Marcellus Shale

Cabot Oil and Gas - Marcellus Shale Conference Call Comments

Cabot Oil and Gas (COG) held a conference call on October 26, 2010, to discuss the company’s earnings report for the third quarter of 2010.  The company made comments on its operations in the Marcellus Shale, where it is active in Susquehanna County.

“In the Marcellus we achieved a new production high of 245 million cubic foot gross per day, predominantly from 43 horizontal wells, and had an outstanding quarter with production growth for the third quarter increasing approximately 74% over the second quarter of 2010.”

“During the quarter, Cabot had two wells exceed the 20 million a day rate for a 24-hour initial production period. One well had a lateral of 4,659 feet in 18 stages while the other had a lateral of 3,960 feet with 15 stages.”

“Also during the quarter, Cabot completed a three well pad with a total of 55 frac stages, and the three wells are producing a combined 47 million cubic foot, which was highlighted also in the press release last night. Cabot continues to run seven fit for purpose rigs in the Marcellus. Today we have a total of 44 stages currently being completed, 93 stages waiting on pipelines, and 336 stages waiting on completion.”

“With the prolific nature of the wells and completions that we are drilling, coupled with balancing our capital allocation, we will be adjusting our rig count in 2011 to five rigs. Right now we are planning 54 horizontal wells in Susquehanna in 2011 which will provide for a significant growth profile.”

“Our Marcellus is quite a remarkable resource, and even with lower natural gas prices and gas being out of favor with investors, our economic returns are in the top quartile of the food chain. Case in point, while we have seen many strong wells, particularly most recently, our EUR guidance is still only 5.5 Bcf. At the current EUR, 5.5 Bcf, and current pricing, our rate of return will compete with most oil and wet gas projects very favorably. We will update our EUR for Marcellus after our year-end reserve bookings.”

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Atlas Energy - Marcellus Shale Conference Call Highlights - Part Two

Atlas Energy (ATLS) reported earnings for the second quarter of 2010, and during the earnings conference call, the company discussed its costs and returns on wells in the Marcellus Shale. The company still earns a healthy return despite low natural gas prices.

“Our current estimates for the fully loaded cost of the well having a 3,000-foot lateral and ten completion stages using recycled water is between $4.2 million and $4.4 million (in the deep dry gas area). We have observed stronger production from wells, having longer laterals in more completion stages.”

“Lease operating costs in the dry gas area of the Marcellus shale are very attractive. We are experiencing least operating expenses per Mcf of production from our Marcellus horizontal wells below $0.20 per Mcf including water costs.”

“Preliminary analysis suggests roughly 2 Bcf of EUR per 1,000 feet of lateral length. As I mentioned, we are seeking to extend our lateral lengths where our lease configurations will allow it.”

“As a result of strong productivity and low costs, our horizontal Marcellus Shale wells generate an attractive rate of return even at today's prices. Using a $6 a flat price, we generate a 58% internal rate of return, using a $5 flat price, we generate a 43% rate of return.”

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Range Resources Talks Up Marcellus Shale During Second Quarter Conference Call

Range Resources (RRC) touted the economics of its Marcellus Shale properties during its quarterly earnings conference call held on July 30, 2010. The company believes that the Marcellus Shale is one of the highest rates of return plays in North America, particularly in the wet gas area where Range Resources holds acreage.

“The Marcellus Shale, and especially the liquid-rich portion of the Marcellus, is extremely economic even at low gas prices. Our analysis indicates that $2.50 flat NYMEX gas and $60 flat oil or liquid ridge area in Southwest PA generates a 35% rate of return.”

“Our midyear estimate for all of our horizontal wells that are online averages 5 Bcfe per well. The five Bcfe average is based on 95 horizontal wells that all have greater than 30 days of production and they're all in the southwest part of the play. Our estimate of reserves per well per acreage has been 4 to 5 Bcfe. To date, we are clearly at the high end of that range.”

“In the southwest part of the play, given our current average lateral length of 3,050 feet with 10 frac stages, our completed well cost is about $4 million. The rate of return for our wells in Southwest Pennsylvania, which is in the wet gas area, assuming that we spent $4 million to get 5 Bcfe and that the gas price is $4 dollars per Mcf flat forever is 60%, and $5 flat forever, the rate of return at 79% and that's $6 flat and increases to 100%.”

“I believe that this is one of the highest, if not the highest rate of return gas play in the United States. Again, the qualifiers that we are drilling in the core portion of the wet gas area of the play in the Southwest Pennsylvania.”

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