A Pennsylvania joint venture is set to start work on two midstream assets that could ease a bottleneck in one of the fastest growing counties in the Marcellus Shale.
Keystone Midstream Services LLC has received permit approval to build the Bluestone cryogenic gas processing plant in Butler County, according to upstream partner Rex Energy Corp. The partners expect to bring the 50 MMcf/d facility online in May 2012. Keystone Midstream also recently got permits to build the Voll Compressor Station at its existing Sarsen plant. That would expand the Butler County facility to 40 MMcf/d from its current capacity of 34 MMcf/d as soon as February.
State College, PA-based Rex has 20 wells in Butler County awaiting hydraulic fracturing (hydrofracking) and expects to start on the backlog in the first half of 2012.
Butler County, located north of Pittsburgh in the wet-gas corridor of the Marcellus, is attracting more interest than activity right now. The Pennsylvania Department of Environmental Protection (DEP) has issued 133 drilling permits in the county this year through November, compared to 73 from the same period in 2010. But actual drilling in the county is at 35 wells this year, slightly down from November 2010.
While Rex holds the most permits and has drilled the most wells in the county, ExxonMobil Corp. subsidiaries XTO Energy Inc. and Phillips Exploration Inc., and Shell Oil Co. affiliate SWEPI LP are also active in the county, to a lesser extent.
The Marcellus Shale continues to be a focal point for producers, according to NGI‘s Shale Daily Unconventional Rig Count for the week ending Dec. 23. Behind the Eagle Ford Shale (236 rigs) and the Bakken/Sanish/Three Forks play (203 rigs), the Marcellus is the third most active play in the country with 158 rigs currently drilling for oil and gas.
While down one rig from the previous week, the Marcellus rig count is up 13 rigs from one year ago.
In an effort to focus on its exploration work, Rex is looking to divest up to 28% of its midstream assets in Butler, including its stake in Bluestone and Sarsen, the company said. Rex is also looking to sell its 48,000 net acres in the Rockies.
Rex expects to produce between 66 MMcf/d and 72 MMcf/d in 2012. The company’s $189.7 million capital budget includes $150 million for Appalachian Basin drilling. That money will go toward three areas.
As the operator and majority owner of a 70/30 joint venture with Summit Discovery Resources II LLC, a subsidiary of Japan’s Sumitomo Corp., Rex plans to drill 12 wells, hydrofrack 20 wells and bring 21 wells into service in Butler County next year.
Rex plans to drill and bring online three Utica Shale wells in Carroll County, the eastern Ohio county where Chesapeake Energy Corp. is concentrating some of its efforts in the play. Rex does not yet have permits for that exploration activity. Rex drilled the Cheeseman 1H well in the Utica of Butler County this year and plans to bring it into production in the first quarter of 2012 (see Shale Daily, Nov. 3).
Through its 40% minority interest in a program operated by Williams Co., Rex also plans to participate in drilling 17 wells in Westmoreland, Clearfield and Centre counties in Pennsylvania, hydrofracking 16 wells and bringing 16 wells online.
Rex recently closed on a $100 million loan that matures in March 2016, and it said its bank group agreed to increase another facility to $255 million from $240 million.
In addition to shale, Rex operates an enhanced oil recovery project in Illinois.
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