Replies to This Discussion

Permalink Reply by Ralph cramdon on January 30, 2014 at 10:48am

Any have a sense of what those new Shell leases are going for in northern Tioga County ?

Permalink Reply by wyalusing jim on February 3, 2014 at 6:45pm

I need to make a correction to an earlier post. the brumwell 657 1x well is not a Utica, but a vertical Marcellus.

so why the vertical? they also permitted 3 horizontals, could they be thinking of poking the vertical to hold leases quick and cheap? some in the unit expire this summer.

wj

Permalink Reply by wyalusing jim on February 6, 2014 at 7:18pm

jack. here's some interesting reading regarding toe frac's.

https://www.enerplus.com/files/pdf/investor-relations/Enerplus%20Q2...

from page 4, under "shale-gas Marcellus"

"Some of our partners have slowed completion and tie-in activities including reducing the number of frac stages per well in an effort to preserve capital."

sounds like it is considered a temporary cost saving measure to some of the big guys, doesn't it?

and although they don't say it, I'm sure that they consider it an added benefit that the gas that isn't produced and sold at low prices, will be sold later at probably higher prices as the gas supply dwindles.

wj

Permalink Reply by Jack Young on February 6, 2014 at 7:40pm

That's not how I would interprete the remark. Reducing the number of stages being done isn't the same as doing one or two stages to officially establish "production". The industry has always had questions about how close to space frac stages and thus how many stages is an optimal completion. You'll always do enough to get most of the gas, of course, but the marginal stages are just that - marginal. Eventually you get to the point where an additional stage may not pay for itself, and that happens sooner at low gas prices. That's all their statement says to me. It doesn't mention "toe fracing" and as far as I can tell, is unrelated to that concept.

Permalink Reply by wyalusing jim on February 6, 2014 at 7:46pm

ok, we'll just agree to disagree once again then, because that is exactly what that statement is saying to me, and the evidence is in the completion reports and the production statistics here in se. Bradford county.

wj

Permalink Reply by Jack Young on February 6, 2014 at 8:04pm

I agree - the facts are out there. I  trust the folks I've worked with in the business for 30 years to tell me what's going on, and am fine with anyone who wants to believe something different. Industry experience should make many of the statements you see in these investor presentations easier to interprete, but that's just my opinion.

I'm constantly tempted to try to explain in detail the financial reasons why the idea of "toe fracing" just wouldn't make sense in any normal situation, but it's hard to see how I could get that across when we clearly don't speak the same language in some regards. What seems obvious to me (like the meaning of the quote you cited) clearly is being interpreted by some others in a very different way. Not understanding how that could be, it's impossible to know what I would need to explain to get us both on the same page.

  

Permalink Reply by Tom on February 7, 2014 at 7:45am

Jim,  Enerplus is not talking about toe fracing in their annual report you posted.  They have a small WI in Anadarko and Chesapeake wells in Lycoming & Bradford counties.  In Lycoming County, Anadarko has gone from 300' stage spacing to 500' stage spacing in an effort to save some capital.  The wells with 500' spacing are not as prolific as those with 300' or smaller spacing, but the with the reduced completion cost it must make economic sense to them.

Permalink Reply by wyalusing jim on February 7, 2014 at 8:38am

thanks tom, during what timeframe was the spacing increased?

wj

Permalink Reply by Tom on February 7, 2014 at 10:37am

Looks like Anadarko started increasing spacing in mid to late 2012.  There is a mix of 400-550' stage spacing.  It doesn't look like a steady increase in spacing, just random 400s here and 500s there.  They must feel different areas require different spacing.

Permalink Reply by wyalusing jim on February 7, 2014 at 10:43am

thanks again tom. that's in the same time period as the enerplus release. any idea as to how the additional spacing affected well performance?

wj

Permalink Reply by Tom on February 11, 2014 at 7:35am

I don't know an exact percentage difference.  You could dig through the state production report and compare 2012 & 2013 Anadarko wells to other operators.  They are targeting locations where they expect 8+ BCF wells.  8 BCF seems low compared to some other operators EUR estimates across Lycoming County.

Permalink Reply by wyalusing jim on February 6, 2014 at 7:38pm

ralph, I understand that if shell is interested in your lease, but that you are not going to be developed soon, they will offer you $3-500/acre.

if you are nearing development with them, they will pay $1500/15%. they will try to lowball even if development is very close though. some are signing for $1000/15% and less and they will be drilled this summer. it seems that many in tioga county are still unaware of what is going on around them.

the bigger question is the one that I think you are specifically asking. how high will they go? unfortunately not many are saying much about that. that works in shell's favor of course, and landowners are only hurting themselves and their neighbors by keeping quiet.

wj

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