National Fuel Gas Co. (NFG) subsidiary Seneca Resources Corp. said Monday that it would extend its joint venture (JV) agreement with an affiliate of Dallas-based IOG Capital LP across 10,500 acres in Northern Pennsylvania, further reducing this year’s exploration and production budget.

Both parties agreed to modify the terms of the JV, boosting IOG’s participation up to 82 wells instead of 80. Under the new deal, IOG would participate in 75 Marcellus Shale wells in Elk, McKean and Cameron counties. The private equity firm was also granted an option to participate in a seven-well pad that’s planned to be completed before the end of 2017.

IOG would continue to hold an 80% working interest in the joint development wells, while Seneca would retain the other 20% working interest. To date, 39 of the 75 wells have either been completed and turned to sales or drilled and are waiting on completion. Seneca’s royalty in the remaining 36 wells has been reduced from 10% to 7.5%, but its working interest would increase to 85% once IOG achieves a 15% rate of return.

“The joint development arrangement provides a number of operational and financial benefits to both parties. For National Fuel, it allows us to leverage the competitive advantage of our low cost, fee acreage in the Marcellus and reduce the level of capital investment in our upstream business over the next two years, while maintaining operational efficiencies and providing the throughput necessary to support our pipeline expansion projects,” said CEO Ronald Tanski. “Given National Fuel’s large Appalachian footprint and the alignment of our strategic goals, we think there could be additional opportunities to work with IOG in the future to accelerate value creation for our shareholders.”

NFG first announced the JV with IOG in December, billing it as a way to preserve liquidity and its momentum during the commodities downturn (see Shale Daily,Dec. 3, 2015). The company’s fiscal year (FY) started in October, and during its first quarter, Seneca curtailed another 14.6 Bcf of natural gas production on lower prices in addition to the 45 Bcfe of curtailments it announced throughout FY 2015 (see Shale Daily,Feb. 5). The company has since cut its capital budget, dropped a rig in the Marcellus and delayed its Northern Access pipeline expansion project until next year — moves that it has said don’t affect the IOG JV.

Seneca has, however, continued to lower its well costs. At the time the JV was announced with IOG, the firm was expected to fund $380 million for its 80% working interest, but NFG said Monday that IOG would now be expected to fund $325 million of the well costs. Extending the JV, NFG said, would further reduce Seneca’s FY 2016 budget to $120-160 million from the previous range of $150-200 million. It’s also expected to save the company another $120 million in 2017 and 2018.

Production from all of the JV wells will continue to be gathered by National Fuel’s gathering segment. The company said its FY 2016 production forecast remains unchanged at 139-202 Bcfe.

Founded in 2014, IOG is a private equity firm partnered with funds managed by affiliates of Fortress Investment Group LLC. IOG’s founder and senior managing director, Marc Rowland, formerly served as CFO of Chesapeake Energy Corp. and as CEO of the oilfield services firm FTS International Inc.