This year, Pennaco Energy Inc. expects to increase its already aggressive drilling program in the Powder River basin coalbed methane play, which some analysts describe as the hottest onshore gas play in the US.
The company is looking at a preliminary budget of $42 million for 2000, about the same level as in 1999. But much of last year's spending-$22 million-was for lease acquisitions. That's being chopped to $10 million or less this year, with the bulk of the budget earmarked for drilling.
Already the most active operator in the Powder River basin of northeastern Wyoming and southeastern Montana, Pennaco will participate in drilling as many as 550 wells this year, officials say. That's up from 468 wells the Denver-based independent participated in drilling in 1999, most of them as operator. That was the most of any operator in the basin, the Wyoming Oil and Gas Commission reported.
Coalbed methane wells in the basin are generally 350-1,200 ft deep and take only 2 or 3 days to drill and complete.
Founded in January 1998, Pennaco quickly became one of the biggest leaseholders in the basin, with about 347,000 acres. The company is entirely focused on exploration, development, acquisition, and production of coalbed methane in that region.
Since the start of its drilling program in November 1998, Pennaco has participated in 642 coalbed methane wells-485 net to the company. With only 5% of its lease acreage drilled so far, Pennaco officials expect to remain focused on that basin for the next 10 years.
Only 42% of those wells are on stream. Just since early November 1999, Pennaco has hiked its gross production 110% to 46.1 MMcfd of gas, as the number of producing wells more than doubled, to 273 from 122.
"We are working very hard on connecting wells and expect to shorten the time delays to hook-up as we go forward, which should accelerate our production ramp-up," said Paul M. Rady, Pennaco's chairman, president and CEO.
Recent construction of several new pipelines and gathering systems in the basin has greatly enhanced the marketing of gas from the Northern Fairway and South Gillette areas, officials say.
Pennaco, CMS operations
Pennaco's production is from two primary operating areas-South Gill- ette, where it has drilled and operated 470 wells with an average 86% working interest; and the joint area of mutual interest that it formed with CMS Oil & Gas Co., a subsidiary of CMS Energy Corp., Dearborn, Mich.
Current production in the joint mutual interest area totals 2.2 MMcfd, with 1.1 MMcfd net to Pennaco's average 50% working interest in 24 producing wells in the Northern Fairway. That production continues to increase as dewatering continues, said company officials.
Pennaco has drilled 76 wells-34 net to the company-with an average 45% working interest in the mutual interest area, while CMS has drilled and operated 96 wells-48 net to Pennaco. Most of those wells are either in the process of dewatering and being flow tested, or are awaiting conncection to gas gathering and water discharge facilities, officials said.
CMS Field Services, another CMS Energy subsidiary, is building gathering lines and compression facilities to connect the additional wells drilled in that area.
About 40 of the wells in the South Gillette area were only recently hooked up and are in early dewatering stages. Pennaco officials plan to connect another 221 shut-in wells in the South Gillette area over the next several months.
Meanwhile, Pennaco has 14 rigs working in the Powder River basin, while CMS Energy has two.
