ST. CLAIRSVILLE - Even as Utica and Marcellus shale companies set records for oil and natural gas production, plummeting oil prices likely will lead some to ditch their short-term drilling plans, industry officials said Friday.
"Even just a few weeks ago, it was about $80. Now, it's under $60," said Shawn Bennett, senior vice president of the Ohio Oil and Gas Association. "Low commodity prices are causing some companies developing in shale areas to re-evaluate their drilling plans. Some, unfortunately, are going to start laying down rigs."
"I would suspect that things will slow a little in the short-term," added Tim Carr, a geology professor at West Virginia University. "In the long-term, if it stays low, then it will hurt."
According to the Ohio Department of Natural Resources, drillers produced more than 132 billion cubic feet of natural gas from July 1 through Sept. 30, up from 88 billion during the previous three-month period - and more than the 100 billion drawn from the entire state in all of 2013. In terms of Utica oil, the numbers show Buckeye State drillers increased production by 546,000 barrels during the period from July 1-Sept. 30, compared to the April 1-June 30 time frame.
Generally speaking, the farther west one travels in Ohio, the more likely they are to find oil in the Utica Shale.
Bennett said PDC Energy, a firm with wells across Ohio, does not plan any drilling in the Buckeye State next year because of the lower oil prices, as the company will instead focus its efforts on the Wattenberg gas field in Colorado.
"We will continue to monitor crude oil and natural gas pricing and have the operational flexibility to adjust capital spending in Wattenberg or Utica should commodity prices change materially," PDC President and CEO Bart Brookman said regarding his company's plans to cut its drilling budget by 14 percent for 2015.
As PDC diverts its exploration and production efforts away from the Utica Shale, global oil giants BP and ConocoPhillips are also bracing for collapsing crude prices. This week, BP officials announced a $1 billion "restructuring" plan that may put many workers in the unemployment line.
ConocoPhillips, meanwhile, slashed its drilling budget by 20 percent for 2015, emphasizing it will defer spending in North American shale plays.
"We are setting our 2015 capital budget at a level that we believe is prudent given the current environment," Ryan Lance, ConocoPhillips chairman CEO, said.
However, a Congressional Budget Office report released this week disputes the concept that U.S. shale oil production is causing crude prices to collapse. Instead, the CBO report attributes the oil price drop to "a rapid increase in Libyan production and a slowdown of consumption in Europe and Asia."
Nevertheless, Bennett said each shale driller will need to make its own decision on how much it continues to drill. Some companies simply have too much of an investment already in place simply to walk away, he said.
"Companies operating in Belmont or Monroe counties will continue to make money, as long as natural gas prices stay up," he said, noting most of these producers are drawing natural gas, as well as liquids such as ethane, propane and butane. "You're unlikely to see companies just pull up and leave there. But in the oil patch, there will be a slowdown."
R. Dennis Xander, past president of the Independent Oil and Gas Association of West Virginia, said lower oil prices help the economy because of the presence of cheap energy.
"I don't think this will impact those drilling for dry natural gas at all," he said. "If you have signed a contract to put gas in a pipeline, you are going to have to put gas in that pipeline to fulfill your contract."
