Thursday, July 21, 2011

NYS Natgas Production Down 23% in 2010
But Check Out These Top Ten Wells

[Blogger's note:  Original post July 7, 2011, then revised July 15, and now this:  On July 20, this story was amplified upon by Forbes energy writer Christopher Helman, who spells it out here with a bit more pointedness than usual.  My original post was and is based on my own query against the state's dataset as it existed around July 6.  I noticed only afterwards that the DEC had at some point in time issued official 2010 production totals in DBF format on its web page here — numbers which also show the downturn, but which vary somewhat from mine.  On July 14, Steve Reilly of the Binghamton Press and Sun-Bulletin did a story based on the official government stats, which ran in a number of Gannett outlets (sample here).  So, just to correct the record, the DEC's official stats show NYS natgas production of 35.8 BCF in 2010, a drop of 20% by volume compared to the previous year.  I'm not able to open a DBF file, so I still haven't been able to figure out where the discrepancy originated.  One more thing:  Keep in mind that DEC Minerals Division should, in late July, issue its complete 2010 annual report, which will mine through all this data in many additional, illuminating ways.]

Stats maintained by the NYS DEC, but released from legal confidentiality as of July 1, show indigenous natural gas production in New York State was 34.57 BCF (billion cubic feet) in 2010 — a drop of 23% by volume, compared to 2009, when production was 44.85 BCF.

The prior dropoff in 2009 was 11% by volume, compared to 2008.

So, as I mentioned the other day here when covering New York's three-year downturn in drilling activity, we now have something of a confirmed trend going on.  The trend syncs up pretty closely with New York's having politically balked at the dawn of the shale gas revolution — at the exact same time as that's where most oil and gas investment money happened to be flowing, to other states, by the millions. 

Measuring the dropoff by dollar value requires assumptions regarding the price achieved at the wellhead by the state's various producers, and I'm just not going to get into it — at least not on the basis of comparing things year to year.  Later during the month of July, 2011, the NYS DEC Minerals Division should be releasing its 2010 annual report, and they will undoubtedly pick an average statewide $ per MCF number for year-to-year comparison purposes.  So stay tuned for that.

The chart below shows the top ten producing wells during 2010.  Note that all the best wells continued to be horizontal Black River limestone producers drilled in the Southern Tier counties of Steuben and Chemung during the Aughts — except for Norse's Corey 2H, which is a horizontal Herkimer sandstone well, drilled in the Town of Smyrna, Chenango County. 

In terms of payout to the landowner — based on unit size, per acre, per year — the Corey 2H would probably be the Number 1 well statewide.  This would have to be double-checked by somebody with better computer access and more patience, but I believe this is the first time that's happened for such an easterly wildcat in New York State.

Well Name Operator Gas (MCF=1000 Cubic Feet) Value if $4.16 per MCF (EIA) Royalty if 12.5% (No Deductions) Unit Size Royalty per Acre per Year County (Town)
The Center at Horseheads 1 Anschutz Exploration Corporation   1,324,941 $5,511,755 $688,969 637.72 $1,080 Chemung
Gross D1 Talisman Energy USA Inc.   1,010,952 $4,205,560 $525,695 631.88 $832 Steuben
Dzybon 1 Talisman Energy USA Inc.   883,475 $3,675,256 $459,407 664.74 $691 Steuben
Nowlan 1 (626469) Chesapeake Appalachia, L.L.C.   809,355 $3,366,917 $420,865 634.51 $663 Chemung
Reed 1 Talisman Energy USA Inc.   677,876 $2,819,964 $352,496 515.42 $684 Steuben
Lovell 1323 Talisman Energy USA Inc.   636,843 $2,649,267 $331,158 636.08 $521 Chemung
(Big Flats)
Hartman, BJ 1 Talisman Energy USA Inc.   575,660 $2,394,746 $299,343 630.51 $475 Steuben
Harndon 1 Talisman Energy USA Inc.   569,990 $2,371,158 $296,395 639.19 $464 Steuben
Corey 2H Norse Energy Corp USA   511,776 $2,128,988 $266,124 87.53 $3,040 Chenango
Cotton-Hanlon 2 Talisman Energy USA Inc.   478,940 $1,992,390 $249,049 650.72 $383 Chemung
(Van Etten)

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