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Pennsylvania shale drilling has National Fuel Gas upbeat

National Fuel Gas Co.’s first well drilled into a different shale formation on land that it controls in western Pennsylvania has shown promising results.

The Amherst-based energy company said the first well that it drilled into the Geneseo Shale produced as much as 14.1 million cubic feet of gas per day, at its peak, and averaged 8.6 million cubic feet per day during its first 30 days of production. The Geneseo Shale is a layer located above the Marcellus Shale, the geographic formation that has attracted most of the attention from drillers during the first few years of the shale gas boom.

While the Geneseo Shale is generally thinner than the Marcellus and varies in thickness by location, according to geologists at Penn State University, it has been targeted as holding potential for drillers as another possible source of significant quantities of natural gas, beyond the Marcellus Shale and the Utica Shale, which is even deeper below the surface than the Marcellus.

Ronald J. Tanski, National Fuel’s president and CEO, said the company was pleased with the results from its initial Geneseo Shale well, which is located in Lycoming County, Pa., and plans to drill additional wells into the formation before the end of summer to further explore its potential.

“Both the Utica and Geneseo shales look to hold significant long-term development potential,” Tanski said.

In comparison, National Fuel last fall began production on six new Marcellus wells in Lycoming County that had a peak 24-hour production rate averaging 15.6 million cubic feet of gas per day, about 10 percent more than the peak production on the Geneseo Shale well.

Last summer, the company tested a well in McKean County, Pa., that drilled across more than a mile of the Utica Shale. That well had a peak 24-hour production rate of 8.5 million cubic feet per day and averaged 6.8 million cubic feet over a week.

That peak production rate was in line with some of the exploratory Marcellus wells that the company has drilled in the western portion of its acreage.

National Fuel controls about 780,000 acres of land across the Marcellus Shale region in Pennsylvania, where it has the rights to drill. So far, most of its activity has been centered on land it leases on the eastern portion of its holdings, but the company also has been drilling a handful of wells on its western acreage.

National Fuel said that it already has identified about 2,000 potential drilling sites for wells that tap into the Marcellus Shale and would be profitable to operate with natural gas prices at $2 to $4 per 1,000 cubic feet.

The company plans to spend between $550 million and $650 million during the fiscal year that ends in September on drilling new wells, using three horizontal drilling rigs on the eastern portion of its Pennsylvania land holdings. National Fuel plans to increase its drilling budget by 17 percent during the next fiscal year, which begins in October, to between $650 million and $750 million.

“We continue to believe our current pace of development is appropriate,” despite the challenges of drilling profitably with natural gas prices hovering around $4.50 per 1,000 cubic feet, Tanski said.

The company expects its natural gas production to rise by about 28 percent this year to around 155 billion cubic feet, with output forecast to jump by an additional 29 percent during the fiscal year that begins in October, to about 200 billion cubic feet.

National Fuel recently finished drilling nine wells at a site in Elk and Cameron counties in western Pennsylvania but said that it does not expect to begin production there until a gathering pipeline system is completed to help bring that natural gas to market. The company currently has two drilling rigs operating in the western portion of its land holdings.