Chief Oil and Gas
Dallas, Texas-based Chief Oil and Gas (aka Chief Oil & Gas Appalachia) is a privately held, independent exploration and production company. Its Marcellus shale leasehold was reported in November, 2009 to be in excess of 560,000 acres in Pennsylvania and West Virginia.
Latest Operating Developments
As of November, 2009, the company had already drilled 39 Marcellus shale wells--28 had been horizontal and 11 vertical. These spanned 9 different counties in Pennsylvania and West Virginia. It had 20 horizontal wells still awaiting completion and 7 more that were either in the process of being drilled or else were to be spud before year-end.
In 2010, Chief had 5 rigs operating in its Marcellus drilling program--at least 3 of these were fit-for-purpose ones. It planned to drill 50 Marcellus shale wells during 2010. The company had more than 100 employees working on Marcellus development.
Late 2007 to 2008 Development Timeline
During 2008 Chief's primary area of operations in the Marcellus shale was in northeastern Pennsylvania particularly in Lycoming and Bradford County.
Ramp up of drilling in Lycoming Co.
Chief had been working with Union Drilling Inc. in Pennsylvania who was operator for several Marcellus wells that Chief had drilled in northeastern Pennsylvania's Lycoming County. For example, a late 2007 report found that the company had drilled two Lycoming Co. wells in the township of Mifflin and a third one in Watson. A fourth well had been planned for Penn Township. In May, 2008 Chief opened a field office on Fairfield Road in Montoursville, a suburb of the city of Williamsport located in the county.
In September, 2008, Chief was reported to have paid a fine to the Susquehanna River Basin Commission of $250,000 for failing to comply with limits on water withdrawals used for drilling gas wells in the Basin.
An October, 2008 report noted that Chief had been very active leasing property in Bradford County, Pennsylvania with 627 leases having been recorded with the County Registrar of Deeds. Only Chesapeake Appalachia LLC had recorded more.
In November, 2008, a report appeared about yet another Lycoming Co. drilling project Chief had underway near Hughsville, Pennsylvania. It was on the Barto farm off Beaver Lake Road. Again, Union Drilling was operating the rig.
A report later in November found Chief hydro-fracturing its second well on the Kensinger farm also located in Hughsville. Richard Thurston had been the on-site project manager.
An early December, 2008 report identified Chief as having drilled again in Mifflin Township. It is located approximately twenty miles west of Hughsville and about seven miles north of Jersey Shore. This vertical well was also in the process of being hydro-fractured.
2009 Development Timeline
Chief diversified its Marcellus shale exploration activity in Pennsylvania during 2009 spilling out from the northeastern part of the state into the central and south central counties.
Leasing and seismic testing in south central PA
A May, 2009 report noted that Chief had been conducting seismic testing near Portage Township, Cambria County and in Middlecreek Township, Somerset County, Pennsylvania. These two regions had been targeted for gas exploration. The area in Portage Township to be studied had been in the vicinity of Bens Creek. It is in the northern part of Portage, yet the survey area may have even stretched into Washington Township. The study area covered 10.3 miles cutting across the Bens Creek area. An earlier report (Jan, 2008) indicated that during 2007, Chief had signed over 300 leases in Somerset County through its agent, Keeton Group LLC. By May, 2009, the company was planning to drill test wells there from six to twelve months later.
Appalachian Geophysical Services was to conduct the seismic testing in both Cabria and Somerset counties. Appalachian Geophysical personnel typically plant small explosive charges in a series of test holes each ten feet deep. Once the charges are detonated, acoustic information echoes back up from the subsurface features and is picked up by sound equipment on a logging truck.
Similar seismic testing was also underway in Blair County, PA.
Drilling in central PA
A June, 2009 report found Chief drilling in rural Clearfield County's Chest Township. This well site was located on the Hutton farm along Punkin Ridge Road, State Route 3003, LaJose RD. It had been Chief's second Marcellus shale well in this central Pennsylvania county.
The Enerplus alliance
In August, 2009 Enerplus announced that it had entered into agreements with Chief and affiliates to purchase a 30% share in the latter's prospective drilling rights for Marcellus shale. The announcement stated that, prior to the acquisition, Chief had owned a 72% interest in 540,000 gross acres located mostly in Pennsylvania's Marcellus shale fairway. Enerplus paid a total of $406M (US) or ($3,500/net acre). $162M was to be paid up-front, with the balance contributed over a period of four years in the form of payment--that is, a carry--for 50% of Chief's future Marcellus shale drilling and completion costs. The deal was to close in September, 2009. Under terms of an area of mutual interest side-agreement Enerplus was entitled to participate in any future Marcellus land acquisitions Chief and/or its affiliates made on exactly the same terms. Chief was to be well operator.
This Enerplus announcement noted that Chief had drilled 10 vertical and 21 horizontal Marcellus wells. Nine were producing at the average rate of 8.2 Mmcfe/d gross (1.8 Mmcfe/d Enerplus). It also mentioned that Chief maintained regional offices in Wexford near Pittsburgh, and field offices in Uniontown and Montoursville (Williamsport).
Drilling plans for Lycoming County
A year end 2009 report mentioned that Chief was in the process of drilling its 14th well in Lycoming County, PA and planned an additional 15 wells there during 2010.
Chief Gathering LLC, a Chief affiliate, was in the process of building pipelines to collect gas from Chief's various wells across Pennsylvania. According to a November, 2009 report, Chief had been building pipeline capacity for approximately one year and had established interstate pipeline interconnects in Bradford, Clearfield, Fayette (2), Lycoming (2), and Susquehanna counties. Enerplus had also entered into a long-term agreement with Chief Gathering LLC for taking care of gathering, dehydrating and compressing its share of gas production resulting from the deal.
2010 Development Timeline
In January, 2010 Caiman Energy LLC announced that it had entered into an agreement with Chief to provide midstream gathering services for its Marcellus shale production in a nine county, tri-state area that comprised 267,000 acres of Chief's leasehold. As part of this agreement, Caiman purchased Chief's interstate taps and right-of-ways in the included areas.
A news item appeared in June, 2010 that mentioned Chief had been leasing land near Back Mountain in Luzerne County, Pennsylvania, home of the City of Wilkes-Barre. The company appeared to be planning a horizontal well cutting across a 130 acre parcel belonging to the Back Mountain Recreation Complex. No drilling pad was to be placed on the property. Rather the lease was for horizontal drilling to take place underneath the Complex's property. The news item implied that the surrounding land had already been leased. The terms of the lease were an up-front payment of $12.50/acre and a 20% royalty on any gas production.
2011 Development Timeline
In January, 2011 it was reported that Chief was seeking a permit for drilling the Marcellus shale formation in the Friendsville area of Garrett County, Maryland. Samson Resources is the only other company active in this county, although Chesapeake Energy has operations in neighboring Mineral County, WV.
Also in January, there was a news account of a minor spill of flowback water at a Chief well pad in Blair County's Juniata Township off Route 164. The pad was located on a mountaitop above the headwaters of Bobs Creek. The article mentioned that Chief had been drilling in Blair Co. since early in 2010. 4 to 5 wells had been drilled at the site to date.
- Chief has been pursuing a strategy of pivoting off of its strong leasehold and drilling positon in the heart of the northeastern Pennsylvania Marcellus play to build up its portfolio in the central and south central portion of the state.
- Through its up front payment and 50% carry with Enerplus, Chief should have sufficient financial wherewithall to pursue a diversified exploration program in the Marcellus shale.
Key Executive Contacts
- Trevor Rees-Jones is Founder, President and CEO of Chief Oil & Gas
- Michael Radler is Chief Operating Officer.
- William Buckler is Chief's Senior Vice President of Operations.
- Tony Carvalho is Senior Vice President of Geology.
- Kristi Gittins is Vice President of Communications.
- Terry Bossert is Vice President of Governmental Affairs.
- Jason de Wolfe is Chief's Regulatory Manager.
- Richard Adams is Senior Regulatory Advisor.
- Daria Fish is Chief's Community Affairs Officer, Appalachian Region.
- Ben McCue is a Government Affairs Specialist.
- Mike Hallford is Regional operations manager.