The Marcellus Shale in the Appalachian basin is an area of focus for several operators.
The northern part is typically wet gas acreage and the southern, dry gas.
This post will provide end of year 2013 results and 2014 estimations for Marcellus activity from the most active (permit-wise) of these companies. A few key data points we will review are CapEx, rig count, proved reserves, EURs, and net acreage.
First up: Cabot Oil and Gas ~200,000 net acres
Last year, Cabot invested $815.8 MM in the Marcellus. In 2014, Cabot plans to focus 73% of their $1.3 to $1.4 Bn capital program into the play. They’ll have 6 rigs in the play and plan to drill 110 to 120 net wells for 2014.
Cabot noted that the typical well cost $7.0 MM in 2013, but they expect to up their lateral lengths in 2014. This means an increase in cost for these wells, but the budget is a bit higher than last year (73% of $1.3-$1.4 Bn is about $950 MM to just over $1.0 bn).
(Source: Cabot Oil and Gas 2013 10-K and February 2014 Presentation)
Next: Chesapeake ~100,000 net acres in the Northern Marcellus
Chesapeake estimates it will spend ~10% in their north Marcellus Acreage and <5% in their south Marcellus acreage of the total 2014E budget. This aligns with their transition into a more liquids-focused company. The company estimates 6-7 rigs in the north and just one in the south Marcellus this year. Year-end 2013 left Chesapeake with 112 wells drilled (Gross operated) in the North and 47 in the South.
Last, but not least: EQT Corporation ~560,000 net acres
EQT had 18.5Tcfe 3P reserves as of the last day of 2013 in the Marcellus. The company is planning 186 wells in 2014 in the play. EQT has 90,000 net acres in their wet gas area of Northern West Virginia and is planning 70 wells here in 2014. That is nearly 40% of all wells they will drill in the Marcellus this year, but they will drill 96 wells in their Southwestern Pennsylvania dry gas region.
EQT has 110,000 net acres in the dry gas region where wells typically cost $6.5 MM. EQT lists a 9.8 Bcfe EUR/well in Southwestern Pennsylvania.
These are just a few operators in the Marcellus. We are seeing growing investments by a couple (Cabot, for example) and increased rig activity in the play.
With Henry Hub Natural Gas Spot price hitting over $8.00/mmBtu in February and remaining fairly strong for March ($4.57/mmBtu on 3-17-2014) the Marcellus is looking fine for 2014. The average Henry Hub Price was $2.75 in 2012 and about a dollar more in 2013. However, a surplus in supply of natural gas from U.S. shale is expected to keep prices steady versus spiking substantially anytime soon.
With economic growth and natural gas supply increasing, I hope we will indeed see this slow and steady climb for natural gas. I did hear somewhere that, ”Slow and steady wins the race,” but we will continue to watch how the Marcellus fares for 2014 and beyond.
What do you think? What other activity do you expect to see in the Marcellus Shale play? Leave a comment below.
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