American Oil and Gas Reporter - May 2020 - 50

SpecialReport: Dry Gas Strategies
ceived feedback that this is a very positive
step for the natural gas industry."

When gas prices recover, Jonah Energy plans to resume development of the Jonah Extension (Normally Pressured Lance) play, which lies south and west of the Jonah Field.
The company says the 140,000 acres in that new play may support as many as 3,500 directionally drilled wells.

accounts for 30% of company revenues,
but its principal targets remain dry gas.
Jonah Energy operates more than 2,400
wells across the Jonah Field's 24,000
acres. When it was discovered in the
1990s, the leasehold had an estimated
original resource of 19.2 trillion cubic
feet, the company reports. Immediately
south and west of this play, the Normally
Pressured Lance or Jonah Extension Project, encompasses 140,000 acres, with
company estimates of as many as 3,500
directionally drilled wells possible.
The company has seen some slight increases in gas prices and that is positive
news for those in Southwest Wyoming who
make a living off dry gas, Ulrich says,
adding "Forecasts show a steady climb in
prices. They certainly are not where we
want, but prices are better than they have
been. We are hoping that holds as we move
forward through the summer and into 2021."
Future Jonah Field and NPL development will use new vertical and horizontal
well technologies, Ulrich says, pointing
out the company also is relying on improvements to reduce supply and overall
well costs.
"There is growing concern in the industry
as a whole about securing capital, particularly for new projects and obviously for
ongoing operations," he says. "This is an
area we all need to look at seriously as we
chart a path forward. Oil and gas are the
bedrocks of Wyoming's economy and the
bedrock of a number of states' economies.
We need to gear up first and foremost to a
50 THE AMERICAN OIL & GAS REPORTER

quick recovery, and then pivot to growth."
Forecasts for gas prices to bounce to
$4/Mcf would allow consideration of developing the NPL play, which he says already has been authorized by the Bureau
of Land Management.
"When we stood up Jonah Energy a
number of years ago, natural gas prices
were hovering in that high $3-low $4
range. That gave the company optimism
that it could not only continue developing
the Jonah Field, but look at prospects
such as the company's Jonah Extension
(NPL)," Ulrich indicates. "Current prices
don't support that play as being economic,
but if those prices change over the next
year or two or beyond, that gives a lot of
promise that Jonah Energy might be able
to begin in earnest development of that
aspect. To me, that is very exciting."
In March, Jonah Energy became the
first gas producer to be certified for low
methane emissions under Independent
Energy Standards Corp.'s TrustWellTM
Responsible Gas program. The company
says the certification process tracks the
leak rate as a percentage of overall production and the reduction in methane
footprint versus the industry benchmark.
"This low emissions certification is
really important for the market," Ulrich
applauds. "Jonah Energy takes pride in
differentiating itself as an operator from
an environmental and sustainability standpoint. The company works with a number
of environmental groups, and without
any specific endorsement yet, it has re-

Adjusting To Demand
While gas demand is staying strong,
structural changes in the nation's supply
system, including the drop in rig count,
eventually will push production down,
predicts Tom Ward, chairman and CEO
of Mach Resources. He points to EIA
projections of gas prices above $4.00/Mcf
this winter as cause for optimism.
"I look at the market and see we aren't
having the demand destruction in natural
gas that we see in crude oil or gasoline
because people aren't traveling," he poses.
"Industrial demand might be down somewhat but that still is buffeted by usage of
natural gas around the world, and we are
seeing production declining."
Domestic gas production has been
dropping since hitting a peak last October,
Ward says, adding that the impacts are
increasing as companies shut in production
and drill fewer wells. "I don't think there
is any doubt prices will go higher in the
near term, and then probably much higher
out to 2021," he predicts. "There have
been projections we will lose 10 Bcf/d
of supply by year-end 2021, dropping
down to 82 Bcf/d."
Many gas producers still will be standing at years' end, but Ward predicts they
will see significant changes in their makeup. Publicly held companies already are
saying they are in a restructuring mode,
with even a number of healthy firms
seeing the need to sell assets to beef up
their balance sheets. He says Mach Resources has made seven acquisitions in
the past two years, including three deals
in the Mississippian Lime and two in the
western Anadarko Basin.
"Companies such as Mach Resources,
which are seen as distressed buyers and
that have a very large operating team and
are focused on one particular area, will
be the survivors that end up rolling up a
lot of production," he projects. "So, whenever we look at a project, we look at it
only on the basis of proved, developed,
producing reserves at some discount to
PV-10. Instead of drilling for excess cash
flow, we buy it. To me, it doesn't matter
if that is natural gas or oil. I like both.
Mach Resources' April 9 acquisition
of the upstream assets of Alta Mesa Holdings and the midstream assets of Kingfisher
Midstream moves the company into both
Oklahoma's STACK and Eastern STACK
plays, Ward says. The deal includes 30,000

American Oil and Gas Reporter - May 2020

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