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Consol Preparing Utica Shale Drilling

Consol Energy Corp. is returning to the Utica Shale. The Pittsburgh coal and gas producer recently announced plans to run six rigs starting this fall, five on its acreage in the Marcellus Shale and one full time in the Utica of eastern Ohio.

"It's [Utica] in many ways the Marcellus all over again," Consol President Nicholas Deluliis said during an earnings call last Thursday. "A lot of the lessons learned from the Marcellus ramp-up, from a midstream standpoint -- processing, permitting, rigs, regulatory, all of that -- will be very applicable right across the river with regard to Ohio."

Consol announced its first Utica discovery last November in Belmont County, OH, with a 8,450-foot vertical well that flowed at 1.5 MMcf over 24 hours. Consol chose not to complete the well at the time to avoid "running too soon to the altar," as Consol CEO Brett Harvey put it, and instead shifted some of its 2011 capital budget toward the Utica (see Shale Daily, Nov. 1, 2010). Consol currently holds 200,000 net acres in Ohio and plans to drill six test Utica test wells this year.

While the company plans to drill the Utica this year, it doesn't expect production to begin until 2012.

That production should be wetter than what the company is producing in southwestern Pennsylvania, Deluliis said, estimating that at least half of Consol's acreage is in the "oil zone" or "transitional gas zone" of the Utica in eastern Ohio.

Consol drilled 40 Marcellus wells through the first half of 2011 and plans to drill 85 Marcellus wells altogether by the end of the year across three general regions: southwestern and central Pennsylvania and northern West Virginia.

Consol produced 6 Bcf from the Marcellus in the second quarter, up from 2.3 Bcf in the second quarter of 2010. The company expects to produce between 150 Bcf and 160 Bcf by the end of the year, as more wells come online.

With all-in costs between $3 and $3.50/Mcf the Marcellus is profitable at current prices, Deluliis said, but those costs should come down as production increases from multi-well pads, such as a 10-well pad in Westmoreland County.

The Utica in Ohio is gaining in prominence among operators. The Ohio Department of Natural Resources has issued 24 Utica drilling permits since mid-2010, including 16 in the last two months. The majority of those permits went to Chesapeake Energy Corp. CEO Aubrey McClendon recently told analysts that Chesapeake's Utica acreage in Ohio "is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas" (see Shale Daily, Aug. 1).

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