Wet or Dry. Does it Really Matter?

It have noticed that areas like Butler county and Greene county are getting drilled like crazy. Every time I am down that way I see action whether it is drilling or pipelines or whatnot, yet it is Marcellus dry gas. Up here in Mercer county it's all about wet or dry. All I can say is drill baby drill wet or dry. I guess it is maximum profit and infrastructure?

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Permalink Reply by Jim Litwinowicz on January 14, 2014 at 11:54am

Wet gas certainly matters as it is worth much more. But it  also takes more money, time, and infrastructure so some companies are happy drilling for dry gas. Especially now that prices have rebounded somewhat.

Also, Greene Co Marcellus is wet, I believe. And in S Butler, several companies are drilling Upper Devonian wells and getting reasonable wet gas production.  And if they drill a couple of UD wells, they often drill Marcellus wells while they are there. With the pads, pipelines, access roads, and all the equipment on site, it makes sense to drill both strata.

Last, some companies may have limited land under lease and have to drill what they have.  And drilling it allows them to HBP it for later development.

Permalink Reply by J. Kinney LandRights on January 14, 2014 at 2:49pm

I agree with Jim on the wet gas areas mentioned above-

the companies that have been in this play for a while such as shell (words still out on them), rex, range, xto, and others have core areas here in SW PA and are focused to producing those areas.  Once they commit to an area with infrastructure then they are going to move at a snails pace for new areas of interest.  Over the last year you can see that the dust has settled and each of these companies have their areas and don't want to move outside the grid.  This is why Range has sold a lot of northern leases because their core is Washington/Greene.   It's too expensive and creates too many ticking clocks if they jump to new areas.  

Permalink Reply by rmc on January 15, 2014 at 6:25pm
Correct me if I'am wrong but I believe that Range has some wells in Greene township Greene county
Permalink Reply by JamesG on January 16, 2014 at 5:10pm

I have studied the production data for all of Pa up to July 2013.  In the process I made a table showing all the operators by county and type of well (Dry, Wet, and Super Rich).  The Table includes all horizontal unconventional wells with any production reported in the 1st half of 2013.  This may help in knowing which operators are active in which areas.  The source of the information is the PA DEP production which is updated twice a year.  The 2nd half of 2013 will be released in mid February 2014.  As a note, the type of well (dry, wet, or Super Rich) is determined by a ratio of reported gas produced in mcf to the number of barrels of condensate produced. 

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Permalink Reply by William Harris on January 16, 2014 at 6:07pm

So which counties in pa do you think are super rich

Permalink Reply by JamesG on January 16, 2014 at 7:23pm

The Super Rich region is limited to the Western Portion of Washington Co for the Marcellus Shale.  There really is a complete range of wells in PA going from dry to very rich in condensate.  A single pad can have wells in all three categories.  There is also significant variations in production of wells in the same area.  I have found this to be true across all regions and operators in PA.  That is why an honest guess of what wells on your property are worth before actual production has started must have a big uncertainty.  It usually takes about 180 days of production to get a good idea based on PA DEP data.  You could see a variation of a factor of three for production for wells on the same pad with about the same lateral length.  The definitions I used closely follow those of Range Resources.  Range has publicly provided average cumulative production curves for each of these three regions.  I have found them to be consistent with information from the PA DEP.  Some Upper Devonian wells are also heavy with condensate but their production numbers are limited.  So it is hard to tell from public production data what the case is for these other shale layers.  Also, the condensate tends to be produced early and then drop off faster than the gas production.  The condensate production in the wet region as reported is not a steady type of production.  The production data is available to anyone on the PA DEP web site.  It just takes time (lots of time) to look at all the numbers.  But the production numbers speak for themselves.  For those that want to get a quick idea of the gas in place (GIP) look at the Range presentation for Nov 2013. I found their plots for the Marcellus shale are consistent with the reported production data from PA DEP. 

Permalink Reply by Jason on January 16, 2014 at 10:09pm
I placed an image you will want to see on this page showing super rich area size.
Permalink Reply by Jason on January 16, 2014 at 10:07pm
This is a few years old but pretty descriptive.

Jason
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Permalink Reply by William Harris on January 17, 2014 at 7:29am

Thanks for the reply Jason.

Permalink Reply by JamesG on January 17, 2014 at 8:28am

I attached a more recent viewgraph (Oct 2013) from Range Resources showing the regions for the Marcellus shale.  The Super Rich region is a small area (not shown) within the "wet" region that is shown on the newer attachment.  The new public information is that as one moves away from the western part of Washington Co the amount of gas in place (GIP) drops off.  So the production may be wet but not nearly as much production.  This is even more true for the super rich area.  The areas with the best quality (currently wet is better) and quantity are first in line for development.  The known hot spots (SW Pa and NE Pa) alone in PA can supply significant production ( maybe 20% of the current national demand) without any production from the lower tier areas for probably at least 5 to 10 years.  Development in the lower tier areas will be slow as operators without the best acreage try to maintain a position.    The bottom line is the huge success in the best areas will delay development the other areas.  My guess is it will be slow for 5 years in those lower tier areas.  What is needed is higher gas prices and a better economy that can use cheap gas at current bargain prices.  But that is a whole other discussion.  Another point to mention is that the current cost advantage of the wet areas goes away if the price of dry gas is high enough.  It costs to separate out the liquids from the gas in the ground and make the gas and other products saleable.  With current costs, that advantage goes away when dry gas gets near $6.00/mcf.  Then in the $6.00 to $7.00 price range there is not much difference.  Sorry for the long response.  I hope every landowner is successful.  The more the landowner knows the real score the more likely in the end everyone is happy. 

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