Why are companies leaving the Marcellus shale?
Tuesday, December 31, 2019
Low natural gas prices forced many companies to evaluate their Marcellus shale assets during 2019. Some decided to leave the natural-gas rich play, while others have decided to stick around. So how are they making their decisions?
Forced to contemplate their future in the play, drillers are deciding whether they should leave the Marcellus shale based on the locations of their wells. Due to lower than expected prices, the profit-making ability of every Marcellus shale acre is not equal. Companies with wells located in the “sweet spots” of Appalachia and Northeastern Pennsylvania can make money even amid low prices, while companies outside these areas are in trouble.
For nearly a decade, analysts valued companies on the amount of gas-producing acreage they owned rather than historical profitability. As of 2019, analysts have shifted their thinking and profitability has been the focus when valuing companies in the Marcellus Shale.
Learn more: Forbes > The Marcellus Shale Region: 2019 Year in Review
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Shale FAQ
How often do royalty payments come?
Depending on the company, royalty payments can arrive monthly or quarterly.
Are my royalty payments transferable?
Yes. If you plan on selling your property, notify the gas company that is leasing your land and your realtor. They will make arrangements to allow the royalty payments to transfer to a different land owner.
What are royalties?
Royalties are payments from the gas company to the landowner as part of a lease agreement. Royalties payments cannot begin until production begins. The payments are dependent upon the market price of the resource.