All this natural gas, and so little pipeline capacity to move it. This summer, another “Rambo” Marcellus well was hit in Pennsylvania. That’s good news and not so good news. Here’s why:

Chesapeake Energy CEO Doug Lawler recently reported the company has brought on line an experimental well drilled in Wyoming County, Pa., with an initial production of 61 million cubic feet equivalent per day. That’s another monster well. The most productive onshore shale well known is EQT’s Utica well in Greene County, Pa., with a 72.9 MMcfe/d IP rate. It was drilled in July 2015.

Fracking of the Chesapeake McGavin well in Wyoming County unleashed 32 million pounds of “Hell on Earth” — frack sand into a 10,500 foot lateral. The well cost was estimated to be $8.5 million — more expensive than others they’ve drilled in the area, but a bargain with those kinds of flow rates. There were 70 frack stages, and the well was connected to a pipeline on July 28.

Transportation issues
The Marcellus has been producing 2 billion to 2.2 billion cubic feet a day, according to Chesapeake officials. That’s capacity as far as pipe being able to get gas out of the field.

The primary reason for capping production is lack of pipelines to transport the gas to other markets, claimed the Chesapeake CEO. Companies like Chesapeake that operate in multiple plays have no problem with stopping drilling in one play if/when it becomes less profitable than others.

From a capital allocation perspective, will Chesapeake be adding rigs in 2018 in Northeast Pennsylvania?

Lawler indicated the company may deploy less capital and allow more capital to be put on other assets until additional pipeline takeaway capacity is gained. That means royalty payments will be slower to arrive as well.

Source: Marcellus Drilling News