There’s still gas in the Appalachian Basin, and that’s a fact that exploration-minded producers will be waking up to. At least that’s what those interested in developing New York state’s gas resource would like to believe.

The latest hint that Appalachia has a whole lot more gas to give up comes from Talisman Energy Inc. Last week Talisman subsidiary Fortuna Energy Inc. of Calgary began production from two prolific gas wells in New York’s Appalachian Basin, and the latest results from the upper Black River Formation are showing the same promise that’s been seen in recent years.

The Stoscheck No. 1 well was drilled vertically, then steered horizontally across a newly identified graben structure within the upper Black River Formation. Fortuna Energy Inc. has a 99.6% interest in this well, which is currently flowing at 22 MMcf/d (gross sales gas) with a flowing pressure of 2,600 psi. The pressure measured on the well test indicates that a new pool has been penetrated.

The deep Trenton-Black River formation in New York’s Finger Lakes region is thought to be a promising play. And last year’s sweeping reform of New York’s leasing regulations can only help (see NGI, Aug. 8, 2005). “Natural gas production from new and existing Trenton-Black River wells was responsible for record production in the state for the second consecutive year,” according to the “New York State Oil and Gas Leasing Report, 2005.”

The second well, Hartman BJ No. 1, is currently producing at 12 MMcf/d (gross sales gas) at a flowing pressure of 1,950 psi, from what is interpreted to be a new pool. Fortuna has a 49.25% working interest and operates the well. East Resources Inc. has the remaining 50.75% interest and was the drilling operator. Fortuna is evaluating additional drilling locations near both wells.

Fortuna President Jim O’Driscoll did not want to discuss his company’s activities in the play for competitive reasons. But Bradley Field, director of New York State’s Department of Environmental Conservation minerals resources division, told NGI that Fortuna’s wells are par for the course. “It’s pretty much, well, they did it again,” he said. “They found another good spot. It’s been following this type of pattern the last few years.” Field said that for about every 10 wells drilled in the area a couple are real “eye-openers.”

That said, development in the Trenton-Black River has been consistent and is expected to remain so, Field said. “It seems like it’s a steady, consistent pace.”

David Khani, managing director and energy analyst with Friedman, Billings and Ramsey, follows Chesapeake Energy, which has acreage in Appalachia and the Trenton-Black River by virtue of its acquisition of Columbia Natural Resources (see NGI, Nov. 21, 2005). So far, the Chesapeake hasn’t done much in the Trenton-Black River, but plans include some seismic surveys, Khani said. “They’re not comfortable right now really going after the exploration side,” he told NGI.

Khani described the Trenton-Black River as a very complex formation that is very hit or miss. “Talisman has probably been the one that has been the most successful at it. I’ve seen several other companies go after it and really come up empty.”

Khani said he expects Talisman to drill 20 to 25 wells this year in the play at a cost of about $10 million each. Decline rates are high. “You’ll see that $35 million a day and then a third of it is gone by year-end.” He said at the end of last year well economics in the play dictated $4.00 gas to make it work. That figure might be greater now due to rising costs.

What’s exciting to those in New York state who want to see its resource base developed is the fact that the Trenton-Black River is part of a broader growth in interest in New York, and Appalachia, for that matter, among producers. Companies are coming back to Appalachia and its gas-bearing shales and looking at pay zones deeper than 10,000 feet. After all, Appalachia is where it all began for U.S. gas drilling. When the shallower depths were tapped out, producers moved elsewhere. Now they’re coming back with the tools, technology and know-how to find and get gas out of deeper pay zones.

Appalachia very much is an exploration play, Khani said, and that sort of thing is coming back into vogue. “I think Appalachia generally is an under explored basin… And if you can gather enough mass and control your own gathering system and have good access to pipeline infrastructure, which is challenging today, you can make it work given its positive basis to Nymex.” Still, it’s necessary to drill thousands of wells to achieve the production and economies of scale to make it worthwhile.

Over the last 10 years, the amount of exploration capital in the industry has been declining, Khani said. However, he thinks that’s changing. The need for companies to acquire new skill sets to mount successful exploration campaigns probably will be a driver for consolidation in the months ahead, he said.

Fortuna Energy Inc. has an active exploration and development program in 2006. The company plans to drill or participate in a total of 17 horizontal Trenton-Black River wells and five vertical wells, spending US$110 million in 2006, including two compressor installations. Fortuna is currently producing 110 MMcf/d.

As of year-end 2005, New York state received royalties from nine Trenton-Black River wells that include state acreage in their producing units. “Gas production increased as more Trenton-Black River wells were completed and natural gas prices rose to record highs, and consequently, royalty revenues received by the state increased six-fold in 2005,” according to the New York Leasing Report. “The royalty received by the state in 2005 was nearly equal to the royalty revenue of the previous 20 years combined.

“With continued high gas prices and production from Trenton-Black River wells, royalty revenue will likely overtake bonus bids as the largest contributor of oil and gas revenue in the near future…. To date, 18 Trenton-Black River wells have been drilled on state lands or have had state lands included in a spacing unit.”

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