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Marcellus Shale Keeps Turning Heads

Toby Shute
September 23, 2010

The Marcellus shale first crossed my radar in late 2007, at which time I dubbed it the next great gas play. Before too long, major media outlets began hitting on the massive potential here, and the Marcellus has been hogging energy headlines ever since. Here's a roundup of a few of the most recent highlights.

Flashy gas flows
On the development front, National Fuel Gas (NYSE: NFG  ) subsidiary Seneca Resources announced a pair of eye-popping initial production rates in Pennsylvania. One, operated by joint venture partner EOG Resources (NYSE: EOG  ) , reportedly flowed at a 24-hour rate of 8.9 million cubic feet per day, while a Seneca-operated well clocked in at 15.8 million per day. For context, Cabot Oil & Gas saw an average 24-hour IP (initial production) rate of 7.5 million per day for Marcellus wells completed in 2009, and one of its recent completions IP'd at 18.4 million per day.

You know how I feel about 24-hour initial production rates. There is no standardization, and the results of a single well can easily be overhyped. Seneca's rates aren't so high as to be suspect, but the release of these results in tandem with the announcement that Seneca has hired an investment bank to shop around a joint venture interest in a broad swath of its Marcellus acreage still smacks of showmanship. It reminds me a bit of an operator that cashed in on the Haynesville hoopla late last year following a big well test by partner Devon Energy.

Another Asian buyer
We've seen a steady stream of joint venture deals in the Marcellus, such as Chesapeake Energy's (NYSE: CHK  ) tie-up with Statoil (NYSE: STO  ) and Carrizo Oil & Gas' more recent partnering with India's Reliance Industries. This week, Gastar Exploration (AMEX: GST