PITTSBURGH—The Appalachian Basin has been home to many family-owned companies over the years. Now there’s a new twist on this familiar model, with a father-son duo heading up a private-equity backed venture. Clark Nicklas, CEO, and David Nicklas, president, co-founded Laurel Mountain Energy LLC in 2014. In 2015, they secured backing from Tudor, Pickering, Holt & Co.
Clark Nicklas has had a long association with the Appalachian Basin, including several ventures with Vista Resources Inc., a company that he founded in 1987. His son David Nicklas also worked at Vista in various roles from 2003 to 2014, including as its president.
Pittsburgh-based Laurel Mountain has focused its efforts north of the Steel City in portions of Butler, Clarion and Armstrong counties. It is working on the north end of the north-of-Pittsburgh play, an area where such operators as Rex Energy, EdgeMarc Energy Holdings, Penn Energy Resources, Range Resources and Snyder Brothers are active.
Laurel Mountain holds 20,000 net acres with favorable lease terms, with no primary expirations until 2020 at the earliest. “We also have very attractive unitization provisions that allow us to HBP positions with a relatively few number of wells,” said David Nicklas, speaking at Hart Energy’s recent DUG East Conference.
The company was attracted to the area because of its stacked reservoir potential. “We have the Upper Devonian at 5,100 feet, the Marcellus at 5,500 feet and the Utica-Point Pleasant at about 10,000 feet,” said Nicklas. Like its neighboring operators in this portion of the basin, Laurel Mountain is developing the Marcellus and Upper Devonian wet-gas resources. The deep, dry-gas Utica is largely being shelved for a later date, although EQT Corp. plans a Utica test nearby in Armstrong County this year.
So far, Laurel Mountain has drilled six wells. It has done extensive core analysis on its #1H Kennemuth, drilled in Clarion County. Results from analyses—done by both CoreLabs and Schlumberger—show that Laurel Mountain’s reservoirs exhibit favorable characteristics. Gas-in-place values range from 226 Bcf to 244 Bcf per section in the Upper Devonian and Marcellus intervals. This compares nicely to reservoirs in the southwest liquids-rich core area of the play, in which combined values for the two reservoirs typically range up to 255 Bcf per section.
VIDEO - Operator Spotlight: Home Sweet Home, David Nicklas, Clark Nicklas, Laurel Mountain Energy (2017)
Laurel Mountain contends that the southwest core can be extended to the northeast through its area. “We think that the production management approach will cause lower declines—and ultimately similar or better EURs—versus the southwest liquids-rich core, although with potentially slightly lower IPs,” said Nicklas.
A 20-inch trunk line for a rich-gas gathering system is currently being constructed, and Laurel Mountain expects to bring its six wells on line in first-quarter 2018. The company will connect its initial wells to Energy Transfer’s Galaxy station and Revolution cryogenic facility.
“The Marcellus wet-gas fairway development has been driven by the infrastructure expansion over time,” said Nicklas. “We see our opportunity as capturing the northern extent of that.”
The operator predicts positive economics across a range of commodity prices. Even in a pull-back type of environment, in which Henry Hub natural gas prices are $2.75 per Mcf, the well economics are still reasonable, noted Nicklas.
Laurel Mountain plans another eight to 12 wells on its acreage in 2018.
Peggy Williams can be reached at pwilliams@hartenergy.com.
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