Gross gas production in Pennsylvania and the Permian Basin probably hit all-time highs in August, a Rystad Energy data analysis shows, pushing up total US output and helping reverse a decline in the first half of the year when oil output curtailments reduced associated gas volumes. With nearly complete reported data coverage for August, we see another month of material additions of about 500 million cubic feet per day (MMcfd). This puts Pennsylvania's total shale gas output above 19.8 billion cubic feet per day (Bcfd) in August, 100 MMcfd higher than the previous record from November 2019. Associated gas output in the most prolific unconventional basin, the Permian, also delivered a new record. Our updated data shows that by the end of summer, the basin's production returned to its previous record in New Mexico and surpassed the previous high in Texas touched in the first quarter of the year. Basin-wide gross gas output is currently estimated at 16.84 Bcfd, 70 MMcfd higher than the previous record in March. "The new record-high gross gas production in the Permian Basin does not automatically mean dry gas production will also be at a record. On one hand, flared gas volumes have gone down substantially since the first quarter, though they picked up somewhat during the summer months. On the other hand, we are seeing a substantial increase in the use of unprocessed gas for gas-lift purposes, which compensates for the reduction in flaring," said Artem Abramov, head of shale research at Rystad Energy. Most large shale gas producers in Pennsylvania increased production in August, both on a year-on-year and quarter-on-quarter basis. EQT produced 3.7 Bcfd of shale gas in the state during the month, which corresponds to a 13%-14% increase over the previous three months and a year earlier. Cabot's volumes remained practically unchanged from a year earlier, but recovered substantially, by 10%, through the summer months. Chesapeake saw little to no immediate impact on its operations from its Chapter 11 filing, as output increased by 9.4% between May and August. CNX Resources is the only outlier among the top 10 shale gas producers in the state, with significant production declines both from the previous quarter and from a year earlier. Pennsylvania's resilient shale gas production is remarkable given the significant slowdown both in rig count and fracking activity this year. Lower drilling and fracking activity is reflected in the decline in wells put-on-production (POP). In 2019, we saw a material increase in frac activity in the state during summer, with shale POPs spiking to an average of 75 wells per month in the third quarter. Since then, POP activity has slowed to 40-45 wells per month in the second quarter of this year. Shale gas producers were quick to respond to improving gas economics and boosted POP activity in the state to 52-57 wells per month in July and August. Even so, we are yet to see the full impact of increased POP activity in September and October on the production side, and the state is well positioned to at least maintain its record-high output for the rest of this year. Similar to gas, our updated reported well data for August also reveals an outperformance in oil output. In our previous outlook we projected a monthly decline of about 50,000 barrels per day (bpd) in Permian oil production between July and August, with the Texas side of the Permian accounting for almost the entire drop. While the updated Texas data does not change the estimate for the Midland and Delaware sub-basins in the state, the data for New Mexico in August came in stronger than initially expected. We therefore now expect that Permian oil production stayed flat in August at 4.4 million bpd, as the decline in Texas was offset by similar-sized growth in New Mexico. The fast recovery in Delaware New Mexico in the post-curtailment period was driven by both smaller private operators, who opportunistically ramped up operations as soon as oil prices improved, and large, well-established public producers. Of the top eight operators in Delaware New Mexico, the most recent growth was driven by a continuous reactivation of curtailed volumes by EOG and connection of delayed POPs by ExxonMobil. ExxonMobil, Chevron and Mewbourne are three key operators that have already surpassed their pre-COVID-19 oil production records in the sub-basin. Concho and Cimarex show gradual production declines since the beginning of the downturn, without any evidence of curtailments in the state. Devon's oil output came down from the pre-COVID-19 peak and stabilized at around 110,000 bpd during the summer months. Occidental is the only large producer in New Mexico that saw a substantial slowdown in volumes beginning in the fourth quarter of last year. Occidental's operated oil production declined from about 150,000 bpd in October last year to about 90,000 bpd in August this year. Excluding Occidental, the sub-basin practically returned to the pre-COVID-19 production record by August. — Rystad Energy
