Welcome to the Business Journal Archives
Search for articles below, or continue to the all new BusinessJournalDaily.com now.
Search
Development of Utica Shale Outpaces Other Plays
![](https://archive.businessjournaldaily.com/sites/default/files/DDlogoLeftPlacement_204.jpg?1385729227)
PITTSBURGH -- Despite the relatively small number of wells in production, oil and gas development in the Utica shale in eastern Ohio is moving at a rapid clip compared to more mature plays in the United States, analysts and energy executives say.
Many of the exploration and production companies that drill in the Utica are applying the lessons learned from their experiences in some of the larger plays, such as the Bakken in North Dakota, the Marcellus in Pennsylvania and the Barnett and Eagle Ford in Texas.
“The Utica shale is off to a very fast start,” says Chris Simon, managing director of asset acquisitions and divestitures at Raymond James Financial Inc. Although it’s still early in the Utica play, its pace of development meets or surpasses the rate of exploration and production in some of the major shale plays across the country, Simon says.
At Hart Energy’s DUG East conference in Pittsburgh Nov. 14, Simon noted more than 300 wells were drilled in the Utica through the third quarter. At this rate, the number of wells drilled this year should easily outpace the number drilled in 2012, he reports. “The rig count also continues to grow.”
Three-and-a-half years into the play, the Ohio Department of Natural Resources reports that 184 wells in the Utica are in production. However, Simon attributes the low level of productive wells to the lack of infrastructure in the shale play and notes that the number of wells drilled thus far – 606 – is impressive when compared to other large-scale shale plays across the country.
The first year of developing the Utica, 2010, resulted in just two wells drilled. The next year, 63 were drilled.
But it’s the number of wells drilled during 2012 that speaks to a shale play on the fast track, Simon notes. That year, exploration companies drilled 227 wells with just 2 years into development. Through 2013, an additional 314 were drilled.
In comparison, the Barnett Shale in northern Texas, the first play that demonstrated the viability of unconventional drilling, took seven years of experimentation before exploration took off in 2008. “Then, it exploded,” he says.
Still, five years into the play, slightly fewer than 300 wells were drilled annually there, Simon says. In 2008, nine years into the play, 2,804 wells were drilled in a single year.
Moreover, the Bakken oil shale play in North Dakota took nearly nine years to develop, largely because of delays in building pipeline infrastructure. In 2007, the fifth year into that play, fewer than 300 wells were being drilled per year. Last year, the Bakken’s 10th year of development, 1,981 new horizontal wells were drilled.
Other shale plays that followed – the Fayetteville in Arkansas, the Haynesville in Texas and Louisiana, and the Marcellus in Pennsylvania – all benefited from early exploration technology and techniques developed in these early efforts and were off to faster starts, Simon adds.
The Utica, taking into consideration infrastructure restraints but also a flurry of permitting activity in the southern tier of the play, is outrunning all of these plays when it comes to the pace of development. “It’s very early in the play,” Simon adds, “but it’s well ahead of its peers.”
He compares what’s occurring in the Utica to the red-hot Eagle Ford play in southern Texas. “The Eagle Ford, one of the fastest plays being developed, hit over 300 wells per year within three to four years,” he says.
As additional infrastructure comes online in the Utica – MarkWest Energy Partners, UEO Buckeye and Pennant Midstream recently placed into commission major processing plants in Columbiana, Harrison and Mahoning counties in Ohio – Simon believes it’s likely that the Utica’s pace will mirror that of the Eagle Ford, and not plays developing more slowly, such as the Bakken.
Last year, 2,921 new oil and gas wells were drilled in the Eagle Ford, Simon reports, and 2,259 wells were drilled through August of 2013.
What is clear to many energy companies is that the Utica play is finally being delineated, and these energy giants are stepping up exploration in areas they now believe are the most productive.
Much of the attention today is concentrated in the southern tier of the Utica play, especially Belmont, Noble, Monroe, Carroll and Harrison counties, says Hsulin Peng, senior analyst E&P for Robert W. Baird & Co.
“Counties with the high peak production rates and solid liquids splits are emerging as the core of the play,” Peng says. In the southern tier of the play, wells are reporting a strong mix of both dry and liquids-rich gas, while the oil window to the west has been abandoned.
Among those companies in a prime position to capture the core of the play are Gulfport Energy Corp., Antero Resources, Chesapeake Energy and PDC Energy, she notes.
In particular, Gulfport and Antero have staked out strong positions in this section of the Utica and both companies have brought very strong wells into production.
“We’ve still got a lot of science to do out there,” says Gulfport President and CEO Jim Palm. Nevertheless, the energy executive says that the Utica is, even in its early stages, starting to prove very lucrative. “I’ve never seen a place like this that you could have such success early on.”
Gulfport’s Shugert wells in Belmont County, for example, are turning in on average 6,368 barrels of oil equivalent per day, 66% of which is gas. The rest is higher-priced liquids.
Antero’s Yonz and Norman wells in Monroe County have produced even more staggering numbers. The average initial production of those wells stands at 8,500 barrels of oil per day, 62% of which is gas.
Despite these strong numbers, the Utica has also produced confusion among potential investors, says Baird’s Peng. In a survey Baird Energy conducted, 17% of the respondents viewed the Utica as a positive catalyst and 33% as a negative catalyst.
These results, Peng notes, represent a microcosm of the industry when the Utica is taken into consideration. This is largely because of mixed-well results from a large play, immature infrastructure, and incomplete well production data the state of Ohio have provided.
Any investor apprehension should be allayed over the next two years as infrastructure development continues and state data reporting shifts from an annual to quarterly basis, Peng says. “Investor concerns may be overblown in the medium term,” she says. “The Utica is still in its earliest days. There’s plenty more to learn.”
EDITOR'S NOTE: This story appears in the December edition of The Business Journal.
Copyright 2013 The Business Journal, Youngstown, Ohio.
CLICK HERE to subscribe to our free daily email headlines and to our twice-monthly print edition.