November 1, 2014

Comments from Susquehanna River Basin Citizen

As I said more than a year ago, after reading the US Geological Report comparing the Marcellus and Barnett shale plays, and having a few conversations with independent petroleum engineers that are familiar with both plays, that the ‘drop-off rate of Marcellus and Utica shale plays was going to be quicker and decline more than the Barnett because of the density of the shale in this part of North America. The information I got from the USGS was apparently accurate. What it means is that the Marcellus wells will have to be re-stimulated (re-fracked) more frequently than other shale plays (requiring more water and chemicals than other shale plays), and would have to be drilled in a much closerproximity than other shale plays (using up more land mass) which would mean higher post production costs and less royalty payments for land owners, since most royalties are based on the “profit” after the company recaptures their cost. Consider that it costs an average of $2M to drill a Barnett horizontal well and an average of $4M to drill a horizontal well in the Marcellus (twice the cost-half the production).

So, when considering the drop-off rate of Marcellus wells compared to the Barnett and the Fayetteville shale plays (both of which are already in a steep decline), the life span of Marcellus wells (and the royalty payments) are going to be much less than anticipated.

Barnett wells drop off rate is approximately 50-55% every 12 to 14 months (Fayetteville is about the same). Marcellus wells tend to drop off rate is 67% every 105 days, or about three to four months (the Utica is even faster).

Also, Chesapeake seems to be quietly selling off their leases to a company called CGAS, which is a subsidiary of Enervest (EV Energy Partners LP.). CGAS Properties, L.P. does not have any Key Executives recorded, or listed on the web site.

All things considered, I’m guessing most land owners have already seen the most money they’re going to see from Marcellus wells in NEPA. To quote the Chesapeake representative that was holding those private landowner meetings in Shunk, Elkland, Fox, and Forks Twps. a few months ago: “Don’t go out and buy that new Lamborghini.”

The gas companies, Gov. Corbett, and many of the politicians that blindly support the gas industry in PA have said: “PA is going to be just like Texas.” Well, this is how these “good neighbor” companies do business in Texas.

Landowners upset over unpaid royalties in the Barnett Shale
http://www.wfaa.com/news/local/Landowners-upset-over-unpaid-royalties-in-the-Barnett-Shale-175868241.html

Utica’s production decline rate
http://gomarcellusshale.com/forum/topics/utica-s-production-decline-rate

Has anyone heard anything about the rate of production declining abnormally fast? It was brought to my attention that there is some concern that production might fall off in Utica wells faster than in other shales. Does anyone know if this is the case?

That appears to be the rumor. I spoke with a petroleum engineer working in PA and he stated the same thing. He said Marcellus wells drop off too, but stabilize more quickly and then decline much more slowly than the Utica wells. I don’t know if there is a track record for the Utica wells that confirms any of this. If you read the Utica well production reports (filed in March) for the wells drilled early on, it did seem like the production of both oil and gas was down substantially from the stated initial production numbers. But, you can never rely on initial production numbers anyway since frac pressures are usually still fairly high and companies are trying to get a boost in their stock price. Only time will tell.

Chesapeake selling lease to CGAS Properties,L.P.
http://gomarcellusshale.com/forum/topics/chesapeake-selling-lease-to-cgas-properties-l-p

I spent 3 days at the county recorders office and basically did my own title search, which by the way is no picnic because everything past 20+ years ago is penned in on the sides and not on computer documents it is one book after another. I found conflicting information, like Enervest sold my shale gas rights to Chesapeake in June of 2011 but they did not hold the lease to it. I contacted the ODNR and got the cap records and it was Knox. I called CGas because I had gotten a letter from them years ago that they bought the well from Stocker, and they didn’t have any idea what I was talking about. I called Enervest and fired them up about them attempting to sell rights to something they did not own. They said (Enervest) that they would get back to me, which they did not. I called everyday and got no answer. I called Knox and told them everything I had found out and they sent me a release letter. It took a couple of weeks but for me it was worth it. I have my concerns about Enervest as they do not return calls and hold land currently (not mine) that is pooled and are only using a few acres of it for a well (several wells actually from what I hear) at less than minimal production. There has to be a law somewhere that will give people back their lands not in use, my sister is next to me and stuck in that type of deal. Just like Enervest selling my lease and they NEVER owned it. I am certain this has taken place on more than my land. I went to sign a lease with all the paper work. I was also in a landowners group who had lawyers but I did not use them for the research I had already done my own.