American Oil and Gas Reporter - August 2017 - 88

established monitoring and testing protocols demonstrate that shale operations
are safe.
* Local government laws and regulations continue to spawn debate and
legal challenges that continue to increase
through the basin. However, Upstream,
Midstream and Downstream says, the
industry has challenged overly restrictive
ordinances successfully. In contrast to
municipalities that have adopted ordinances that permit reasonable oil and gas
development, in 2017 some local governments continue to test their regulatory

authority by enacting regulations for uses
ancillary to well-site development. Impacted operators continue to push back
on these local regulations.
* Downstream opportunities include
developments for production and midstream companies with new emerging
markets for consuming gas and natural
gas liquids, such as power generation,
export, and the petrochemical and related
manufacturing industries, the report says.
The U.S. petrochemical industry is undergoing tremendous growth, including
in the Northeast, which is seen as a prime

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88 THE AMERICAN OIL & GAS REPORTER

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opportunity to repurpose industrial assets
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The New Price Environment

Natural gas prices saw a positive bump
late in 2016, and some producers engaged
in reasonably favorable hedging of 2017
production, Babst Calland points out. "At
present, there are indications that modest
price stability may be achieved given the
prospect of both increased pipeline capacity
out of producing areas such as Appalachia,
as well as some national export capacity.
However, it appears that relatively low
prices are likely to persist for some periods
of time," the report warns.
In this environment, Upstream, Midstream and Downstream recommends
Appalachian Basin gas producers, and
by extension their midstream providers,
continue to reduce costs and improve efficiencies, while taking advantage of attractive opportunities. Gas producers continue to pursue those goals, particularly
with respect to oil field services, the
report says.
The number of natural gas producers
in the basin is declining because of mergers
and acquisitions, the report notes. Under
those circumstances, it says skillful and
efficient post-closing rationalization of
asset portfolios is crucial as buyers and/or
new post-joint-venture operators move to
create full value from their acquisitions.
In addition, Babst Calland says opportunities remain for large-scale consolidation
through further M&A activity for those
gas producers with sufficient financial
strength and operational ability.
"The key in both instances is to ensure
that due diligence efforts are sufficiently
comprehensive while still performed efficiently," the report lays out. "Finally,
established Appalachian Basin producers
may look for opportunities to sell noncore
assets to lower-cost operators who can
produce the acreage efficiently."
With efficiency of operations in mind,
Upstream, Midstream and Downstream
says natural gas producers should focus
on consolidating their activities geographically, by selling or trading parcels
on the periphery of their operations,
those not easily developed or in relatively
less productive areas. Where acreage
positions are complementary, producers
would benefit with joint ventures on a
unit-by-unit basis with other producers
who are able to operate at lower cost,
with higher productivity, or with a more
intense focus on a particular area, Babst

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American Oil and Gas Reporter - August 2017

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