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Pennsylvania Unconventional Gas Output Soars

After overcoming a series of technical glitches, the fourth iteration of the Pennsylvania Department of Environmental Protection's (DEP) 1H2012 production report issued last week indicated that natural gas production from unconventional wells totaled 894.8 Bcf, a figure that includes Marcellus Shale wells along with some targeting the Utica Shale and other formations. The figure was more than double the 435.1 Bcf in 1H2011, although that figure only included Pennsylvania Marcellus production.

Operators in the first six months of 2012 also reported producing 672,550 bbl of condensate and 49,194 bbl of oil.

The data showed that a Chesapeake Energy Corp. subsidiary was atop the list in terms of production and wells permitted, and Bradford County remained the locality to host the most production. The DEP listed 8,673 permitted wells in the latest production report, but only 2,874 (33.1%) recorded any production.

The DEP said the top producing well in the state was Citrus Energy Corp.'s Johnston 1H well in Wyoming County's Meshoppen Township, which produced 4.54 Bcf. Citrus also had the second-most productive well, Lasco 2H in Meshoppen, which produced 2.88 Bcf. As a point of interest, Citrus and Cabot Oil & Gas Corp. together had the top 27 wells in terms of production, all in Wyoming and Susquehanna counties, respectively.

Chesapeake Appalachia LLC led the field for first half 2012 production with 189.2 Bcf, or 21.1% of all production. Cabot was second in production at 107.6 Bcf, followed by Talisman Energy USA Inc. at 100.9 Bcf. Completing the list of top 10 operators in terms of production were Range Resources Appalachia LLC (83.0 Bcf), Anadarko E&P Co. LP (64.1), EQT Production Co. (45.0), Royal Dutch Shell plc subsidiary SWEPI LP (39.6), Seneca Resources Corp. (24.2), Southwestern Energy Production Co. (22.0) and Citrus (21.9).

Bradford County remained the top producer of natural gas from unconventional sources during 1H2012, with 234.6 Bcf produced. Susquehanna County came in second at 189.0 Bcf, followed by Lycoming County at 96.6 Bcf. The rest of the counties in the top 10, in terms of production, were Tioga County (88.8 Bcf), Washington (78.8), Greene (74.4), Wyoming (28.8), Westmoreland (24.4), Clinton (17.1) and Fayette (15.4).

The production figures for 1H2012 are far above what was reported for the previous three biannual reports. Marcellus production totaled 631.0 Bcf during 2H2011 (an increase of 41.8%), 435.1 Bcf in 1H2011 (105.7% increase) and 271.8 Bcf in 2H2010 (229.2% increase).

"These production reports are proof-positive that the Marcellus Shale holds tremendous potential for decades to come," Patrick Creighton, spokesman for the Marcellus Shale Coalition, told NGI. "What's even more interesting [is] the Marcellus is still a relatively young play with only a few thousand producing wells in Pennsylvania. When you add in West Virginia, Ohio and hopefully one day New York, only then will the full potential of the Marcellus be realized."

Lou D'Amico, president of the Pennsylvania Independent Oil and Gas Association (PIOGA), told NGI that there were two events that resulted in the higher production totals: increased drilling activity and more completed infrastructure.

"Up until several months ago, drilling activity had continued to increase," D'Amico said. "Obviously that has since dropped off dramatically because of dry gas pricing. But the other factor is that at one point in the last year there were more than 1,300 wells drilled and completed and yet to be tied in line. A lot of infrastructure -- midstream lines -- is going into service, so gas that was waiting on production is finally getting out here."

The DEP had been scrambling recently to publish a complete 1H2012 report, due to a series of technical glitches. Last Tuesday the DEP blamed Chesapeake for submitting data that violated database rules, causing the largest producing company in the state to be temporarily excluded from the report. Reporting errors by Talisman and SWEPI kept those companies off the report on Tuesday and Thursday, respectively.

The DEP's Office of Oil and Gas Management has annual oil and gas production reports dating back to 2000 available for download from its website. The first Marcellus-only report covered a 12-month period from July 2009 to June 2010. Subsequently, the DEP released Marcellus-only reports that covered three six-month periods: July-December 2010, July-December 2011 and January-June 2011.

However, the fourth six-month report, which covers January-June 2012, includes all unconventional wells and is not broken down by shale/tight gas and oil plays. The DEP said the change was mandated by Act 13, the state's omnibus Marcellus Shale law. Accordingly, the latest biannual report includes about 40 wells targeting the Utica Shale.

Whether the enormous production increases from the Marcellus continue is another question altogether. Thanks to natural gas prices that reached 10-year lows earlier this year, dry gas production has fallen out of favor in exchange for more liquid targets.

According to NGI's Shale Daily Unconventional Rig Count for the week ending Aug. 24, the number of rigs actively drilling in the Marcellus sits at 120 rigs, which is 24% below the 158 rigs that were operating one year ago.

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