Seneca sells gulf assets; hits Marcellus output mark

By OGJ editors
HOUSTON, Mar. 9
-- An undisclosed purchaser has agreed to buy the Gulf of Mexico oil and gas producing properties of Seneca Resources Corp., Williamsville, NY, for $70 million, leaving Seneca free to increase focus on its Appalachian and California assets.

Seneca said it hasn’t made substantial investments in the gulf properties for several years and that it will invest the proceeds in the Marcellus shale. Closing is set for Apr. 30 retroactive to Jan. 1.

Meanwhile, Seneca said its Marcellus production reached 120 MMcfd on Mar. 7 from 32 operated and 27 nonoperated wells. The company said longer laterals and more frac stages per well have led to higher anticipated estimated ultimate recoveries that will offset the increased service costs.

Seneca said, “We are now anticipating well costs of $5-6.4 million for wells with up to 20 frac stages and lateral lengths reaching over 6,000 ft. Taking these factors into account, we expect to see results continue to improve over time, with some of our best wells achieving EURs of 8 bcf.” This implies 20-65% pretax internal rates of return at $4/MMBtu.

With the gulf sale, the exploration and production segment’s fiscal 2011 capital spending is expected to be $600-655 million, up from $485-560 million.

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