The latest oil and natural gas horizontal production numbers released by the Ohio Department of Natural Resources (ODNR) Division of Oil and Gas Resources Management show a modest increase in production from where we left off ending 2016. The quarterly results show that Ohio producers recovered 3,904,732 barrels of oil and 371,921,659 Mcf (371 billion cubic feet) of natural gas, spanning the first quarter of 2017. The results are always reflective of the previous quarter, this time covering all oil and gas production that took place January 1, 2017 through March 31, 2017 across Ohio.
The production results this quarter are a positive sign, as we left 2016 seeing both oil and natural gas production decrease for the first time since ODNR began recording horizontal production numbers. Production increased 9% for oil (up from 3,577,553 barrels) and 8% for natural gas (up from 345 billion cubic feet). Yes, we are up from the lowest point thus far, which is reassuring but production is still increasing modestly.
For example, some of the largest production increases on a quarterly basis that we have seen in the ODNR’s statistics is oil increasing 26% in the second quarter of 2015 (going from 4,401,687 in first quarter, to 5,578,255 in the second) and natural gas increasing 23% in the fourth quarter of 2015 (going from 245 bcf in the third quarter, to 404 bcf in the fourth quarter). Since both of those quarters, if production was not decreasing—which it did at one point for both products—we have only seen single digit percentage increases.
So how does someone make sense of seeing any array of headlines with conflicting messages:
Ohio oil production down in first quarter (Canton Repository, June 9)
1Q Valley oil, gas production down year over year (Vindicator, June 10)
Natural-gas output on rise, oil down in Ohio (Toledo Blade, June 9)
Ohio natural-gas production continued to rise in first quarter as oil numbers fell (Columbus Dispatch, June 9)
Utica Shale Oil, Natural Gas Volumes Rebound in First Quarter (Natural Gas Intelligence, June 9)
The confusion behind some of the headlines is that outlets are choosing to report on Q1 2017 compared to Q1 2016. Go back to the first paragraph of this post, and you will see that the number have increased—for both commodities. When looking for an overall trend of a cyclical industry, a quarter-by-quarter comparison over a number of years tends to provide the most accurate representation. We are encouraged to see that oil and natural gas producers are slowly ramping back up. The past two years brought a crippling downturn for the industry and this new sign of life is definitely welcomed by the industry.