What are we missing here? What are we overlooking?

If the gas wells seem to deplete so quickly (as it appears to be the case with many of us), then how will there be enough gas to justify all the pipelines and processing plants are they are being constructed? What do the operators / companies know that we don't? 

When I originally leased, I was told royalties would stay high for 4 years before they dropped off. I've had a big drop less then 2 years into this. I've read before that these wells would produce for 20 plus years. That seems to be way off now.

Even with all the new wells being drilled, if volume drops so fast, then how will there be enough gas to sustain these plants such as the ones MarkWest is constructing.

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Permalink Reply by Barry D on July 5, 2015 at 8:00am

Zack,

The Marcellus alone is one of the largest, if not the largest, reserves of natural gas in the world.

Yes the decline curve is steep in the first two years but levels off.

Here is a decline curve graph courtesy of EQT.

https://search.yahoo.com/yhs/search?p=decline+curve+marcellus+shale...

As you can see they project up to 50 years of production

Permalink Reply by Charles Hurlburt on July 5, 2015 at 8:07am

How much are your production actually fallen? 

Please note that "dollars per acre" tells us little about production, as you are introducing a "price" variable that is independent of the production rate. 

For example if, in year one, your leases produced 100 units and you got $10.00 per unit, for income would be $1000. 

If in year two you produced 110 units but only got $5.00 per unit, your income dropped to $550 even though your production rose.

If you are actually having greater than expected production declines (we know you have greater than expected price declines), then I can think of several possible scenarios:

1.  Insufficient take away capacity.  If you pipeline can move 50 MMCF per day but there is 65 MMCF to be moved, SOME of the gas isn't going anywhere.  Maybe wells are choked back, maybe some are shut in, maybe a little bit of both.  Please note that while I used the pipeline as the choke point, it could also be a processing plant or the connection to the transmission lines; for gas especially you tend to be at the mercy of conditions.

2.  Economic conditions may have mandated slower that planned development.  The original plan may have been to drill the "Zach #1" in year one, drill the "Zach #2, AND complete the #1 well in year 2 and so on, but the price collapse or the inadequacy of take away capacity, may have stretched that timeline out, so you are experiencing a rapid decline in existing wells with not supplemental increase in new well production.

3.  The reservoir may simply not be as good as originally thought.  I put this one last because most of the predictions of decline rate from a single well that I have seen from shale plays suggest a very rapid decline, which is also what theory would tell us.

Permalink Reply by Gas Boy on July 5, 2015 at 9:23am

"If the gas wells seem to deplete quickly, then how will there be enough gas to justify the pipelines and processing plants...." - Simple:  Keep drilling and turning wells into line.

Mike MurphyPermalink Reply by Mike Murphy on July 5, 2015 at 9:40am

they are alsoable to refrack wells several times too and as time goes by they are learning new ways to refrack to rejuvenate old wells .........also there is room in the Marcellus for 1000s of more wells then you have the monster Utica with room for 1000s of wells and the upper  devonian and the rome trough also and who knows what other layers are below that......the Appalachian basinis the biggest gas play in the world  and this companies are not building pipelines and processing plants on hopes an dreams.......they know what we got

Permalink Reply by Rich on July 5, 2015 at 11:00am
Mike
Great answer! You are absolutely correct. The O&G co. Know what is here and are not going no where. And to those with dought's just do some due diligents and look back on the different area's in this country that has had fracking in there area and see in the past 15 to 20 yrs what there production rates are. Then an now! Once prices go up the production will increase! Economics 101. And I think that's better for the land owner and oil & gas producer.
Permalink Reply by Joseph-Ohio on July 5, 2015 at 9:07pm
Factor in :

Current low natural gas and oil prices, lack of adequate infrastructure, (currently) not enough access to foreign markets, throttling production / (perhaps) actually creating / enhancing lull time and using the created lull time to change / manipulate the above and (as the above changes / is manipulated / gets developed / rectifies) exhaust all avenues to build / implement new Oil & Gas slanted legislation, all also known as asset management / market conditioning / position enhancement and then, (I think) we might have it (the reasoning) covered.

Delay production until prices are better / are where they want them / the market is more suitable / conditioned; and use the time spent waiting to enhance their position (to me) kind of sums it up.

Seems to me (as I think they're rolling in dough anyway and always) that they're probably making enough money to be able to afford to manipulate / massage the variables and wait for / construct a better return.

It seems to me that the O & G business runs on their own clock and is different than any lessor's / landowner's.

Still, two (2) big questions in my mind are : Is it all by happenstance ? Or, is it by some grand plan / design ?

The cynic in me says it's a plan. However,the fair minded individual in me says it's all happenstance / evolution.

Just my read and IMHO.
Permalink Reply by Jack Young on July 12, 2015 at 12:05pm

If you look at the thousands of wells in PA that were hydrofractured 15 to 20 years ago you'll find that many have been plugged or are waiting to be plugged. A typical well that made 2,000 barrels of oil in year one is probably making 40 to 60 barrels/year now. That's Geology 101!

Permalink Reply by Joseph-Ohio on July 12, 2015 at 12:38pm
New technology available these days Jack.

New strata to explore and exploit.

Long horizontals could open things up to production in strata explored earlier via conventional vertical wells.

Re-frac. may work too.

Good luck friend.
Mike MurphyPermalink Reply by Mike Murphy on July 12, 2015 at 2:45pm

enervest is currently horizontally drilling in the Clinton in around stark county ohio and I know of some old wells in carroll county that were refract both  with good results going on so old wells and old formations  can be reworked to get or increase production   Jack maybe you need to go to Economics 102 or maybe GEOLOGY 101....  and there is a great number of horizontal wells with old fracks on them in the Marcellus and Utica that are canidates for refracking .....new wells are closer spaced fracs but wells drilled 4 or 5 years ago had wider stage spacings leaving a lot of area un fractured and then there is waterless fracing that reaches deeper in to the formation then water and also they are looking at Nitrogen fracs that actually shatters the formation

Permalink Reply by Joseph-Ohio on July 12, 2015 at 3:10pm
Now you're talking my dialect Mike !

Nitro-Frac sounds like a great tech.

N2 is inert - no added flammables.

I like it !

Good Luck All.
Mike MurphyPermalink Reply by Mike Murphy on July 12, 2015 at 3:30pm

along with no after frac waste to be deposed of the nitrogen evaporates under ground but give jack a little time and he will find something wrong with the idea He usually has all the answers to why things wont work  but none to what will work

Permalink Reply by Joseph-Ohio on July 12, 2015 at 3:32pm
Probably a bit more costly but I think all the benefits would be worth it.

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