Penn Virginia presses Appalachian horizontal coalbed methane work

By OGJ editors

HOUSTON, July 28 -- Penn Virginia Corp., Radnor, Pa., said it controls 650,000 acres of prospective horizontal coalbed methane leasehold in the Appalachian basin.

The company's 2004 capital budget called for the development of 8,000 acres, but with the redesign of drilling patterns Penn Virginia now expects to develop 11,000 acres with the same number of wells with an associated increase in 2004 drilling capital and production.

The acreage is in southern West Virginia, western Virginia, and eastern Kentucky.

Penn Virginia drilled 11 conventional wells and three horizontal CBM wells in West Virginia and Virginia in April-June 2004. All were successful save one horizontal CBM well under evaluation.

Each horizontal CBM well produces from two stacked lateral patterns. The company has drilled 24 successes in 25 attempted horizontal CBM wells since 2001.

The company told security analysts that a horizontal well has 75 MMcf estimated ultimate recovery, pays out in about a year, produces 85-90% of the gas in the first five years, and yields an internal rate of return twice to four times that of a conventional well.

Despite pipeline curtailments this year, production from the horizontal CBM wells rose to 5.2 MMcfe in the 2004 three months from 1.8 MMcfe in the same 2003 period.

The company's total Appalachian production in the quarter was 27.3 MMcfe, up 5% from the same quarter of 2003. Pipeline curtailments under interruptible contracts began in May, and Penn Virginia has acquired long-term firm transportation on one system starting in November 2004.