Seneca third largest Marcellus shale player

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 will 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 in north-central Pennsylvania. 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 2009, 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.

BowLeven PLC, Edinburgh, plans further appraisal drilling on the Isongo-E and F structures on the MLHP-7 block of the 2,314 sq km Etinde permit in the Gulf of Guinea off northern Cameroon.

The Isongo-F-1r exploration well averaged 3,371 b/d of oil on a ½-in. choke and peaked at more than 4,000 b/d with a GOR of 1,200 scf/bbl from the uppermost Miocene Isongo formation below 5,750 ft MD in 2008. Analysis indicated 137 million bbl of oil in place.

The structure continues south, and the mean initial estimate for its untested southern compartment is 142 million bbl in place.

BowLeven said the discovery “transformed the traditional perception and understanding of Cameroon’s petroleum systems, which ascribed oil potential only to the northern part of the Rio del Rey basin with all acreage south of this historically considered to be gas and gas-condensate prone.”

Norwood Resources Ltd., Vancouver, BC, plans to twin its San Bartolo-1 indicated discovery well in Nicaragua’s Sandino basin later this year after a technical reevaluation and improvement in financial markets.

Consulting petrophysicists prioritized six targets for coring and testing as follows: 6,250-80 ft, 6,370-6,420 ft, 7,225-90 ft, 2,850-2,900 ft, 5,900-50 ft, and 7,590-7,670 ft.

The consultants concluded that movable oil appears to be present and that improper testing techniques most likely account for failed tests, Norwood said.

Norwood noted that it swabbed 60 bbl of 39° gravity oil from 5,900-50 ft on June 14, 2008 and reverse circulated 13 bbl of 34° gravity oil from 6,250-80 ft on June 26, 2007.

The six reservoirs, which are normally pressured, contain nontraditional volcaniclastic, fledspathic sandstones with 10-35% hydrophilic clays with 12-18% porosity and 30-45% water saturation. Permeabilities are poorly known but appear to range from less than 10 md to 20-30 md in some of the better zones. Frac stimulation and artificial lift likely will be required.

Other zones are potentially oil bearing but are considered riskier targets until core is obtained and logs are calibrated.