The super-sized well pads targeting multiple horizons that CNX Resources Corp. plans to increasingly develop in the coming years will “disrupt” the Appalachian Basin, a company executive said this month at an industry conference in Pittsburgh.
In recent years, the company has been focused on building its Utica Shale program in Ohio and Pennsylvania, while the Marcellus Shale has anchored sales volumes. But lately, CNX management has been talking about the “stacked pay factory” it envisions for the future. In particular, CNX has discussed how well pads that target both the Marcellus and Utica, or even the Upper Devonian shales and the Point Pleasant formation in places like southwest Pennsylvania, may redefine field economics and its priorities.
While many operators have been promoting Appalachia’s stacked pay potential for years, few have ramped into full development and consistently drilled pads with multiple wells targeting the basin’s various unconventional resource plays.
Calling it “key to the southwest Pennsylvania strategy and economics,” COO Tim Dugan told a crowd at Hart Energy’s Dug East Conference and Exhibition that among the benefits of stacked pay development is the ability to blend wet and dry gas to reduce processing costs and enhance returns.
“The dry volumes from the Utica, blended with the damp Marcellus, allows us to avoid uneconomic processing of the damp Marcellus gas,” Dugan said. “One Utica well will blend down three to four Marcellus wells, and it’s all within the same gathering system, much more economic than separate wet and dry systems.”
The company is applying completion design and spacing lessons from its Utica program in Monroe County, OH, and other results from newer wells in Pennsylvania as it continues to delineate the deep, dry Utica core in the southwest part of the state.
“The blending strategy in southwest Pennsylvania, we’re just starting into that,” Dugan said. “As we finish up 2018 and move into 2019, the blending strategy is a critical component of the stacked pays in southwest Pennsylvania. And so we’ll [work] on some existing pads, and we’ve got other pads we’re building specifically for stacked pay development.”
Dugan said the stacked pay pads, which could ultimately house up to 24 wells, “will become a larger and larger part of our development plan moving forward.”
Capital spending is also likely to decrease over time, as assets like pads, production equipment and water infrastructure are reused. He said the company might get three to four years of optimal use out of those assets if it were developing the Marcellus alone, versus the eight or nine years it might get by targeting multiple formations.
“The big upside there is what it does to economics for those damp Marcellus wells,” Dugan said. “If we’re just drilling damp Marcellus, that 1150, 1170 [Btu] gas has to get to a wet gas outlet, we have to pay the processing fees, which really hampers the economics of the wet Marcellus; it really drops them down in our inventory priority list.” By blending the wet and dry gas, CNX reduces the heat content, allowing it to meet pipeline specifications.
“Being able to blend increases the rate of return on those wells and allows us to get to them sooner.”
However, the blending strategy doesn’t help CNX avoid the natural gas liquids constraints in the basin, he said. CNX has worked around those issues with a flexible marketing portfolio as one of the basin’s larger operators. It has more than one million net acres considered prospective for the Marcellus and Utica.
Late last year, the company acquired full ownership of its midstream master limited partnership, which operates more than 200 miles of pipeline in Pennsylvania and West Virginia. Having greater control of those assets, has better allowed the company to move ahead with its stacked pay plans and the blending strategy that makes them more attractive, Dugan said.