After finding success in Woodford, Newfield expands to white-hot Marcellus

Mikaila Adams
OGFJ Associate Editor

Newfield Exploration Co. and Hess Corp. have signed a joint exploration agreement in the Marcellus Shale play. The agreement covers up to 140,000 gross acres primarily in Susquehanna and Wayne Counties, Pennsylvania. Newfield will operate the new venture with each company having a 50% interest.

New territory
The venture marks Newfield's entry into the Marcellus shale, a play noted by Lee K. Boothby, Newfield president and CEO, to "likely" become one of the nation's largest natural gas resource plays. "Today, with substantially all of our acreage held-by-production in the Woodford Shale, it's a great time for us to enter an important new focus area and apply our expertise to a similar play of scale."

Newfield has focused much of its recent energy on the Woodford Shale. The company was featured as a Top 2008 Woodford Producer in the August issue of Oil & Gas Financial Journal. The company has amassed 165,000 net acres since entering the play in 2003. Roughly 300 horizontal wells have been drilled in the area with a resulting current gross operated production capacity of nearly 300 MMcfe/d.

The 2009 portion of Newfield's Marcellus Shale activities will be funded within the company's existing $1.45 billion capital budget. Drilling operations are not expected to begin until 2010.

Greg Hill, president of worldwide exploration and production for Hess believes the company is set to build on the unconventional expertise the company has from its operations in North Dakota's Bakken play, noting the company's "established technical capability in horizontal, multi-stage fractured wells" and "sound environmental operating practices"—something the pair may have to draw upon. Just six permits were issued in Susquehanna County versus 13 in August, potentially due to environmental issues, noted Pritchard Capital Partners.

September drilling permits
Despite concerns about natural gas storage—EIA reports for the week of October 5 noted storage injection of 69 bcf, putting total storage at an estimated 3.658 tcf, 15% above its five-year average— the Marcellus shale play has been a hotbed of activity.

An update from Pritchard Capital Partners notes drilling 184 horizontal permits issued in the play in September versus 91 in August.

The counties with the highest number of horizontal drilling permits in September were Bradford County (36), Tioga (31), Washington (23), Clinton, (15), Lycoming (14), Greene (14) and Lackawanna (11).

Terms of the transaction are dependent upon the companies finalizing additional agreements over the next few weeks.