Marcellus Wells, Output Up in Third Quarter
Pittsburgh Tribune-Review
October 19, 2010
By Joe Napsha
Natural gas production in the Marcellus shale reserve in Pennsylvania
continued to rise in the third quarter, and industry observers expect
additional increases despite a drop in prices.
Based on reports from major producers in the state, production
increased significantly in the third quarter, and overall activity in
terms of wells drilled rose dramatically this year.
"The Marcellus shale has been clearly the largest shale play in the
country ... and production is going to be robust," said Alexander
Steis, managing editor for Natural Gas Intelligence's Shale Daily in
Sterling, Va.
"The production is increasing ... despite the possibility of a
severance tax and a drop in prices. We're beginning to see a dropoff of
production in other areas" where it is more costly to drill, said Kent
F. Moors, director of Duquesne University's Energy Policy Research
Group.
Natural gas futures prices have fallen, but they are still high enough
for companies to make a profit in the Marcellus reserves, Moors said.
In late June, the New York Mercantile Exchange futures price was about
$4.80 per thousand cubic feet (mcf). Yesterday, the futures price
settled at $3.43 per mcf, down 10.4 cents.
Pennsylvania is reaping the benefits of Marcellus shale gas that is
cheaper to produce than in other regions. The average Marcellus well is
cheaper because the reserves, at more than a mile underground, are
shallower than reserves such as Eagle Ford in Texas, where the gas is
at 12,500 feet underground, Moors said. The "pay zone" is better in
terms of the volume and pressure of the wells, and the ability to
cluster wells in an area, Moors said.
Production activity in the first seven months of this year has
increased, compared to the same period a year ago, according to reports
from the state's Bureau of Oil and Gas Management.
There were 1,721 permits issued for wells in the Marcellus reserves
from January through July and 822 were drilled, compared with 999
permits issued and 263 horizontal wells drilled in the same period a
year ago, state figures show. There was more activity in Washington and
Greene counties -- 273 permits issued and 148 wells drilled -- than
eight other southwest Pennsylvania counties combined, according to the
report.
The state has received production reports from all but seven of about
80 producers in the Marcellus reserves for the period from July 2009
through June 2010, but it has not tallied the total production or
average production per well.
Chesapeake Energy Inc., based in Oklahoma City, with offices in Mt.
Morris, Greene County, said it was the largest producer in
Pennsylvania's Marcellus shale for the 12 months ended June 30, with
33.6 billion cubic feet produced from 49 wells. Range Resources Corp.
of Fort Worth, Texas, with offices in Cecil, produced 29.5 billion
cubic feet of gas from 96 wells, according to the state.
In the third quarter, Consol Energy Inc. in Cecil said last week its
natural gas division -- including traditional shallow wells and newer
Marcellus wells -- achieved record production of 35.8 billion cubic
feet, a 44 percent increase from the 24.8 bcf produced during the same
quarter a year ago.
Consol began the quarter with one Marcellus rig running in Greene
County and ended with three rigs, said the coal-and-natural gas
producer.
Atlas Energy Inc., Moon, said its Appalachian unit reached a record
63.3 million cubic feet of natural gas in the third quarter, compared
with 41.3 million cubic feet in the third quarter of 2009. Atlas
drilled 19 Marcellus wells during the quarter and completed 12.
"The drilling is going to be getting even bigger in the Marcellus shale
in 2011," predicted Bill Holland, associate editor of Gas Daily, a
trade publication based in Washington.
Joe Napsha can be reached at jnapsha@tribweb.com or 724-836-5252.