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Small Gas Producers Continue Pumping Away

Allenergy Inc. said it has equipped and put on pump eight of the 26 existing wells on its Ball Lease property, part of the company's 960-acre AE Project Four in southeastern Kansas. Allenergy plans to have two additional wells pumping before the end of 2006, weather permitting.

The Coffeyville, KS-based company has a 17-year history in the oil and gas industry and is currently involved in gas fields in Kansas and Oklahoma. The company's wells represent but a handful of thousands of marginal wells across the country that collectively contribute a huge portion of the nation's natural gas and oil supply.

"Six of the eight wells are in the de-watering process, which should take about 30 days before the bulk of the natural gas in the formation will become marketable," said Allenergy President Larry Sanford. "The remaining two wells have flushed 700 barrels of oil before each one settled down to five barrels of oil per day, along with 40,000 cubic feet per day of natural gas.

"The Ball Leasehold was producing about 160,000 cubic feet per day of gas from three wells before it was shut in about 15 years ago due to unfavorable gas prices," Sanford said. "After additional selected wells are put on pump, the company believes that the Ball Lease has the potential to produce 15 barrels of oil per day, and 250,000 cubic feet per day of gas."

As previously announced by Allenergy, the Ball Lease property is adjoined to the south by the Dark Treasures Lease, containing 960 acres. The company is currently conducting due diligence on potentially acquiring Dark Treasures, which would strengthen and consolidate Allenergy's existing properties and holdings in Chautauqua County.

And small producer Wilon Resources Inc. of Chattanooga, TN, said Monday that it resumed delivery from West Virginia wells following an extended period of suspension. The company is in the process of placing wells back into production, and plans to have all wells in operation in six to eight weeks.

During the period when delivery of gas was restricted, arrangements were made to utilize a second pipeline, nearing completion, to facilitate delivery to an interstate pipeline owned by El Paso Corp. With the completion of this pipeline, Wilon will now have two delivery sources, which the company said should ensure no future interruption of gas delivery.

Three-year-old Wilon has successfully drilled or reworked 65 gas wells and plans to complete a number of new wells during the next 12 months. Its operations are in West Virginia and Kentucky on leaseholds that aggregate approximately 15,000 acres.

With gas prices at a historical plateau and production decline rates continuing to accelerate, the role played by marginal or stripper natural gas wells in meeting demand continues to increase. In 2005, marginal wells accounted for nearly 17% of oil and 9% of natural gas produced onshore in the United States. Marginal gas wells produced more than 1.76 Tcf of natural gas.

According to the Interstate Oil and Gas Compact Commission (IOGCC), the number of U.S. marginal gas wells has increased every year since 1996, growing from 168,702 in 1996 to 288,898 in 2005. Over the same period cumulative production from marginal wells also has increased every year, from 986,676 MMcf in 1996 to 1,760,064 MMcf in 2005. Average daily production per marginal well reached an all-time high for the period of 16.7 Mcf in 2005.

Texas has 17% of the country's marginal well gas production, followed by Kansas at 16%, West Virginia at 11%, Oklahoma at 10% and Pennsylvania at 9%. Remaining states make up the other 37% of marginal well gas production.

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