline steeply. Most forecasts don’t anticipate a decline setting in for at least a few more years, but it’s something we will be watching closely here.

Companies in the Marcellus

Space constraints don’t allow me to take a deep dive into the Marcellus companies, which are more diverse than the Bakken producers I highlighted last week. Among the major Marcellus producers covered in depth in The Energy Strategist are Cabot Oil and Gas (NYSE: COG), EQT (NYSE: EQT), Range Resources (NYSE: RRC) and Southwestern Energy (NYSE: SWN). However, these companies vary in lot in their production (gas versus liquids) and risk profile. Further, the Marcellus has logistical constraints in some areas for getting the gas to market. This has resulted in significant regional discounts on Marcellus gas at times, but has also created enormous opportunities for pipeline companies and infrastructure providers in the region.

Conclusions

The Marcellus Shale and surrounding Appalachian Basin have a growth story every bit as impressive as that of the Bakken, which I covered in last week’s Energy Strategist. The area has become the most important shale gas producing region in the country, despite challenges from environmentalists. In addition, there are logistical challenges that have prevented this gas from reaching some of the lucrative markets of the northeast. We expect more growth from the Marcellus and like a number of companies operating in the area. Join us at The Energy Strategist for in-depth analysis and profitable recommendations of the companies riding the Marcellus boom.

via Exploding Marcellus Has More in the Tank — COG, EQT, RRC, SWN — Investing Daily.