Pennaco Energy, the largest leaseholder and most active operatorin the Powder River Basin in Wyoming and southeastern Montana,reported that its gross gas production out of the basin has reached46.1 MMcf/d and is expected to increase rapidly now that newpipeline infrastructure is in place. This promising coal-bedmethane play, which took the national spotlight last year, isexpected to be one of the fastest growing areas in the RockyMountain region over the next decade.
“We are still quite early in the infrastructure buildout sinceonly 42% of our 642 wells drilled thus far are hooked up andproducing gas and only 5% of our lease acreage has been drilled,”said Pennaco CEO Paul M. Rady. “We are working very hard onconnecting wells and expect to shorten the time delays to hook upas we go forward, which should accelerate our production ramp up.”
Pennaco is entirely focused on the exploration and production ofgas from coal bed methane properties in the Powder River. Thecompany currently holds 347,000 net acres, including 285,000 netacres held in its joint venture with CMS Oil and Gas.
Since early November, the company’s gross gas production hasincreased by 110% and the number of producing wells has risen from122 to 273 wells. Pennaco was the most active operator in basin in1999 with 468 gross wells drilled and operated. The Company has nowdrilled 642 gross (485 net) CBM wells since beginning its drillingprogram in November 1998.
Its current production comes from two primary areas: the SouthGillette area and the Pennaco/CMS Oil and Gas Area of MutualInterest (AMI). In South Gillette, current production is 43.9MMcf/d from 249 wells, about 40 of which were hooked up veryrecently and are still dewatering with production increasing daily.Pennaco plans to connect an additional 221 shut-in wells in theSouth Gillette over the next several months. In the Pennaco/CMSAMI, current production is 2.2 MMcf/d from 24 producing wells.
Pennaco’s ability to market its gas production from the NorthernFairway and South Gillette Areas has been greatly enhanced due tothe opening of several new pipelines and gathering facilities. Inthe Northern Fairway Area, gas production will move south on theBighorn Gas Gathering Pipeline (formerly known as the NorthernHeader), a 250 MMcf/d pipeline which opened in December andconnects at its southern terminus with the Fort Union pipeline.Bighorn Gas Gathering, LLC is owned by CMS Field Services, NorthernBorder Partners and Enron.
In the South Gillette Area, the company will have the ability tomove its gas production to market on an unrestricted basis untilSouth Gillette Area gas production reaches 110 MMcf/d. There arethree primary takeaway points in South Gillette, including Bear PawEnergy’s Antelope Valley Compressor Station, which will be expandedto 80 MMcf/d from 40 MMcf/d as production increases. Antelopedelivers gas to the Fort Union Gas Gathering Pipeline. KinderMorgan’s Coal Seam Booster Compressor Station moves 10 MMcf/d ofPennaco production to the Thunder Creek Gas Gathering Pipeline. AndWestern Gas Resources’ Dopplebach Compressor Station moves 10MMcf/d to the MIGC pipeline. Western Gas Resources plans to expandDopplebach takeaway capacity to 20 MMcf/d.
The Fort Union Pipeline and the Thunder Creek Pipeline both are450 MMcf/d pipelines that became operational in September and movegas from the center of the Powder River Basin to Glenrock, WY. Bothconnect to the KNI, Pony Express, WIC Powder River Lateral andMedicine Bow Lateral pipelines. The Medicine Bow pipeline is a new260 MMcf/d line that became operational in December 1999 and movesgas from Glenrock to Cheyenne, WY.
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