Appalachian Gas is Prime, CNX Says

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Reporting improvements in drilling efficiency, natural gas company CNX Resources Corporation (NYSE:CNX) (Canonsburg, Pennsylvania) said it viewed the Appalachia shale basin as the premier basin in the Lower 48 U.S. states despite some headwinds.

CNX is focused primarily on operations in the Appalachia shale basin, which is spread out over parts of Ohio, Pennsylvania, New York and West Virginia. The U.S. Energy Information Administration (EIA), the statistical arm of the Department of Energy, had previously split the basin into the Marcellus and Utica plays in its reporting, but now usually refers to the region collectively.

The Utica basin is situated a few thousand feet below Marcellus. Combined, the two reservoirs make up one of the largest gas basins in the world, behind Russia. The EIA estimates the entire basin will represent about 30% of the expected 110 billion cubic feet of gas produced each day from the Lower 48 states.

Production was flat for CNX, though it notched improvements in efficiencies.

"We continue to optimize our drilling performance and for the deep Utica wells drilled in 2024 we reduced our average drilling time down to 49.3 days, a 23% improvement compared to the deep Utica wells drilled in 2023," the company said on Thursday.

Shale drillers in general are doing more with less by drilling longer laterals. During the three-month period ending September 30, CNX reported an average lateral length at its Utica wells of around 2.4 miles.

"These early results continue to support CNX's view of the deep Utica as a premier resource within the Appalachian basin," the company said.

For next year, the company said its position was contingent on natural gas prices, which have been suppressed for much of the year on ample supply and a warmer winter. CNX said it would remain nimble, with an option to draw on its 11 drilled but uncompleted wells in the basin.

The EIA, in a Thursday briefing, however, said that shale natural gas production dropped slightly relative to year-ago levels over the first nine months of 2024. Should that hold, the EIA cautioned, it would be the first decline in shale gas production since data collection began in 2000.

The decline was primarily from the Haynesville play, situated largely in Louisiana, and in the Utica. In the Utica basin, the EIA estimated that gas production was down 10% from year-ago levels, while output from the Marcellus was flat.

In a low-price environment, many energy companies are favoring shareholder returns over new production opportunities.

CNX is not alone in facing headwinds. Before earnings season began, Nick Dell'Osso, the chief executive officer at Chesapeake Energy (NASDAQ:CHK) (Oklahoma City, Oklahoma), now called Expand Energy Corporation, said last month that his company was curtailing production. The company also targets the Appalachia Basin. For related information, see September 20, 2024, article - Chesapeake Cautious on 'Supply Picture'.

Second-quarter production volumes for Chesapeake were down 14% from first quarter levels. The EIA, meanwhile, is not expecting production gains from the basin. Total U.S. natural gas production increases only by 1.1% next year to reach 111.7 billion cubic per day, assuming the EIA forecasts are reasonably accurate.

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