What We Learn from Financial Statements About Future Plans for Drilling in the Marcellus Shale

Reading financial statements by corporations is about as fun as watching paint dry—but hey, someone has to do it. We do learn important tidbits of news from drilling companies about their recent activities, and more importantly, what they are planning for the coming year. Henceforth, a few gleanings from some recent financial statements.

Magnum Hunter reports:

In 2010, they substantially expanded lease acreage positions in the Marcellus shale play.

In 2011, they will spend $60 million to drill 12-13 wells in the liquids rich portion of the Marcellus Shale play in northwest West Virginia.

Williams made this statement about their 2010 operations:

“Our new positions in the Bakken and Marcellus turned 2010 into a transformational year,” said Ralph Hill, president of Williams’ E&P business. "We diversified both geographically and in terms of our product slate.

“We have significant scale in these areas now, similar to the framework we established in the Piceance and Powder River basins,” Hill said.

Talisman Energy said the following in their year-end report:

We have proved the low cost, high growth potential of the Marcellus shale, which was producing 315 mmcf/d at the end of the year.

Looking forward, the portfolio is now positioned for sustainable and profitable growth. We have shifted the emphasis in 2011 in North America to liquids opportunities with a 35% reduction in spending on dry gas. We will ramp up activity in the Eagle Ford and in our conventional liquids areas, while scaling back our net spending in both the Marcellus and Montney.

Production in North America from continuing operations was 126,000 boe/d, a 14% increase over 2009. North American natural gas production increased 19%, due principally to successful development in the Pennsylvania Marcellus shale and Farrell Creek in the Montney shale play in northeastern BC. Production from the Pennsylvania Marcellus shale play was 315 mmcf/d at the end of 2010, up from 65 mmcf/d at the end of 2009.

In the Pennsylvania Marcellus area, the company drilled 152 gross (145.4 net) wells during the year, 139 operated and 13 non-operated. Production averaged 181 mmcf/d in 2010, up from 29 mmcf/d the previous year, with an exit rate of 315 mmcf/d. Talisman ended the year with 12 operated rigs in the area.

Ultra Petroleum

Ultra Petroleum has amassed an extensive land position in the Pennsylvania Marcellus Shale. The company started 2010 with approximately 168,900 net acres in the Marcellus Shale. During the year, through a combination of land acquisitions and swaps, including the company’s 78,000 net acre acquisition from a private company, Ultra Petroleum has added over 91,300 net acres, increasing its position to approximately 495,000 gross (260,200 net) acres. Ultra invested $453.2 million towards its incremental acreage additions throughout the year. The company’s core position is concentrated around Potter, Tioga, Lycoming, Clinton and Centre counties in north central Pennsylvania.

During the fourth quarter 2010, Ultra and its partners drilled 37 gross (24 net) horizontal Marcellus wells, compared to 16 gross (11 net) wells during the fourth quarter 2009 across its acreage position in Pennsylvania. For the year, the company participated in drilling 116 gross (72 net) horizontal Marcellus wells, in comparison to 33 gross (20 net) horizontal Marcellus wells for 2009.

Ultra and its partners initiated production from 33 gross (21 net) new horizontal wells during the fourth quarter. For the year-ended December 31, 2010, Ultra and its partners initiated production from 77 gross (51 net) horizontal Marcellus wells. Early well-performance results continue to be encouraging. The initial production rate for wells brought on-line during 2010 averaged 6.4 MMcf per day. Ultra’s peak production rate, 90 MMcf per day (net) also coincided with the company’s exit production rate for the year.

“We have worked diligently in 2010 to complete the necessary steps towards establishing a second core area: assemble a contiguous acreage position, evaluate resource potential, and build necessary infrastructure. As we move through the next few years, we look forward to transitioning to a development-mode similar to where we are in Pinedale and be able to optimize efficiencies and costs,” stated Watford.


Magnum Hunter Press Release (Feb 18) – Magnum Hunter Resources Announces Fourth Quarter and Full Year 2010 Financial and Operating Results

PR Newswire (Feb 17) – Williams Reports Year-End 2010 Oil and Gas Reserves

Talisman Energy Press Release (Feb 17) – Talisman Energy Reports Strategic and Operational Success in 2010

Ultra Petroleum Press Release (Feb 18) – Ultra Petroleum Reaches Production Milestone, Delivers Increased Earnings and Cash Flow, and Achieves Outstanding Returns for 2010