Cost reduction and well performance enhanced by pressure management have demonstrated the commercial viability of dry-gas development in the deep Utica shale of central Pennsylvania, says CNX Resources Corp.
The company in late November started sales from two dry Utica wells in Westmoreland County that show “the future of dry Utica development is on the immediate horizon,” CNX Chief Operating Officer Timothy C. Dugan said in a Jan. 9 budget update.
The company is using managed-pressure drawdown for the wells, Aikens 5J and 5M, each of which produced an average 25 MMcfd of natural gas for 35 days under restricted choke with average flowing casing pressure of 8,830 psi. Average lateral length is 7,500 ft.
The 5J and 5M wells offset the CNX Gaut 4IH dry Utica well but, at an average of $15 million each, had total costs 48% below those of the older well.
With those costs and with gas prices indicated by futures markets, and assuming the Gaut 4IH estimated ultimate recovery of 3.5 bcf of gas equivalent/1,000 ft of lateral, CNX expects average after-tax rates of return from the Aikens wells of 50%.
CNX projected capital spending of $790-880 million in 2018, including $515-580 million of drilling and completion capital and $275-300 million of capital associated with land, midstream, and water infrastructure.
About 65% of the drilling and completion spending will be in the Marcellus shale and the rest in the Utica shale.
The budget projection excludes the company’s recent acquisition from Noble Energy Inc. of a 50% membership interest in CONE Gathering LLC for $305 million. The deal gave CNX 100% interest in CONE Gathering, which holds all the interests in CONE Midstream GP LLC, which in turn holds the general partnership interest in CONE Midstream Partners LP.
CNX renamed the company, now a single-sponsor master limited partner with properties in Pennsylvania and West Virginia, CNX Midstream LP.
CNX is the exploration and production company split from coal operations of Consol Energy Inc. last year (OGJ Online, Nov. 1, 2017).