Indiana County Marchand Unit

Does anyone have an update on the Marchand Unit in North Mahoning Township.  One unit is producing and four additional permits are on the books.

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Permalink Reply by Blueflame_02 on February 1, 2018 at 12:13pm

Obviously depth is huge. Companies are having issues drilling these wells in a timely manner (causes drilling costs to rise). I think there is a reason that Rice, EQT, Range, etc. have only poked into the PA Utica and more power to CNX if they get it figured out before anyone else. What I'm saying is, well costs of $2000/ft are not sustainable. Shareholders aren't going to go for those numbers. Utica is more favorable in Ohio and northeast PA because it is shallower which means cheaper and the wells are just as good.. Yes, deep Utica is high pressure, which can create huge wells, but until well costs come down, the Marcellus and Ohio Utica will dominate. Seneca is excited to drill the Utica because the rate of returns are similar if not better than their Marcellus assets (due to their particular acreage position). 

Also, Rice drilled the Bigfoot 9H in Belmont County as a standalone well with no immediate offsets. The well was HUGE! Why didn't they continue doing this...? It's not sustainable. It cuts out future well locations and decreases your asset value. 

Permalink Reply by farmgas on February 1, 2018 at 12:36pm

Thanks Blueflame for your insightful comments.  I appreciate your challenging viewpoint.  Given what you have said, why then is CNX so fixed on developing the Dry Utica so quickly?  They have a huge amount of leased acreage to work with, so why focus so much on Utica?  Is it a "go big or go home" attitude of management?  Are they taking a huge gamble that could hinder their growth or catapult them ahead of competition?  How are they handling the requirements of the 15 year agreement with Dominion to meet their pipeline injection agreement?  Could this agreement influence their drilling strategy for huge producing wells?

Permalink Reply by Blueflame_02 on February 2, 2018 at 2:58am

I personally think that CNX has drilled a lot of their premier acreage up and they are looking to chase another area that is "out of the core" if you will. I think they are trying to get ahead of the major companies (EQT, Range and Antero) here in Appalachia  as far as the Utica in PA. It could prove to be that catapulting formation if it goes well. The capacity agreements are definitely challenging for operators to meet, so I have no doubt that CNX is probably feeling the pressure as well. 

I think lettijack below really hit the nail on the head with Step 3 if the costs are low enough to profitable. It will be interesting to see how CNX fairs over the next year and whether the Utica development is a game changer or not. 

Permalink Reply by Spike's Kin on February 1, 2018 at 9:18am
The economics of stacked pay in C. PA could mean the driver for building pads is now Deep Dry Utica, with Marcellus a tack-on. Too, EQT has stepped back from Dry Utica and is keen on letting somebody else like CNX figure out the reservoir, but also got permits and built takeaway for it up into Armstrong Co. They could step back into it anytime they want, and they've done about face before (Like, if Mariner East doesn't get completed and basis differential stay low, they'd might need Dry Utica volumes to fulfill commitments.)
Permalink Reply by Spike's Kin on February 1, 2018 at 11:59am
Aikens 5J and 5M are described as offsets to Gaut 4IH. The Gaut was a Marcellus-design pad, populated with mostly (9?) Marcellus sized laterals, IIRC. Higher pressure, hotter temps in drilling Deep Dry Utica means drilling rigs had to be redesigned on the fly. They're not spurring multiple wells off on top hole any longer
Permalink Reply by Blueflame_02 on February 1, 2018 at 12:14pm

CNX describes these as "offset" but they aren't direct offsets within 1000-1500' well spacing. No company in SWPA has drilled multiple Utica wells from one pad, going the same direction with well spacing. 

Permalink Reply by lettijack on February 1, 2018 at 1:46pm

I've enjoyed following the discussion today and wish to add a few details since I own property very near to the Gaut well and do follow things closely around there.  While I've held reservations over the strategic planning (or lack thereof) of CNX's marcellus operations in the immediate area, thus far,  their Utica operations appear sensible and well planned out.  I've watched the following progress being made as they develop a deep dry utica drilling program in Central PA:

Step 1 was to drill a single lateral running 30 degrees SSE from the existing Gaut marcellus pad and unitizing 137 acres.  The Utica top hole was separated from the 7 marcellus wellheads by a hundred feet or so (this can be seen on google earth).  At any rate CNX hit a home run on their first at bat.  Very impressive considering the technical challenges of drilling the Deep Dry Utica with no prior experience.

Step 2 for them was to drill two Utica laterals running roughly in opposite directions from each other and at 20 degrees NNW and SSE orientations using the existing Aikens Marcellus Pad.   While not offsetting wells to each other the SSE lateral was de facto an offset to the Guat SSE lateral abet at varying distances due to the difference in drilling orientations.  This might have been a way of checking cross-talk between adjacent wells.  Again, two for two with the initial success of the Aikens Utica laterals.

Step 3 will be to drill 3 utica wells at roughly 1100' spacing from the existing Shaw macellus pad.  On paper these wells look like the traditional marcellus "pitchfork" layout all orientated at 20 degrees SSE.  Two wells will be in a Shaw west unit while the third will be in the Shaw east unit--likely to keep from running afoul of leases with a maximum unit size of 640 acres.   I speculate these wells will be drilled in 2018.  Like Farmgas stated, I too think all four utica Wells will be around Beaver run, with the fourth at the existing Bell Point 6 pad.

Hope this information helps,

Permalink Reply by farmgas on February 2, 2018 at 5:53am

Blueflame...when you mention the standalone Utica wells being drilled by CNX and other gas companies being huge producers and with limited gathering pipeline capacity available to them, why would they drill more wells if the takeaway capacity won`t withstand it?  As with MS wells, don`t the gas companies stage the drilling around declining well production of existing wells before drilling new ones?   Seems they would need to install larger diameter pipe in the beginning anticipating future growth needs.  My point is, isn`t this the primary factor to not drill more Utica wells on the same pad? 

Permalink Reply by Blueflame_02 on February 2, 2018 at 6:28am

To a degree, yes. But, at the same time they are wanting to increase their proved reserves and increase shareholder value..  its the catch 22 that I think Chesapeake caught themselves in a few years ago where the best business decision may be to not drill more wells but shareholders want to see growth year after year. 

My overall view on this is, if I'm EQT, Range, Antero, etc., I let CNX figure out the PA Utica while I continue to drill Marcellus and Ohio Utica wells at a lower cost per foot and better rate of returns. The Marcellus and Ohio Utica are far better investments right now if you have the acreage to drill. I think it is good for the basin that CNX is testing CPA Utica, and depending on how it turns out, could be great for CNX in the long term. 

Permalink Reply by farmgas on February 2, 2018 at 6:45am

Thanks Blueflame...your comments & views seem logical and are very interesting, so why then is CNX so fixed on drilling for Utica and not following the rest of the pack by drilling Marcellus wells?  Do they need the big wells to capture shareholder or new financial support?  We should know the results of the Marchand well soon.   The well record report from DEP shows similar Utica/Point Pleasant shale layer thickness as those near Beaver Run Reservoir.

Permalink Reply by Spike's Kin on February 2, 2018 at 2:56pm
Original point of this thread is kind goes off in a tangent by discussing what companies with big acreage positions elsewhere are doing to maximize returns next quarter. CNX is further delineating the Dry Utica in Central PA, says it's commercially viable already, backs it up with data points from several wells to indicate they don't think their big Gaut strike was just a fluke. As an unleased, in the fairway C. PA gas rights owner myself, I'm moderately encouraged someone's making slow steady progress, particularly in light of the churn EQT caused as they walked away from Dry Utica last year to pursue Rice deal (just when they were poised to start their own delineating test well quite nearby).
Permalink Reply by farmgas on February 5, 2018 at 7:42am

Sorry Spike`s Kin, I didn`t mean to veer off course from the Marchand pad too far.  Just a great comparison to what CNX is doing at the Beaver Run Reservoir and what might happen in Northern Indiana County including Southern Jefferson County.  I think evidence is now showing that Dry Deep Utica in Central PA is viable, and will contribute to drilling both Marcellus & Utica from the same pad.  The stars are lining up for us property owners in Westmoreland, Indiana, Armstrong and Jefferson counties for increased drilling activity.  The "when" is the big unknown for us!   How about XTO Energy and their pursuit of Utica in these same counties too.   They just completed a Utica well near the Homer City Power Plant and one just south of Reynoldsville in Jefferson County.  Any results known yet?  Our biggest problem moving forward is the limited pipeline capacity for new wells.  Any news on this front?  Thanks for sharing your thoughts!!!

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