EVALUATING RESERVES FOR THE MARCELLUS SHALE
Hart Energy Publishing
Pittsburgh, PA
November 3, 2010
D. Randall Wright
(615) 370-0755
randy@[Link]
[Link]
THE MARCELLUS SHALE: HOW IT ALL STARTED
Play began in 2004 with the Range Resources Renz well
Other “local” companies took note
• Atlas • Cabot
• Chesapeake • Consol/CNX
• EQT • Others
In 2007, it was estimated that the play could produce 50+ Tcf
Leasing costs dramatically increased
Game on – Jobs, Jobs, Jobs
PA MARCELLUS PRODUCING WELLS
As reported August 15, 2010 for 12 Months, July 2009 – June 2010
849 Horizontal and Vertical Active Gas Wells
Source: Pennsylvania Department of Environmental Protection
LEADING PRODUCERS FOR FIRST REPORTING PERIOD
Horizontal Wells Only
OPERATORS WITH THE MOST PRODUCTION
As reported August 15, 2010 for 12 Months, July 2009 – June 2010
Horizontal Wells Only
Talisman Energy USA, Inc.
53 wells – 27.8 Bcf
Shell/East Resources, Inc.
25 wells – 10.1 Bcf Cabot Oil & Gas Corp.
34 wells – 23.0 Bcf
Chesapeake Appalachia LLC
45 wells – 31.0 Bcf
Range Resources Appalachia LLC
97 wells – 31.0 Bcf + liquids and NGLs Atlas Resources LLC
10 wells – 2.2 Bcf
EQT Production LLC
14 wells – 7.6 Bcf
Source: Pennsylvania Department of Environmental Protection
TOP 10 SW PA HORIZONTAL PRODUCING WELLS
As reported August 15, 2010 for 12 Months, July 2009 – June 2010
Range Resources Appalachia, LLC
5 of the top 10 producing wells EQT Production, LLC
for reporting period 5 of the top 10 producing wells
4.0 Bcf + liquids and NGLs for reporting period
5.0 Bcf
Source: Pennsylvania Department of Environmental Protection
TOP 10 NE PA HORIZONTAL PRODUCING WELLS
As reported August 15, 2010 for 12 Months, July 2009 – June 2010
Cabot Oil & Gas, Corp.
4 of the top 10 producing wells
for reporting period
6.8 Bcf
Bradford
Chesapeake Appalachia, LLC
6 of the top 10 producing wells
for reporting period
11.4 Bcf
Source: Pennsylvania Department of Environmental Protection
YOU HAVE HEARD/READ THE PRESS RELEASES
(That is why you are here.)
Initial Open Flow Rates (24-hour)
• 26 MMcf per day (Range)
• 21 MMcf per day (Atlas)
• 18 MMcf per day (Cabot)
• 15 MMcf per day (EQT)
First 30-day Average Rates
• 22 MMcfe per day (EQT)
• 11 MMcfe per day (Range)
• 8 MMcfe per day (Cabot)
• 4 MMcfe per day (CHK)
Lateral Length
• 2,500 – 9,000 feet
RECENT MARCELLUS TRANSACTIONS
Buyer Seller Amount
Royal Dutch Shell, PLC East Resources, Inc. $4,700,000,000
CONSOL Energy, Inc. Dominion Resources, Inc. $3,475,000,000
Reliance Industries Ltd. Atlas Energy, Inc.* $1,700,000,000
Mitsui & Company Ltd. Anadarko Petroleum Corp.* $1,400,000,000
BG Group, PLC Exco Resources, Inc.* $950,000,000
The Williams Companies Inc. Alta Resources, LLC $501,000,000
Ultra Petroleum Corp. Undisclosed $400,000,000
Reliance Industries Ltd. Carrizo Oil & Gas, Inc.* $392,000,000
Statoil ASA Chesapeake Energy Corp. $253,000,000
Reliance Industries Ltd./Atlas Energy, Inc. Undisclosed $192,000,000
Sumitomo Corp. Rex Energy Corp.* $140,000,000
Chesapeake Energy Corp. Epsilon Energy* $100,000,000
Atinum Partners Co. Ltd. Gastar Exploration Ltd.* $70,000,000
TOTAL $14,273,000,000
* Indicates Joint Venture (JV)
THE MARCELLUS SHALE LEARNING CURVE
PHASE I PHASE II PHASE III
Exploratory Research & Development Exploitation & Optimization
(Defining Reservoir Parameters) (Reasonable Certainty, (Consistency, Repeatability,
Reliable Technology) Economically Producible)
Statistical
Economy Optimization
of Scale
Infrastructure
Marketing
Completion
Drilling
Horizontal
Regulatory
Geoscience
Vertical
As the Number of Wells Drilled Increased
HOW DO YOU EVALUATE SHALE RESERVES?
Evaluating unconventional resources
and serving the petroleum industry
for over 22 Years
THE MARCELLUS SHALE:
Some basic geology…
GEOSCIENCE
Defining Reservoir Parameters
Depth: 2,000 to 9,000 feet
Net Pay: 25 to 300 feet
Porosity: 2 to 12 percent
Matrix Permeability: 50 to 800 nanodarcies
Water Saturation: 10 to 35 percent
Pressure Gradient: 0.4 to 0.7 psi/ft
Original Gas in Place (OGIP): 25 to 200 Bcf/sq. mi.
Recovery Factor: 15 to 40 percent
STRUCTURE MAP
Subsea Depth – Base of the Marcellus
MARCELLUS GROSS ISOPACH MAP
Source: W.D. Von Gonten & Co. (used with permission)
AREAS OF POTENTIAL HYDROCARBON PRODUCTION
ESTIMATING RESERVES
Volumetrics
• Porosity
• Thickness
• Original Gas in Place (OGIP)
• Recovery Factor
SHALE PETROPHYSICS AND VOLUMETRICS
• Free Gas
• Gas Filled Porosity
• Kerogen Created Porosity
• Inter-Connected Porosity
• Formation Thickness, Pressure, Temperature
• Drainage Area
• Recovery Factor (RF)
• Varies by Permeability
• Varies by Stimulation Coverage
• Adsorbed Gas
• Gas Content (scf/ton)
• Based on Correlations
• RF Varies by Pressure
MARCELLUS SWEET SPOTS MAY EMERGE
Based on Activity and Production to Date
ESTIMATING RESERVES
Volumetrics
• Porosity
• Thickness
• Recovery Factor
• Original Gas in Place (OGIP)
Performance
• Type Curves
• Statistical Analysis
• Probability Analysis
Reserves per 1,000 feet lateral (wellhead)
FIVE OPERATOR TYPE CURVES
Southwest PA Area
10000
Range of Values
Based on ARIES™
IP 2.4 – 6.5 MMcf/D
“b” Factor 1.5 – 1.7
Initial Decline 62.5 – 72%
EUR 3.4 – 5.0 Bcfe
Mcfe/D 1000
100
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120
Months
Source: Various Public Websites
NINE OPERATOR TYPE CURVES
Northeast PA Area
100000
Range of Values
Based on ARIES™
IP 4.1 – 12.2 MMcf/D
“b” Factor 1.2 – 2.0
Initial Decline 63 – 77.5%
EUR 3.75 – 7.0 Bcfe
10000
Mcf/d
1000
100
0 6 12 18 24 30 36 42 48 54 60 66 72 78 84 90 96 102 108 114 120
Months
Source: Various Public Websites
NORMALIZE PEAK MONTH TREND ANALYSIS
Example Data
Trend Parameters
Based on ARIES™
IP 3.5 MMcf/D
“b” Factor 1.7
Initial Decline 70%
EUR 4.0 Bcf (approximately)
STATISTICAL ANALYSIS IN RESOURCE PLAYS
Society of Petroleum Evaluation Engineers (SPEE)
• Monograph 3:
Repeatable results
Continuous hydrocarbon system that is
regional in extent
Offset well performance may not be a reliable
predictor
Wright’s experience suggests that EURs usually
exhibit a lognormal distribution
Resource plays can become highly predictable IF
there is a large sample size
PROBABILITY PLOT - VOLUMETRICS
Hamilton Group OGIP per Square Mile (Bcf/Mi2)
Example Data
Lognormal Regression
P10
P50
P90
PROBABILITY PLOT - VOLUMETRICS
Marcellus OGIP per Square Mile (Bcf/Mi2)
Example Data
Lognormal Regression
P10
P50
P90
PROBABILITY PLOT – WELL PERFORMANCE BASED
EUR per 1,000 feet Effective Lateral Length
(MMcfe/1,000 ft.)
Example Data
Lognormal Regression
RISKS AND ONGOING CHALLENGES
Rig and service crew availability
Placement of laterals, effectiveness of completions
Statewide regulatory issues
Water use and disposal
Gas leakage and groundwater contamination issues
Pipeline capacity, transportation bottlenecks
Plants, processing and installation
Gas and liquids pricing
WHAT DOES WRIGHT EXPECT NOW?
More wells » more data » more accurate reserves
estimates
Play to continue rapid development toward
statistical and mature phases
Drilling/Completion techniques to improve
Infrastructure to provide outlets to markets
Average EURs, lateral lengths, optimal spacing,
efficiencies to be more clearly defined
THANK
YOU!
D. Randall Wright
(615) 370-0755
randy@[Link]
[Link]
Sometimes the Wright choice is obvious.