Last month, we saw natural gas giant Williams
Using data from its 24 horizontal Marcellus shale wells that have produced for more than 120 days, Range Resources recently assembled an updated model of average expected well performance, costs, recoverable reserves, and rates of return in the play. In the biz, this is known as a "type curve." This type curve is simply top-notch.
In the past, Range Resources has talked about expecting to average 3 billion to 4 billion cubic feet equivalent (Bcfe) of reserves per well in the Marcellus, located in the Appalachians. So far, the average well is tracking higher, at 4.4 Bcfe. At a well cost of $3.5 million (somewhat higher than in the Fayetteville or Barnett shales, but less than half the cost of a Haynesville horizontal) and assuming a flat $6 price for natural gas on NYMEX (the New York Mercantile Exchange), the rate of return for these wells is modeled at 64%. Dropping the gas price to $5 keeps the rate of return at a robust 50%.
No wonder Williams was eager to step in here, as was StatoilHydro
Fool contributor Toby Shute doesn't have a position in any company mentioned. Check out his CAPS profile or follow his articles using Twitter or RSS. The Motley Fool owns shares of Chesapeake Energy. Our disclosure policy thought you should know that.