A HART ENERGY PUBLICATION/JUNE 2015 - The Utica's monster dry gas wells separate it from the pack.
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A HART ENERGY PUBLICATION/JUNE 2015 The Utica’s monster dry gas wells separate it from the pack.
A Hart Energy Publication
38 JUNE 2015/VOLUME 35/NUMBER 6
38
UTICA SHALE BULKS UP
Bigger wells and coming infrastructure will show what
the Utica Shale is made of.
51
CATCHING THE BLUE MARLIN
Founder, chairman and CEO Porter Trimble is on a mission
to grow KKR-funded Fleur de Lis.
55
A DOUBLE SCOOP
Continental Resources’ Springer Shale is
51 Investor’s Best Discovery of 2014. Here’s the
story behind the play.
59
REDETERMINATION SEASON
Fall borrowing-base redeterminations may be tougher than in the spring.
65
MLP FLAVORS
Even in a volatile commodity price environment, going public as an MLP can
have benefits.
72
69
ROLL OVER, PRODUCTION
The collapsing rig count augurs for a production drop, but will productivity
gains offset that decline?
72
A ‘GOOD CRISIS’: LEADING THROUGH
THE DOWNCYCLE
These leadership skills will determine who emerges stronger
from the oil price collapse.
June 2015 ▪ OilandGasInvestor.com 1
DEPARTMENTS
7 FROM THE EDITOR-IN-CHIEF
1616 S. Voss Rd., Suite 1000 Half-time is here. Has the bottom been reached?
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OilandGasInvestor.com 9 COMPLETIONS
Editor-in-Chief Texas aims to ban a fracking ban.
Leslie Haines
lhaines@hartenergy.com 11 ON THE MONEY
Group Managing Editor Susan Klann The rebalancing of oil supply and demand has begun.
sklann@hartenergy.com
Art Director Marc Conly
13 A&D TRENDS
Chief Technical Director, Upstream Richard Mason
rmason@hartenergy.com An influx of private capital paves the way for transactions.
Senior Financial Analyst Chris Sheehan, CFA
csheehan@hartenergy.com 14 EVENTS CALENDAR
Senior Editor Steve Toon
stoon@hartenergy.com 17 INSIGHTS FROM STRATAS ADVISORS
Senior Editor Darren Barbee The Gulf of Mexico will host a production surge this year.
dbarbee@hartenergy.com
Manager, Online Content Mike Madere
mmadere@hartenergy.com 21 NEWSWELL
Activity Editor Larry Prado
The economics of refracking get a closer look.
lprado@hartenergy.com
Associate Editor Caroline Evans 77 E&P MOMENTUM
cevans@hartenergy.com Lockhart Oil & Gas has plans for the Raton Basin.
Contributing Editors
Velda Addison
Eldon Ball 78 U.S. EXPLORATION HIGHLIGHTS
Editor-at-Large Nissa Darbonne
ndarbonne@hartenergy.com 86 INTERNATIONAL HIGHLIGHTS
Corporate Art Director Alexa Sanders With war, Yemen’s production is at risk.
Production Director Jo Lynne Pool
Senior Marketing Manager Tamara Murphy 89 NEW FINANCINGS
tmurphy@hartenergy.com
Vice President, Marketing Greg Salerno 95 COMPANY BRIEFS
Site License/Research
slamb@hartenergy.com 102 BRIGHT SPOT
Customer Service Jason Reimbold discusses the few but strong deals of 2015.
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List Sales
dbmarketing@hartenergy.com 104 LEGENDS
International plays in West Africa are Bobby Gerry’s focus.
Vice President, Publishing
Shelley Lamb
slamb@hartenergy.com 106 COMPANIES IN THIS ISSUE
ADVERTISING SALES
713-260-6400 108 AT CLOSING
Fax: 713-627-2546 Halcon Resources pursues a dilution solution to preserve liquidity.
1-800-874-2544
Director Business Development Morgan Mascio ABOUT THE COVER: These separators handle natural gas from the Utica Shale at Eclipse
mmascio@hartenergy.com Resources’ Hays central gathering facility in Ohio. (Photo by Mike Robinson)
Director Business Development Nella Veldran
nveldran@hartenergy.com Information contained herein is believed to be accurate; however, its accuracy is not guaranteed.
Investment opinions presented are not to be construed as advice or endorsement by Oil and Gas
Manager Business Development Kevin Holmes Investor.
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Copyright ©Hart Energy Publishing, LP, 2015. Hart Energy Publishing, LP reserves all rights to
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June 2015 ▪ OilandGasInvestor.com 3
UTICA SHALE BULKS UP Bigger wells, and much-needed infrastructure coming within 18 months, will show what the Utica Shale is made of.
C
ARTICLE BY all it the Golden Triangle of natural gas. wells have been drilled. At press time about
LESLIE HAINES
The region where southwestern Penn- 850 were producing, but 300 or so were shut-in
PHOTOGRAPHY BY sylvania, southeastern Ohio and north- because of low prices or lack of infrastructure
MIKE ROBINSON ern West Virginia mash up near the Ohio River hookup—and roughly another 300 have been
is turning out to be the natural gas version of drilled but not completed (DUCs).
Fort Knox. Monster dry gas wells seem to be “In the Utica, we have a significant amount
fulfilling the promise of geologists who claim of DUCs,” Simmers said. “So we do expect
Utica Shale production might end up being big- production to increase even though drilling has
ger than its Marcellus cousin. slowed down.” Echo that thought, based on
That’s saying something, because the Mar- what many Utica operators said on their first-
cellus already produces more than 17 billion quarter 2015 conference calls.
cubic feet per day (Bcf/d) and is the largest pro- The ODNR is grappling with newfound
ducing gas field in the world. Utica drilling by having consulted with Texas
As a result, traditional Appalachian pipeline and North Dakota regulators on shale play dos
flows are changing for the first time since the and don’ts. When Simmers became chief in
1940s, with gas and NGLs now set to flow November 2011, the staff numbered 35 people;
south to the Gulf Coast, east to New Jersey and it has increased to about 120 to keep up with
Maryland LNG export points, and west via the permitting and field inspections for proper well
reversed Rockies Express Pipeline to Midwest design, blow-out preventers (BOPs) and ce-
markets. ment jobs. The ODNR tracks Utica activity
Bernstein Research forecasts that by 2018, weekly, separately from conventional Ohio oil
the Marcellus and Utica combined will produce and gas plays.
23 Bcf/d or a third of all U.S. gas production. Despite the Utica’s promise and some excel-
About 3.7 Bcf/d of new and expanded pipeline lent well results, the rig count is down by about
capacity comes on line this year and another 6 a third as of press time to about 25, with low oil
Bcf/d comes on line in 2016. prices hammering the value of condensate and
Like other shale plays, the Utica offers a bas- NGLs, and low gas prices coupled with take-
ket of opportunities via its wet, dry and conden- away bottlenecks affecting gas economics. Sev-
sate/oil windows. It is larger than the Marcellus eral operators with good lease positions—and
in areal extent throughout the Appalachian re- great well results so far—will not drill any
gion and is a thicker reservoir, but it’s found Utica gas wells this year, at least not until com-
deeper, so is more expensive to drill. modity prices improve.
Its ultra-rich gas areas boast some of the low- Gastar Exploration Inc. CEO J. Russell
est breakeven prices in the U.S. Rice Energy Porter, who enjoyed announcing the company’s
Inc. claims its Utica dry gas breakeven price is Simms U-5H (it tested 29.5 MMcf/d from
$2.35/MMBtu; wet gas is $2.05. However, Utica in Marshall County, West Virginia), said
thanks to low oil prices that hurt condensate re- at the IPAA’s OGIS conference in April that he
alizations, producers have been focusing on the has stopped drilling in the Utica for now. Like-
Utica’s dry gas window, and that is turning up wise, PDC Energy Inc. president and CEO Bart
some huge prizes. Brookman told OGIS attendees that he will
This play first kicked off in Ohio in 2012 drill no wells in Ohio until prices improve.
(four early Utica well permits were issued in
2010). Most of the permits to date are east of Utica Gas Production
2,200 5,250
Interstate 77. “The infrastructure is partly driv- 2,000
ing that and, of course, the geology is speak- 1,800
4,500
ing,” said Rick Simmers, chief of the Ohio 1,600 3,750
Department of Natural Resources, Division of 1,400
Production Per Rig
MMcf/day
1,200 3,000
Oil & Gas. “We believe when commodity
1,000
prices recover, some exploration will go west 2,250
In Ohio roughly 800
300 Utica wells of I-77 again.” 600 1,500
are drilled but Several players who arrived in the Ohio 400
uncompleted, 750
said Rick
Utica later went south and east where there 200
Simmers, chief of were leases still available, and lo and behold, 0 0
Jan ’07
Jul ’07
Jan ’08
Jul ’08
Jan ’09
Jul ’09
Jan ’10
Jul ’10
Jan ’11
Jul ’11
Jan ’12
Jul ’12
Jan ’13
Jul ’13
Jan ’14
Jul ’14
Jan ’15
the Ohio they found bigger wells there, he said. “We do
Department of
Natural attribute that partly to better completion tech- Data source: EIA, Drilling Productivity Report, April 2015. Their method ignores oil/gas splits,
Resources, niques over the past two years.” The longest based on evidence that wells often produce oil and/or gas, and/or condensates.
April and May 2015 are estimated by the EIA. Interpretations: Global Hunter Securities
Division of Oil & producing lateral reported so far is 12,194 feet
Gas. Facing
page, a by Chesapeake Energy Corp. in Columbiana Ohio Utica Shale Cumulative Data
Helmerich & County. The longest permitted lateral is 13,000 Wells Wells Wells
Payne FlexRig feet, held by Antero Resources Corp. in Noble Date Permitted Drilled Producing
drills on Eclipse 12/31/2013 1,037 661 249
Resources County, ODNR data show.
Corp.’s The play gained a lot of momentum until the 12/31/2014 1,735 1,277 707
Fuchs/Dietrich As of 4/11/2015 1,872 1,442 845
pad in Monroe oil price crash hit last fall. Ohio has issued
Source: Ohio Dept. of Natural Resources
County, Ohio. nearly 1,900 Utica permits to date and 1,442
40 OilandGasInvestor.com ▪ June 2015
shale days, when the drillbit passed through the
Utica. This nicely set up its first horizontal
Some 50% of PDC’s 67,000 net Utica acres is Utica well.
held by production. At year-end 2014, the com- “We had looked at all the logs in the region
pany moved approximately 8 million barrels of and compared them, plus we had already shot a
oil equivalent (MMboe) of Utica PUDs to the lot of 3-D over most of Washington County,”
probable category, due to this change in its de- said Range chairman, president and CEO Jeff
velopment plans. Ventura.
Gulfport Energy Corp., an early leader in the “We sidewall cored the Claysville well and
Utica, cut its horizontal rig count to three from contributed that to the Core Lab consortium for
eight last year. Chesapeake Energy Corp. cut its further study. Our well not only had the highest
count to between three and five rigs, partly due rate of any Utica well on a normalized basis per
to economics, partly due to more efficient 1,000 feet of lateral, it also had the highest test
drilling; its Utica expenditures will almost dou- rate of any Utica well ever. If you look at the
ble, however, to $1.06 billion because its 2011 raw quality of the data, we have some of the
joint venture drilling carry with Total has highest porosity and permeability rock, and the
reached its term. At year-end, the company had highest reservoir pressure.”
165 Utica wells waiting on completion or Range believes it has anywhere from 20% to
pipeline hookup. 40% more gas in place across its southwest
“I would Pennsylvania acreage than any of its peers in
characterize this
year as learning A sporting chance eastern Ohio or West Virginia.
about the Utica,” Meanwhile, new excitement is building “The question is, what will the Utica’s per-
said Range across the Ohio River as producers test the formance be, and what will the economics be,
Resources Corp.
chairman, Utica in Pennsylvania. It appears that the excel- relative to the Marcellus?” said Ventura. “If it
president and lent porosity found in southeast Ohio extends can compete, we’ll drill more Utica wells, be-
CEO Jeff into Washington and Greene counties at depths
Ventura. “The cause there are a lot of hydrocarbons in place.
question is, of 10,500 to 13,750 feet, with the Washington The other good thing is, we basically are
what will the County formation shallower than in Greene. drilling where we have Marcellus production
economics be,
relative to the Recently, one of the Marcellus Shale’s top holding the acreage.”
T
Marcellus?” players, Range Resources Corp., upped the ante he Claysville has been producing 20
when it drilled its first deep Utica well in west- MMcf/d since it was put on line on an in-
ern Washington County, the Claysville Sports- terruptible basis in January 2015. Once
man’s Club. It tested 59 MMcf/d—all dry gas. permanent facilities are ready this July, Range
This is the largest Utica gas well completed will see how much gas it really has captured.
in the tri-state area, surpassing some impressive Ventura would not venture an EUR estimate at
headline-makers announced in the past year by press time, saying he needs to see about six
a dozen operators, from the likes of Chevron to months of well performance first. The eco-
Stone Energy Corp. (The latter has ceased all nomics look fine: No processing is needed here,
drilling operations for Marcellus until receiving because the gas is nearly pure methane.
a fit-for-purpose, hybrid rig in late 2015 or Meanwhile, a second well is going down on
early 2016. The new rig will be capable of the Claysville pad in Washington County, aim-
drilling both the Marcellus and Utica. In the ing for total vertical depth of 11,700 feet with a
meantime, Stone said it will study optimal de- lateral of 6,500 feet. Completion will be similar
velopment plans for both shales.) to the first well, which was slickwater fracked
Range thinks its Claysville well may in fact in approximately 32 stages. The expected drill
have the highest test rate of any shale well to and complete (D&C) cost is $13 million.
date in the U.S. “That $13 million has a lot of science in it,”
The company knew that Utica pay underlies Ventura added. “I would characterize this year as
the Marcellus throughout its Appalachian learning about the Utica. And I would argue that
acreage. Over the years it had drilled vertical we’ll do some of the same things we did with
Trenton/Black River wells in the good ’ol pre- our team in the Marcellus over time that should
This ranking
could change Top 10 Utica Dry Gas Wells
rapidly. In the Lateral
first quarter, Well Operator IP Length (ft) County
Range Resources Claysville SC 11H Range Resources 59.0 5,420 Washington, Pa.
brought on line a Stewart Winland 1300U Magnum Hunter 46.5 5,289 Tyler, W.Va.
well in the dry
gas area of Bigfoot 9H Rice Energy 41.7 6,957 Belmont, Ohio
Washington Stalder 3UH Magnum Hunter 32.5 5,050 Monroe, Ohio
County,
Pennsylvania, Irons 1-4H Gulfport Resources 30.3 5,714 Belmont, Ohio
that produced Pribble 6HU Stone Energy 30.0 3,605 Wetzel, W.Va.
under Simms U-5H Gastar Exploration 29.4 4,447 Marshall, W.Va.
constrained
conditions 31.3 Conner 6H Chevron 25.0 6,451 Marshall, W.Va.
MMcf/d, with a Tippens 6H Eclipse Resources 23.2 Monroe, Ohio
lateral length of #51038-73H Seneca Resources 22.7 4,640 Tioga, Pa.
7,906 feet and 41
Source: UGCenter.com, company presentations (data as of April 15, 2015)
frack stages.
42 OilandGasInvestor.com ▪ June 2015
enable us to get the costs down by 15% to 25%, 2H flowed an average 24.8 MMcf/d in its first The Utica is
deeper and
not counting whatever service costs do.” 30 days; the Schroyer 4H averaged 22.1 higher-pressured
With 400,000 net acres prospective for Utica, MMcf/d. than the
Range enjoys one of the biggest footprints in But at the moment, it has reduced spending Marcellus, so
usually more
southwestern Pennsylvania and, indeed, in the to only one operated rig. expensive to drill.
entire Utica play. But as Ventura says, it’s not “Even with that one rig, we’ll grow produc- Here, another
just about size, it’s about quality of acreage. tion,” said president and CEO Ben Hulburt. view of the rig on
Eclipse
The Utica is deeper and higher-pressured, “Our backlog from DUCs will come online Resources’
therefore more expensive to drill, but the indus- through the second quarter. We’d like to be Fuchs/Dietrich
pad.
try foresees no technical problems handling the going faster, but it’s prudent to be cautious
reservoir, he said. Pressure was 0.88 psi per right now.” On April 15, Eclipse Resources
foot at the Claysville. revised capex to $350 million, down from its
For now, the company plans to stay focused December guidance of $640 million. Produc-
on The Keystone State and not venture into tion growth is still estimated to be over 100%
Ohio. “In general, when you think of where the this year.
most prolific part of any shale play is, it’s al- “I think the most likely reason to go up by
ways in the dry gas window, and that’s where one more rig later is when we see WTI closer to
our acreage is, so we think we may be sitting on $65 or if we see gas get up to $4,” he said. “I
the core of the Utica” in southwestern Pennsyl- think we’ll end up spudding almost 30 wells
vania, he said. this year though [operated], which is a little less
than half what we did last year.”
T
Eastern Ohio he company breaks its Utica holdings
Operators throughout Appalachia have into seven type curves with EURs rang-
pulled back to focus on the sweet spots in the ing from 0.7MMboe to 1.4 MMboe on
most gas-rich counties in the tri-state area. The the easternmost acreage, to 1.6 MMboe in the
center of Utica action, in Belmont and Harrison rich-gas portion.
counties, Ohio, is seeing the most activity re- Hulburt said he can move a rig between each
cently with eight rigs and seven rigs drilling, re- of these areas fairly quickly, in five to seven
spectively. The other most active counties are days between pad sites, and a few sites are al-
Monroe and Guernsey. ready built and waiting.
Having a clear vantage point of the whole Rates of return are still 30% to 40% in the
Utica scene is Eclipse Resources Corp., which gassy areas, he said, whereas in the liquids area,
has drilled 181 gross Utica wells (68 operated); return ranges from the high teens to 20%. “It
for the rest it has partnered with eight other op- doesn’t take much in the way of an oil price
erators. In Monroe County it has drilled some move where liquids will compete with our dry
good wells and, among those, some real win- gas acreage,” he said.
ners. Its Tippens 6H in the middle of the county “We have about 20 wells in the lean conden-
tested 23.2 MMcf/d with a lateral of 5,858 feet. sate area that are not completed yet, mostly in
In the northern part of the county, the Shroyer Guernsey County, that we’d go back in and
June 2015 ▪ OilandGasInvestor.com 43
complete first” if prices merit that, he said.
As Eclipse’s team has climbed the learning
curve, the time it takes to reach total depth has some of which were very late in the year,” said
improved; the last 20 operated wells averaged chairman and CEO Paul Rady on the com-
18 days, versus 25 a year ago. The company pany’s first-quarter conference call.
uses zipper fracks on its pads and can do five to For the rest of 2015, Antero anticipates
eight stages a day. putting an additional 45 Utica wells online,
“It’s very different as you go into different with roughly half placed in the third quarter
thermal maturity bands. Each has its own chal- from three different seven-well pads, he said.
lenges, so you almost have to look at it as two “It’s important to point out that the natural
plays, not one. In completions, I’d say we are gas production from these 45 wells will flow
still in the third inning as far as knowing best into our Rex [Rockies Express Pipeline] firm
practices in each thermal band, but I do think transport capacity to the Chicago and Michigan
we’ll continue to see EURs move up,” Hulburt markets,” he said.
said. Rady expects AR’s production this year to
One pad that was drilled for dry gas experi- average 1.4 Bcfe/d, including more than 37,000
mented with a spacing test down to 750 feet be- bbl/d of liquids. Antero acquired roughly
tween laterals. Slickwater fracks are used, but 12,000 net acres in the Utica dry gas window in
Eclipse and others still are experimenting with December for $240 million. This included 20
different proppant volumes and stage spacing. MMcfe/d of production and 115 drilling loca- Facing page:
“Initially our challenge was really about under- tions. The deal added 29 Bcf. Halliburton
A
standing the reservoir, but that is largely well s of December 2014, Rice Energy had conducted a
fracture
delineated at this point.” 57,000 net acres prospective for the Utica stimulation job
Rather, Hulburt said, the biggest challenge in Ohio, resulting in 356 undeveloped on Eclipse
Resources’ three-
confronting Utica operators remains low com- net locations. The company assumes these loca- well Sawyers pad
modity prices, which are not helped by the tions will support wells with 8,000-foot laterals in Monroe
surge in Appalachian gas output. At Dominion and 750-foot spacing between wells to yield ap- County. CEO Ben
Hulburt says the
South Point, the largest gas hub in the play and proximately 138-acre spacing. pad was
just 45 miles northeast of Pittsburgh, the recent The company has partnered with Gulfport Eclipse’s first dry
price was about $1.10/Mcf below Nymex— Energy Corp. Their first well in Belmont gas spacing test
with 750-foot
which at press time was just below $2.80. In County was spectacular; the Bigfoot 9H tested spacing instead
Hulburt’s words, this location is “the worst pos- at a stabilized rate of 42 MMcf/d and the well is of the usual
1,000 feet.
sible gas market in the U.S.” currently producing at a restricted rate of 16
MMcf/d. It has produced 4.6 Bcf so far.
Limited completions, growth anyway Wunderlich analyst Haas said Rice is well-
As of early May, Antero Resources Corp. positioned within this sweet spot in Belmont
was running four rigs and five completion County. “Rice’s first operated well … had
crews on its acreage. A significant hedge book porosity of more than 14% and is over-pres-
of 94% of 2015 production, one of the highest sured, with a pressure gradient of more than 0.8
of its peers, has insulated it somewhat from the psi/ft and bottomhole pressure of more than
downturn. 8,000 psi. The company believes that this high-
“We had limited completion activity during porosity pocket extends eastward into Wash-
the first quarter, but achieved record average ington and Greene counties in Pennsylvania,
daily [Utica] production of 274 MMcf/d equiv- and the company was drilling its first dry Utica
alent (43% higher than fourth-quarter 2014) … well in Pennsylvania in early 2015.”
primarily driven by the 16 completions we Meanwhile, Gulfport Energy Corp. brought
placed online in the fourth quarter of 2014, online 22 gross Utica wells during fourth-quar-
Harrison Jefferson Eclipse
Eclipse Stacked Pay Area Resources
Eclipse Acreage Area breaks the Utica
into seven type
CANADA curves, with
Guernsey rates of return of
NEW YORK
30% to 40% in
the dry gas
Belmont OHIO window and
PENNSYLVANIA possibly up to
20% in the liquids
area. CEO
Hulburt says he
OHIO NEW won’t put a
Utica JERSEY
Marcellus Marshall second operated
Detail rig back to work
Area until commodity
MARYLAND Noble
Monroe prices improve.
WEST W. VA.
VIRGINIA
Wetzel
VIRGINIA
Source: Eclipse Resources Corp. Washington Tyler
June 2015 ▪ OilandGasInvestor.com 45cutline
The Hays central ter 2014. Six were in the condensate window, the core of the dry gas window in Belmont and
gathering facility 12 were in the wet gas window and four were Jefferson counties. Pro forma for this transac-
now moves 42
MMcf/d and a in the dry gas window. In the first quarter of tion, Gulfport will have approximately 208,000
stabilizing rate of 2015, it spudded 12.7 net wells and turned-to- net acres under lease in the core.
4,000 bbl/d of
condensate. sales 7.2 net wells. In January the company had
Capacity is 80 six horizontal rigs drilling in the play, but in the Tioga County allure
MMcf/d and first quarter of 2015, it dropped to operating To date, most of the Utica action has focused
7,500 bbl/d of
condensate. three. on Ohio and in Pennsylvania’s southwest cor-
Eclipse is At press time it reported net Utica production ner, but tantalizing results are being announced
selling the averaged 396 MMcfe/d in the first quarter of far to the northeast, in the north-central part of
facility to Enlink
Midstream, which 2015, an increase of 213% over first-quarter the state near the New York boundary. Last
will operate. 2014 and an increase of 12% over fourth-quar- September, Shell Oil unveiled two Utica wells
ter 2014. there in Tioga County, the Neal and Gee. Its
As previously announced, Gulfport is acquir- Neal well tested 26.5 MMcf/d.
ing Paloma Partners III LLC for $301 million, “These wells were drilled to a total measured
thus adding 24,000 net nonproducing acres in depth of approximately 14,500 and 15,500 feet
46 OilandGasInvestor.com ▪ June 2015Neal well in February 2014, with observed Wellheads, top,
peak flowback rates of 26.5 MMcf/d.” and separators,
sand traps and
Shell said at the time that it was awaiting re- production units,
sults from four additional wells. bottom, at
Eclipse
Meanwhile, Seneca Resources also reported Resources’ Andy
completing an exploration well in the county on Yoder production
a pad located within its DCNR 007 tract. The pad.
well had a 24-hour peak production rate of 22.7
MMcf/d. It was drilled to a true vertical depth
of approximately 12,200 feet, had a treatable
lateral length of 4,640 feet, and was completed
over 30 stages.
R
onald J. Tanski, president and CEO of
with lateral lengths of 3,100 feet at Gee and parent company National Fuel Gas Co.,
4,200 feet at Neal, respectively,” a Shell release said in a release, “This well, along with
said. “These results are comparable to the best wells drilled by other operators in the area, has
publicly announced thus far in the emerging de-risked the Utica potential of our 10,000
Southeast Ohio Utica dry gas play. acres on DCNR Tract 007. We estimate re-
“The Gee and Neal discovery wells extend source potential on this tract alone of approxi-
the sweet spot of the Utica Formation beyond mately 1 trillion cubic feet.”
Southeast Ohio and Western Pennsylvania, Upon hearing about Tioga County, Wunder-
where previous discoveries have been located, lich Securities analyst Irene Haas asked in her
and into an area where Shell holds a major recent Utica report these key questions: “Is the
leasehold position of approximately 430,000 area between the two clusters prospective?
acres. The Gee well was drilled over 100 miles Have we overlooked the Utica in these parts of
to the northeast of the nearest horizontal Utica northern Pennsylvania? If we do end up with
producer, and had an initial flowback rate of another mega-dry gas trend, what are we going
11.2 MMcf/d. Gee has been on production for to do with the gas, while current production still
nearly one year. Shell began production of the exceeds outbound capacity?”
June 2015 ▪ OilandGasInvestor.com 47Gas is flared at Utica end-use markets said Robert C. Skaggs, CEO of CPP GP LLC,
the Hays central More than commodity prices, in the end what on the company’s first-quarter conference call.
gathering facility.
matters is the degree to which new infrastruc- PTT, the Thai energy company, and Japanese
ture—and new markets—absorb the tremen- conglomerate Marubeni have chosen a site in
dous amount of projected Utica production Belmont County, Ohio, for their proposed
growth. A Morgan Stanley report said recently, ethane cracker. Engineering studies are ongoing
“In 2017 [and beyond], pipelines to move Mar- with a final investment decision expected in
cellus/Utica gas to new demand in the U.S. 2016.
Gulf Coast will begin to come online as pro- Meanwhile, Braskem America, whose parent
duction continues to grow, causing basis differ- is the Brazilian firm that is the largest petro-
entials to stabilize around transport costs. chemical company in Latin America, said it is
“Brownfield pipeline economics point to a reevaluating its plan to build an ethane cracker
transport cost of approximately $1/MMBtu in nearby Parkersburg, West Virginia, to use
from the mid-Atlantic to the Gulf, with green- Marcellus and Utica gas. Some 40% of U.S.
field costs as high as $1.50-2.00/MMBtu. We polyethylene demand is within 500 miles of the
believe we are at the inflection point of a struc- proposed site. The developer cited that there
tural shift in the U.S. natural gas market … may in fact be too much ethylene available if
with the Marcellus/Utica becoming the new all the proposed projects are built.
base price point for U.S. natural gas.”
A
nother company, Houston start-up Ap-
In Columbus, Ohio, law firm Bricker & Eck- palachian Resins Inc., is moving ahead
ler LLP’s oil and gas group began tracking such with plans to build a $1.3-billion ethy-
announcements in October 2013, according to lene/polyethylene facility in Monroe County on
the Columbus Business Journal. The firm said the Ohio River. It would take up to 350
more than $28 billion in projects has been an- MMcf/d from the Marcellus-Utica area. Start-
nounced, from pipelines to gas processing up could be in 2018.
plants to petrochemical plants and new hotels It all shows just how much natural gas lies
and office buildings in southeast Ohio. beneath these scenic vistas.
Of course, not all will be built, and some will “I think U.S. utilities are seeking a call on gas
be delayed. Haas said 16 Bcf/d of pipeline ca- supply and LNG off-takers are also looking to
pacity will be online by 2017. Columbia Gas secure supply through deals with producers.
Pipeline, which plans to separate from The potential gas resource in the Utica may
NiSource and be a separate public entity this well exceed the Marcellus, and this is the time
July, is negotiating with a large producer in for people with a long-term view to secure that
southwest Pennsylvania for a new dry gas gath- gas supply,” noted Skip Hobbs, managing part-
ering system. “The need for this system is ner of Ammonite Resources Co., a consulting
driven by the robust results of Utica drilling in firm. “I think good deals can be made in this
that region. It could be as large as a B [bcf/d],” environment on favorable terms.”
48 OilandGasInvestor.com ▪ June 2015You can also read
