Hart recently held a Marcellus shale webinar, featuring three speakers. I thought the entire broadcast was intriguing, but I wanted to share one nugget in particular. Randy Wright, president of Wright and Co., offered vertical and horizontal well models, with rates of return plotted against Nymex base prices. Wright modeled a vertical Marcellus well using assumptions of 100% working interest and 85% net revenue interest; $1.5 million D&C costs; $1,250 per month LOE; and $7 a barrel for water hauling and disposal. No lease costs were added, and the prices were not adjusted upward for Btu or basis premiums. Additionally, a 5% severance tax that is being considered in Pennsylvania was not added. He ran four EUR dry-gas base cases: 300 million, 600 million, 900 million and 1.2 Bcf. The horizontal well model employed similar assumptions, but used $4 million D&C costs and $2,000 per month LOE. Its EUR base cases were 2 Bcf, 3 Bcf, 4 Bcf and 5 Bcf. Results showed that at a Nymex base price of $5 per thousand, a vertical well needed to recover at least 900 million cubic feet of gas to hit a 10% ROR. That's a pretty hefty vertical well. Horizontal wells, with their greater reservoir contact, fared much better. At $5 gas, a 2-Bcf Marcellus producer can deliver a ROR just below 10%, a 3-Bcf well hits a bit below 20%, a 4-Bcf well reaches 40%, and a 5-Bcf well, 60%. Wright noted that these well models were not intended to represent typical Marcellus wells, or wells in any specific area. Rather, they illustrated sensitivities to EURs and base Nymex prices. To me, they showed why the horizontal Marcellus continues to attract investment even as other U.S. plays are withering. --Peggy Williams, Senior Exploration Editor, Oil and Gas Investor Contact me at pwilliams@hartenergy.com
Recommended Reading
Exclusive: Tenaris’ Zanotti: Pipes are a ‘Matter of National Security’
2024-04-12 - COVID-19 showed the world that long supply chains are not reliable, and that if oil is a matter of U.S. national security, then in turn, so is pipe, said Luca Zanotti, U.S. president for steel pipe manufacturer Tenaris at CERAWeek by S&P Global.
Exclusive: As AI Evolves, Energy Evolving With It
2024-02-22 - In this Hart Energy LIVE Exclusive interview, Hart Energy's Jordan Blum asks 4cast's COO Andrew Muñoz about how AI is changing the energy industry—especially in the oilfield.
Exclusive: Liberty CEO Says World Needs to Get 'Energy Sober'
2024-04-02 - More money for the energy transition isn’t meaningfully moving how energy is being produced and fossile fuels will continue to dominate, Liberty Energy Chairman and CEO Christ Wright said.
Chesapeake, Awaiting FTC's OK, Plots Southwestern Integration
2024-04-01 - While the Federal Trade Commission reviews Chesapeake Energy's $7.4 billion deal for Southwestern Energy, the two companies are already aligning organizational design, work practices and processes and data infrastructure while waiting for federal approvals, COO Josh Viets told Hart Energy.
Exclusive: Sabine CEO says 'Anything's Possible' on Haynesville M&A
2024-04-09 - Sabine Oil & Gas CEO Carl Isaac said it will be interesting to see what transpires with Chevron’s 72,000-net-acre Haynesville property that the company may sell.