Seneca third largest Marcellus shale player

Alan Petzet
Chief Editor-Exploration

HOUSTON, Jan. 15 -- Seneca Resources Corp., third largest acreage holder in the Devonian Marcellus shale gas play, plans to emerge as an operator of record this year even as it continues a joint venture with EOG Resources Inc., Houston.

Seneca plans to spend $40 million on the Marcellus compared with $60 million to drill 300 Upper Devonian wells in the Appalachian basin in 2009.

Its Marcellus holding has grown to 725,000 acres, most of it clustered south of Warren in northwestern Pennsylvania and much held in fee. Chesapeake Energy Corp., Oklahoma City, leads in the play with 1.2 million acres, and Range Resources Corp., Fort Worth, has 900,000 acres.

Seneca's spread includes 23,988 acres picked up at a Pennsylvania state lease sale in September 2008, most of it in Lycoming and Tioga counties. The other top successful bidders at the sale were ExxonMobil Corp. 19,439 acres, Anadarko Petroleum Corp. 17,189 acres, Talisman Energy Inc.'s Fortuna Energy Inc. unit 9,339 acres, and Hunt Oil Co. 4,068 acres.

A Seneca-EOG joint venture formed in late 2006 gives EOG the right to earn 50% interest in 200,000 Seneca acres and Seneca the right to earn 50% in all of EOG's 120,000 acres.

EOG must complete prospect selection by March, rather than the initially agreed December 2011. That will leave Seneca in complete control of 525,000 acres.

Seneca will operate 8-10 vertical Marcellus wells in 2009 plus starting in July several horizontal wells. Typical horizontal cost is $3.5 million/well to drill and complete. Gas in place is estimated at 30-150 bcf/sq mile, and EUR is 1-3 bcf/well. Depth of the shale is 5,000-8,000 ft.

Meanwhile, EOG must ramp up to 60 development wells/year by 2014.

Joint venture results so far are encouraging, Seneca said. Having first drilled five vertical wells, the firms are drilling their seventh horizontal well.

The first horizontal well flowed 350 Mcfd, likely victim of an ineffective frac. Well 3 made 400 Mcfd from a 1,200-ft leg in Marcellus. Well 4 did 1.4 MMcfd from a 3,500-ft lateral. The other two wells await fracs.

Seneca is a subsidiary of National Fuel Gas Co., Williamsville, NY., which plans to build a west-to-east lateral through the heart of the Pennsylvania Marcellus play within 2 years and beef up storage capability at a total cost of $1 billion.

The company is benefiting from start-up in December 2008 of the Empire Connector, which links the Millennium Pipeline in Chemung County, NY, with National Fuel Gas's system southeast of Rochester, NY.

Contact Alan Petzet at alanp@ogjonline.com.

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