By Bob Downing
Beacon Journal staff writer
The tumbling prices of natural gas and oil are starting to affect shale operations in eastern Ohio.
Colorado-based Antero Resources Corp. announced Tuesday that it was cutting its 2015 capital budget by 41 percent.
The company, one of the biggest players in Ohio’s Utica Shale, intends to spend $1.8 billion on capital projects, down from $3.05 billion in 2014.
Antero’s cutbacks are among the first major reductions in the Utica Shale region due to lower commodity prices.
Pennsylvania-based Rex Energy Corp. earlier had announced a 44 percent reduction in capital spending for this year. Denver-based PDC Energy Inc. had announced a 14 percent reduction from 2014 to 2015.
Other companies drilling in the Utica Shale could make similar cuts, if prices remain low, said Shawn Bennett, executive vice president of the Ohio Oil and Gas Association. States like Texas and North Dakota, with more drilling, are facing bigger cuts than Ohio, he said.
Cuts and layoffs are unfortunate, but drillers must respond to market realities, he said, adding that the industry as a whole is in “survival mode.”
Bennett said the question is where prices will end up after bottoming out and rebounding.
Low prices have been especially hard on Ohio’s conventional drillers, he said.
Antero said it intends to cut the number of drilling rigs from 21 at year-end 2014 to 14 in the Utica and Marcellus shales.
The company also plans to complete only 80 horizontal Utica wells and 50 Marcellus wells in 2015, down from a combined 179 wells in 2014. Its drilling and completion budget for 2015 is $1.6 billion, a 33 percent reduction from the $2.4 billion in 2014.
Even with the reductions, net daily production is expected to grow in 2015 by 40 percent over 2014 due to increased efficiencies, Antero said.
“Despite the challenging commodity price environment, Antero is well positioned to continue executing on our development program and achieve peer-leading growth and margins,” Antero chairman and CEO Paul Rady said in a prepared statement. “Our ability to generate production growth of 40 percent, while materially reducing the 2015 drilling and completion budget, is a testament to the momentum established and efficiencies attained from having the largest development program in Appalachia.”
Antero also said it intends to scale back its well completions in the Marcellus Shale in West Virginia this year.
Rady said Antero will defer 50 well completions slated for the second and third quarters until 2016 to avoid unfavorable pricing for natural gas. New pipelines to be completed late this year will create new and favorable markets for that Marcellus natural gas, he said.
Antero has also cut money available for land acquisition by 67 percent to $150 million for 2015. The capital budget could be revised lower if commodity prices continue to drop, Rady said.
Natural gas prices have dropped from nearly $5 per thousand cubic feet last May to less than $3 in recent days. The price of oil has fallen by more than 50 percent in the past six months to a five-year low of less than $50 per barrel.
Other energy companies have announced significant cuts with the lower prices.
Texas-based well service companies Halliburton and Baker Hughes together are laying off about 16,000 workers.
Bob Downing can be reached at 330-996-3745 or bdowning@thebeaconjournal.com.
