PITTSBURGH—Top executives from three private-equity-funded companies offered rare public insights into their business strategies at Hart Energy’s recent DUG East Conference & Exhibition. These firms all appreciate the charms of the Appalachian Basin plays, but each is focused on different portions of the Marcellus and Utica reservoirs, including preferences for phases of the business cycles and phases of production.

Slimholes; Dry gas Utica

EdgeMarc Energy Holdings LLC, based in Canonsburg, Pa., has been in business since 2012. It is backed by significant investments from Goldman Sachs’ merchant banking division and the Ontario Teachers’ Pension Plan, said Callum M. Streeter, COO.

Initially, the firm concentrated on developing a 25,000-acre Marcellus and Upper Devonian position in Butler County, Pa. To date, it has drilled 52 wells on that asset, 22 of which are completed.

As part of an effort to reduce well costs, EdgeMarc has been experimenting with slimhole wells in Butler County. “This is an old idea that we are reinventing, downsizing the entire wellbore,” Streeter said. “We like to think of ourselves as cutting edge, not leading edge.”

In Butler County, EdgeMarc realized it was treating in the 6,000- to 7,000-psi range, while its wells were sized for 10,000 psi pressures. “We saw we had all kinds of bandwidth on pressures, so we said, ‘why don’t we try downsizing the well?’”

It has drilled seven such tests to date, which Streeter called Ecowells. The approach uses 7-in. casing in place of the usual 9 5/8-in. casing, with subsequent strings sized accordingly. Savings in pipe and cement are significant, and the one Ecowell completed to date by EdgeMarc is performing in line with the traditionally drilled offsets, said Streeter. He estimates that the approach cuts 10% to 15% off total drilling costs.

EdgeMarc Energy Holdings holds assets in both the Marcellus and Utica plays; its current focus is in the dry gas Utica in Monroe County, Ohio. (Source: EdgeMarc Energy Holdings, DUG East 2016 presentation)

Recently, EdgeMarc has been looking hard at the Utica play. It holds two positions in Ohio—one in the dry gas window in Monroe County and one in the wet gas window in Washington County. On its 12,000-acre Monroe asset, it has drilled four wells and completed one, and on its 16,000-acre Washington asset it has drilled and completed one.

Its star Utica well is its Moonraker #2PPH, in Monroe County, which it treated with white sand and ceramic proppants. The 32-stage frack job targeted a production rate of 2 million cubic feet per day (MMcf/d) of gas per 1,000 ft of lateral. “It’s not a particularly long lateral—about 4,800 ft. But we are very pleased with its results,” Streeter said.

Going forward, EdgeMarc plans to focus on its Monroe County acreage. “We were drilling up until about six weeks ago in Monroe County; our plan is to get active again in Monroe County later this year. We like the economics on dry gas better at present,” Streeter said. For the balance of 2016, the company also plans to complete three DUC wells in its inventory.

“Right now, we’re about building sustainability and recoveries, and we will be ramping accordingly as commodity prices allow,” he said.

Westmoreland County Marcellus

A different strategy is being pursued by Apex Energy LLC. This Wexford, Pa.-based entity, backed by Apollo Global Management, is headed by CEO Mark Rothenberg.

“When we came to the Appalachian Basin in 2013, we were focused on finding where the high-quality reservoirs were,” Rothenberg said. “We felt very confident that the Marcellus was going to be the driving force of the supply—it is the low-cost producer in the U.S., and that is where we wanted to be.

"We felt like we had to specialize in one of the phases of development. Most companies fill the full-field development space; we were interested in focusing on the early phases of project development. We wanted to figure out what the market was missing.”

Its target area is in western Westmoreland County, Pa., in the dry gas Marcellus. Apex saw this area as geologically comparable to the areas already recognized as the best-of-the-best in the Marcellus—Susquehanna, Washington and Greene counties, Pa.

Apex Energy’s holdings in western Westmoreland County, Pa., are in the dry gas portion of the Marcellus play. (Source: Apex Energy, DUG East 2016 presentation)

Apex began to build a positionwholly focused on the initial project-build phase of its asset. “We are striving to build the most economic inventory of drill-ready laterals in the Appalachian Basin.”

To do that, it is consolidating acreage, proving well performance, establishing takeaway capacity and building an inventory of locations. It has accumulated about 30,000 acres to date, and drilled and completed multiple wells.

"We're extremely pleased with the well results," Rothenberg said. Apex realized EURs of 1.7 Bcf to 2.4 Bcfper 1,000 ft of lateral. The economics of its wells are second only to those in the very strongest Marcellus wells in Susquehanna County

“We are able to show that our EURs are as good as the wells in Washington and Greene counties.” Apex’s extensive horizontal inventory averages 10,000-ft laterals, in contrast to the often typical 5,000-ft lengths of wells in those areas.

“Our Westmoreland project is ready for full-field economics, and it has superior economics and superior inventory than what everyone else is advertising,” said Rothenberg.

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North Of Pittsburgh

Rick Weber, chairman and CEO of PennEnergy Resources, has a long history working in the Marcellus. Prior to founding PennEnergy in 2011, Weber led Atlas Energy Inc., which was merged in 2010 with Chevron Corp. (NYSE: CVX) in a $4.4 billion deal.

PennEnergy is backed by more than $450 million of equity commitments from EnCap and Wells Fargo, with stakes also contributed by PER management.

“We integrate geology, reservoir characteristics, actual production and drilling economics to find the core of the plays,” Weber said.

The company has put its stake in the ground in Beaver, Butler and Armstrong counties, north of Pittsburgh. Beaver County is in the wet gas window of the Marcellus, and the Butler/Armstrong acreage is in the dry gas portion.

PennEnergy’s chosen area offers that promised land of resource plays—stacked reservoirs. “The Marcellus is clearly our big get, and that’s our target, but we love the stacked reserves in this region,” Weber said.

Positions in both the wet gas and dry gas Marcellus are the centerpieces of PennEnergy Resources’ efforts in the Appalachian Basin. (Source: PennEnergy Resources, DUG East 2016 presentation)

The core of the Marcellus extends across PennEnergy’s acreage; the core of the Upper Devonian play extends through its Beaver County position; and geologic and geophysical data indicate that increased porosity is present in the Point Pleasant across the central and southern portions of PennEnergy’s acreage.

To date, PennEnergy has accumulated 74,000 net acres. It has 36 horizontal producing wells currently producing 100 MMcf/d of gas equivalent. Production histories on PennEnergy’s wells show steady, consistent rates with low declines, according toWeber.

“Nothing resonates more than actual production,” he said. In its dry gas acreage, its wells average EURs of 2.7 Bcf per 1,000 ft of lateral, and in its Marcellus and Upper Devonian wet gas area, its average is 2.36 Bcfe per 1,000 ft. The company has built an inventory of some 900 actual horizontal locations that average 7,000-ft projected lateral lengths.

“When it is all said and done, we are a rate-of-return [ROR] company,” Weber said. “We are always looking at expected ROR for drilling new wells. Our current internal RORs are in the 30% to 40% range at strip prices, which exceeds our internal ROR hurdles. We do intend to put a rig back out this fall.”

Peggy Williams can be reached at pwilliams@hartenergy.com.