Back in December of 2014, it became obvious to everybody that the most recent oil boom was over.  Oil prices dropped below $50 a barrel.  OPEC had stated that it wasn’t going to cut back production to drive up prices.  Our office started getting calls from landmen trying to finalize leases before the end of the year.  All of them said that the new year was going to bring lower bonus prices and reduced drilling activity, and they were right.

In January 2015, Antero Resources laid off 301 landmen and rescinded all their offers in Wetzel County.  Cimarex pulled out of Wayne County.  Stone Energy stated it was going to quit drilling for the rest of the year.  Pretty much every published 2015 budget stated that drilling and leasing was going to decrease by 33%.  Even Odebrecht said it was “rethinking” the cracker plant that’s being planned for Wood County, though they say they’re optimistic it will still be completed.  It was all doom and gloom for the Marcellus Shale region.

However, since the first half of January, things haven’t been quite so bad as expected.  Oil prices are hovering at $50 a barrel for WTI crude and $60 a barrel for Brent crude.  Our office continues to get calls from people saying they’ve been offered a lease on property they didn’t know they owned.  The offers aren’t quite as high as they were before, but it’s still normal to get over $4,000/acre in Tyler County. In fact, we just completed a lease in Wetzel County for $5,000/acre and 17% gross proceeds royalties.  It wasn’t even a large tract.  Big pipelines are still being worked on and demand for natural gas as a source of generating electricity is still growing.  There are even a couple of companies that are increasing their investment in the Marcellus Shale, Southwestern Energy being the biggest.

Today over at “Marcellus Drilling News”, there was an article about three new natural gas powered electrical generating plants being proposed for West Virginia.  They’ve been proposed by the same people who are behind the power plant going in at Mounsdville, WV.  Two of them are up in Brooke County and the other is in Harrison County.

Other parts of the country are feeling the effects more than the Marcellus/Utica region.  Things are slowing down more in the Bakken, Eagle Ford, Haynseville, and Niobrara plays.  That’s because the Marcellus is the most economic play due to low leasing costs (still), high production rates, and vicinity to large markets.  A lack of infrastructure has slowed things down some, but the infrastructure is being built.

Some analysts think that oil will drop down to $20 a barrel before prices start to recover.  It seems that most analysts think that $40 a barrel is the lowest it will go, and that prices will recover to around $70-$80 per barrel around the end of 2015.

Luckily for our clients, this means business as well. We just expect reduced profits.