BP To Drill 10 Appraisal Wells in Trumbull in 2013

BP announced 12/17 that beginning in April 2013, they will drill the first of 10 "appraisal" wells in Trumbull County. They say if the results are positive, more will be drilled ASAP to get as much of their leased acreage HBP as possible. 10 wells in one year is a LOT of activity! They talked about pipeline infrastructure, midstream processing capability being built, the whole shebang. So from a landowners perspective, what does this mean? The appraisal wells will probably not produce much if anything. Can they be enlarged to producing wells? If you get unitized for a appraisal well, are you shut out of royalties because your well isn't a producer? This thing has all the makings of a big roll of the dice, largely a matter of luck. Doesn't look like many will see their signing bonus a second time at the end of the primary term. You will either be HBP by then, or your land found to be unproductive and the lease allowed to run out.

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Permalink Reply by Brian Powers on December 28, 2012 at 4:51am

Utica -

While the leases may state the origin of the downhole production, vertical or horizontal, or even the horizon in play, the flow gathers in the vertical section near surface, goes through the valves at the tree, reverts to the horizontal again for measurement/separation and then horizontal again for transmission down the pipeline (for the dry gas).

 

Brian  

Permalink Reply by sldouglass on December 28, 2012 at 4:29am

"roll of the dice"

I doubt it.  A lot is known about the geology already and before spending millions on wells, you can bet BP has done seismic work.

Wells described as "appraisal" wells would seem to be for the purposes of expanding and refining knowledge.  What exactly is likely to come out of the hole? In what proportions of what quality and quantity so the company can plan real production in the future based on market needs that might develop etc.

The ten proposed wells can probably be said to be indicative of some interest in the area - particularly if they are drilled well before the end of primary lease terms.  If there is enough of the right stuff maybe BP will actually build the billions dollar cracking plant discussed for Monaca PA [or not]..

And that plant is an example of the industry's need for long term need for reserves to feed developing markets.

Wells that are admittedly appraisal wells do not indicate a plan for immediate production without more.  Perhaps that will occur immediately with a well for every 40 acres or so.  But do not count on it.

Do not spend  your money until you get it.

Permalink Reply by sldouglass on December 28, 2012 at 9:03am

Marcus Grayson

I suppose I can add to your list wells on the eastern edge of Somerset County, PA where the shale was found to be overmature - an thus the southeastern edge of the productive Marcellus was defined.  I suspect in Ohio they are looking for some of those edges as well as the sweet spots.  Of course the sweet spots are particularly attractive which is why the producers ran from the dry Marcellus to the wetter Utica - and postponed drilling in dry gas except as needed to extend leases.

You may be able to add to your list of dry holes, but the percentage is, I believe, nominal - not in any way like conventional drilling.  A dozen dry holes?  How many shale wells have been drilled in Appalachia.  The guys who have to made the decisions to spend millions even on an "appraisal" well do not make decisons lightly or uninformed.  Why did Chesapeake go on and spend so much money on land acqusition with almost no wells drilled?  [I bought a little of Chesapeake at $17.50/sh and still expect it to do well.]

0i7okn54zwbdoPermalink Reply by 0i7okn54zwbdo on December 28, 2012 at 9:48am

CHK is literally the worst example of how money should be spent in pursuit of energy.  To answer your question they didn't spend "so much money", they spent someone else's "so much money".  And BP making the decision to spend a few million on appraisal wells is like you deciding to grab a $2 coffee in the morning.  It isn't real money to them.

Permalink Reply by Rob on December 28, 2012 at 6:22pm

All- this may seem a bit off topic, but I am concerned about the lack of infrastructure.  The gas in the Marcellus Fm in western Butler Co, PA and Utica Fm in Mercer Co, PA, and eastern OH counties is depicted on most maps as loaded with natural gas condensate.  That means without removal of the condensate our gas can't get to market (too high BTU content).  Removal means processing.  I know of a couple of processing plants in Butler Co, PA, but none in Mercer/Mahoning/Trumbull.  I have not heard a peep about big new pipelines either.  We are in the process now of leasing our Mercer Co land but I fear without those two elements (pipelines and processing) we may have to wait a long time to see any royalties.  Thoughts?

Permalink Reply by Brian Powers on December 31, 2012 at 3:58am

Fang -

Be careful what you wish for in terms of an economic boom. I don't know much about the Williamsport area, but Williston is undergoing its second boom in the past 35 years. The social services are strained to the max, crime is on the rise, and housing is all but non-existant. You can get a well paying  job there if you have a heartbeat and can pass a drug test, but who wants to live in their cars?

Even McDonald's in Williston pays $15.00/hr, but they can't find help because of the lack of housing and other basic services, so who would want that???.

Besides that, its colder than a well drillers behind in Western ND in the wintertime.

 

Your civic leaders would do well discussing a measured approach to any pending boom to ensure that as many needs as possble can be met.

 

Brian 

Permalink Reply by Jim Litwinowicz on December 31, 2012 at 5:45am

Brian; while it is wise to plan on future boom issues, there is no comparison to Williston ND or even Towanda Pa for that matter. Williston is, or at least was, a very small town in the middle of a semi-arid desert. Ther are very few roads, hotels, restaurants and/or houses. In contrast eastern Ohio and eastern Pa have tons of roads, restaurants, hotels, houses and more to handle anything that comes about.. More people have left this area in the last 20 years than will come in the next ten. We have more than enough capacity to absorb the people this will bring to the area. 

Permalink Reply by Brian Powers on December 31, 2012 at 9:39am

Jim -

Your civic leaders may also want to keep some cash reserves in their budgets to handle the other services strains: more schools and especially more road patching capability to repair the public roads that get trashed out by the heavy machinery.

 

May your boom start soon and be a long one - and may all who read this have a healthy, happy, and prosperous 2013!!

 

Brian 

Permalink Reply by Bob Rock on December 29, 2012 at 3:36am
Tennessee natural gas is applying for permits to build a big compressor falicilty across the road from where they are located on Rt 58 .
Permalink Reply by Rob on December 29, 2012 at 4:44pm

Thank you for the insight.  What are the group's thoughts on DAS (Data Acquisition Services) seismic leases?  I thought the offer of five dollars an acre was low considering it made no reference to timber damage or any other damage to our property.  I have seen seismic surveys in Washington County and they do minimal surface damage.  Given that this outfit does not appear to be connected with the gas company leasing in our area, I'm not too eager to sign the lease as-is.  After the New Year, I will revisit it with them to see if we can come to some mutual understanding.

Permalink Reply by Jon Popio on December 31, 2012 at 3:34am

I believe I read that BP was in discussion with companies who can build midstream facilities. They are probably going to wait until the appraisal wells give them data. My guess is 2016-17 before wells really start produing in Trumbull if the appraisal wells show promise.

Permalink Reply by Brian Powers on December 31, 2012 at 4:21am

Jon -

BP, like its competitors, keeps a list of major projects and other investment opportunities updated at all times. Depending upon production needs and other investment drivers, the project priority list is juggled several times per year, which may accelerate or defer project timing. At other times and under worst case scenarios say a Gulf oil spill, for example, the project may fall of the list all together

 

Brian

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