South Jersey Industries, energy services holding company, announced Monday that Potato Creek LLC, a company in which it is a stakeholder, has entered into a lease agreement with “an experienced exploration and production company” to set up a deep well natural gas drilling operation and exploration on 21,000 acres of land in the Marcellus Shale in northeast Pennsylvania.
“We are partnering with another company to do the drilling, and they have asked to remain anonymous,” said Joanne Brigandi, an SJI spokesperson. “This is deep well drilling, and it has not started yet. The anonymous party will be making decisions about drilling scope and operation.”
Potato Creek has retained royalty rights that could boost returns based on natural gas production on the property. The upfront lease payment will add an estimated 15 cents to SJI’s earnings per share over the life of the lease.
“Currently we have a successful commodity marketing and shallow well program at Potato Creek in western Pennsylvania,” said Edward Graham, SJI’s Chairman and CEO, in a statement. “Leasing the deep mineral rights that we control to an experienced E&P company enables us to begin realizing the value of this asset for our shareholders without incurring the risks and costs associated with drilling this acreage ourselves,”
SJI is among a slew of companies currently ramping up natural gas drilling operations in northeast Pennsylvania. The Marcellus Shale core region, which includes 31 million acres in southern New York, Pennsylvania, West Virginia, eastern Ohio and western Maryland, is thought to contain 363 trillion cubic feet of recoverable natural gas. Potato Creek’s acreage could have as much as 275 billion cubic feet of recoverable natural gas.
Source: South Jersey Industries, Joanne Brigandi
Writer: John Davidson
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