The financial woes plaguing the nation's second largest natural gas explorer, Chesapeake Energy Corp., have made for headline fodder recently, but some Pennsylvania energy attorneys said the company's problems are indicative of larger trends: the floundering price of "dry" gas and the ongoing shift of drilling operations from Northeastern Pennsylvania to the southwestern portion of the state and Ohio.
But attorneys on both the industry and landowner sides of the oil and gas practice said that while the shift has had some effect on the nature of the work they're seeing, it hasn't changed the volume of work much.
"What puts Chesapeake in the news is largely the price of gas," said Kevin L. Colosimo, managing partner of Burleson LLP's Pittsburgh-area office. "But for the low selling price of gas, these issues with Chesapeake probably would have never reached the forefront."
Colosimo explained that Chesapeake, his firm's largest client, had been heavily invested in the exploration of dry gas — gas that is almost pure methane — but has recently begun shifting its natural gas investment toward "wet" gas, which is a combination of methane and other components such as propane, benzenes and ethane.
And, according to energy lawyers, the company is not alone in this shift.
The reason, according to Colosimo, is that dry gas has dropped in price to around $2 per 1,000 cubic feet, while wet gas remains in the $6 to $7 range.
The gas found in Northeastern Pennsylvania, Colosimo explained, is more pressurized and therefore more "dry" than the gas found in the southwestern region of the state as well as in Southern Ohio.
According to Kenneth Komoroski of Fulbright & Jaworski in Pittsburgh, who does not represent Chesapeake, drillers are finding it more and more difficult to remain profitable in Northeastern Pennsylvania.As a result, lawyers said, drillers are moving their northeastern rigs south.
"I don't want to suggest they've all moved, because there is a cost associated with not drilling and losing leases. You have to drill at some level or risk the expiration of leases," Colosimo noted, but added that, in general, "rigs move to where the action is."
For law firms with diversified energy practices and the ability to also go where the action is, the shift has not disrupted business, attorneys said.
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