The recently released oil and natural gas production numbers from the fourth quarter of 2016 are being reported in varying ways depending on which news outlet is writing the story— we are here to help make sense of it all. Ohio law requires the owner of any capable producing well to annually report its production data to the Ohio Department of Natural Resources (ODNR) Division of Oil and Gas Resources Management. ODNR then release its quarterly report on how much oil and natural gas was produced in our state, from each company, in each county. On March 22 they released horizontal shale production numbers from the fourth quarter of 2016 that show the amounts of oil and natural gas produced from October 1, 2016 through December 31, 2016 (quarter 4, i.e. Q4) completing the results of 2016 activity.
In Q4 of 2016 there were 3,577,553 barrels of oil produced and 345bcf of natural gas. The quarter before that we saw higher amounts of both oil and natural gas being produced to the tune of 3,954,095 barrels of oil and 360bcf of natural gas. When comparing quarter over quarter you see that the production trend was heading downward by the end of 2016—in both oil and natural gas production.
This is the first quarter that both oil and natural gas production decreased from the previous quarter since ODNR began recording shale production numbers. We saw oil production start its decline in the beginning of 2016 during the first quarter and has since continued declining—but this is the first time we have seen natural gas production on the decline.
So why are we seeing headlines like these following the release of the new stats:
Ohio Utica Shale gas production up 43% in 2016 (Farm and Dairy, March 23)
Ohio energy production: Shale oil slides, natural gas rises in fourth quarter (Columbus Dispatch, March 20)
Eastern Ohio Sets Bar for Natural Gas Production (The Intelligencer, March 27)
And a headline like this, reporting on the same information:
Fewer Rigs, Wells And Less Spending Show in Ohio's 4Q Shale Production (Natural Gas Intelligence, March 21)
Numerous outlets are touting natural gas production as soaring in 2016—this remains an incomplete representation of the industry as we’ve seen both oil and natural gas production decline. The quarter-by-quarter statistics are the most accurate representation in analyzing a cyclical industry. While we are encouraged that oil and gas producers are able to find efficiencies and continue to drill new wells, it is important that the production results are represented accurately so that the general public gets a realistic view of what is happening across Ohio’s oil and natural gas producing industry.
Jamison Cocklin’s article in the Natural Gas Intelligence best depicted what is likely taking place:
The decline in rig counts, less spending and a smaller backlog of drilled but uncompleted (DUC) wells that persisted as 2016 came to an end are thought to be some of the culprits responsible for Ohio's first sequential shale gas production decline since the state started reporting quarterly three years ago.