Posts Tagged ‘Chesapeake Appalachia LLC’

Marcellus Shale production data exceeds expectations

By Laura Legere (Staff Writer)
Published: September 9, 2010

Marcellus Shale gas wells in Northeast and Northcentral Pennsylvania led the state in natural gas production last year, exceeding even industry predictions about the promise of the gas-rich shale, according to well production data released for the first time by the state.

In the 12 months between July 1, 2009. and June 30, 2010, the state’s 632 producing Marcellus wells released 180 billion cubic feet of gas – an amount that more than doubles Pennsylvania’s annual natural gas production from the years before the shale exploration began.

The well-by-well data were released for the first time since the governor signed a law in March that required Marcellus operators to report their production totals every six months and eliminated a provision that would have kept the data confidential for five years.

The production data posted on the Department of Environmental Protection’s website appeared much earlier than the Nov. 1 date the department set for making the information available online. It provides the first public look at how much gas the booming industry is pulling from the shale that underlies three-fifths of the state.

Eight of the 10 wells that produced the largest volume of gas last year are in Susquehanna County, including the top well – Chesapeake Appalachia LLC’s Clapper 2H well in Auburn Twp. – which produced 2.8 billion cubic feet of gas over 270 days. Of the top 20 producing wells, all but one are in Susquehanna, Bradford or Tioga counties.

Raymond Deacon, an analyst with Pritchard Capital Partners LLC, sorted the wells’ production depending on how long they were on line in order to measure their performance.

“It seemed like in every case, all the counties in the Northeast really stood out as being among the strongest in terms of production,” he said.

“It shows the Northeast looks much more prolific in terms of how much you’re getting out of the wells.”

Terry Engelder, a geosciences professor at Penn State University who studies the Marcellus Shale, said the production reports show that the expected ultimate recovery for the wells – the cumulative amount of gas each well will produce – is going to exceed predictions made by the industry in the earliest days of the shale exploration.

Dr. Engelder compared the average cumulative production for Marcellus wells drilled horizontally in the shale in a five-county core area in the Northcentral and Northeast part of the state last year to predictions about the average cumulative production of Marcellus wells released by Chesapeake Energy to investors in 2008.

The actual numbers last year surpassed the company’s expectations, even though “expectations were quite high,” Dr. Engelder said.

“Everybody is going to be happy with these numbers,” he said. “These numbers are huge.”

John Harper, chief of the mineral resources division of the Pennsylvania Geological Survey, noted that the Marcellus wells that produced gas in the last fiscal year averaged almost 2 million cubic feet per day – “a lot better” than the earliest dozen or so Marcellus wells in the state that produced an average of only 89,000 cubic feet per day.

“The amount of Marcellus natural gas reported is very encouraging,” he said.

The production numbers also help create a fuller picture of the economic potential of the shale.

The Marcellus gas produced in the state last year was worth about $720 million, Dr. Engelder said – a large number but much less than the cost of drilling and developing the wells.

Matt Pitzarella, a spokesman for Range Resources, which reported a total production of about 35 billion cubic feet of natural gas and 402,000 barrels of natural gas liquids last year, said the report indicates what the industry believed, “which is that it is a very large natural gas discovery and could be one of the largest anywhere when it’s all said and done. It’s just going to take time.”

Mr. Pitzarella added that the “very promising” production numbers in the report represent the earliest stages of the shale development, and it will still take several years for each well to break even.

“It’s very much a long-term investment,” he said.

Mr. Harper pointed out the production data’s implications for a state severance tax on the shale gas, which the legislature plans to adopt by Oct. 1.

If a 5 percent tax had been levied on the value of all Marcellus gas produced last fiscal year, it would have earned the state around $40.5 million, he said.

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Copyright:  The Scranton Times

Forced into drilling

By Elizabeth Skrapits (Staff Writer)
Published: July 11, 2010

DALLAS TWP. – Mary Alice Frederick became nervous in March when she discovered her neighbor, the Irem Temple Country Club and the Masonic Village development, had leased mineral rights to a natural gas company.

“I can’t put a chicken coop in my backyard but people can put heavy industry all around the township. I don’t understand that,” the retired Dallas school teacher said. “It doesn’t make sense. It doesn’t seem fair.”

A proposal on the table that would allow natural gas companies to take gas from beneath people’s properties regardless of whether or not they have leased their mineral rights, Frederick now fears losing the peace and quiet of her beloved neighborhood.

In exchange for a tax on natural gas extraction, gas companies are seeking what they call “fair pooling,” legislation that would require property owners without leases to allow drilling beneath their land in exchange for a share of royalties to be determined. However, the gas companies could not put a drilling rig on unwilling owners’ properties. Landowners call “forced pooling.”

“Gas companies are just bullying their way in and telling the legislators what they want. It should be the reverse,” Lehman Township resident Joseph Rutchauskas said. “It’s a democracy, not a corporate dictatorship.”

Rutchauskas lives near two sites permitted for natural gas wells. In August, Encana Oil & Gas USA Inc. intends to start preparing one in nearby Lake Township for drilling, and has all the requirements for a well in Lehman Township. Encana recently notified Lehman Township supervisors they do not plan to drill the third well in Lehman Township.

“I do not support that one bit because I feel it’s a violation of my rights,” Rutchauskas said about forced pooling. “I don’t think anyone should have the right to tell me they can drill under my land without my consent.”

He said his development, which has 10 properties, is protected by covenants that do not allow drilling of any kind, including beneath the property.

“We would have to change the covenants to allow it, and nobody in the development wants to do that,” Rutchauskas said.

He said the question of whether the covenants would hold up under a forced pooling law would have to be answered legally.

“I would take it to court to whatever level necessary,” Rutchauskas vowed.

Irem Temple Ancient Arabic Order Nobles Of The Mystic Shrine have leased 355.91 acres to Chesapeake Appalachia, LLC. The land completely surrounds Frederick’s half-acre property.

The concept of forced pooling scares Frederick, who was already concerned about the potential to turn her quiet suburban street into an “industrial zone.” She opposes natural gas drilling because of potential harmful effects on the environment. She also doesn’t like the idea that foreign investors from countries such as United Arab Emirates and China have interests in natural gas companies.

“I don’t want to be part of this,” Frederick said. “I do have a conscience.”

Irem Recorder Harry Wood said the organization has not heard anything from Chesapeake about plans for the site.

“I don’t blame them,” he said in response to residents’ concerns about forced pooling.

However, Wood said gas drilling would be done far enough away from homes that they shouldn’t be affected, even in the case of horizontal drilling.

“Everybody has the wrong idea about that. It would never be allowed on any of these properties. If any drilling would be done it would be on the top of the hill, or away from the residences,” he said.

Developing the Irem Golf Course is also not an option, he said.

“I’m not going to take a $7 million golf course and put a drilling rig in the middle of it,” Wood said., 570-821-2072

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Copyright:  The Citizens Voice

Chesapeake aims to raise $5 billion

By MURRAY EVANS Associated Press Writer

OKLAHOMA CITY — Chesapeake Energy Corp. said Monday it plans to raise about $5 billion over the next two years in an effort to expand its investment in oil and natural gas liquids and to reduce its debt.

Oklahoma City-based Chesapeake announced a “strategic and financial plan” that includes the sale of up to a 20 percent equity interest in its Chesapeake Appalachia LLC subsidiary to investors within the next three to 12 months. Chesapeake is a key driller in the Appalachian Basin, with 24 operating rigs in the Marcellus Shale natural gas play.

Chesapeake also announced a private placement of $600 million of a new series of convertible preferred stock to investors in Asia. The investors, Maju Investments (Mauritius) Pte Ltd. and Hampton Asset Holding Ltd., will have an option for up to $500 million more shares within the next 30 days.

Of the $5 billion to be raised, Chesapeake said it plans to use $3.5 billion to pay off its debt and $1.5 billion to focus on drilling for oil and natural gas liquids.

Chesapeake also is looking at negotiating various joint ventures as part of its plan, which the company said is ultimately designed to achieve an investment grade rating for its debt securities.

Chesapeake is one of the top independent natural gas producers in the U.S. but has gradually expanded its oil and natural gas liquids portfolio in recent months. Company spokesman Jim Gipson said natural gas accounted for about 90 percent of Chesapeake’s production in the first quarter of 2010, down from 93 percent a year ago.

Chesapeake’s CEO Aubrey McClendon has spoken in recent weeks about the company’s interest in expanding its oil and natural gas liquids production, noting that oil prices are rising while the cost of natural gas is stagnant. Crude oil rose $1.69 to $76.80 per barrel Monday on the New York Mercantile Exchange while natural gas rose 15.5 cents to $4.170 per 1,000 cubic feet.

In a production update issued last week, Chesapeake said it is trying to identify more supplies of oil and natural gas liquids.

Copyright: Times Leader