American Oil and Gas Reporter - July 2016 - 66

duced water and avoid disposal costs.
"The key drivers in our continuing
cost reductions include a frac contract
executed in September 2015 and a significant reduction in water costs," Seneca
Chief Operating Officer John McGinnis
says in the company's first quarter earnings
report. "We now average less than $1 a
barrel in water costs, compared with about
$3 early in our development program."
Boulware says Seneca started its own
water logistics company, Highland Field
Services, to handle a substantial portion
of the fluids used in its operations.
"Having invested $20 million in in-

frastructure-including a centralized storage
facility, a treatment plant, and a pipeline
delivery network-Seneca has reduced
significantly the amount of freshwater it
uses in drilling operations by reusing
produced fluids in future completions,"
Boulware explains. "Seneca also used
Highland's pipeline delivery network to
transport water from its centralized storage
facilities directly to well pads, reducing
truck traffic on local roadways."
Moving forward, Seneca's goal is for
freshwater to account for no more than
half the fluids it uses in well completions,
and Boulware says the company expects

recycling produced fluids to save an average of $500,000 a well.
McGinnis reports Seneca drilled and
completed its first Clermont, Pa., area
horizontal in the Utica/Point Pleasant
play at an estimated cost of just over $7
million.
"This well was drilled with a relatively
short, 4,500-foot lateral to better understand per-foot productivity," McGinnis
reports. "Once we have completed all 11
wells on this pad (10 in the Marcellus),
we will bring them into production later
this summer."
He adds that the rig was moved to another pad in the Clermont area, where it
was drilling Seneca's second Utica well.
"This well is scheduled to be tested early
in 2017," McGinnis says.
On the marketing front, he says the
company plans to continue layering in
fixed-price sales and firm sales tied to financial hedges, when the opportunity
arises. "This has allowed us to slowly
grow production and realize acceptable
pricing during an exceedingly difficult
period," McGinnis states. "For the remainder of our fiscal 2016, the vast majority of our natural gas production-forecast around 64 Bcf-is locked in, both
physically and financially, at an average
realized price of $3.20, which is net of
firm transportation."
Joint Development
National Fuel Gas Company announced
June 13 that Seneca Resources, its wholly
owned exploration and production subsidiary, and IOG CRV-Marcellus LLC,
an affiliate of IOG Capital LP, along with
funds managed by affiliates of Fortress
Investment Group LLC, had agreed to a
modified extension of their joint development agreement, which included a
commitment to develop additional Marcellus Shale natural gas assets in northcentral Pennsylvania.
Under the terms of the agreement,
Seneca and IOG committed to jointly participate in a program to develop 75 Marcellus wells in the Clermont/Rich Valley
area of Pennsylvania. IOG initially committed last December to develop 42 wells
with an option to participate in 38 more.
At that time, according to the announcement, 39 of the 75 joint development wells had been either completed
and turned to sales, or were drilled and
in the process of being completed, leaving
36 wells to be developed under the revised
joint development agreement.
IOG also was granted an option to
participate in a seven-well Marcellus pad
that will be completed prior to Dec. 31,
2017. If IOG chooses to participate in
the seven-well Marcellus pad, the company

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