Stratas Advisors is a Hart Energy company.

So far in 2015, operators in the Appalachian Basin have been adjusting to changes in commodity prices. Conservative exploration and production strategies are being emphasized in order to better position operators in the depressed price environment and become well positioned for a price recovery. But despite slowdowns in new wells drilled and completed, production growth remains positive as the focus shifts to increasing efficiencies. What’s more, new infrastructure projects are expected to ease the burden of oversupply and move the Appalachian’s gas reserves throughout North America. Additionally, the Nexus pipeline coming online in November will open transportation capacity from the region to the Gulf Coast, where prices are more favorable.

Despite lower natural gas prices, many Marcellus wells remain economic. Highlighting the dry gas region, assuming an average well cost of $6 million and a GPM value of 0.5, some 58% of Marcellus wells are economic at a netback price of $3/Mcf.

The majority of Marcellus dry gas wells have robust economics that remain viable during unfavorable periods. Improved drilling techniques, including longer laterals, increased fracture stages and a decrease in average drilling days per well, are leading to stronger production results at lower costs. Additionally, marginal production per rig has improved to approximately 8.3 MMcf/d.

Marcellus activity is focused in the dry gas window in northeastern Pennsylvania and the southwestern border between Ohio and West Virginia. While the rig count has decreased as commodity prices have fallen over the last 10 months, the Marcellus has seen a less dramatic decline of 25% compared to the Utica, which fell 50% from the same period last year—likely due to its favorable economics and geology. Despite the slowdown, total production from the Marcellus in 2015 is expected to top 17 Bcfe/d by the end of the year.

Utica activity is shifting in response to the lower price environment. With drilling in the volatile oil window in eastern Ohio stalled, as the revenue from these plays has decreased with lower crude prices. Throughout 2015 approximately 90 wells have been drilled in the oil window of the Utica; however, only 28 are producing. The Utica could see an increase in activity going forward though, as record IP rates are becoming a trend in the dry gas area.

In August 2015, the EIA reported that month-over-month production in the Utica is expected to increase, despite unfavorable economics and reduced drilling activity. Additionally, new geological findings by a study by the University of West Virginia suggest that total recoverable natural gas could be far greater than first believed: approximately 782 Tcf (with nearly 2 Bbbl of oil).

In recent months several exploratory Utica wells have produced record-breaking 24-hour IP rates that outshine any other shale play in the U.S. It’s interesting to note they were drilled primarily in the dry gas window, outside of what had been considered the Utica’s core region. The 24-hour IP rate averaged 59 MMcf/d from a well drilled by Range Resources in Washington County, Pennsylvania. More recently, EQT Corp. reported a well that initially tested 72.9 MMcf/d in Greene County nearby. These huge results could signal a re-evaluation of the high potential hydrocarbon regions of the play. Operators have begun targeting Utica dry gas from existing Marcellus pads, taking advantage of stacked pays. This is yielding additional production at a low capital cost.

The outlook for the Appalachian Basin remains positive. Operators have shifted focus from gaining acreage and production, to refining asset portfolios and reigning in capital expenditures in order to develop cost-effective means of growing production. The increasing popularity of stacked pays indicates the new ways in which operators are finding cost-efficient ways to drill and complete their wells and boost production. Improved infrastructure on the horizon will benefit the play and better position producers to get their oil, gas and NGLs to demanding markets.