Marcellus shale driller Noble Energy Inc. sinks roots into Pittsburgh
Dropping an anchor in Pittsburgh was an easy choice for executives at Noble Energy Inc.
The Houston-based driller is settling into a headquarters across the street from Range Resources Corp., the largest landholder among shale drillers in Western Pennsylvania, and Consol Energy Inc., the oldest local company working the Marcellus shale.
The six-story building in Cecil's Southpointe development that Noble will lease sits among a cluster of peers and service contractors, with easy interstate access to its well sites in Washington County and West Virginia.
The Marcellus “is quickly shaping up to be a world-class play,” said Bob Ovitz, senior operations manager for Noble's Marcellus business unit. “Southpointe is sort of the nexus, the epicenter of what's going on out here. ... This is a great regional hub for the industry.”
That hub stretches from the Washington County business park to Cranberry in Butler County. About a dozen drilling companies, big and small, and most of the biggest Marcellus shale-gas producers in Pennsylvania chose to be here, even some that drill mostly in Eastern Pennsylvania and those, such as Noble, that do a lot in West Virginia.
It's a unique opportunity for the region, putting Pittsburgh atop the Appalachian energy industry's supply chain, economic experts said. Rigs move and field offices close when the rigs go, but the corporate presence taking root in Pittsburgh is a constant that can withstand the whims of a boom-and-bust industry, they said.
The drilling companies draw pipeline companies such as Williams and MarkWest, and service companies such as Halliburton. Law firms and engineering and environmental consultants follow. Clustering in Pittsburgh offers them access to finance, skilled workers and culture, centrally located between drilling hot spots in Pennsylvania, West Virginia and eastern Ohio, experts said.
“Pittsburgh is the place that has all of that at once,” said Kurt Rankin, an economist with PNC Financial Services Group. “Any firm that has hopes of being part of the natural gas revolution in the United States, and in particular focused on the Marcellus shale, is going to want to be a regional presence (here), with people on the ground who understand the marketplace in Pittsburgh.”
There's hope that petrochemical makers and manufacturers will locate here as well, to take advantage of cheap natural gas. The gas industry could become like the coal industry that brought natural resource companies and steel-making that has survived in the region for more than 100 years, said Chris Briem, regional economist at the University of Pittsburgh.
“It's a fortunate accident of geography, millennia old,” he said.
About a dozen shale drillers are in the Pittsburgh area, most along Interstate 79, including Royal Dutch Shell plc and Exxon Mobil Corp. and midsized companies such as Cabot Oil & Gas Corp. and Talisman Energy Inc. Suburban locations give them quick access to Pittsburgh International Airport and field sites around the countryside.
The trend — building for a while — is ongoing. Chevron Corp. spent $17.5 million last year to buy land in Moon, closer to the airport. Township officials have said it could be a regional headquarters with 1,000 to 1,500 workers, though Chevron has yet to confirm that.
Rice Energy Inc., which just went public, has a headquarters under construction in Southpointe and plans to move in June 1.
“For us, it's proximity to our acreage in Washington and Greene counties … and Belmont County in Ohio,” said Jamie Rogers, a vice president at Rice, which is outgrowing a suite at Southpointe. “So many of the service companies have now migrated to Southpointe, especially, it really does simplify doing business.”
The shale boom brought this growth as it grew between 2005 and 2011. Some companies moved to compete with established companies such as Consol and EQT Corp., Downtown. A few, especially the majors — Chevron, Shell and Exxon — spent billions to buy local companies.
Noble paid $3.4 billion in 2011 to buy a share of Consol's holdings, creating a 50-50 venture to help Consol ramp up its gas drilling business. Noble, with an estimated market value of about $25 billion, is about a tenth of the size of those major companies. But it brings drilling experience without the bureaucracy of a multinational corporation, said David Hackworth, Consol's general manager of gas operations strategy.
Consol and Noble share a philosophy for how fast to work, executives said. Though some companies had to drill quickly, at scattered sites, in order to lock leases into long-term deals, Consol has mined Appalachian coal and drilled for so long that it has many of land deals in place. That appealed to Noble executives, who like long-term development, they said.
The goal of their “integrated development plan” is to methodically develop large swaths of land at once. That helps get water and gas pipelines in the ground before the wells are finished, limiting the trucking of water or the risk of having shut-in wells without pipeline connections to markets.
“This is an asset base here for decades to come. This isn't a quick land rush,” Hackworth said. “This isn't a basin where we're going to have it all drilled up here in another five to seven years. This is a really prime piece of what is likely to be the most prolific gas field in the world.”
In less than three years, Noble made the Marcellus its No. 2 priority, behind only the Colorado shale. It plans to spend a quarter of its $4.8 billion capital budget in 2014 on Marcellus drilling, according to its year-end report for analysts.
The office lease Noble signed runs 16 years, and executives say that's proof they're putting down roots.
“We're real excited to have a place we'll call home for the long term,” said Ovitz. “We're looking for critical mass, scale to work with, and space to run in.”
Timothy Puko is a Trib Total Media staff writer.