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Smaller Outfits Tap Shallow Appalachia Targets

As the majors and big independents deploy across the Marcellus and Utica shales, a handful of smaller producers are targeting shallower formations like the Upper Devonian Shale, using hydraulic fracturing (fracking) at less expensive wells to achieve their own measure of success.

Mark Thompson, president of Horizontal Exploration LLC, said his company has already drilled three horizontal wells and has plans to drill another eight, possibly as early as the first quarter of 2014. The company, based in Indiana, PA, is focused on seven counties in northwest Pennsylvania: Clarion, Elk, Forest, Jefferson, McKean, Venango and Warren.

"We're going through the learning curve like everybody else did earlier," Thompson said, adding that the company's first well cost approximately $2.3 million, while the second was near $1.4 million. "We're hoping to get them in range of around $900,000 to $1 million. That's the plan, anyhow." A group of operators that supports Horizontal's drilling efforts "would like us to do as many [wells] as possible, as long as the success is there."

The Upper Devonian lies above the Marcellus but shares some of its attributes. In places where the Marcellus is either gassy or liquids-rich, the Upper Devonian is generally the same. According to Thompson, Horizontal has been drilling to a vertical depth of 1,600-2,300 feet, targeting the Upper Devonian sandstones. Specifically, he said the company has targeted the Balltown, Bradford, Cooper Town and Lewis Run zones.

"We're finding out that the longer the lateral, the more issues you have on shallow," Thompson said. "These issues have to do with lifting the oil, and so that's why our engineers are now recommending that we just drill out 2,000 feet. We were in an eight-foot zone on one of the plays, and an 18-foot zone on the other. We're basically going to start chasing zones that are 40- to 60-foot thick. That seems to be the better results."

In the southwest corner of the state, Penneco Oil Co. Inc. COO Ben Wallace told NGI that his company has 24 horizontal wells in line, all of which are targeting the Upper Devonian. He said the company plans to add about 10 horizontal wells a year, but they're currently targeting oil, not gas. "We're really curious to try [targeting] gas, but the gas price doesn't support it and we don't want to take the risk at the moment," Wallace said. "But we think there would be a real opportunity to do it in conventional gas formations."

Penneco, which is based in Delmont, PA, operates about 900 wells in the Pittsburgh area, mostly vertical. The horizontal wells are primarily in Allegheny, Greene and Westmoreland counties, and each cost around $2 million.

"The [horizontal] wells' costs are five- to eight-times higher than a vertical," Wallace said. "It's hard to maintain a good portfolio. You have to manage your portfolio carefully so you have good portfolio risk." Penneco typically drills a horizontal well to a depth of 3,200 feet using laterals measuring 1,800-2,700 feet. The amount of fluid used to hydraulically fracture wells varies from 300,000-500,000 gallons.

According to data from the Pennsylvania Department of Environmental Protection, Catalyst Energy Inc., Pennsylvania General Energy Co. LLC and Phoenix Energy Productions, also have permits to drill shallow horizontals in the state. 

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