Natural gas drillers in the Marcellus Shale would benefit if there were fewer companies competing in the country’s most prolific gas field, according to the CEO of Fort Worth-based Range Resources.
Consolidation would make gas drillers more efficient and smooth out the pace of development, said Jeff Ventura, Range’s chief executive officer. Supply gluts that weaken prices would be easier to manage as pipelines linking the region to high-demand markets are built, leading to more stable prices.
The Marcellus, centered in Pennsylvania and West Virginia, is changing rapidly as gas production there approaches a record. Deal interest is accelerating as new pipelines promise to end transportation bottlenecks and bring higher prices. Consolidation is seen by many as the key to unlocking the region’s full potential.
Fewer companies in the Marcellus “is probably a positive thing,” Ventura said on a conference call Wednesday after Range released its second-quarter earnings. Consolidation means “a more paced development, more prudent and more rational development.”
Range reported second-quarter earnings late Tuesday that missed estimates Wednesday, largely due to a hiccup in Louisiana where the company is experimenting with well-completion techniques, according to Chief Operating Officer Ray Walker. Net income totaled $69.6 million, or 6 cent a share adjusted for non-recurring gains, short of analysts estimates of 7 cents.
Shares (ticker: RRC) plunged nearly 12 percent to $17.90 a share, the biggest one-day decline since 2011.
Last year, Range expanded with its $3.3 billion purchase of Memorial Resource Development of Houston, which added significant natural gas resources in Louisiana.
The latest proposed merger in the Marcellus is EQT’s $6.7 billion bid to buy Rice Energy, which would create the largest gas driller in the U.S. EQT noted an “accelerating trend of industry-wide consolidation in the Appalachian Basin” in a filing with the Securities and Exchange Commission.
Rice Energy bought Vantage Energy for $2.7 billion in 2016, just weeks after the target filed to go public. Alta Marcellus Development bought $1.24 billion of Marcellus acreage from Anadarko Petroleum this year. And Noble Energy sold its upstream operations in northern West Virginia and southern Pennsylvania for $1.23 billion in May to portfolio company Quantum Energy Partners.
“The recent glut of production was created by a lot of different players and would have been easier to manage or avoid if it had been in the hands of fewer operators,” said Brian Velie, an analyst at Capital One Securities in New Orleans.
This article includes material from Star-Telegram archives.