Stacked pay (play?)

"“On the completion side, we are in the process of completing our “stacked pay” Stalder pad, which incorporates two Marcellus Condensate wells and three Utica Dry Gas wells. We expect that this pad will begin to turn to sales in January 2018 and anticipate that it will provide the Company with the data needed to further validate our condensate rich Marcellus play footprint in eastern Ohio."

I lifted this from an Eclipse presentation of their company's operations.

What are they talking about ? Are they drilling and producing from two separate formations in the same unit as it would seem logical ? Looking at the available mapping of the Utica and Marcellus plays there appears to be some overlapping and anyone with acreage in that area would be excited about the possibility of receiving royalties from two plays instead of one.

Anyone have better information than my possible wishful thinking ?

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Permalink Reply by Jeffrey Beunier on July 6, 2018 at 2:04pm

Didn’t the rest of your acreage just get pooled into the new eclipse unit?  Or is that a different parcel...the permits and/or unit agreements include parcel numbers

Permalink Reply by David Allen Lilly on July 7, 2018 at 2:12am

Mr. Beunier,

Yes, it did, the Mercury unit which is fracked but may or may not be in production, I cannot get verification either way. We have 12.5 acres in the McClain Unit with Chesapeake that has been producing for a little over two years. The balance is in the Mercury.

Reading down the letter, in the bottom half, it says that any acreage already paying royalties will "adjust the offer for runoff".

I didn't read down that far when I opened the letter because there was no chance I would sell anyhow.

Permalink Reply by jason irvine on July 9, 2018 at 12:50pm
Does anyone have a opinion about the best areas for stacked play.
Permalink Reply by David Allen Lilly on July 10, 2018 at 2:40am

It seems to come down to the thickness of the Marcellus where it overlaps the Utica and according to one person who responded that only occurs along the Ohio River.

And it may be that way always but things in this industry change very rapidly, so who knows ?

Permalink Reply by LewPa on July 10, 2018 at 7:05am

DAL,

In Butler Co, PA, Rex Energy drilled the Burkett formation and the Marcellus formation years ago from the same pad. Burkett is above the Marcellus. I 'm in different units that correspond to the different layers of these wells. The Utica is much deeper and is not cost effective at the current gas prices. But down the road, maybe at least three formations to drill, time will tell!! 

Permalink Reply by Jeffrey Beunier on July 10, 2018 at 4:52am

Stacked plays in Appalachia?

The best would be along the river and east into WV and PA.  If you look through some of Range Energy's, CNX's, EQT's, and/or Antero Resources' presentations, you will see where they made some really good Utica throughout south west PA, in northern WV and in the WV panhandle. 

Range's Sportsman club well in Washington County, PA created quite the stir a few years back - it was a monster.  This was followed by a series of huge Utica wells, through Greene, Washington Counties PA, and even farther east in Westmoreland County. There were a number of big Utica Wells in WV as well, with Magnum Hunter (pre-bankruptcy) bringing in large wells in Tyler WV.  Others operators, such as SWN brought in some decent wells in Wetzel and in the WV Panhandle.

The Utica gets deeper as you trend east, and is more expensive to drill.  However, the wells are much more productive as the formation is even more 'over-pressured' than it is in south east Ohio.  Actually both formations trend deeper as you go east, and the Marcellus goes from wet gas to dry gas.  Most of the pubco's company's have a 'wet/dry' line indicated on their maps.

There are some challenges when you have  'wet' marcellus sitting on top of 'dry utica' as most gathering systems tend to be geared for one type of gas or the other.

At the end of the day, the best stacked is probably NW WV and SW PA - Greene County will be a monster when EQT gets their act together.

In addition to the Utica and Marcellus, there is also shallower horizontal development potential in the Upper Devonian - this is primarily in SW PA (you essentially have a triple stack of Upper Devonian, Marcellus, and Utica).  However, economics are still challenging.

Finally, some have been experimenting with the Trenton and Black River.  The reality is nothing is a sure thing, and there is always potential for the next best thing to come along. 

Outside of the Ohio River Valley, most of the pay in OH is viewed as a single zone play (but the point pleasant/utica is one dang good zone in some places for a whole host of factors).  Places such as the Powder River Basin and DJ Basin to a lesser extent, and the Permian, Delaware, and Mid-Con basins to a much higher degree are known for being true 'stacked' plays with multiple horizons and multiple formations.

If you look at slides 17 - 20 of the attached presentation, you will get a sense of where the best part of each formation/zone lays.  Keep in mind this is a slight dated (2015) presentation and there has been a large increase in data and knowledge since then.  Additionally, Range, like all public companies, tend to insert a large amount of 'bias' into their public maps to make their acreage look like the best.

RRC%202015%20Range%20Resources%20DUG%20East%206-24-2015.pdf

Permalink Reply by Ralph cramdon on July 10, 2018 at 7:32am

Years ago the best gas wells in lower NY State came from the Trenton / Black River , just North of Corning ...........

Permalink Reply by David Allen Lilly on July 11, 2018 at 5:34am

It does seem that things can and do change rather rapidly, I am just one guy with some land wondering if we would ever be in a stacked play area ?

I am also wondering about the areas in Guernsey county around Cambridge, which is a little west of where the good drilling activity is currently.

I had a guy who was not wearing muddy boots and oil stained coveralls tell me that they were going to come this way after they satisfy the more preferable area they are currently drilling.

Permalink Reply by Jeffrey Beunier on July 12, 2018 at 5:24am

David et al....here's an article/post from BTU Analytics that you may find helpful

https://btuanalytics.com/update-on-dry-utica/

Stacked Pay? An Update on Dry Utica

View all posts by Marissa Anderson

Being able to drill multiple horizons in a play, as emphasized in regions like the Permian and STACK, increases the drilling location inventory and longevity of a play. What about Appalachia? Utica production has primarily been focused in Ohio; however, the resource spans well into Pennsylvania and West Virginia, states where drilling has primarily targeted the Marcellus. Since the Utica sits under the Marcellus, this gives producers in region the potential for a ‘stacked pay’ opportunities, providing upside to drilling inventory and production. Since the Utica gets relatively deeper and drier moving east, it’s often referred to as ‘dry Utica’ in Pennsylvania and West Virginia. Despite several noteworthy wells with impressive IP rates, since it is deeper, economics can be hindered by higher costs. EQT, who produced the monstrous, well-known Scotts Run dry Utica well, suspended their deep Utica testing program in middle of last year to focus on the Marcellus. Lately though, discussion of the dry Utica is making an appearance in producer earnings, particularly with the ‘stacked pay’ potential it provides. Two companies, CNX Resources and National Fuel Gas (Seneca Resources), report actively developing this resource in their outlook.

Looking at horizontal wells that have started producing since 2013, it is clear that dry Utica development in Pennsylvania and West Virginia is still in its infancy, with less than 200 producing wells tagged as targeting the Utica/Point Pleasant formation, compared to over 5,500 Marcellus wells, as shown in the figure below. Note this is leveraging data identifying the target formation as reported to the states. Key operators which brought on dry Utica wells in 2017 include: Shell, JKLM, and National Fuel Gas, all focused in central and northeast Pennsylvania, and CNX Resources, which is focused further south in Westmoreland County, Pennsylvania.

Looking at production data, the overall average IP rates in 2017 for Utica/Point Pleasant wells are in line with the Marcellus. Focusing on the key operators targeting the Utica, the average IP rates in the Utica for CNX Resources, National Fuel Gas and Shell are all higher than the Marcellus, with CNX and Shell materially higher. CNX Resources brought on two highly productive wells at the end of last year. Note, however, there are far fewer wells for Utica which makes it difficult to understand how things may trend if more development occurs.

Going one step further, the relative economics of Utica wells in Pennsylvania and West Virginia appear less favorable than the Marcellus, as shown in the figure below. However, operators with development plans that include the Utica generally have Utica wells that are outperforming their Marcellus wells. CNX Resources, National Fuel Gas, and Shell are likely to continue to develop the Utica if well performance trends continue.

Ultimately, the dry Utica remains a very small portion of overall drilling activity in Pennsylvania and West Virginia, but the resource potential is there, particularly as several producers continue to delineate this acreage. Over the long term, the dry Utica provides upside to production out of Appalachia. Check out the Upstream Outlook and Northeast Gas Outlook to continue following production trends in the Utica, and the E&P Positioning Report to understand how economics are evolving in the region.

Author: Marissa Anderson

Marissa Anderson is a Senior Energy Analyst for BTU Analytics, LLC. She has a diverse 10 years of experience in the energy industry including fundamental analysis, investor relations and engineering. Prior to joining BTU Analytics, Marissa was a Senior Investor Relations Analyst with MarkWest Energy Partners, L.P., and a Senior Energy Analyst with Bentek Energy where she focused on the Natural Gas Liquids market. Marissa holds a B.S. in Chemical Engineering from the Colorado School of Mines, an M.S. in Global Energy Management from the University of Colorado Denver, and is a licensed professional engineer in the state of Colorado.

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