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Anadarko Decreasing Number of Marcellus Rigs by 40%

Yesterday Anadarko Petroleum announced its 2012 capital plan. Anadarko’s activities in the Marcellus get a brief mention. Anadarko’s lease holdings in the Marcellus are primarily in north-central Pennsylvania, the non-wet gas area. Therefore, they are scaling back drilling in the Marcellus for 2012.

From the Anadarko press release:

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Pennsylvania’s Top 10 Marcellus Drillers in 2011

NOTE: The facts and figures below were cited from a Pittsburgh Tribune-Review article. MDN has been contacted by several of the drilling companies in the list to let us know the numbers in some cases are not at all accurate. MDN is attempting to verify now (Feb 28) and will correct these numbers as soon as the raw data can be further analyzed.

top 10In 2011, Marcellus drilling expanded exponentially in Pennsylvania. According to the PA Department of Environmental Protection (DEP), companies drilled 2,755 Marcellus shale gas wells in Pennsylvania in 2011, up from 1,386 in 2010. That’s nearly a 200 percent increase (or doubling) in one year alone.

Below are the top 10 Marcellus drillers in Pennsylvania ranked by amount of gas produced. Included are some other bits of information (PA figures only) to give you an idea of the size and scope of that company’s operation in the PA Marcellus. (mcf = thousand cubit feet)

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Anadarko Offers $3K/Acre + 17.5% Royalties for Utica Lease

Coshocton County in eastern Ohio requested Utica Shale lease offers for 436 acres of county-owned land no longer being used for any other purpose. There was only one offer put on the table, by Anadarko. Under the five-year lease offer, the county would receive a $1.3 million signing bonus ($3,000 per acre) and 17.5 percent in royalties.

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SRBC Rejects Anadarko Water Request in Centre County, PA

At the the Dec. 15 meeting of the Susquehanna River Basin Commission (SRBC) held in Wilkes-Barre, PA, commissioners voted to reject a request from Anadarko Petroleum to withdraw up to 715,000 gallons of water per day from a well near Council Run in Snow Shoe Township (Centre County), PA. The rejection is rare because the SRBC informs requestors ahead of time that a request is likely to be voted down. Apparently Anadarko wanted to move forward with the request despite a warning from the SRBC.

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The 10 Largest Natural Gas Drillers in the U.S.

Top 10ProPublica recently compiled a list of the top 10 natural gas drillers in the U.S. based on daily natural gas production volume. The list includes gas drilled by both “traditional” vertical drilling as well as “non-traditional” horizontal hydraulic fracturing. Or think of it as non-shale gas and shale gas—companies who drill for both are in the list. The Marcellus Shale represents a good portion of the gas now being produced in the country, but other shale formations, like the more mature Barnett Shale (in Texas) also contribute a substantial volume of natural gas.

MDN presents this list as a useful resource for landowners. The biggest drillers are not always the best, and not always the right choice for a given landowner and situation. However, knowing who the “bigs” are can be a helpful guide—you know they have the money and the technology to get the gas out of the ground, and they have money to pay for leases and royalties.

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Recent Marcellus Shale Joint Venture Deals

Joint ventures are a common way for oil and gas companies to share risk, expertise and resources. Here is a list of recent deals in the Marcellus shale:

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Group of Investment Managers Target Drilling Companies Who Use Hydraulic Fracturing

godfatherA group of investment managers who belong to an organization called The Investor Environmental Health Network have banded together (some might call it collusion) to put pressure on energy companies who engage in natural gas drilling by using hydraulic fracturing. Their aim? To stop fracking of course, but that’s not what they say in their press statement. They’re just little ‘ole investors encouraging companies to “do the right thing” …
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The Two (Drilling) Faces of PA Gov. Ed Rendell

Is Pennsylvania Gov. Ed Rendell pro- or anti-drilling? Darned if I can tell. In some ways he has encouraged and allowed drilling to flourish in PA under his watch, something PA landowners should be thankful for. But it seems he has to keep some in his own party appeased, so he often talks down drilling. In typical politician fashion, he talks out of both sides of his mouth. The latest example is today. One headline trumpets that Rendell has signed a deal with Anadarko for $120 million (Anadarko to pay Pennsylvania $120 mln for drilling – Reuters) to allow drilling on an additional 33K acres. But another headline says Rendell backs a stop to further leasing of PA public lands (Rendell backs halt to gas leasing in public lands – CBS/Channel 21), as if he’s champion of the anti-drillers. What gives?

Well, it’s the same Ed Rendell on the same day walking a tightrope. He did indeed sign a deal with Anadarko to lease land that is supposedly surrounded by other public land already leased for drilling and so, as the thinking goes, the newly leased land won’t be “disturbed” all that much since most of the drilling operations will be from adjacent land. But now that he’s got his fist-full of $120 million, he immediately announces he’s now on board with no further leasing (after today, of course). Methinks he’s not going to make either side happy—but then he’s not running for re-election. What a strange character, that Gov. Rendell.

Press release from Gov. Rendell’s office putting the master spin on today’s high-wire act:

Harrisburg – Governor Edward G. Rendell announced today that the Department of Conservation and Natural Resources has finalized a responsible natural gas lease agreement by which Pennsylvania will meet its need for revenue from drilling next year, while also fulfilling its obligation to protect Pennsylvania’s natural resources.

Under the agreement, Anadarko Petroleum Corp. has paid the commonwealth $120 million to access 32,896 acres that are surrounded by tracts of land for which drilling companies already hold lease agreements. Because these newly leased tracts can largely be accessed by gas operations on the adjacent tracts, the amount of new state forest surface area that must be disturbed is minimized.

Other than the agreement, the commonwealth will not have to make any additional state forest land available to reach its revenue goals for natural gas drilling in the 2010-11 fiscal year.

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Anadarko Now Operating Four Drilling Rigs in Marcellus, Drilled First Lycoming County, PA Well in 1Q 2010

An update on Anadarko’s Marcellus drilling activities from a recent operations report released to investors:

Anadarko entered into a joint venture with Mitsui E&P USA LLC. Under the terms of the agreement, Mitsui will participate with Anadarko as a 32.5% partner in Anadarko’s Marcellus Shale assets in exchange for providing a $1.4 billion capital carry to Anadarko that covers 100% of its capital in 2010 and 90% thereafter. The carry is expected to be fully utilized by 2013. In addition, Mitsui committed to approximately $100 million to normalize its position with respect to Anadarko’s historical costs.

At the end of the 1st quarter, Anadarko was operating four rigs and participating in an additional 12 non-operated rigs. The company spud ten operated wells and completed two wells during the quarter. Anadarko expects to be operating six rigs by the end of the 2nd quarter 2010.

The Company completed and tested its first Lycoming County well (Larry’s Creek 3H) in January. The well was tested at a peak rate of approximately 6.1 MMcf/d.*

*Anadarko Operations Report First-Quarter 2010

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Mud Spill at Drilling Site in Central PA Due to Human Error

There was a mud spillage at a drilling site on Friday, April 2nd in Pennsylvania. The site is located on state-owned land—the Sproul State Forest in north-central Pennsylvania. The drilling was being done by Anadarko. According to reports:

An estimated 8,000 to 12,000 gallons of mud used by Anadarko E&P Company Inc. for drilling operations overflowed at the well site due to human error, said Daniel Spandoni, spokesman for the Department of Environmental Protection in Williamsport.

While about half of the mud spilled over the boundary of the well pad, it didn’t spread far enough to contaminate any surface waters, ground water or wetlands in the area, Spandoni said. A contractor began cleanup work Friday night. DEP officials have taken mud samples to determine a proper disposal method.

The mud is used as a cooling agent in drilling operations. Since the mud that spilled is synthetic-based, it doesn’t contain any diesel fluids as some other agents do, said Spandoni.*

*Hazelton Standard Speaker (Apr 2) – Mud spill at drilling site contained

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Mitsui Investment in Anadarko Projected to Grow from $1.4 to $4 Billion in Next 10 Years

Philly.com – Philadelphia Inquirer (Feb 17)
Japanese firm to invest $1.4 billion in Marcellus operation

The Philadelphia Inquirer has posted a story about the huge investment from Mitsui in Anadarko. As Marcellus Drilling News reported yesterday, Mitsui has purchased a 32.5% stake in Anadarko for $1.4 billion. What was not in the original news release is this tidbit:

The Tokyo company expects to invest up to $4 billion over 10 years in the partnership, which would produce up to 460 million cubic feet of natural gas a day at its peak.

We also learn from the article that 768 Marcellus wells were drilled in Pennsylvania in 2009. Anadarko alone, with Mitsui’s new investment, projects drilling 4,500 wells in PA “in the coming years.”

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Anadarko Takes on Mitsui as Partner in Marcellus Drilling

Anadarko Press Release (Feb 16)
Anadarko Announces Joint Venture with Mitsui in the Marcellus Shale

The full text of the press release from Anadarko is below. It announces they have taken on a partner for their Marcellus drilling interests, mostly in north-central Pennsylvania.

Anadarko Petroleum Corporation (NYSE:APC) today announced a joint-venture agreement with Mitsui E&P USA LLC, an affiliate of Mitsui & Co., Ltd. (NSDQ: MITSY), whereby Mitsui will participate with Anadarko as a 32.5-percent partner in Anadarko’s Marcellus Shale assets, primarily located in north-central Pennsylvania, for approximately $1.4 billion. Mitsui will earn approximately 100,000 net acres in exchange for funding 100 percent of Anadarko’s share of development costs in 2010, and 90 percent of these costs thereafter, with an estimated completion of all obligations by 2013. In addition, Mitsui will have the opportunity to purchase a 32.5-percent share of Anadarko’s existing wells and additional acreage acquisitions by reimbursing a proportionate share of Anadarko’s prior expenditures, currently estimated to be approximately $100 million.

"We are very pleased to have Mitsui as a partner in the Marcellus Shale," Anadarko Chairman and CEO Jim Hackett said. "This transaction reflects the significant value of Anadarko’s fairway position in the Marcellus Shale, which has a gross unrisked resource potential of more than 30 Tcf (trillion cubic feet) of natural gas and spans more than 715,000 gross acres. We continue to ramp up our activities in the Marcellus and anticipate drilling more than 4,500 wells over the coming years. We have successfully partnered with Mitsui in other parts of the world and look forward to working with them and our other partners in the Marcellus, as we continue to develop and deliver these domestically produced, clean-burning natural gas resources to American consumers."

The joint-venture agreement is effective Jan. 1, 2010. Closing of the transaction is subject to applicable regulatory approvals and other contractual conditions, and is anticipated on March 15, 2010.

A map of Anadarko’s Marcellus Shale acreage, primarily located in north-central Pennsylvania, will be available under the "Media Center/Anadarko News" tab at //www.anadarko.com.

Anadarko Petroleum Corporation’s mission is to deliver a competitive and sustainable rate of return to shareholders by exploring for, acquiring and developing oil and natural gas resources vital to the world’s health and welfare. As of year-end 2009, the company had approximately 2.3 billion barrels-equivalent of proved reserves, making it one of the world’s largest independent exploration and production companies. For more information about Anadarko, please visit //www.anadarko.com.