Record natural gas production in the Marcellus Shale has put Atlas Energy Inc. on a path to increase output 21% in 2Q2010 from the first three months of the year, the Pittsburgh-based producer said Wednesday.

Average output in the Appalachian unit reached a record 55 MMcfe/d net in the quarter because of "strong results from new horizontal Marcellus Shale wells turned into line in the quarter and increased capacity" on its legacy gathering system in southwestern Pennsylvania, Atlas said.

"With average initial rates of production in excess of 5 MMcfe/d, we expect first-year average production to be in excess of 2 MMcfe/d per well," said President Richard D. Weber. "We have concluded that landing our laterals low in the Marcellus Shale section produces superior results and we intend to continue to drill our wells accordingly in the future."

Appalachia production in June averaged 59 MMcfe/d net. Gross Marcellus Shale output grew to 81.9 MMcfe/d at the end of June from 62.8 MMcfe/d at the end of March, a 31% increase.

Net gas production in the play was 64% higher in that period, reaching 33.2 MMcfe/d at the end of June from 20.2 MMcfe/d at the end of March. Total production was around 110 MMcfe/d net in 2Q2010, or 10% higher than in 1Q2010.

In 2Q2010 eight new horizontal Marcellus Shale wells were turned to sales in southwestern Pennsylvania with average peak production rates of 5.1 MMcfe/d net, Atlas said.

The latest production results, as well as the joint venture investment with India's Reliance Industries Ltd. (see Daily GPI, April 23), led Atlas to forecast total Marcellus output by the end of 2014 to be about 500 MMcfe/d net.

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