New shale gas boom could be on the way

The Wall Street Journal

Nicole Friedman

Natural gas prices plunged Monday to their lowest level in more than three years on concerns that the market will remain oversupplied this winter.

Adding to investors’ fears, some companies are hinting at a new production boom.

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Most of the growth in natural-gas production in recent years has been in the Marcellus Shale in Pennsylvania and West Virginia. Some industry experts say the Utica Shale, which stretches into Ohio and also lies underneath the Marcellus in some places, could be just as bountiful.

EQT Corp.EQT -3.09% said in an earnings call Thursday that it has drilled wells in the Utica with very high production rates. EQT’s shares fell more than 7% that day.

“A year ago, it would have been hard to imagine a more prolific play than the Marcellus,” said David Porges, EQT chief executive, on the call. “However, if the deep Utica works, it is likely to be larger than the Marcellus over time.”

This comes on top of already-booming production. Total output rose to a record of 74.9 billion cubic feet per day in September, according to the latest Energy Information Administration estimate.

Deutsche Bank saDBK.XE -0.26%id in a note Monday it expects production from six companies focused on Northeast natural-gas production to exceed expectations for the third straight quarter.

Investors have been adding to their bearish bets on natural-gas prices. As of Oct. 20, money managers including hedge funds held one of the largest net bets on record that natural-gas prices would fall, according to the Commodity Futures Trading Commission.

To be sure, some analysts expect natural-gas production to decline in the coming months, as producers drill fewer new wells. The number of rigs drilling for natural gas in the U.S. has dropped 42% in the past year, according to oilfield-services firm Baker Hughes Inc.BHI +0.34% In addition, oil production has started to decline, which could limit the amount of natural gas extracted from oil wells.