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Ohio Utica Shale

CONSOL Energy offers Utica, Marcellus updates

By Bob Downing Published: July 15, 2014

From CONSOL Energy today:

 

 

 PITTSBURGH, July 15, 2014 /PRNewswire/ -- CONSOL Energy Inc. (NYSE: CNX) is providing an operations update for the quarter ended June 30, 2014.

CONSOL Energy Logo.

CONSOL's much anticipated 3-well NBL19 pad in northern Noble County, OH, had initial production rates exceeding 23 MMcfe per day, per lateral, with controlled pressure drawdown. The three wells were turned into production last week and are located adjacent to CONSOL's NBL16 pad, which contains two wells: the NBL16A and NBL16B. The NBL16A had a lateral length of approximately 4,900 feet and tested at 12.0 MMcf per day plus 768 barrels oil per day. The NBL 16B had a lateral length of approximately 3,400 feet and is currently undergoing completion activity. Both NBL16 wells are expected to be turned into production in August, 2014. Adjacent to the NBL16 pad is the 5-well NBL18 pad with average lateral lengths of approximately 5,400 feet. The five wells at NBL18 are currently undergoing fracture stimulation and are expected to be turned into production in October, 2014. Also, in the immediate vicinity is the 3-well NBL30 pad with average lateral lengths of approximately 4,800 feet. The NBL30 pad is currently undergoing completion activity and is expected to be turned into production in September, 2014.

CONSOL's E&P division produced 51.9 Bcfe for the 2014 second quarter, or 34% more than the 38.6 Bcfe produced in the 2013 second quarter. Gas production was in-line with previous second quarter guidance of 50.0 – 52.0 Bcfe, net to CONSOL. The 2014 second quarter net production included 542 MMcf per day of natural gas, 1,209 barrels per day of oil/condensates, and 3,514 barrels per day of NGLs.

"The E&P division continues to achieve production targets while focusing on improving operational efficiencies," commented Nicholas J. DeIuliis, President and Chief Executive Officer. "CONSOL is improving cycle times from SPUD to turning a well in-line with improvements in both drilling and completion efficiencies. Specifically, we are reducing the number of days to drill wells and time to move a horizontal rig, as well as increasing stages completed per day. These improvements will not only help compress cycle times but will also result in growing our gas production even more efficiently."

CONSOL's coal division produced 8.3 million tons for the 2014 second quarter, including 1.0 million tons of low-vol coking coal from the company's Buchanan Mine. These results are in-line with previous second quarter guidance of 8.1 – 8.5 million tons, which included low-vol tons of 0.85 – 0.95 million tons. Geological issues at Enlow Fork Mine and equipment issues at Harvey Mine, partially offset by outperformance at Bailey Mine, impacted costs. Of the 7.0 million tons of thermal coal produced in the quarter, 6.5 million tons were from Northern Appalachia and 0.5 million tons were from Central Appalachia.

As of June 30, 2014, CONSOL's total coal inventory decreased by 234,000 tons to 407,000 tons. Thermal coal inventory decreased by 242,000 tons to 209,000 tons, while low-vol coal inventory increase by 8,000 tons, to 198,000 tons.

The company's second quarter financial results will include the expenses related to the 2017 bond refinancing, the completion of a new revolving credit facility and a pension settlement charge, offset, in part, by income from a coal contract buyout. The result of these four items will cause the company to show a net GAAP loss for the quarter.

Forecasts:

E&P: CONSOL Energy expects third quarter 2014 gas production, net to CONSOL, to be between 59.0 – 61.0 Bcfe, which, using the midpoint of the range, would be a 30% increase as compared with the 46.1 Bcfe produced in the third quarter of 2013. CONSOL expects the Marcellus and Utica Shale programs to be back-end weighted with approximately 70% of the combined wells turned in line during the second half of the year. Annual 2014 total gas production is now estimated to be 225 – 235 Bcfe, where the low end of the range has been increased by 10 Bcfe over the earlier guidance. The 2014 production guidance assumes liquids content between 5% – 8% of the total. Production guidance for 2015 and 2016 remains unchanged at annual growth rates of 30%, with liquids content increasing to 10% – 15% of total production in 2016.

Coal: CONSOL Energy expects third quarter 2014 coal production to be between 7.3 – 7.7 million tons. The decline from the second quarter production is due to normal miner vacation schedules. Annual 2014 total coal production guidance remains 31.0 – 33.0 million tons. Buchanan Mine's third quarter production is expected to be between 0.75 – 0.85 million tons, while annual low-vol production is now estimated at 3.4 – 3.8 million tons, which is a decrease from previous 2014 guidance of 3.6 – 4.2 million tons. The decrease in Buchanan's annual guidance is a result of continued market weakness.

E&P Division Results:

CONSOL's E&P division continues to execute the company's production growth plan while capturing operational efficiencies in drilling and completion activities, and the Marcellus Shale remains the growth driver of the E&P division, as illustrated by volumes increasing 129% from the year-earlier quarter.

In drilling, CONSOL set a new company record in the Marcellus Shale for longest drilled lateral on the NV34G well in Washington County, PA at a measured depth and drilled lateral length of 18,770 feet and 10,970 feet, respectively. Drilling efficiencies were also illustrated on the NV58 where one horizontal rig drilled four laterals in May. During the quarter, in Southwest PA, CONSOL averaged drilling a well in 1.4 days per 1,000 feet of lateral compared to 1.6 days per 1,000 feet of lateral in 2013. In addition, CONSOL also remains focused on reducing non-productive time and completed three horizontal rig moves in the second quarter in less than seven days compared to an average of 14 days in 2013.

CONSOL also continued to realize efficiency improvements in completion activities in the quarter: the Gaut pad, in Westmoreland County, PA completing 6 stages per day compared to the 2013 average of 3.5 stages per day.

The table below summarizes the Marcellus Shale drilling and completion results during the second quarter:

 

# Horizontal

   

Turned

Avg. TIL

 

Sub-Regions

Rigs

Drilled

Completed

In Line (TIL)

Lateral Length (ft)

Counties

Southwest PA

2

15

12(1)

9

9,253

Washington, PA

Central PA

1

3

10

11

7,071

Westmoreland, PA; Indiana, PA

Northern WV Dry

2

6

6

3

8,827

Barbour, WV

North Wet Gas

4

20

13

12

6,623

Marshall, WV; Washington, PA

South Wet Gas

1

4

10

--

--

Ritchie, WV

Total

10

48

51

35

7,629

 

 

(1) Includes 6 wells recompleted in Greene County, PA using RCS/SSL.

In the Marcellus Shale, in Westmoreland County, PA, the 3-well Shaw pad was completed using RCS/SSL with an average of 27 stages per well and had an average lateral length of 3,965 feet. The initial 24-hour production averaged over 7.8 MMcf per day, which are particularly strong results given the shorter lateral lengths. In the North Wet Gas area, in Washington County, PA, the 8-well WFN6 pad was recently brought on-line with an average lateral length of 6,100 feet. The 24-hour initial production rate averaged approximately 8 MMcf per day and 10 barrels of condensate per million cubic feet of gas. The best well on the pad had a 24-hour initial production rate of 10.4 MMcf per day and 100 barrels of condensate per day, with several other laterals producing over 9 MMcf per day and approximately 200 barrels of condensate per day. Estimated NGL yields for the WFN6 pad are between 40 – 50 barrels per million cubic feet of gas, assuming ethane rejection.

CONSOL recompleted six Marcellus Shale wells in Greene County, PA including the GH10BCV and GH10CV, which were originally turned in line during the first half of 2009 and had lateral lengths of 1,860 feet and 1,529 feet, respectively. These wells are on sales with 24-hour flowrates of 4.6 MMcf per day and 4.2 MMcf per day, respectively, which is a substantial production increase from the 0.375 MMcf per day and 0.215 MMcf per day that the wells were previously flowing before the recompletion. The remaining four wells are completed, drilled-out, and currently under flowback operations; CONSOL expects these wells to be on sales in July. The three GH10 laterals were recompleted with an average of 9 stages and 46 perforation clusters per well, compared to the original completion of 5 stages and 9 clusters. Similarly, the GH11 laterals were recompleted with an average of 9 stages and 49 perforation clusters per well, compared to the original completion of 4 stages and 8 clusters. The company has over 200 additional recompletion opportunities to capture more resource.

The table below summarizes the Utica Shale drilling and completion results during the second quarter:

 

# Horizontal

   

Turned

Avg. TIL

 

Sub-Regions

Rigs

Drilled

Completed

In Line (TIL)

Lateral Length (ft)

Counties

Noble County

1

8

4

3

9,510

Noble, OH

Surrounding Core

3

3

8

--

--

Harrison, OH

Total Ohio Wet Gas

4

11

12

3

9,510

 

In the Utica Shale, CONSOL's 3-well NBL19 pad in Noble County, OH, was completed using RCS/SSL with an average of 64 stages per well and had an average lateral length of 9,510 feet. The pad, which had a controlled drawdown in pressure, yielded 24-hour average rates over 23 MMcfe per day, which included condensate yields of 70 barrels per million cubic feet of gas and an estimated NGL yield of 55 barrels per million cubic feet of gas. CONSOL is optimizing production facilities, midstream liquids handling and managing the reservoir pressure, and the company believes that the pad has the potential to produce at much higher rates. Each of the three wells achieved peak flow rates of approximately 18 MMcf per day, which would equate to 33.4 MMcfe per day. In the Ohio Dry Gas area, CONSOL has started drilling the top-hole on one dry Utica and one Marcellus in Monroe County, OH and expects to drill the horizontal for each well early in the fourth quarter in 2014.

In the Utica core, surrounding Noble County, OH, CONSOL expects to turn in line 2 – 3 pads, or 8 – 13 laterals, during the coming quarter.

CONSOL continues to expect the Utica Shale to become a larger portion of the production mix with estimates over 6% of the total production in 2014.

 

Coal Division Results:

Within CONSOL's coal division, the Bailey Complex had record production of 2.6 million tons in April. The Enlow Fork Mine sealing project, which involved sealing 11 airshafts and eliminating 6.8 miles of underground belt and track haulage, was completed, on schedule, on June 30. The sealing project was possible due to the overland belts and new slope that were commissioned in the first quarter of 2014. As a result of sealing this area, CONSOL expects over $3 million in annual power savings. In addition, maintenance costs, and more importantly, potential risks to employees working in these older areas of the mine, will be eliminated. The mine is now approximately 70% sealed.

The low-vol Buchanan Mine in Virginia continues to manage operations to match the current weak market environment. The mine is prepared to return to higher production levels, when market demand and pricing rebounds.

Earnings Release Information:

CONSOL Energy will report additional operational and financial results for the quarter ended June 30, 2014 at 6:45 a.m. ET on Tuesday, July 29, followed by a conference call at 10:00 a.m. ET. The call can be accessed at the investor relations section of the company's web site, at www.consolenergy.com. 

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