Question-and-Answer Session
Operator
(Operator instructions) And first we'll line up Scott Hanold with RBC Capital Markets. Please go ahead.
Scott Hanold – RBC Capital Markets
Thanks. Looking at production growth – and Nick, you indicated that there's not much contribution assume from the shale, can you give us sort of a better sense of what sort of the capital investment and maybe well drilled in, the focus on the shales will be here over the next year to, to kind of give some sense of how much upside could there be or will there be any sort of cannibalization, I know is that you indicated that some of these CBM projects are there pretty good rate to return, but the shale start actually really coming in a lot better than expected, would you cannibalize of some of these coal bed methane projects?
Nick Deluliis
Sure, Scott. With regard to the sort of the ranking of which project gets the rigs and the capital and the people focus it does go back to the net present value ranking that we spoke about in the comments. So, we see a shale play come in through the exploration program over the next year, that just looks to be the best NPV, best rate of return project out there within our portfolio because the first in the line and that's just again the way that we go about our decision-making. We don't think that if we do have successes in the shales that at this point we're in trouble with regard to things like rig capacity, or other resources in terms of having to take away from the CBM operations or their drilling programs that comprised of three-year production guidance. So from that perspective, we do tend to look at the shale as pure incremental to production to capital and to other resources within the company. Now, with the plans over the next year or 18 months with regard to those well, again, we got the $80 plus million exploration capital that was putting to work that's already paid dividends within the Chattanooga Shale and again, it's early with the Chattanooga Shale, but as I said we like what we see, we think we've got a bid of a blanket play with regard to that as much as the shale play could be for that matter, and we like the economics. We think from F&D perspective, without getting an IP rates in EURs or all those other things we think that overall efficiency capital on the Chattanooga Shale is going to be somewhere between Virginia and Mountaineer, a little bit better than Mountaineer, little bit higher with regard to F&D costs in Virginia. But again I want to stress thoroughly we will see, so far so good. Marcellus, there with regard to that first vertical well we've seen again, so far so good. Very accretive from economic perspective, we got some obvious synergies that we spoke about, so with regard to where we're out on those two, it looks again like we continue to allocate exploration capital resources and those production parallels and numbers come in from a rate of return in NPV perspective, think of it is incremental.
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