Seneca Resources Corp. is proceeding with drilling operations in the Marcellus and Utica shales, and has established positions in oil fields in Kansas and California, the National Fuel Gas Co. (NFG) subsidiary said Thursday.

In the Marcellus, Seneca has brought on three wells in Lycoming County, PA, which had peak 24-hour production rates of 13.4, 14.9 and 11.3 MMcf/d, the exploration and production (E&P) company said. Seneca has tested eight wells on its DCNR Tract 100 acreage with IP rates ranging from 10.5 to 16.1 MMcf/d. In its Rich Valley prospect in Cameron County, PA, Seneca said one horizontal well was drilled and reached a peak 24-hour rate of 6.3 MMcf/d.

Seneca had 263 permitted wells in Pennsylvania’s portion of the Marcellus during the first six months of the year, according to a biannual production report recently issued by the state’s Department of Environmental Protection (see Shale Daily, Aug. 27). Seneca has an estimated 755,000 net acres in the Marcellus, more than any company except Chesapeake Energy (1.78 million net acres) and Shell (850,000 net acres), according to company reports (see Shale Daily, Sept. 21).

In July Seneca reduced its outlook in the Marcellus after long-time joint venture partner EOG Resources Inc. said it didn’t expect to drill the minimum number of wells that were defined in an area of mutual interest (see Shale Daily, July 27).

In the Utica, Seneca recently completed two horizontal wells, one each in Pennsylvania’s McKean and Forest counties. The well in Forest County had all stages successfully completed; the McKean County well was only partially completed with three hydraulic fracturing stages due to an “operational challenge” unrelated to the quality of the reservoir. Both Utica wells are shut-in for a period of 60 days and are expected to begin production in November, the company said.

Seneca also said it has established a new position within the Mississippian Lime crude oil play, with approximately 9,300 net acres (23,000 gross) in Pratt County, KS, where it expects to participate in three to eight horizontal wells in fiscal 2013. The company has reached an agreement in principle with Chevron USA for a portion of Chevron’s assets in the East Coalinga oil field in California. The activity anticipated as a result of the oil property acquisitions is included in the company’s preliminary fiscal 2013 capital expenditure (capex) forecast of $555-710 million and production forecast range of 92-105 Bcfe.

Earlier this year NFG said low natural gas prices were forcing Seneca to scale back capex on E&P for fiscal 2012, which included dropping two of its six drilling rigs in the Marcellus (see Shale Daily, Feb. 8). NFG cut capex for Seneca’s East Division, which includes the Marcellus and Utica shales, by $70 million, or 8%, to between $720 million and $800 million. Despite the spending cutbacks, executives predicted production would grow by about one-third year/year, driven by an expanding presence in the Marcellus and Utica shales.

Over the past several years, Seneca has transitioned from an exploration company focused on conventional plays to a development company focused on resource plays. “I am quite confident that we have the technical and operational team in place to continue our development in California and Appalachia and to be successful in our entry into the Mississippian Lime,” said NFG CEO David F. Smith. “With the growth of our Appalachian properties over the last few years and the resulting shift to a higher percentage of natural gas production, the acquisition of additional oil development opportunities will keep us on the path towards our ongoing goal of maintaining a significant contribution to the company from our oil-producing properties.”