Chesapeake Reports Ohio County Production

November 22, 2012
Shale Play

TRIADELPHIA, W.Va. - Based on Chesapeake Energy's initial Ohio County natural gas production numbers, West Virginia University geology professor Tim Carr believes local mineral owners will soon be very pleased.

"Bottom line - great wells for anyone. I wouldn't mind having the royalty interest, say 12.5 percent, which would be about $7,000 per day," said Carr, upon reviewing production numbers for three Ohio County Chesapeake wells in the names of Ferrell, Craig and Gantzer.

Carr's assessment is based on a number of variables, including how much of a property owner's acreage is used in creating a drilling pad; the price of natural gas; the price of oil; production costs for drilling and fracking; the royalty rate in a mineral owner's lease; etc.

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Oklahoma City-based Chesapeake is not required to report these initial production numbers for this year to the West Virginia Department of Environmental Protection until next year. However, in the company's earnings report released Thursday, Chesapeake listed the following average daily results for these Ohio County horizontal wells - all located in the area generally described as south of Interstate 70, but north of Dallas - for their initial test flows:

-- Roy Ferrell 8H well - 5.3 million cubic feet of natural gas, 220 barrels of oil and 430 barrels of natural gas liquids (ethane, propane, butane and pentane);

-- Deborah Craig 3H - 2.6 million cubic feet of natural gas, 200 barrels of oil and 205 barrels of NGL; and

-- George Gantzer 8H - 2.7 million cubic feet of natural gas, 130 barrels of oil and 220 barrels of NGL.

"I wish any one of those wells was in my backyard. Those are very good rates and should certainly encourage further drilling and development activity," said Robert Chase, chairman of the Department of Petroleum Engineering and Geology at Marietta College.

Chesapeake spokeswoman Jacque Bland said the company had no further comment regarding the Ohio County numbers.

Most of the wells in Ohio, Brooke and Hancock counties are not yet hooked up to pipelines. Chesapeake has been assembling large blocks of acreage with lease agreements over the past few years in preparation to drill for and move natural gas out of West Virginia's Northern Panhandle. Some of these leases are slated to pay mineral owners as much as 20 percent of production royalties, while others will pay as little as 12.5 percent.

After the leasing, Chesapeake drilled numerous wells throughout Ohio County. Subcontractors working on behalf of the company then laid miles of gathering and transmission pipelines. Much of this work is still ongoing, as the company has more pipelines - and compressor stations - to finish building in the county to be able to access the gas from all of its wells. As evidenced by the piles of pipes stacked on the south side of I-70 near The Highlands and along National Road in the Valley Grove area, Chesapeake and its subcontractors are not finished installing pipelines in Ohio County.

Chesapeake is building the Battle Run compressor station at a site on the north side of Interstate 70 near the Truck Stops of America at Dallas Pike, roughly two miles east of The Highlands. Chesapeake, in a legal advertisement earlier this year, noted it has the "potential to discharge" various air pollutants from the Battle Run compressor station. The company also has a compressor station established in the Sand Hill area that is also slated to release air pollutants.

Once the gas gets going, Chesapeake Senior Director of Corporate Development Stacey Brodak previously said the Ohio County gas will be dehydrated and compressed at one of Chesapeake's compressor stations. It will then head to the MarkWest Energy Majorsville plant for processing. This will separate the natural gas liquids - ethane, butane, propane and pentane - from the dry methane gas. The liquids will then be ready for transport, while the methane will be ready for market.



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