Arkansas Now Nation’s Fourth-Largest Shale Gas Producer

As the nation’s shale gas inventories touched an all-time high in 2013, Arkansas is now the fourth-largest shale gas producer in the U.S. behind only Texas, Louisiana and Pennsylvania, the U.S. Energy Information Administration (EIA) announced in a new report released on Tuesday.

According to the EIA’s “Natural Gas Annual” report, gross withdrawals from shale gas wells increased from five billion cubic feet per day (Bcf/d) in 2007 to 33 Bcf/d in 2013, representing 40% of total natural gas production. Total U.S. natural gas gross withdrawals also reached a new high at 82 billion cubic feet per day (Bcf/d) in 2013.

“New technology has enabled producers to shift production to resources that are now easier to reach and have lower drilling costs,” the EIA report said. “These trends have been reflected in a lower market price of natural gas.”

In 2007, shale gas wells made up only 8% of total natural gas produced in the United States, with 63% of shale gas production coming from Texas. Since then, the distribution of shale gas production by state has changed significantly in the United States, especially in Texas, Pennsylvania, Louisiana and Arkansas. These states accounted for 26 Bcf/d, or 79%, of U.S shale production in 2013, the EIA said.

Here are some of the highlights in U.S. shale production that has taken place over that seven year span:

• Arkansas became the fourth-largest shale gas producing state, accounting for 2.8 Bcf/d, or 9%, of U.S. shale gas production in 2013. All of its shale gas production growth came from the Fayetteville (Shale) play.
• Texas shale gas production increased from 3 Bcf/d in 2007 to 11 Bcf/d in 2013. Most of its shale gas production growth came from the Barnett, Eagle Ford, and Haynesville-Bossier plays.
• Pennsylvania became the second-largest shale gas producing state in 2013, producing 8 Bcf/d, with almost all the growth coming from the Marcellus play. Shale gas production from the Utica play is increasing, but this volume remains small by comparison.
• Louisiana produced a minimal amount of shale gas in 2007, but it produced 4 Bcf/d in 2013. All of this growth came from the Haynesville play, which stretches across North Louisiana into South Arkansas.

IMPACT ON TAXES
The new report from the U.S. Department of Energy’s statistical arm confirms recent state and industry reports recognizing how the Fayetteville Shale has put Arkansas on the nation’s energy map and bolstered the state’s economic fortunes over the past decade.

In early October, Gov. Mike Beebe thanked Southwestern Energy executives and employees during a company-sponsored event in Conway celebrating the Houston-based natural gas driller’s 10 years of increasing production in the Arkansas shale play.

“As a result of what you are doing, America now has more than 100 years of natural gas,” Beebe said of the nation’s domestic supply of the shale-produced energy resource.

At the time, Southwestern said that it had produced more than 3.6 trillion cubic feet (Tcf) of natural gas from the north central Arkansas shale play since 2004. In 2013, the Houston-based energy giant produced 486 billion cubic feet (Bcf) alone.

That tally represents almost half of the natural gas that was produced in Arkansas, according to the statistics from the EIA and Arkansas Oil and Gas Commission.

In addition, Talk Business & Politics reported in September that severance tax collections in Arkansas reached an all-time high of $77.3 million in fiscal 2014, pushed upward by stronger natural gas prices and better drilling techniques and production at the wellhead.

For the fiscal year ended June 30, 2014, gross natural gas severance tax revenues were up more than 50% from $50.6 million for fiscal 2013, according to tax data compiled by the Revenue Division of the Arkansas Department of Finance & Administration.

At the same time, collections of $8.44 million in July, the beginning of fiscal 2015, put the state on track to top $100 million for the first time since the state began keeping such records.

UNANSWERED QUESTIONS
Meanwhile, there are still a lot of questions concerning the future viability of the Arkansas shale play after 10 years of increasing production. BHP Billiton, the second largest stakeholder in the Fayetteville Shale play, announced plans in late October that it had put up a “for sale” sign for the Australian industrial giant’s Arkansas shale acreage.

“We have initiated the marketing of our Fayetteville acreage. However, we will only divest the field if it maximizes value for shareholders,” said BHP Billiton CEO Andrew Mackenzie in an investor presentation on Monday (Oct. 27). BHP bought Chesapeake Energy Corp.’s Fayetteville Shale assets in 2011 for $4.75 billion.

Southwestern is also expected to shift a large share of its capital spending to the wet oil and gas Marcellus Shale in Pennsylvania, where the low-cost natural gas driller has announced plans in early fall to purchase 413,000 net acres and 1,500 wells from former Fayetteville Shale rival Chesapeake for $5.4 billion.

Still, Southwestern’s new Fayetteville Shale operation’s executive said he believes the play will remain viable for years to come, especially with the industry’s improving technology and drilling techniques.

“The most exciting thing to me is that we’ve got another decade (of production), based on what we know today,” Paul Geiger, head of Southwestern’s Fayetteville Shale operations, said in October.

Of course, those plans could quickly change depending on the direction of U.S. oil and gas prices. In recent weeks, the price of natural gas has fluctuated widely amid growing concerns about the dramatic decline of domestic and international crude prices.

In Tuesday’s session ahead of the Thanksgiving holiday, natural gas futures were trading at $4.18 per million British thermal units (MMBtu) on the New York Mercantile Exchange. Premium grade West Texas Intermediate fell 33 cents to $73.76 a barrel in the pre-holiday session, while global contracts for Brent fell 1.7% to $78.33 a barrel in Europe.