Replies to This Discussion

Permalink Reply by Jack Young on January 8, 2014 at 7:29pm

The Gee well unit designation was just recorded on January 2nd, and lists all the folks who have a share in the production from that well. Knowing more about the current gas production from that well would tell everyone involved a great deal about whether the Utica is going to be a profitable formation in parts of Tioga County. Theresa is right - most people really just want to know the basic facts about the play so they can anticipate how it might impact their lives and finances. Ultimately it's pretty simple - if the wells make money on average, more will get drilled. If not, then things will eventually stop despite all the money the industry has committed to the area. So it's favorable production news that we all should be hoping for. That's the gold standard.

Permalink Reply by Ann Ticopa on January 8, 2014 at 10:51pm

Given what SWEPI paid ERI, it's likely that some TC Marcellus wells will never turn a profit.  That's water over the dam.  But as the price of gas increases, operators will be able to generate positive cash flow by getting shut-in wells online and drilling new ones.  Even as the gas price was dropping, SWEPI continued to install their gathering line network in NE TC.  The line nearest my location includes 24" and 8" gas gathering lines, 10" and 6" fresh water lines, and a fibre optic cable.  No, I don't expect new wells here anytime soon.  But I do expect SWEPI to continue incremental drilling (in a better producing area) to meet their Empire pipeline committment.  

Otoh, the Utica, T/BR, and Burkett are in the exploration stage, with no production/decline history.  

Permalink Reply by Jack Young on January 9, 2014 at 8:27am

One of the beauties of shale gas is that enough has been found to keep consumer gas prices low for 25 to 30 years. We need to remember that this oversupply isn't good news for producers (or royalty holders). Most of Tioga County will eventually be drilled, but perhaps not as soon as we might hope.

The Burkett (Geneseo) has been tested enough to have a pretty well-developed decline curve established, but the Utica in our area hasn't, hence my interest in the Gee well production. I've heard nothing that suggests that the TBR will be commercially productive in our area, however. As I've mentioned before, the base of the Utica is the top of the Trenton, so you will see Trenton noted on well permits as the deepest formation to be penetrated, but it's not the target.

Shell is a tough customer, and applies rigorous financial tests to their investments. Ultra was making the same heavy investments in infrastructure too until they suddenly stopped. So there's no certainty that Shell won't do the same thing. It's all price and production - if both look good we'll be in business, if both go bad things will stop cold. Mixed results will yield uncertainty, which is the normal state of the business, I'm afraid!   

Permalink Reply by paleface on January 9, 2014 at 8:36am

 You should see big smiles from the people in the C Gee unit those checks should be coming in about now.

Permalink Reply by Ann Ticopa on January 9, 2014 at 2:49pm

Jack Young wrote:
"Ultra was making the same heavy investments in infrastructure too until they suddenly stopped. So there's no certainty that Shell won't do the same thing. ..."

According to their 2012 pipeline operator report to the PUC, Ultra had 14 miles of C1 pipeline in TC. SWEPI reported 146 miles of C1 and 2.2 miles of C2. In their 2011 Emissions inventory to the PA DEP, Ultra reported only their wells, no compressor stations. Has Ultra made some "heavy investments" that you're aware of but aren't in the public records?

I did run across this in Ultra's 3rd qtr (latest) Operational Report:
"A few notable completions during the quarter include a three well pad in Tioga County that came online with an average initial production (IP) rate of 9.2 MMcfe per day per well. The average 30-day production rate for the pad was 21.6 MMcfe per day."
.

Permalink Reply by Jack Young on January 9, 2014 at 3:51pm

Yes, look at Ultra's "heavy investments" across the line in Potter County, and remember that their acreage position straddles the county line. Also remember that PUC-reportable pipelines aren't the only infrastructure required in this business.

Permalink Reply by Ann Ticopa on January 9, 2014 at 4:17pm

5.7 miles of C1 in Potter County. 

Permalink Reply by paleface on January 9, 2014 at 4:59pm

 Jack didn't Ulta help bail out ERI and had there name put on some of the ERI leases for collateral? I heard there is a few of the JV'S wells left,but Shell is buying them out or paying back the loan. I would think that is why Utra has been quiet for a short while.

Permalink Reply by Jack Young on January 9, 2014 at 5:19pm

I don't think they bailed East out, but they had a 50/50 JV agreeent that probably involved the wells you're describing. Working with Shell tuned out to be very hard for Ultra, as Shell's costs were enormous. I believe that the relationship almost went to court at one point, and that substantially over $100 Million was at stake. (Shell was the operator on these leases, so the infrastructure is probably reported under Shell's name.)

Ultra also had some areas where they owned the leases/wells themselves. Those weren't so profitable, however, and the bad drilling results are what stopped Ultra dead there. We have royalties in at least 10 Ultra wells along the county line, and none have even produced a Bcf to date. It was pretty depressing. Ann's report of recent production from Ultra is certainly positive, but some of the wells I've described had even higher initial production, and they turned out to be duds anyway.     

Permalink Reply by Jack Young on January 9, 2014 at 5:02pm

Shell has a lot more wells than Ultra, so you expect them to have a greater infrastructure investment in total. It's all sunk cost at this point, of course - neither company will let their past investment drive their future plans. Just talked to Ultra recently - they are hoping to get bailed out by the Utica too!  The northern part of their acreage position looks promising.  

Permalink Reply by Larry Linder on January 10, 2014 at 3:06pm

Jack, What are C1 and C2 pipelines?

Permalink Reply by Jack Young on January 10, 2014 at 4:15pm

Those are state regulatory categories - I'm not sure what the standards are for each, however. Possibly pressure, as you don't see the smaller shallow producers reporting their low-pressure gathering lines to the PUC. The State doesn't always break down facilities by category the way a producer would, but you have to report things the way they want it.   

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