Rachael Seeley, Editor
Royal Dutch Shell PLC has signed two separate deals that will enable it to exit its positions in the Haynesville shale and Pinedale field in exchange for $2.1 billion in cash and additional acreage in the Utica and Marcellus shales in Pennsylvania.
The deals will allow the company to focus its US gas program more intently on the Utica and Marcellus shales.
Marvin Odum, Shell's Upstream Americas director, said: "With this announcement we are adding highly attractive exploration acreage, where we have impressive well results in the Utica, and divesting our more mature Pinedale and Haynesville dry gas positions."
Shell announced the deals in August. In one agreement, Shell agreed to sell 100% of its holdings in the Haynesville shale to Vine Oil & Gas LP and its partner Blackstone, a private equity group, for $1.2 billion cash. Shell is selling 107,000 net acres, including 418 producing wells, in the north Louisiana play. Net production totaled 250 MMcfd on July 1. The agreement is expected to close later this year and carry an effective date of July 1.
In the other agreement, Shell agreed to exchange 100% of its Pinedale asset in Wyoming for $925 million and 155,000 net acres in the Utica and Marcellus shales in Pennsylvania from Ultra Petroleum Corp.
Shell entered Pinedale field in 2001, and net production averaged 190 MMcfd in the second quarter. The company's position includes 19,000 net acres of leasehold, 1,108 gross wells and associated facilities, and an average 0.7% overriding royalty interest in 11,500 acres.
Shell is set to acquire from Ultra 63,000 net acres in the Marshlands area and 92,000 net acres in the Tioga area of mutual interest (AMI), an unincorporated joint venture area. Both areas are in Tioga County, Pa. Once the deal closes, Shell will have 100% interest in the Tioga AMI. In the first 6 months of 2014, net production from both areas averaged 109 MMcfd.
Extending the Utica
Shell's focus on Appalachia comes after the company drilled two discovery wells that extended the core of the Utica shale beyond southeast Ohio and western Pennsylvania and into Tioga County in north-central Pennsylvania.
Shell said its Gee discovery well was drilled over 100 miles northeast of the nearest horizontal Utica producer. It flowed back at an initial rate of 11.2 MMcfd and has been online for nearly a year. The Gee well was drilled to a total measured depth of 14,500 ft with a 3,100-ft lateral and utilized 13 frac stages.
The second well, Neal, has been online since February and had an observed peak flowback rate of 26.5 MMcfd. It was drilled to a total measured depth of 15,500 ft with a 4,200-ft lateral and utilized 16 frac stages.
"Last year, we refocused our resources plays strategy to select fewer plays with specific scale and economic characteristics to best suit our portfolio. The Appalachian basin is one of those areas, and these two high-pressure wells both exhibit exceptional reservoir quality," Odum said in a press release.
Shell said the Gee and Neal discoveries extend the core of the Utica into an area where the company will hold 430,000 net acres of leasehold after the agreement with Ultra Petroleum closes. Results from four additional Utica wells in Tioga County are expected later this year.
