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Appalachian Output Strong but Some Capacity Constrained

CONSOL Energy Inc.'s natural gas division said Thursday it produced a record 40.4 Bcf in 3Q2011, or nearly 13% more than the 35.8 Bcf produced in the year-ago period. Separately, Magnum Hunter Resources Corp. also reported strong results in Appalachia, but it said gas sales have been constrained because of "volume limitations" in some midstream infrastructure.

Pittsburgh-based CONSOL's gas output this year, on a 100% basis, is forecast to be around 160 Bcf, which is at the high end of CONSOL's guidance. However, the company in August sold half of its 663,350 net acre leasehold in a portion of the Marcellus Shale in Pennsylvania and West Virginia, including a half-stake in existing wells, to Noble Energy Inc. under a multi-year transaction valued at $3.4 billion (see Shale Daily, Aug. 19). And last month it sold a 7% overriding royalty interest in more than 115,000 net acres in Pennsylvania and West Virginia to Antero Resources for $193 million (see Shale Daily, Sept. 27).

Because of the two agreements, CONSOL said net gas production for the year is expected to be 150-152 Bcf. Gas output in the final three months of this year is forecast to be 36-38 Bcf. In the first nine months of this year the company drilled 58 wells in the Marcellus, with 36 in southwestern Pennsylvania, 16 in the central part of the state and six in northern West Virginia. By the end of this year the company expects to have drilled 80-85 wells across the play.

CONSOL's gas division also reported that it has achieved peak production of 39.4 MMcf/d from the first five wells on a new 10-well pad in the Pennsylvania portion of the Marcellus Shale. The 10-well Hutchinson pad is considered one of the industry's largest single pads to date in the Marcellus, it said. The 10 wells were drilled and completed for a total of $48 million, with drilled laterals cased and completed totaling 41,200 feet. The longest of the 10 laterals was 5,517 feet. The pad had 138 continuous hydraulically fractured stages, which used 47 million pounds of sand and 47 million gallons of water.

"This pad highlights CONSOL's competitive advantage in the Marcellus Shale," the company said. "With limited acreage expiration, CONSOL can efficiently drill wells on large pads, instead of drilling to hold acreage." Larger pads "should result in lower unit operating costs, while minimizing the number of permits needed for pads, gathering systems and stream crossings." CONSOL also has one rig drilling on the eight-well Aikens pad in Pennsylvania. CONSOL's full operational and financial results for 3Q2011 are scheduled to be issued on Sept. 30.

Houston-based Magnum Hunter also provided an operational update for subsidiary Triad Hunter LLC, which operates in the Appalachian Basin. Triad has 58,048 net acres predominately in northwestern West Virginia and southeastern Ohio.

Triad's WVDNR No. 1102, which is in Wetzel County, WV, is currently testing into a sales pipeline at an initial production (IP) rate of 10 MMcfe/d, which includes 9.9 MMcf/d of gas and 30 b/d of natural gas liquids (NGL). The No. 1103 well in the county tested at an IP rate of 10.5 MMcfe/d, which included 10.4 MMcf/d of gas and 20 b/d of NGL. The No. 1104 well tested at an IP rate of 10.4 MMcfe/d, which included 9.56 MMcf/d of gas and 74 b/d of NGL.

"All of these Marcellus wells were tested and are currently producing on a capacity constrained basis due to volume limitations of the existing midstream infrastructure," Magnum Hunter said. The company expects the constraints to be "completely alleviated" by Oct. 31 with the completion of new pipeline construction and production capacity.

Through September Triad has drilled and completed 11 gross wells (9.5 net) in the Marcellus, said Magnum Hunter. An additional five net wells are planned before year's end, and by then a total of 16 gross wells (14.5 net) are expected to be on line and flowing to sales.

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