The announcement was made on Monday, June 13th. Marcellus Shale natural gas development will proceed in the north-central Pennsylvania counties of McKean, Elk, and Cameron. The pact is between Dallas affiliate IOG CRV – Marcellus LLC and Seneca Resources Corp. Seneca Resources Corp. is the production and exploration subsidiary of National Fuel (NYSE: NFG), which is based out of Williamsville.
In a news release, the companies stated that an agreement was reached in regards to an amended extension of the joint development agreement the companies have for assets in McKean, Elk, and Cameron counties. So far, 39 joint development Marcellus Shale wells were completed and went to sales or were drilled and are nearing completion. There are a total of 75 joint development Marcellus Shale wells, so 36 will be developed under the amended agreement. In addition, IOG was given the option to partake in a 7-well Marcellus pad to be completed before December 31st, 2017. If IOG opts to take part in the 7-well Marcellus pad, there would be a total of 82 wells under the joint development agreement.
Presently, IOG has an 80% working interest in the joint development wells. The other 20% working interest is held by program operator Seneca. The contract’s royalty structure has also been amended.
The President and CEO of National Fuel Gas Company, Ronald Tanski, issued the following statement regarding the deal, “For National Fuel, it allows us to leverage the competitive advantage of our low cost, fee acreage in the Marcellus and reduce the level of capital investment in our upstream business over the next two years, while maintaining operational efficiencies and providing the throughput necessary to support our pipeline expansion projects. Given National Fuel’s large Appalachian footprint and the alignment of our strategic goals, we think there could be additional opportunities to work with IOG in the future to accelerate value creation for our shareholders.”
On June 10th, National Fuel shares closed at $56.04.