National Fuel Reports Seneca's Operational Results in its Appalachian Region and the Results from Netherland, Sewell's Study



    WILLIAMSVILLE, N.Y., October 11 /CNW/ - National Fuel Gas Company
("National Fuel" or "Company") (NYSE:  NFG) is announcing the preliminary
results of the Appalachian operations of Seneca Resources Corporation
("Seneca"), the Company's exploration and production subsidiary, for its 2007
fiscal year, which ended on September 30, 2007. In addition, Seneca is
reporting the results of a study performed by Netherland, Sewell & Associates,
Inc. ("NSA" or "Netherland, Sewell") regarding Seneca's undeveloped
reserves(1) in a portion of Seneca's acreage in Appalachia.

    Highlights of Seneca's Appalachian Operations in 2007:

    --  Seneca's proved reserves increased approximately 33 percent to 110
billion cubic feet equivalent ("BCFE") as of September 30, 2007, (including
proved undeveloped reserves of approximately 10.4 BCFE that had not been
historically reported by Seneca) from 83 BCFE as of September 30, 2006.

    --  As confirmed by public data available through September 2007, Seneca
was the most active driller in northwestern Pennsylvania. Seneca drilled or
participated in 233 wells during fiscal 2007 (not including a deeper Onondaga
Reef well and two vertical wells drilled through the EOG Resources joint
venture), representing more than a 50 percent increase compared to drilling
activity in 2006; 219 of the 233 wells (94 percent) have been, or will be,
completed as producing wells (five of the remaining 14 wells have been plugged
and nine are in the final stages of evaluation).

    --  2007 results are consistent with previous disclosure regarding per
well estimated ultimate recoveries ("EUR"), production profile and costs to
drill and complete wells in this region.

    Highlights of NSA Study:

    --  NSA identified more than 1,000 prospective drilling locations on
approximately 200,000 acres. The acreage that qualified for Proved, Probable,
or Possible status was limited to a 200,000-acre area within close proximity
to wells with reliable production histories.

    --  NSA identified total undeveloped reserves of approximately 120 BCFE
consisting of the reserve categories of Proved Undeveloped, Probable
Undeveloped and Possible Undeveloped, resulting in total 3P reserves of
approximately 220 BCFE in accordance with the Society of Petroleum Engineers
("SPE") reserve definitions.

    Seneca's 2007 Appalachian Activities

    Philip C. Ackerman, Chairman and Chief Executive Officer of National Fuel
Gas Company, stated: "We have taken significant action in the Exploration and
Production segment this year to take advantage of our opportunities. Of note,
we've hired Matt Cabell as Seneca's new President and John McGinnis as its new
Senior Vice President of Exploration and Development. We sold our Canadian E &
P operations at a very attractive price and we have significantly, and very
successfully, increased our activity in the Upper Devonian and Silurian
sandstones in Appalachia. We entered into an agreement with EOG Resources, a
recognized leader in shale development that will help us exploit the Marcellus
Shale in a timely and prudent fashion. We believe that the Appalachian region,
in particular, is significant to the Company's growth, and we will continue to
develop our acreage in the region on the basis of reliable scientific and well
data."(*)

    Seneca drilled or participated in 233 wells in Appalachia during fiscal
2007 (excluding a deeper Onondaga Reef well and two joint venture wells with
EOG Resources) and 219 of those have already been, or will be, completed as
producing wells.(*) Five of the 14 remaining wells have been plugged, and nine
are in their final stages of evaluation and will be completed and begin
producing early next year, or plugged and abandoned. The 219 successful wells
are expected to produce on average, or have an EUR of, approximately 97
million cubic feet equivalent ("MMCFE") of oil and natural gas, which is
in-line with previous Company EUR disclosures.(*) In addition, Seneca
participated as a 50 percent working interest partner in the deeper Onondaga
Reef well, which has an expected EUR of more than 1,000 MMCFE.(*)

    Matthew D. Cabell, Seneca's President, said: "I am very pleased with the
2007 results, and we hope to do even better in 2008, both by increasing the
number of wells to be drilled and by continuing to high-grade and prioritize
drilling locations.(*) While the average EUR per completed well was 97 MMCFE,
our individual well results across all shallow Devonian and Silurian wells
ranged from dry holes to a well with an EUR of approximately 640 MMCFE.(*) By
high-grading and prioritizing drilling locations, the average EURs for newly
drilled wells have been increasing over the past few years. Results are
consistent with our prior disclosures and the findings of the Netherland,
Sewell study. We hope to continue to improve our results through detailed
geologic mapping and continuous integration of new results."(*)

    The variability of the reserve potential among wells can be seen on
Exhibit 1, which illustrates a representative portion of Seneca's Appalachian
acreage showing the EUR for wells that have a number of years of production
data. As shown, a well having an EUR of 739 MMCFE has directly offsetting
wells with EURs of 120 MMCFE and 43 MMCFE. This high degree of variability is
typical across Seneca's producing area, although most wells have EURs between
40 and 160 MMCFE.

    Due to the significant variability in the performance of wells in
relatively close proximity, resulting from the heterogeneous nature of the
geology of this part of the Appalachian Basin, Seneca cannot simply drill
successively offsetting wells on immediately adjacent acreage. Cabell noted:
"The results announced today, as well as the NSA study, validate the prudent
pace of Seneca's accelerated drilling program in the Appalachian Basin." While
Seneca has significantly increased its drilling activity on its Appalachian
acreage, the Company remains committed to pursuing opportunities at a pace
that it believes will maximize well production and economics.(*)

    Cabell continued: "This part of the Appalachian Basin has complex
stratigraphy. We can certainly be successful if we are deliberate and careful,
and that is how we intend to operate. The geology and sand characteristics are
more consistent in those areas of the basin where other operators are active."
Seneca's drilling area, relative to certain others, can be seen on the map
labeled Exhibit 2.

    For the fiscal 2007 Appalachian drilling program (excluding the EOG joint
venture), Seneca is providing the average estimated economics:

    Average capital cost per completed well - $200,350 per well

    Average fixed monthly operating cost per well - $150 per month

    Other variable/fixed lifting cost per MCFE - $0.43 per MCFE (average over
life of well)

    Average Net Revenue Interest per well - 94 percent

    Payout - approximately 3 years

    Price Deck - Flat NYMEX $7.00 per MCF and $70 per barrel, adjusted for
British Thermal Unit ("BTU") and basis differential, gathering expense, and
processing expense (net effect equates to $8.12 per MCF).

    In addition, the average "type" decline curve, based on the results of
Seneca's 2007 shallow Devonian and Silurian drilling program, is illustrated
in Exhibit 3.

    Netherland, Sewell Study Results

    Earlier in 2007, Seneca engaged NSA to complete an estimate of Proved
undeveloped, Probable undeveloped, and Possible undeveloped reserves in the
Upper Devonian and Silurian sandstone formations on its acreage. This analysis
has been completed as of September 30, 2007.

    Cabell commented: "Upon joining Seneca, I thought it was important to
have a well-recognized engineering firm review Seneca's developed and
undeveloped reserves. Netherland, Sewell's work was extremely thorough and
their team spent months reviewing Seneca's geologic and production data on all
of its Appalachian acreage. However, due to the definitions and guidelines of
the SPE relating to the recognition of undeveloped well locations, their
estimates are limited to approximately 200,000 acres in close proximity to
existing Seneca wells in Pennsylvania and New York that had reliable
production histories. Because of the incomplete nature of the public
production data for other operators in those States, Netherland, Sewell's
quantification of Seneca's reserves may seem conservative, as much of Seneca's
acreage is too far from reliable data points."

    The NSA estimates have been prepared in accordance with the definitions
and guidelines set forth in the 2007 Petroleum Resources Management System
approved by the Society of Petroleum Engineers ("2007 PRMS"). The 2007 PRMS is
available at

    http://www.spe.org/spe-site/spe/spe/industry/reserves/Petroleum_
Resources_Management_System_2007.pdf (Due to its length, this URL may need to
be copied/pasted into your Internet browser's address field. Remove the extra
space if one exists.)

    Based on Seneca's approximate 94 percent average net revenue interest in
this area, the NSA review yields the following estimates of Seneca's
undeveloped reserves in the Upper Devonian and Silurian formations on its
Appalachian properties:

    
                                                 Net Reserves(*)
                                      ------------------------------------
                            Number of    Oil        Gas     Gas Equivalent
           Category         Locations (Barrels)    (MCF)        (MCFE)
    ----------------------- --------- --------- ----------- --------------

    Proved Undeveloped             82    21,210  10,251,828     10,379,089

    Probable Undeveloped          321    97,379  35,941,088     36,525,364

    Possible Undeveloped          654   246,774  72,272,934     73,753,581
                            --------- --------- ----------- --------------
    Total Undeveloped           1,057   365,363 118,465,850    120,658,034
    

    The 13-page NSA summary report is provided with this release and is
labeled Exhibit 4.

    NSA is in the process of completing its review of Seneca's Proved
developed reserves for the Appalachian region, as well as the other regions in
which Seneca operates. Final production figures for the month of September are
still being tallied in order to arrive at final year-end reserve figures,
which will be included in the Company's Annual Report on Form 10-K. Seneca's
preliminary estimate of Proved developed Appalachian reserves at September 30,
2007, is 99,600 MMCFE and is illustrated in Exhibit 5.(*)

    In addition, NSA is preparing an estimate of "Prospective Resources,"
with respect to the Upper Devonian and Silurian sandstone formations on
Seneca's Appalachian acreage. This analysis is expected to quantify potential
resources that exist on that acreage, but are too far from existing production
data to be considered in the Proved, Probable or Possible categories. Seneca
anticipates that this estimate will be available within the next few weeks and
the Company plans to publicly disclose this estimate when it becomes
available.(*)

    Cabell noted: "Although Netherland, Sewell has identified only
approximately 1,000 locations that can be classified as having undeveloped
reserves, we believe that, at current commodity price levels and well costs,
hundreds of wells will be drillable each year for the foreseeable future.(*) We
fully expect that the step-out locations we drill each year, as well as the
exploratory wells we will drill on the acreage that is now classified as only
having 'Prospective Resources,' will yield additional locations that will
ultimately be classifiable in the Proved, Probable, and Possible categories."(*)

    The drilling history and projected number of wells that Seneca has
targeted to drill during 2008 in its shallow Appalachia drilling program is
shown in the graph labeled Exhibit 6.(*)

    Future Opportunities in the Appalachian Region

    The above estimates do not include any estimate related to the resource
potential of other formations, including Seneca's rights in the Marcellus
Shale, which is a deeper formation in Appalachia. Seneca is actively
investigating the potential of the Marcellus Shale through its partnering
arrangement with EOG Resources, an industry leader in exploiting shale
formations. Seneca and EOG have drilled two vertical wells to date and are
currently drilling the first horizontal Marcellus test well on Seneca's
acreage. By early 2008, Seneca expects to have results for three vertical
wells and three horizontal wells on Seneca's acreage, and additional drilling
is planned for calendar year 2008.(*) Management believes that the plan
developed by Seneca and EOG is prudent and optimal at this early stage of
exploration in the Marcellus Shale. Although the Company intends to provide
regular updates concerning its progress in exploring and evaluating the
Marcellus opportunity, it is a very competitive play and neither Seneca nor
EOG will be disclosing technical or competitive details. While the Company
recognizes that the Marcellus Shale may present a significant opportunity for
National Fuel, the play is still in its early stages and its economic
viability is not yet determined.(*)

    The complete results for Seneca's 2007 fiscal year will be reported when
the Company issues its consolidated fiscal 2007 earnings release on November
8, 2007. Management will discuss this release, consolidated fiscal 2007
earnings and answer questions regarding the NSA study during its conference
call on November 9, 2007, at 11:00 AM.

    Seneca is a wholly owned subsidiary of National Fuel. National Fuel is an
integrated energy company with $3.8 billion in assets comprised of the
following five operating segments: Utility, Pipeline and Storage, Exploration
and Production, Energy Marketing, and Timber. Additional information about
National Fuel is available on its Internet Web site:
http://www.nationalfuelgas.com or through its investor information service at
1-800-334-2188.

    (*) Certain statements contained herein, including those which are
designated with an asterisk ("(*)") and those which use words such as
"anticipates," "estimates," "expects," "intends," "plans," "predicts,"
"projects," and similar expressions, are "forward-looking statements" as
defined by the Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve risks and uncertainties which could cause
actual results or outcomes to differ materially from those expressed in the
forward-looking statements. The Company's expectations, beliefs and
projections contained herein are expressed in good faith and are believed to
have a reasonable basis, but there can be no assurance that such expectations,
beliefs or projections will result or be achieved or accomplished. In addition
to other factors, the following are important factors that could cause actual
results to differ materially from those discussed in the forward-looking
statements: changes in economic conditions, including economic disruptions
caused by terrorist activities, acts of war or major accidents; changes in the
availability and/or price of natural gas or oil and the effect of such changes
on the valuation of the Company's natural gas and oil reserves; inability to
obtain new customers or retain existing ones; significant changes in
competitive factors affecting the Company; governmental/regulatory actions,
initiatives and proceedings; significant changes from expectations in actual
capital expenditures and operating expenses and unanticipated project delays
or changes in project costs or plans; the nature and projected profitability
of pending and potential projects and other investments; occurrences affecting
the Company's ability to obtain funds from operations or from issuances of
short-term notes or debt or equity securities to finance needed capital
expenditures and other investments, including any downgrades in the Company's
credit ratings; uncertainty of oil and natural gas reserve estimates; ability
to successfully identify, drill for and produce economically viable natural
gas and oil reserves; significant changes from expectations in the Company's
actual production levels for natural gas or oil; or significant changes in the
Company's relationship with its employees or contractors and the potential
adverse effects if labor disputes, grievances or shortages were to occur.

    (1) The Securities and Exchange Commission (the "SEC") permits oil and
gas companies, in their filings with the SEC, to disclose only proved reserves
that a company has demonstrated by actual production or conclusive formation
tests to be economically and legally producible under existing economic and
operating conditions. The Company uses the terms "probable" and "possible" and
other descriptions of volumes of reserves potentially recoverable through
additional drilling or recovery techniques that the SEC's guidelines would
prohibit us from including in filings with the SEC. These estimates are by
their nature more speculative than estimates of proved reserves and,
accordingly, are subject to substantially greater risk of being actually
realized. Investors are urged to consider closely the disclosure in our Form
10-K and Form 10-Qs, available at www.nationalfuelgas.com. You can also obtain
these forms on the SEC's website at www.sec.gov.

    MULTIMEDIA AVAILABLE:
http://www.businesswire.com/cgi-bin/mmg.cgi?eid=5515998




For further information:

For further information: Analysts: James C. Welch, 716-857-6987 OR
Media: Julie Coppola Cox, 716-857-7079

Organization Profile

NATIONAL FUEL GAS COMPANY

More on this organization


Custom Packages

Browse our custom packages or build your own to meet your unique communications needs.

Start today.

CNW Membership

Fill out a CNW membership form or contact us at 1 (877) 269-7890

Learn about CNW services

Request more information about CNW products and services or call us at 1 (877) 269-7890