Marcellus activity sizzles while Barnett interest fizzles
If thereÂ’s a lesson to be taken from the latest round of earnings reports from oil and gas exploration and production companies, itÂ’s this: the Marcellus Shale is the place to be.
Many of the Barnett Shale’s biggest operators are shifting resources toward what they see as an amazing opportunity in the Appalachian Basin play, which runs through parts of New York, Pennsylvania and West Virginia. It appears the core area – the richest area – is in southwestern Pennsylvania.
“The Marcellus is the biggest of the shale gases in the United States,” said Terry Engelder, a professor in the Department of Geosciences at Penn State University.
How big is it compared to the Barnett Shale?
“It’s huge,” said David Amend, investor relations manager at Range Resources Corp. “It’s like 64 million acres, and the Barnett is I think somewhere around a tenth of that, depending on how you draw the line.”
The sheer size of the shale isnÂ’t the only thing attracting operators. Initial well results are producing far more than some expected.
“The depths of both are comparable,” Engelder said of the plays’ respective geology. “The cost is a hair higher in the Marcellus because of such things as a rugged terrain, and the Barnett is in an urban area so that has costs of its own. But I think the bottom line … is the average Marcellus well is going to behave better than a Barnett well.”
Gene Shiels is assistant director of investor relations at Baker Hughes Inc., a Houston-based oilfield services and consulting firm.
“One element that has helped operators focus on this is there’s not a lot of uncertainty whether you’re going to have a commercial well or not,” said Shiels, adding there are high rates of initial production but fast depletion rates, too. “You know you’re going to probably have a commercial horizontal well.”
It’s not necessarily less expensive to drill in the Marcellus Shale or Louisiana’s Haynesville Shale, another up-and-coming play, but rather that the Barnett Shale’s “sweet spot” has been played out, Shiels said.
“The Barnett has been around for a number of years and has been well prosecuted, if you will,” he said, adding rig count peaked in the Fort Worth Basin around December 2007. “There have been a lot of holes punched out there.”
The Marcellus has many advantages, but perhaps the greatest is its proximity to a developed natural gas market.
“The northeastern U.S. is the largest and most developed gas market in the world, so there is a price differential … where you don’t have to pay for the pipeline cost of bringing it up from the coasts,” Engelder said.
Moving on up
Range Resources is a big player in the Marcellus Shale, and hasnÂ’t been shy about what it sees as big opportunity in the northeastern U.S. gas play. The company produces more than 50 million cubic feet equivalent per day from the play, and expects to close in on 100 Mmcfe by yearÂ’s end. Furthermore, the company expects to drill about 70 horizontal wells in the Marcellus Shale in 2009 and will double the amount of operating rigs to six to help reach that goal.
In the first six months of the year, the company already has spent $73 million to purchase additional Marcellus Shale acreage, compared to about $15 million in the Barnett Shale. The company will significantly reduce spending in all areas in 2009, according to its second quarter earnings reports, except in the Marcellus Shale play.
Finally, there are the boots on the ground. The company employed about 25 people in its regional Pittsburgh, Pa. office when it opened about two years ago. Range Resources now has about 125 in the office and expects that number to grow steadily over the next several years.
Range Resources isnÂ’t alone either; Chesapeake Energy Corp. and XTO Energy Inc. both are drilling wells and awaiting results. Even before those results come in, however, the companies are investing millions of dollars in the Marcellus. Other players include EXCO Resources Inc., out of Dallas, HoustonÂ’s EOG Resources Inc. and Anadarko Petroleum Corp., based in The Woodlands.
“The early success from our Marcellus activities indicates this play possesses some of the most compelling economics in our onshore portfolio,” said Anadarko Petroleum’s Jim Hackett, president and CEO, during an Aug. 4 earnings conference call.
A flurry of interest
Penn StateÂ’s Engelder was responsible for a university press release in January 2008 that he said made public for the first time the size of the Marcellus Shale. Since that press release, a lot of people have come knocking on his door, and he has kept statistics.
Since the fall of 2007, Engelder has given 102 talks on the Marcellus Shale; spoken to 165 U.S. upstream companies, including Chevron Corp., Exxon Mobil Corp., ConocoPhillips, Devon Energy Corp., Chesapeake Energy, Quicksilver Resources Inc. and more; 13 international companies including Saudi Aramco, Total, Royal Dutch Shell, BP, LibyaÂ’s National Oil Corp. and others and 51 investment firms, such as Goldman Sachs, UBS and Credit Suisse. In all, he has spoken to 6,441 people about the Marcellus.
“It’s one of these subjects that I spent 30 years giving talks, my talks were usually the last afternoon of the last day when everybody had gone home and I’m with the session chairman. Then two years ago these talks really started mattering,” Engelder said. “You can’t imagine what kind of a good feeling that is to be out in the wilderness for 30 years with no one listening and then everyone paying attention.”
By John-Laurent Tronche
jtronche@bizpress.net
If thereÂ’s a lesson to be taken from the latest round of earnings reports from oil and gas exploration and production companies, itÂ’s this: the Marcellus Shale is the place to be.
Many of the Barnett Shale’s biggest operators are shifting resources toward what they see as an amazing opportunity in the Appalachian Basin play, which runs through parts of New York, Pennsylvania and West Virginia. It appears the core area – the richest area – is in southwestern Pennsylvania.
“The Marcellus is the biggest of the shale gases in the United States,” said Terry Engelder, a professor in the Department of Geosciences at Penn State University.
How big is it compared to the Barnett Shale?
“It’s huge,” said David Amend, investor relations manager at Range Resources Corp. “It’s like 64 million acres, and the Barnett is I think somewhere around a tenth of that, depending on how you draw the line.”
The sheer size of the shale isnÂ’t the only thing attracting operators. Initial well results are producing far more than some expected.
“The depths of both are comparable,” Engelder said of the plays’ respective geology. “The cost is a hair higher in the Marcellus because of such things as a rugged terrain, and the Barnett is in an urban area so that has costs of its own. But I think the bottom line … is the average Marcellus well is going to behave better than a Barnett well.”
Gene Shiels is assistant director of investor relations at Baker Hughes Inc., a Houston-based oilfield services and consulting firm.
“One element that has helped operators focus on this is there’s not a lot of uncertainty whether you’re going to have a commercial well or not,” said Shiels, adding there are high rates of initial production but fast depletion rates, too. “You know you’re going to probably have a commercial horizontal well.”
It’s not necessarily less expensive to drill in the Marcellus Shale or Louisiana’s Haynesville Shale, another up-and-coming play, but rather that the Barnett Shale’s “sweet spot” has been played out, Shiels said.
“The Barnett has been around for a number of years and has been well prosecuted, if you will,” he said, adding rig count peaked in the Fort Worth Basin around December 2007. “There have been a lot of holes punched out there.”
The Marcellus has many advantages, but perhaps the greatest is its proximity to a developed natural gas market.
“The northeastern U.S. is the largest and most developed gas market in the world, so there is a price differential … where you don’t have to pay for the pipeline cost of bringing it up from the coasts,” Engelder said.
Moving on up
Range Resources is a big player in the Marcellus Shale, and hasnÂ’t been shy about what it sees as big opportunity in the northeastern U.S. gas play. The company produces more than 50 million cubic feet equivalent per day from the play, and expects to close in on 100 Mmcfe by yearÂ’s end. Furthermore, the company expects to drill about 70 horizontal wells in the Marcellus Shale in 2009 and will double the amount of operating rigs to six to help reach that goal.
In the first six months of the year, the company already has spent $73 million to purchase additional Marcellus Shale acreage, compared to about $15 million in the Barnett Shale. The company will significantly reduce spending in all areas in 2009, according to its second quarter earnings reports, except in the Marcellus Shale play.
Finally, there are the boots on the ground. The company employed about 25 people in its regional Pittsburgh, Pa. office when it opened about two years ago. Range Resources now has about 125 in the office and expects that number to grow steadily over the next several years.
Range Resources isnÂ’t alone either; Chesapeake Energy Corp. and XTO Energy Inc. both are drilling wells and awaiting results. Even before those results come in, however, the companies are investing millions of dollars in the Marcellus. Other players include EXCO Resources Inc., out of Dallas, HoustonÂ’s EOG Resources Inc. and Anadarko Petroleum Corp., based in The Woodlands.
“The early success from our Marcellus activities indicates this play possesses some of the most compelling economics in our onshore portfolio,” said Anadarko Petroleum’s Jim Hackett, president and CEO, during an Aug. 4 earnings conference call.
A flurry of interest
Penn StateÂ’s Engelder was responsible for a university press release in January 2008 that he said made public for the first time the size of the Marcellus Shale. Since that press release, a lot of people have come knocking on his door, and he has kept statistics.
Since the fall of 2007, Engelder has given 102 talks on the Marcellus Shale; spoken to 165 U.S. upstream companies, including Chevron Corp., Exxon Mobil Corp., ConocoPhillips, Devon Energy Corp., Chesapeake Energy, Quicksilver Resources Inc. and more; 13 international companies including Saudi Aramco, Total, Royal Dutch Shell, BP, LibyaÂ’s National Oil Corp. and others and 51 investment firms, such as Goldman Sachs, UBS and Credit Suisse. In all, he has spoken to 6,441 people about the Marcellus.
“It’s one of these subjects that I spent 30 years giving talks, my talks were usually the last afternoon of the last day when everybody had gone home and I’m with the session chairman. Then two years ago these talks really started mattering,” Engelder said. “You can’t imagine what kind of a good feeling that is to be out in the wilderness for 30 years with no one listening and then everyone paying attention.”
