National Fuel has recently extended their joint development agreement with IOG Capital LP. The Marcellus Shale agreement is designed to cover 75 Marcellus Shale wells, of which 39 have presently been completed. 36 more wells will be completed in the Marcellus Shale, which could be extended to a total of 82 wells by 2017. The extension of this joint development agreement is a direct result of renewed investor interest within the Marcellus Shale and the rebounding per barrel oil prices that are breathing new life into the already solid industry.
IOG Holds 80% Working Interest
IOG Capital LP holds 80% working interest within the Marcellus Shale wells, with Seneca another 20% partner. Due to improved well costs, IOG Capital LP has been able to come considerably under budget through the duration of the joint development agreement. It was initially expected that IOG Capital LP would have to fund $380 million for its share of the wells. Instead, it was able to fund $325 million at a savings of $55 million. This could have very significant ramifications for the rest of the oil and gas industry, as it marks a considerable decrease in the costs of creating new wells. It’s possible that many companies will begin developing even further now that it is known that both technology and new techniques have made well drilling so cost effective.
Production to be Gathered by National Fuel
National Fuel will be gathering the production of the wells, which could range from 75 to 82 in number. The production will be handled by National Fuel’s Gathering system, the Clermont Gathering System. Over the next three years, the CEO of National Fuel has stated that the joint development deal will save about $155 million in total in capital costs. Again, this is an incredible cost savings within an industry that needs to leverage cost savings to remain competitive. National Fuel already has a very large presence in the area and the joint partnership within Marcellus allows both companies to operate more effectively. National Fuel shares have gone up since the announcement. Both IOG and National Fuel are optimistic about their ability to produce significant profit for their partners and shareholders.
These new developments within Pennsylvania and the Marcellus Shale indicate an industry that is poised for growth. Not only is it more affordable to develop these wells, but these wells are also more productive and oil and natural gas prices are rising. It’s very likely that 2016 and 2017 will see strong increases in oil and gas development, and the companies that are investing now will be paid large dividends. Much of this is due to the technology and services that have arisen to make development and production more affordable. Keystone Containment Contractors offers turn-key safety services that reduce costs while also improving work-site safety.