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Ohio Utica Shale

Company buys N.Y. leases, wells, pipelines from Chesapeake

By Bob Downing Published: January 8, 2013

From the Binghamton Press & Sun-Bulletin:

Minard Run Oil Co., based in Bradford, Pa., recently closed on the purchase of leases, operating gas wells and related equipment in Seneca and Cayuga counties that was formerly owned by Chesapeake Appalachia LLC.

Included in the deal — which closed in mid-December and makes the company the largest operator in both counties — are 413 gas wells that tap into the Queenston underground formation. The formation lies beneath the Marcellus Shale.

Also included in the sale were leases to 56,130 acres and almost 200 miles of pipelines as well as compression, metering and production stations. The acquisition gives Minard a toehold in New York and the opportunity to begin producing natural gas. It also leaves Chesapeake with about 172,350 acres in the Finger Lakes region still under lease.

Minard has an agreement with Chesapeake to not disclose the price it paid for the assets, Minard Senior Vice President And Chief Operating Officer John Bulmer said. The 2012 production figures of the wells involved in the sale will be released by the state Department of Environmental Conservation in July.

“We have had various properties in New York, but not when we made this deal,” Bulmer said. “Prior to the acquisition, we were a crude oil producer in the Bradford area of Pennsylvania. The deal diversifies us geographically and in terms of natural gas production, which compliments our crude oil here.”

Bulmer said the company wants to drill 20 to 30 wells this year and would like to start the permitting and land title check processes later this spring.

“The political climate in New York may not be favorable to us, but we had a willing seller, and we were willing to take the risk,” Bulmer said.

The Queenston wells will be drilled vertically, and if they are fracked, it would not exceed New York’s regulations for low-volume fracking — which is allowable under DEC rules. The drilling schedule, however, is contingent on the price of natural gas rising above $4 per thousand cubic feet in 2014, something it hasn’t done since August 2011.

Despite the depressed prices, Minard President and CEO Fred Fesenmyer said the transaction plays a huge part in his company’s growth plans over the next several years.

“It increases our footprint by almost double and growth prospects could go well beyond that,” Fesenmyer said in published reports. “This is the beginning of something quite large and we are looking forward to the challenge. There’s lots of growth on the horizon.”*

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