CONSOL Ends 2011 with 3.5 Tcf of Proved Gas Reserves
During 2011, CONSOL Energy Inc. announced net proved reserve adds through extensions and discoveries of 517 Bcf. The company's estimate of 2011 drilling and completion costs incurred and directly attributable to extensions and discoveries was $237.4 million. This number, when divided by the extensions and discoveries of 517 Bcf, yields a drill bit finding and development cost of $0.47 per mcf. CONSOL Energy attributes this excellent result to superb geology, continued refinement of drilling and completion technology, and its held-by-production (HBP) acreage in the Marcellus Shale. The HBP acreage enables the company to achieve economies of scale by drilling multiple wells from the same pad. During 2011, CONSOL Energy believes it achieved an industry first in the Marcellus Shale, by drilling 10 wells from its Hutchinson pad, in northwestern Westmoreland County, Pa.
CONSOL Energy also replaced 528 percent of gas production, when considering all increases from extensions and discoveries (517 Bcf), as well as performance (306 Bcf) and price (-10 Bcf) revisions. Production in 2011 was 154 Bcf (net to CONSOL).
Total proved reserves, as of December 31, 2011, were 3.480 Tcf. This represents a 7 percent decrease versus the 3.732 Tcf at year-end 2010. However, 2011 proved reserves would have been 911 Bcf higher than the 3,732 Bcf, had it not been for 531 Bcf related to the divestitures of the Antero overriding royalty interest and the joint venture with Noble Energy, and the elimination of 380 Bcf proved undeveloped reserves (PUDs) no longer expected to be developed within the next five years. The company is redirecting its drilling capital away from conventional and coalbed methane (CBM) formations and towards the Marcellus and Utica shales. In the future, if CONSOL decides to drill the conventional and CBM formations at a faster pace, these PUDs could return to the proved reserves.
Performance revisions to proved developed producing (PDPs) increased reserves by 306 Bcf, as wells drilled before 2011 produced above earlier expectations. No reserves were added through purchases, as the company did not complete any proved property acquisitions in 2011. Price revisions decreased proved reserves by 10 Bcf.
The proved reserve estimate for 2011 was prepared by CONSOL Energy and audited by Netherland, Sewell & Associates, Inc. The following table shows the summary of changes in reserves. Over 99 percent of the company's proved reserves are gas.
On January 17, 2012, CONSOL reported 78 horizontal wells were drilled and 57 wells were turned online in the Marcellus Shale last year. Total well costs averaged $5.0 million. The expected ultimate recovery (EUR) averaged 5.2 Bcf per well. The average drilled lateral was 3,850 feet, with an average treated portion of 3,367 feet. Maximum 24-hour production averaged 5.0 MMcf per well per day, while 30-day production averaged 3.5 MMcf per well per day. Total daily production from the Marcellus Shale grew from 40 MMcf per day as of December 31, 2010 to 77.5 MMcf per day (net to CONSOL) as of December 31, 2011.
The reserves from our 2011 Marcellus Shale program averaged 5.2 Bcf per well. When one considers that CONSOL's treated laterals averaged 3,367 feet, this means that the company booked about 1.55 Bcf of reserves for every 1,000 feet of lateral.
Year-end 2011 proved reserves were only 39 percent proved undeveloped, as compared to 48 percent at year-end 2010.
The company also has total proved, probable, and possible reserves (also known as "3P reserves") of 20.2 Tcf as of December 31, 2011. This is an increase of 5.9 Tcf, or 41 percent, in 3P reserves from the 14.3 Tcf reported at year-end 2010. This increase is even more impressive when one considers that the company sold one-half of its Marcellus position during 2011. There could be further upside, too, because the 3P reserves are not assuming any contribution from the Utica Shale. The company's 3P reserves have been determined in accordance with the guidelines of the Society of Petroleum Engineers Petroleum Resources Management System (SPE-PRMS).