Gastar Exploration Ltd. announced Monday that it will lease about 3,300 gross acres in West Virginia from PPG Industries Inc. and plans to drill into the Marcellus Shale play as early as July.
The acreage is located on the site of PPG's Natrium chemicals plant on the Ohio River, about five miles north of New Martinsville in Marshall County.
Under a joint venture agreement with South Korean investment firm Atinum Marcellus I LLC, Houston-based Gastar will pay 45% of the lease acquisition costs for a 50% interest. Gastar forged ties with Atinum last September, intent on developing acreage in the Marcellus in West Virginia and Pennsylvania (see Daily GPI, Sept. 23, 2010).
"We are pleased to add PPG's acreage to our Marcellus portfolio, and we look forward to getting operations under way later this year," Gastar CEO J. Russell Porter said. "This lease, when combined with our existing leasehold in Marshall and Wetzel counties, helps Gastar create a large and mostly contiguous block of acreage within an area that is ultra-rich in natural gas liquids and condensate yields."
Gastar plans to start drilling around or after July 2011 and plans to eventually drill more than 30 wells. Pittsburgh-based PPG estimates that the lease will generate about $50 million -- in net present value of future before-tax cash flows -- over the next 30 years. That figure includes an initial cash payment of about $10 million.
"When developed responsibly, Marcellus Shale resources represent a fantastic opportunity in our region to promote jobs and secure an abundant source of U.S.-based energy for our homes and our businesses," said PPG senior vice president Michael McGarry.
PPG's Natrium plant produces chemicals, including chlorine, caustic soda, muriatic acid and calcium hypochlorite.
In December Gastar acquired about 62,000 net acres of leasehold in three West Virginia counties -- Preston, Tucker and Pendleton -- as well as about 17,000 net acres held by production, a 41-mile gathering system, a salt water disposal well and five conventional wells producing about 500 Mcf/d gross of natural gas (see Shale Daily, Nov. 11, 2010).