Stone Energy Corp. has shut-in its largest field in the Appalachian Basin, curtailing between 100 and 110 MMcfe/d of Marcellus Shale production to offset low commodity prices and negative differentials that had reached "unacceptable levels," the company said.
Stone said its Mary Field in West Virginia, where it holds 39,200 acres, would be shut in until further notice. That leaves the company with 25 MMcfe/d of Appalachian production still flowing in its Heather and Buddy fields -- smaller positions also located in West Virginia. The Mary Field is home to one of West Virginia's first deep dry Utica Shale wells in Wetzel County, where Stone tested the Pribble 6HU last December at a five-day peak rate of 30 MMcf/d (see Shale Daily, Dec. 9, 2014).
The company drilled 38 Marcellus wells in the region last year and completed 34 of them. In the second quarter, the company produced 292 MMcfe/d, of which 144 MMcfe/d was produced from its Marcellus and Utica shale positions.
Stone said stagnant oil and natural gas prices further reduced by negative basis differentials and fees for transportation, processing and gathering had reduced operating margins in the basin. The shut-ins are expected to reduce the company's forecasted third quarter guidance from 234-246 MMcfe/d to 225-231 MMcfe. If the wells remain offline, Stone said, full-year guidance would likely be adjusted lower from the current 252-264 MMcfe/d.
Cash flow impacts are not expected to be reflected in the company's third quarter financial results. With the Mary Field offline, Stone indicated that it would narrow its focus even more to the deepwater Gulf of Mexico (GOM), which was already anticipated to account for 88% of capital expenditures this year. The company said those assets are yielding higher margins.
Stone's deepwater drilling rig has completed scheduled maintenance and would resume operations in the coming days under the company's current plans. It intends to mobilize that rig to finish completion of the company's Amethyst discovery, in which it has a 100% working interest, before it moves on to drill three other GOM development prospects
While Amethyst is expected to begin producing in 1Q2016, the Vernaccia exploration well, which is being operated by Italy's Eni SpA, is expected to be spud next month. Stone has a 22% working interest in that deepwater well.