Virginia Pushing for Offshore Oil and Gas

- Virginia Pushing for Offshore Oil and Gas

Thursday, August 04, 2011
Rigzone Staff
by Barbara Saunders

While most states battle to keep offshore oil and gas development away from their coastlines, the State of Virginia pushes – with some success so far – to allow it.

The U. S. House of Representatives already approved legislation that would open Virginia's waters, beyond 50 miles of the coastline, to hydrocarbon exploration and production. However, a corresponding Senate measure got bogged down recently before that chamber's Energy and Natural Resources Committee.

The committee hit an impasse over the proposed revenue-sharing provisions. This would provide states with 37.5 percent of revenues from offshore leasing development.

The Obama Administration postponed South Atlantic lease sale 220 and other lease sales after the 2010 Macondo well disaster in the Gulf of Mexico

Now, the fate of the legislation is up in the air. The legislation – introduced by Virginia Democratic Sens. Mark Warner and Jim Webb – was incorporated into other legislation up for the committee's consideration.

Sen. Lisa Murkowski, a Republican who represents Alaska, expressed optimism that the committee would soon reach agreement on the proposal.

"We must recognize the importance of putting safety and the nation's need for greater energy production together," Murkowski said. "Our shared goal is to have safe production."

Sens. Murkowski and Mary Landrieu, a Louisiana Democrat, offered a revenue sharing amendment to the Outer Continental Shelf Reform Act (S. 917). Although several members on the committee spoke in favor of the concept of revenue sharing, the committee lost its quorum and the proposal was not voted on.

"Today's markup demonstrated bipartisan support for equitable revenue sharing for coastal energy-producing states," Murkowski said. "We'll keep working to fine-tune the language and reach agreement on a plan that's acceptable to our members."

Murkowski added that she would work with members of the committee from both parties on refining revenue sharing language to include funding for renewable energy projects at the state level. Once that was accomplished, Murkowski said she would hope the markup of the bill could be rescheduled as soon as possible so the Outer Continental Shelf Reform Act and revenue sharing could be voted on by the full committee.

"Those who understand the importance of inviting coastal states to be partners in our efforts to increase the nation's energy security are not going to let this issue go away," Murkowski said. "It is in our best interest to have American workers producing American energy, and revenue sharing will help us reach that goal."

The Landrieu-Murkowski revenue sharing amendment would allow coastal states to retain a portion of the revenues generated by energy production in federal waters, beginning in 2019. It would apply to all forms of energy production, from oil and gas to wind and hydrokinetic. Murkowski's new language would create a coastal state clean energy fund with 12.5 percent of the overall federal revenue from offshore production.

According to a Wood Mackenzie study, development of oil and natural gas resources off the Atlantic coast could produce $428 billion in revenues for federal, state and local governments.

The Obama Administration postponed until after 2017 lease sales in the South Atlantic in the wake of the 2010 Macondo well disaster. Since that time, Virginia's governor, senators and congressional delegation have come out strong in favor of lifting the moratorium and allowing lease sales to proceed.

Mike Ward, executive director of the Virginia Petroleum Council, told Rigzone that leasing is needed so the industry can assess the hydrocarbon resources off the state's coastline. "Some of the seismic technologies used are 30 years old now," Ward pointed out. "The question looms as to what might be out there."

The proposed Lease Sale 220 area begins 50 miles off the coast of Virginia and points eastward in a triangle shape about 183 miles, covering approximately 3 million acres. The federal government estimates that the area contains 130 million barrels of oil and 1,140 billion cubic feet of gas. At current national rates of consumption, this would supply six days of oil and 18 days of natural gas, according to the Southern Environmental Law Center.

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US Natural Gas Adds Acreage in W. Virginia

- US Natural Gas Adds Acreage in W. Virginia

Tuesday, August 02, 2011
US Natural Gas Corp.

US Natural Gas has acquired leases totaling approximately 250 acres and three producing natural gas wells in Wayne County, West Virginia.

The Fuller No. 691 well was drilled and completed in 1962 to a depth of 3608' with production occurring from both the Coniferous and McKenzie-Keefer formations. The Company intends on replacing the above ground completion components prior to placing the No. 691 well into production.

The McGee No. 2 well was drilled and completed in 1959 to a depth of 3610' with production occurring from the Coniferous formation. The Company will install new well head and above ground completion components prior to placing this well into production.

The McGee No. 622 well was drilled and completed in 1960 to a depth of 1869'. The well was later deepened to a depth of 3944' with production occurring from both the McKenzie-Keefer and Tuscarora Sandstone formations. The Company will swab this well of any fluids within the wellbore and then place the well into production.

The Company's projected daily combined production from the three wells is on average 60 mcf/day. At current pricing for natural gas of $4.50/mcf, the Company's conservative two year revenue estimate is $200,000.

"The addition of these three wells in Wayne County, West Virginia compliments our portfolio of producing properties in the area," stated Wayne Anderson, President of US Natural Gas Corp. "It is our goal to have all required work completed and the wells tied into our gathering system prior to mid-September with revenue generated immediately thereafter."

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Penn Virginia to Sell Arkoma Basin Properties

- Penn Virginia to Sell Arkoma Basin Properties

Friday, July 29, 2011
Penn Virginia Corp.

Penn Virginia has entered into a definitive agreement to sell substantially all of its Arkoma Basin properties, together with certain other Mid-Continent properties, to an undisclosed buyer for $30.5 million in cash. This sale is expected to close by the end of August and is subject to customary closing conditions and purchase price adjustments.

The properties being sold include the Hartshorne coalbed methane and Woodford Shale formations, as well as a number of conventional natural gas play types. The properties are currently producing, on a net basis, approximately 7.8 million cubic feet of natural gas equivalent (MMcfe) per day, approximately 97 percent of which is natural gas. As a result of the divestiture, PVA's 2011 production will decrease by an estimated 0.9 billion cubic feet of natural gas equivalent (Bcfe). Estimated proved reserves associated with the divested properties, as determined by PVA's third party engineers at year-end 2010, were 42.5 Bcfe, 78 percent of which were proved developed. PVA intends to use the net proceeds from this sale to fund, in part, its 2011 capital expenditure plan, as well as for general corporate purposes.

RBC Richardson Barr served as PVA's financial advisor in connection with the transaction.

H. Baird Whitehead, President and Chief Executive Officer, stated, "Our strategy to shift the focus of our capital spending to oil and natural gas liquids made our Arkoma and other Mid-Continent assets appropriate divestiture candidates. The increase in liquidity generated by the sale of these properties will give us further flexibility to help fund investment in our liquids-rich plays, such as the Eagle Ford Shale, that generate higher rates of return and also improve our growth and profitability going forward."

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Gastar Tests Marcellus Wells in West Virginia

- Gastar Tests Marcellus Wells in West Virginia

Thursday, July 28, 2011
Gastar Exploration Ltd.

Gastar provided an update on its recent Marcellus operational results.

Gastar has completed the drilling and stimulation of its first two horizontal Marcellus wells in Marshall County, West Virginia, the Wengerd 1H and 7H, with lateral lengths of 4,700 and 5,700 feet, respectively. These two wells have been tested at a combined stabilized rate of approximately 15.5 MMCFD of 1285 Btu natural gas and 1,100 barrels of condensate per day ("BCPD") while each well was flowing at approximately 1200 psi of flowing casing pressure and each well was producing over 150 barrels of frac water per hour. The Wengerd 1H and 7H are expected to be placed on sales in mid-August following delivery and installation of separators capable of handling the condensate volumes. Gastar owns a 44.5% working interest ("WI") and 37.5% net revenue interest ("NRI") in these wells.

Gastar currently has three drilling rigs running in the play. We are currently drilling on two multi-well pads in Marshall County and we will commence drilling on a third multi-well pad in Marshall County in early August. Also, we have recently completed the drilling of the Hickory Ridge 2H well (GST 100% WI) in Preston County, West Virginia on the acreage that was acquired in December 2010 and plan on a mutli-stage fracture stimulation of the Hickory Ridge 2H well in the second half of August.

J. Russell Porter, Gastar's President and CEO, commented, "We are extremely pleased that the initial test results from the Wengerd wells have confirmed our assumptions for reservoir characteristics in this portion of the play and may exceed our individual well assumptions on deliverability and condensate yield. We currently have 72 additional locations within the immediate vicinity of the Wengerd wells. We collected a full array of micro-seismic data during these completions and we anticipate using that data to improve our results and become more efficient with our completions."

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Penn Virginia Disappointed by Initial Marcellus Production Rates

- Penn Virginia Disappointed by Initial Marcellus Production Rates

Tuesday, June 28, 2011
Penn Virginia Corp.

Penn Virginia updated its activities in the Marcellus Shale.

Peak 24-hour production rates from our first three Marcellus horizontal wells, the Risser #A-1H, Risser #A-2H and Dunn #A-1H, were approximately 3.1, 2.8 and 4.0 million cubic feet (MMcf) per day, with an average rate over a 72-hour test period of 2.1, 1.7 and 2.7 MMcf per day, respectively. These three test wells are located in the central portion of our approximately 35,000 net acre position in Potter and Tioga Counties, Pennsylvania. Pipeline construction is in progress with sales expected to begin by early August. One additional well in the western portion of our acreage is currently waiting on completion. During the second half of 2011, we plan to test, initially with vertical wells, the eastern portion of our acreage, comprised of approximately 20,000 net acres.

H. Baird Whitehead, President and Chief Executive Officer, stated, "The Marcellus Shale test wells had initial production rates which fell short of our expectations. We will monitor longer term production once these wells are turned into the pipeline and determine if the reserves can support a development program in this immediate area. As important, we will begin testing our eastern acreage position during the second half of the year."

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Penn Virginia Briefs on Eagle Ford Wells

- Penn Virginia Briefs on Eagle Ford Wells

Tuesday, June 14, 2011
Penn Virginia Corp.

Penn Virginia provided an update of its activity in the Eagle Ford and Marcellus Shales.

Eagle Ford Shale

We currently have six producing Eagle Ford Shale wells. These six wells, in which we have an approximate 83 percent working interest, are currently producing an aggregate of 4,096 barrels of oil per day (BOPD) and 2,072 thousand cubic feet (Mcf) of natural gas per day on a gross basis. The natural gas associated with these wells is also expected to yield approximately 150 barrels of natural gas liquids (NGLs) per million cubic feet (MMcf).

• Our initial well, the Gardner #1-H, had a peak 24-hour production rate of approximately 1,250 barrels of oil equivalent (BOE) in late February 2011 and is still producing approximately 350 BOPD and 240 Mcf of natural gas per day after 129 days of production, bringing cumulative production to approximately 68,000 barrels of oil and 56 MMcf of natural gas all of which was flared, or approximately 77,000 BOE.
• We recently completed five additional wells, the Hawn Holt #1-H, #2-H, #4-H, #6-H and #9-H, which had peak 24-hour production rates, as reported to the Texas Railroad Commission, of approximately 726, 986, 560, 711 and 1,876 BOE per day, respectively. These same wells had corresponding peak 24-hour oil production rates of 650, 869, 514, 670, and 1,652 BOPD. The Hawn Holt #1-H and #4-H had subsequent increases in peak rates of production to 830 and 582 BOE per day, respectively. These five new wells were tested at restricted rates with flowing pressures that ranged between 1,180 and 2,994 pounds per square inch. The total horizontal lateral lengths ranged between 3,827 and 5,063 feet with between 14 and 18 frac stages per lateral.
• In addition to our six producing wells, we are currently drilling three wells and have three wells waiting on completion.

We extended our agreement with a private service contractor to provide hydraulic fracturing services primarily in the Eagle Ford Shale, as well as other plays in east Texas and Oklahoma. This agreement has a one-year term with an option to extend for additional one-year terms.

Our natural gas midstream service provider in Gonzales County recently connected our wells to its pipeline and processing facilities. As a result, we have begun to recognize sales revenue associated with NGL and residue gas production.

Marcellus Shale

We continue to test our approximately 35,000 net acreage position in Potter and Tioga Counties, Pennsylvania and have drilled four horizontal wells. We have completed and commenced testing of three of these wells, while the fourth well is waiting on completion. The three completed wells are located in the central portion of our acreage, and the fourth well is located in the western portion. We plan to move a drilling rig to test the eastern portion of our acreage during the second half of the year. In addition, pipeline construction is in progress with sales expected to begin by early August. Earlier in 2011, we conducted a formal process to seek a joint venture partner or other alternatives for this capital-intensive play. Although we are no longer conducting a formal process, we will continue to consider alternatives for our Marcellus acreage position.

Management Comments

H. Baird Whitehead, President and Chief Executive Officer, stated, "The strong results from our first six Eagle Ford Shale wells are consistent with our geological and economic models. Extending our fracturing services agreement in light of potential completion crew availability issues for the industry, as well as establishing our initial natural gas midstream takeaway and processing capacity, are important accomplishments as we look to maximize our returns from this play. We are currently running three drilling rigs in the Eagle Ford Shale play and expect to accelerate the growth of our oil and NGL production over the course of 2011 and beyond.

"We also continue to test our Marcellus Shale position, having recently completed our initial wells in the central portion of our acreage and looking to test primarily the eastern area later in the year. Once the pipeline is completed to these initial wells we will monitor the production and longer term results."

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More Gas Wells for Southwest Virginia?

More Gas Wells for Southwest Virginia?

Monday, March 28, 2011
Knight Ridder/Tribune Business News

by  Debra McCown, Bristol Herald Courier, Va.

 

Another county might soon be added to the list of those producing natural gas in Southwest Virginia: Washington. But only if the county will change its zoning ordinance to allow it.

The Virginia Gas and Oil Board has approved the creation of two drilling units and forced pooling orders for the first of four proposed gas wells in the Benhams area of Washington County.

Forced pooling is a process authorized by Virginia law that allows gas companies to drill even without leases from all affected property owners and that provides the uncooperative owners a default one-eighth royalty. The system is the subject of a set of class-action federal lawsuits in which coalfield landowners claim that gas companies benefit at the expense of citizens -- and that promised payouts are not always delivered.

Charlie Bartlett, a geological consultant who's long advocated for Washington County's gas potential, said he also has long advocated for landowners getting their rightful royalties when gas is produced from beneath their land, and he's making it a point to go about the project in Washington County the right way.

He also said that Washington County could ultimately have many more gas wells.

"If those [first ones] are successful, it will lead to a couple of dozen wells," Bartlett said. "So basically we're hoping for the establishment of a new gas field in Washington County."

Abingdon-based Southeast Land and Mineral wants to drill the proposed wells in an area about a mile north of Benhams, Bartlett said, about five miles north of Bristol and eight miles northwest of Abingdon. He also said the county has gas development potential in the area "between about the North Fork of the Holston and about Route 700."

Were Washington County to enact a severance tax, each well could generate thousands of dollars in revenue, Bartlett said, not to mention thousands in royalties for landowners and the creation of jobs.

"We're hoping that we can make them [Southeast Land and Mineral] some money, make the landowners some money, make the county some money and make the state some money, and everybody will be happy," Bartlett said.

Regarding the concerns raised by the federal lawsuits, Bartlett said he does not anticipate any effects on his project -- except the possible assurance that landowners would get fairer treatment under the law.

First, however, the project, financed by a coal investor from Kentucky, must hurdle the zoning ordinance that currently prohibits natural gas drilling in Washington County. And if the county agrees to change the ordinance to allow drilling, that would open the county for any gas company to operate.

"It would be sort of ridiculous for us to use gas from other places and not allow gas to be drilled here," Bartlett said.

Bartlett said he's run into some skepticism from county zoning officials. But Odell Owens, the county supervisor who represents the district where the wells are proposed, said it's an idea worth exploring.

"If we're sitting on natural gas that the landowners can benefit from extracting, and also if it can serve as a revenue source for the county, we have to look at it," Owens said, adding that experts likely will be asked to speak before the board.

While Owens said the county's groundwater resources are precious, he suggested that if drilling can be done safely -- protecting that natural resource -- he'd be supportive.

County Administrator Mark Reeter said he doesn't know why the county's zoning ordinance doesn't mention -- and therefore doesn't allow -- drilling, and county officials are just beginning to research what gas drilling is about.

At a Feb. 22 meeting of the Washington County Board of Supervisors -- more than six months after the county's Board of Zoning Appeals affirmed a decision denying permission to drill -- a man representing the company came to extol the virtues of gas production.

"We need to get all the energy we can from beneath the soils of the U.S. instead of being held hostage," Gus Sorensen of Bristol told the board members. "I hope that any sort of rules and regulations can be taken care of so we can extract this energy."

At a county board meeting last week, Damascus resident Judith McBride spoke in opposition to the zoning change that would allow drilling, citing potential risks to water supplies from wastewater disposal. Originally from Pennsylvania, McBride compared the impact of drilling on her family farm back home to the effects of strip mining.

In Abingdon, long an economic center for the coal and gas-producing region of Southwest Virginia and home to many who moved away from the environmental downside of life in coal country, it's not clear yet how residents will react to the proposal.

However, there is no coal -- only gas -- in Washington County.

And, Bartlett said, he has no intention of drilling near the town of Abingdon. Plus, he said, the county, through its zoning ordinance, could restrict drilling to certain areas.