Comment

Comment by RJS on March 2, 2013 at 11:03am

Yes, thanks Douglas.  That adds more perspective and patience seems to be the word.

Comment by Douglas W on March 2, 2013 at 10:56am

@ Markkot- I think its going to happen later rather than sooner. :( I could be wrong of course and hope I am, but I try to put this all in perspective. Go read RRC's 7 page report and you'll come to realize we are still a tiny part in all of this. RRC is all over the the country as well as Chevron, Shell and others. The same geology is available in Ohio where it takes 1/3 the time for a permit which also has growing and existing infrastructure. On the other hand, they obviously see opportunity here but don't feel the need to move at a breakneck pace either. There is so much that can happen and needs to happen, and its going to take time as more and more formations are discovered and ache to be developed as they compete with ours. Halcon seems to be pretty aggressive in all of this, maybe its true they're trying to enrich their position so they can be sold, thereby serving our needs at the same time. Even so, I'm beginning to realize progress DOES have patience.

Comment by markkot on March 2, 2013 at 10:23am

thanks for that post Douglas, not outstanding, but definitely encouraging, everything good but the flow.  Now just move some exploratory wells to the West some and produce some oils out of the area..  I like the thickness of the play in the area also.  Need to get the takeaway infrastructure in place to get the product out to market...

Comment by gary smith on March 2, 2013 at 10:01am

yay!

Comment by Douglas W on March 2, 2013 at 9:34am

Taken from Seeking Alpha.

RANGE RESOURCES COMPANY PRESENTATION -- FEBRUARY 26, 2013
From the Range conference call regarding this report:

 
"I'd like to now move on and bring you up to speed on the other projects in our portfolio, namely the Wolfberry, the Cline and the wet Utica in Northwest Pennsylvania. Our position in all 3 of these plays is predominantly HBP. And therefore, we fully control the timing of development.
While we had to bear essentially all the cost of the learning curve in the Marcellus and, to some extent, in the Mississippian, we can enjoy a less risky approach in these 3 areas. Because we are largely HBP, we can allow industry to move up the learning curve and bear those costs while we focus our capital and our resources in our lower-risk, lower-costs and higher-rate-of-return projects like the wet and super-rich Marcellus. This is a great position to be in.
Let me now update you on the first test well of the wet Utica in Northwest Pennsylvania. It had 285 feet of thickness, it's got all the right liquids-rich characteristics, good reservoir pressure, and the initial test rate was 1.4 million cubic feet equivalent per day. Along with the cores and logs, we did perform a significant amount of diagnostics during the completion. Those diagnostics determined that our completion was not optimal as it frac-ed mostly out of zone. However, there is good direction as to how we optimize the next step in order to achieve a better completion by moving the target (this is why they need to respud) and changing our frac designs. We have seen this in other areas like the Marcellus, and it certainly indicates a really good way going forward. We're working closely with our partner, Cabot, and offset operators to exchange data and results.
If you look at Slide 46 on our presentation, you can identify this well and our 181,000 net acre position, along with significant offset activity by operators like Halcón, Hilcorp, Seneca, Shell and Chevron. We believe there will be approximately a dozen wells drilled, offsetting our position this year, and we'll, of course, be monitoring closely as we work on the timing of the next test. Being this is a new area, we have a lot to learn, and the good news is we like what we see. The area has all the right ingredients, the right TOC, the right liquids characteristics, the right pressures, and we have a lot of science indicating what the next step should be.
What we saw in the Utica was we simply put the target in what we thought was the best spot at that point with the data that we have. But clearly, when it frac-ed, we now know that the frac did not go where we wanted it to. So that means we take that data, we have a lot of right mechanics data, full core data, all that stuff that tells us we need to put our target in a different spot in the next test. So our plan, again, is to HBP so we can kind of sit back and we can kind of control our own destiny, and we've talked with our partner, they're very much on board with this. They also are very encouraged by it. And so we're going to sit back and trade information with some offset operators, see what some of their experiences are, and then we'll kind of figure out what the timing of our next test should be. But the good news is, I can't say it strong enough, I mean we're really encouraged that we think we know exactly what to do next time. And 1.4 million cubic feet a day equivalent test, while disappointing, is not a bad test. I mean it did make 1.5 million a day, so it's a pretty decent well. So we're pretty encouraged by the area. But again, it's HBP, we can sit back. We don't have really hardly any capital allocated to it this year."

Comment by gary smith on March 2, 2013 at 8:14am

i'll take a shot.  the .55 psi per foot of depth is how much pressure the formation material (gas/oil/wetgas) has at the bottom. the drillers ,i believe, have to use water ,etc in the bore hole equal to the formation pressure to keep it from blowing out as they drill. the barnett/fort worth shale basin has a .526  pressure gradient.  lippert is in the ball park there. this is guessing on my part.

Comment by markkot on March 2, 2013 at 7:19am

anybody have any thoughts about the 'reservoir pressure gradient of .55psi/ft' that was included with the Lippert well data?   What's the significance good or bad that they're trying to tell us?

Comment by Samuel J. Orr on March 2, 2013 at 5:21am

Bob: Your last two posts are what we expect from you. You must have some scientific and or engineering background given the tenor of many of your posts. I find those types of posts very valuable and interesting reading. As for the big, bad, O&G companies: We must realize that their job, like any corporation, is to make money for their stockholders. That means that they can and will try to lease acreage at the very lowest possible price. It also probably means that if one O&G company acquires enough acreage to dominate an area that leasing values will decrease. Currently there is a huge surplus of natural gas and the price is quite low. Many companies in the short run, with obligations to their stockholders, are trying where possible to employ their assets to recover Oil rather than natural gas because the profit potential from finding and selling Oil yields much better profits. The current glut of natural gas and the low natural gas prices that result therefrom because of insufficient demand will depress leasing values. I generally abhor government subsidies but note that it was republicans who were primarily responsible for the defeat of the natural gas bill. That bill would have provided a one time tax credit for each large truck converted to natural gas. It would have increased dramatically the number of conversions, thereby increasing dramatically the demand for natural gas, and probably increasing the price somewhat. The domestic chemical industry opposed the bill because natural gas and NGLs are raw materials used to produce a whole variety of chemicals including multiple types of plastic. The Koch brothers were among the leading opponents of the bill, while T. Boone Pickens was in favor. In the meantime we continue to foolishly promote and subsidize the production of ethyl alcohol as a fuel, which serves among other things to drive up the cost of corn. The explanation for this poorly thought out policy is that 44 U.S. Senators come from corn states, and farmers from those states like high corn prices. The purpose of this oversimplified analysis is to show some of the players who have skin in the game. I would prefer that we not have government subsidies for anything but if we are going to have them, lets do something that makes sense and really stimulates the economy. I think passage of the natural gas act might have done that. In closing the tax credit for converting large trucks to run on natural gas is such that they would have the ability to be duel fuel capable and also run on diesel. Because natural gas is so much cheaper, trucks would preferentially use natural gas where refueling stations were available. I  think that such stations would initially spring up along the interstate highway system. Finally  to Bob Jenness, thanks for your most recent posts. If, and when you are offered an O&G lease; do your homework, get competent legal advice, and make the best deal you can, while remembering that the O&G company's goal is to lease your property for the lowest available price. When a person goes to buy a new car, he tries to buy the car at the best price possible. To the extent that he is successful, he depresses the profit that the car dealer makes on the vehicle. The O&G company's modus operandi is not much different than what  a prospective car buyer does when trying to buy a new car.  It's called capitalism! . And as for gas leasing....I hope you all get a good one....and me too! This concludes my ruminations for this morning!

Comment by RJS on March 2, 2013 at 3:38am

Thanks, Bob.  Your comments seem to ring a little more in line with what seems to be common sense on this issue or at least to add some good perspective.  To add to the RRC constraints you mention, I think the location was ideal in multiple ways.  Almost all the land was HBP (like my property) at attractive royalty rates for RRC compared to today's new leases and the well was drilled on the site of an existing compression station on land owned by RRC, for example. It seems like finding oil here would have been a bonus and maybe they hoped for that (I can't refute that one), but finding wet gas confirms the expected and that has to have some value.  The biggest disappointment seems like it has to be the volume/flow and maybe that they didn't get a nice oil surprise, depending on how much they really thought that might happen.  Royalties for me from even this volume will be welcome.

Comment by Bob Jenness on March 2, 2013 at 3:06am

And a few thoughts on the relative maturity of Horizontal Drilling technology...

We all have to remember that Horizontal Drilling technology is pretty young.  I'm not an expert, but it looks like it's about 20 years or less.  If we consider where the base technology for computers and digital communications was at 20, we go back to about 1970.  No real big integrated circuits and about 10 or more generations of software away from the first laptop, let alone cell phone. Computers (like gas wells) cost millions and only fit in big buildings with massive support equipment around them. If the O&G industry invests or otherwise attracts continuing  technology development, we should expect to see lots of new systems that help gas and NGLs re-invent the market.  Just consider the opportunities for miniaturizing filtering, compression, and Fischer-Tropfsch to levels compatible with a 1.4 mcfd wellhead application.  Has anybody here done or seen the math to compare the energy flow from such a small well to, for example, a rural gas station or a small-city power or heating plant?  Since we're still waiting for a basic gas pipeline to be built, seems like we can also wait for some new support technology:-)  Let's not allow ourselves to be completely dependent on the megascale infrastructure that fits importing everything from Saudi Arabia, if a smaller-scale model serves Crawford County better!  L

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