Pennsylvania & West Virginia

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Permalink Reply by Ruby_99 on May 15, 2009 at 9:57am

Recent IP results have started to approach Haynesville numbers (not quite, but getting there). There is also proximity to the bigger markets in the northeast, which results in higher prices realized for gas.

Lease bonuses and royalties are still quite low. The best current offer I have in SW PA is $1000/17%/5yrs. Range Resources and Chesapeake are still signing up lots of acreage for that and lower.

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Permalink Reply by The_Baron on May 15, 2009 at 10:18am

From CHK website:

Chesapeake is the largest leasehold owner in the Marcellus Shale play that spans from northern West Virginia across much of Pennsylvania into southern New York. The company expects to end 2009 as the most active driller and the largest producer of natural gas from the play. Chesapeake is currently producing approximately 30 mmcfe net per day (45 mmcfe gross operated) from the play and anticipates reaching approximately 100 mmcfe net per day (220 mmcfe gross operated) by year-end 2009. The company has achieved attractive drilling results in the play to date, including two recent wells that began producing at rates above 6 and 7 mmcfe per day, respectively, and is planning to significantly increase its Marcellus drilling activity during 2009 and 2010. Chesapeake is currently drilling with 11 operated rigs and anticipates operating an average of approximately 14 rigs in 2009 and 28 rigs in 2010 to drill approximately 85 net wells in 2009 and 160 net wells in 2010 to further develop its 1.3 million net acres of Marcellus leasehold. During 2009 and 2010, 75% of Chesapeake’s drilling costs in the Marcellus, or approximately $650 million, will be paid for by its joint venture partner StatoilHydro (NYSE:STO, OSE:STL). The company’s estimated pre-tax rate of return from a targeted 3.75 bcfe Marcellus Shale well drilled for $4.0 million (excluding the benefit of drilling carries) is approximately 38% assuming current NYMEX natural gas and oil strip prices.

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Permalink Reply by Electrodynamics on May 15, 2009 at 1:01pm

Thanks Baron, Ruby & Graysands for this input. Keep it coming! These things have a direct impact on how the business will continue to explore the Haynesville versus the Marcellus. I see the 6X land to get same gas...but look at Ruby's offer. It would be interesting to see if land up there is owned in big tracts by a few individuals or smaller tracts owned by many as it is in this area. Again, many thanks and keep the info coming. It will be very interesting to see how this plays out now that more resources are being sent northeast from the barnett and diverted from the haynesville.

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Permalink Reply by ShaleGeo on May 15, 2009 at 1:09pm

This play has gotten a lot of attention in the past few years. It is kinka like a Haynesville light in a beer analogy. Wells are half as expensive, reservoir is half as deep, IP's are half, acreage is at least half, and EUR's are half.
Jay

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Permalink Reply by Electrodynamics on May 15, 2009 at 4:14pm

Jay, not for argument but, for information and knowledge. Why do you think companies are starting to contract more rigs for the marcellus and also diverting rigs out of the barnett & haynesville to go up there if it is only 1/2 as good? I know of two O & G companies that have already diverted 12 rigs out of the barnett to go to the marcellus. Another drilling company has re-routed rigs that were destined to the haynesville and are moving them up there. It just seems to make it even more interesting as to what they are up to if the case is as you have stated. There are reports beginning to trickle out that some of the IP's are improving significantly there.

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Permalink Reply by ShaleGeo on May 15, 2009 at 4:17pm

One word. They are cheaper to drill.
Jay

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Permalink Reply by Electrodynamics on May 15, 2009 at 4:23pm

If it's cheaper to do, and it appears they could possibly drill 2 & maybe 3 wells up there to one down here and the results almost the same....would that not have an impact here?

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Permalink Reply by ShaleGeo on May 15, 2009 at 4:49pm

No, not in my opinion. 2 of the 3 big HS players (PetroHawk and Shell/Encana) do not even have a position in the Marcellus.
Jay

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Permalink Reply by Mud Man on May 15, 2009 at 7:28pm

I wouldn't say that about the latter, they are grabbing land up there as fast as they can get their hands on it from what I have heard. Having done some work up there for some of the operators, the Marcellus is going to have a major impact on the gas markets (if not more than at least equal to the Haynesville). It pains me to say that it's the real deal up there because I live here, but the numbers don't lie.

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Permalink Reply by Tom Bennett on May 15, 2009 at 9:02pm

I am getting into this discussion late, but to me it seems any prudent oil and gas company would be intrested in the cost per thousand cubic ft of gas bottom line. Now this would include leasing and producing the gas. With the weak market we have how could anyone that expects to be in business tomorrow look at it in any other light? Even if the Haynesville is better ...is it that much better? Remember leases are dirt cheap, royalities are from the 80's and drilling is much less. That could very well add up to much cheaper gas per thousand to produce, which means a larger bottom line.
Don't misunderstand me, I want the Haynesville to do well...very well, but I do think we should face facts.

Permalink Reply by Les B on May 15, 2009 at 9:03pm

Electro, the major acreage holders area as follows:

Chesapeake - 1,300,000
Range Resources - 900,000
Anadarko - 675,000
Atlas - 500,000
Chief - 500,000
Equitable Resources - 400,000
EXCO - 361,000
XTO - 280,000
EOG - 220,000

I would suggest you go to the following website to see the Marcellus Presentation by Professor Engelder.

http://www.energy.ca.gov/2009_energypolicy/documents/2009-05-14_wor...

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Permalink Reply by joey on May 15, 2009 at 9:22pm

I've been looking for data on pressure gradients in the Marcellus and antecdotally know that it gets as high as 0.65 psi/ft compared to HS which in its sweetspot is consistently in the 0.85 to 0.9 psi/ft range. It is known to be normally to subnormally pressured in the WV areas.

Another aspect of this play is the role of stratigraphy. This was an active foreland basin during deposition so within any given well there could be more than one pay zone separated by limestone frac barriers. Its been shown in outcrop that these limestones only need to be a few feet thick to contain the natural hydraulic fractures that formed during hydrocarbon catagenesis. That being said, the role of natural fracs (along with pressure and contacted thickness) is one of the primary factors controlling productivity.

On a point for point comparison of HS vs. Marcellus (including geologic, gas market, surface access issues, etc) these two plays are very different. Given these factors, I suspect there are several sweetspots, and the industry will be climbing the learning curve in the next few years.

The fishing is not too bad either.

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