Tim Dugan, executive vice president and COO of CNX Resources Corp. (left), and Chis Doyle, president and CEO of Huntley and Huntley Energy Exploration, speak at DUG East in Pittsburgh. (Source: Len Vermillion, Hart Energy)
PITTSBURGH—Tim Dugan, executive vice president and COO of CNX Resources Corp., said his company has “great confidence” in the Utica Shale play, with plans to drill 16 wells over the next two years. The 154-year-old Canonsburg, Pa.-based company recently began operations in the Utica play in eastern Ohio, where it built upon its experience in Southwestern Pennsylvania.
“During the past several years, [CNX Resources] has made significant advances in technology, reducing inefficiencies, cost and cycle time,” Dugan told attendees gathered for Hart Energy’s recent DUG East conference and exhibition. As of second quarter 2019, CNX Resources had five rigs running with a total production of 1.4 billion cubic feet per day (Bcf/d).
RELATED VIDEO: Where Do The Gas Plays Go Next? (View the entire session featuring Tim Dugan and Chris Doyle.)
Overcoming Challenges
Since the Utica is not as homogenous as the Marcellus, it presents different challenges with depth and pressure being the biggest, followed by geohazards, according to Dugan. He added that the play has a vertical depth of approximately 13,000 ft with pressure higher than the Marcellus.
“Drilling has been challenging for all operators, but we’ve had positive results. We’re excited because we’re moving from delineation to development,” he said.
Although CNX Resources has taken steps towards integrating new technologies in its operations, including the use of Big Data in making real time decisions, there is “still a lot of room for improvement,” according to Dugan.
Last year, the company announced a three-year agreement with Evolution Well Services for an all-electric fracking fleet in the Appalachian Basin. “The Evolution crew just finished their first pad and we see improvements there—cost savings from a fuel standpoint; it’s safer, environmental friendly and efficient,” Dugan said.
He expressed confidence in CNX Resource’s robust hedging program, low-cost structure and FT book to generate positive rate of returns, despite shrinking margins. “We’re comfortable and confident in the capital we’re spending and what we’re getting from the capital,” he said.
CNX Resource’s updated capital program is expected to position the company to deliver approximately $500 million in free cash flow in 2020.
Dugan added that stacked-pay development plays a major role in providing the flexibility to move gas through wet or dry outlets, ability to blend gas, minimize processing fees and boost rate of returns.
“Our core is expanding as we delineate and move into development mode in the Utica and Marcellus,” he said.
ARTICLES FROM DUG EAST 2019:
- Attacking The Perils Of Longer Laterals, Parent-Child Well Intervention
- Appalachia Is A Model Region For Petrochemical Profitability
- Key Players Eye Increased Production In Utica
Expanding Core
Chris Doyle, president and CEO of Huntley and Huntley Energy Exploration (HHEX), also based in Canonsburg, Pa., said that there is an opportunity for a disruptive change in the industry in the area of completions.
“We do things differently at HHEX around completions efficiency, including a foot-by-foot analysis to decide the best way to complete wells,” he said. “Beyond just perf efficiency, fluid distribution throughout the job leads to more clusters and complexity. That approach has an opportunity for disruptive change in the industry.”
He added that the fundamental challenge in the basin is capital availability, diminishing core inventory with very thin margins.
Doyle said that the core Marcellus Shale Formation is shifting to Allegheny and Westmoreland counties. He stressed on the importance of defining a commercial core in the Marcellus, where his company develops natural gas resources.
“To define a core, the rock is certainly most important but hedging, firm transportation (FT) and margins will define and establish a new commercial core,” Doyle said.
HHEX currently has one rig actively drilling its eighth well in the basin. “Our strategy is focused on delivering differential subsurface results and margins, while maintaining a pristine balance sheet,” he said.
Faiza Rizvi can be reached at frizvi@hartenergy.com.
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