Replies to This Discussion

Permalink Reply by Larry Linder on January 10, 2014 at 10:27am

Thanks!

Permalink Reply by Ann Ticopa on January 10, 2014 at 12:52pm

I used C1 as an abbreviation for Class 1 pipeline (ditto C2).  A Class 1 pipeline has 10 or fewer residences per mile of pipeline, which are within 220 yards of said pipeline.  It's the standard U.S. designation. 

The PUC administers the Act 127 pipeline registry, which applies to  "non-public utility gas and hazardous liquids pipeline equipment and facilities ,,,"

Permalink Reply by Jack Young on January 10, 2014 at 1:35pm

Interesting - so from our standpoint there's no difference between C1 and C2 since the classifications say nothing about the pipeline itself, and merely describe how densely populated the area nearby is. Thanks for the information.

Permalink Reply by Brian Day on January 10, 2014 at 2:58pm

I hate to add qualifications upon news that hasn't even come out yet, but there may be some special limitations on the first results from the Gee well.  One limitation is the amount of volumn and pressure that the aging pipeline currently being used to transport the gas to the Palmer field can handle.  My understanding is that this limits the amount of flow perhaps.  a second factor may be the intitial flows of the well may contain sand and other contaminants from the fracking, inhibiting the actual time the gas is flowing to the line.  I do not know of these problems for certain and perhaps they will make little difference.  I would trust a judgement of the well's value after six months more so , than that of a couple of months.  I think the pipeline near the Neil pad is a more modern line designed for greater pressure and volumn.

Permalink Reply by Jack Young on January 10, 2014 at 3:51pm

The good news is that Shell is very safety conscious, and wouldn't use a pipeline that wasn't rated to handle what they needed. If they are using a pipeline that isn't suitable to move all the gas that's available, they would definitely choke the well back. But I think that they would be more interested in getting a valid test of the well's potential than selling a little extra gas, and don't think they would have turned the well in just a crack. They aren't a company that uses second rate facilities and finds a way to live with them.

Regarding initial production rates, once the well has been cleaned up (which happens after the frac and before any gas goes into a commercial pipeline) production should be at it's peak almost immediately. You don't put a well into production that's still returning a great deal of frac water or sand.

Obviously the longer a production history a person has, the greater the certainty you can have in the reserves it suggests. If the Gee well is still producing strongly, that's necessary but not sufficient to prove that it will be a profitable venture. But if the production has fallen substantially already, then unless there's something unusual going on we have a problem.

But I'm staying optimistic that when we do get more recent production data it will back up the initial estimates posted on this site. If the pipeline could handle over 20 Million/day when the well first came on line (as was posted here) it certainly ought to be able to handle just as much now!

Permalink Reply by Brian Day on January 11, 2014 at 4:25am

All of that is true in general terms and I hesatated to mention any of the factors above.  There is something to be said for pleasing stock holders and future investers, or even potential buyers, by putting a well into partial production until a better pipeline is in the area.  A year ago, looking at general maps of the geology of the entire utica play, the gas was not even supposed to be there.  General rules as you have just mentioned, Jack, are all we can base our hopes on.  Were the Gee well just another Marcellus well out of a hundred, expectations might be more concrete.  It is a pretty deep well in a rescource that wasn't supposed to be there at all.

Permalink Reply by Jack Young on January 11, 2014 at 5:27am

I agree - every map I'd seen of the Utica assumed it would be overcooked long before it reached Tioga County. Shell is so big, however, that nothing they do here will make a material impact on their stock price, so we may just have to wait for the production reports on the second half of 2013 come out. Shell is pretty unlikely to go public with any useful information in the mean time.

Permalink Reply by wyalusing jim on January 11, 2014 at 10:59am

hey jack, what's your thoughts on Richmond/Covington townships for Marcellus and Utica?

you got any minerals down that way?

wj

Permalink Reply by Jack Young on January 11, 2014 at 12:09pm

From what I've seen reported the Marcellus in both townships is as good as it gets in Tioga County, so that's a plus. I've been told, however, that there's a geologic structure in that area south of which the Utica looks much less promising. Exactly where that is I haven't seen, but if the claim is accurate it would make Richmond the better bet for the Utica. So far it sounds like northwestern Tioga County has the best Utica prospects, which helps make up for the poor production reported from the Marcellus in that area. Hopefully there's something for everyone.

And I don't have anything east of Middlebury, unfortunately. But I wish I did!

Permalink Reply by Jack Young on January 17, 2014 at 7:30am

Northern Delmar is certainly not great for the Marcellus, but might have some decent Utica. Not sure what's going on with the Costanza well, probably trying to hold some acreage (or convince someone to sign a new lease by looking like they're ready to drill). Shell is clearly trying to cut expenses these days.

Permalink Reply by Jack Young on January 18, 2014 at 10:12am

They are definitely making better gas than the wells further north, but they still won't be profitable at today's gas prices. On average they look like 2.5 to 3 Bcf wells, which is a little light under the current pricing environment.

Permalink Reply by Jack Young on January 18, 2014 at 11:42am

Of course not - royalty holders never lose money, only the operators!

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