Saturday, September 20, 2014LISBON, Ohio -- Bob Crosser thought working 42 years as an Ohio Edison troubleshooter was enough, so in 2011 he chose to retire and spend his time tending the horses he raises on a farm along U.S. Route 30 here.
But a recent turn of fortune might also have factored in his decision.
“It’s been a gift, really,” Crosser says as his Chevrolet pickup truck bounces toward an operating natural gas well Chesapeake Energy Corp. drilled on his property almost three years ago. “This well’s been good to us. If it keeps coming in like this, I’ll be making a lot more than what I did at Ohio Edison, that’s for sure.”
http://businessjournaldaily.com/company-news/wysu-meets-fund-drive-goal-.... As such, Crosser is among the first residents in Columbiana County who are finally reaping the dividends in the form of hefty royalty checks from oil and gas leases they negotiated nearly four years ago.
Many energy companies have abandoned the northern portion for more lucrative positions further south in Harrison, Belmont, Monroe and Noble counties.
The lack of interest and overall poor well production in the north has led companies such as BP America and Halcon Resources to suspend drilling in areas of Trumbull and Mahoning counties.
But the latest data show that wells in Columbiana County are in step with some of the results seen from wells drilled in the southern tier of the play.
For residents such as Crosser, the promises of royalties generated from natural gas held millions of years under eastern Ohio farmland weren’t hollow. Indeed, they’re very real, he says, exemplified by the royalty checks he and his wife expect to receive each month.
“We received our first check in August,” Crosser says, a payout based on the production of the Crosser well over three months. A second check arrived the first week of this month for a single month’s production.
“They’re starting to trickle in,” Crosser says, declining to divulge just how much the royalty checks are. “It’s going to be every month now.”
The Crosser well is one of 24 in Columbiana County that are connected with pipelines and in full production. Other wells are completed but haven’t produced oil or gas because they await infrastructure to be built.
According to the Ohio Department of Natural Resources second-quarter production report, a cluster of wells in Columbiana County’s Center Township is among the best producers of natural gas across the entire play.
The most productive in the county is the Dye 10H well, about one mile away from Crosser’s well. The Dye well produced 526 million cubic feet of natural gas over 90 days and stands as the 21st-most productive gas well of the 504 that reported results in the entire Utica play, according to records. Other wells near Crosser’s are also producing encouraging results. The Andrulis well yielded 508 million cubic feet of gas during the quarter while the Tritten well produced 426.9 million cubic feet.
Crosser’s well recorded 301.6 million cubic feet of natural gas over 87 days.
Crosser leased his 112 acres to natural gas giant Chesapeake in early 2011 at $1,500 an acre and 15% gross royalties. At the time, Chesapeake landmen scoured the Columbiana County countryside in search of potentially rich pockets of oil and gas in eastern Ohio’s Utica shale. Crosser says he used the leasehold bonus to buy a newer combine to harvest grain.
While the upfront money was good – Crosser was among those landowners who negotiated during the early speculative stage of the play and settled for less than others across the region – it’s the royalties attached to well production that are likely to build wealth in this community, he says.
Crosser spent a portion of his first royalty check on restoring a show wagon he bought seven years ago, making it possible for him to display his horses at the Canfield Fair this year.
“They said this could last 10 years or more, and there’s the potential to frack more wells here,” Crosser says, pointing to the well and noting that as many as six could be drilled at the pad. “It’s going to get interesting,” he laughs.
During the second quarter, 24 wells in Columbiana County produced 4.4 billion cubic feet of natural gas, according to ODNR. Those wells also produced 28,581 barrels of oil.
It’s clear that this part of the Utica is overwhelmingly a natural gas producer and not a major hub for oil production.
Still unknown is just how much of that production is “dry” gas such as methane, and “wet” gas that can be converted into ethane, propane and butane. Natural gas liquids command higher prices than traditional methane gas.
Also, it’s still very early in the Utica play, cautions Jeff Dick, chairman of the geology department at Youngstown State University. Although production rates could look strong for a single quarter, the real test is how these wells perform five or six quarters hence.
“It’s between the bottom of the first inning and the top of the second” in the Utica play, Dick says.
It’s not unusual for energy companies to increase initial production at well sites so they can boost their shareholders and investors’ confidence, the geologist explains. But doing so reduces pressure for future production, leading to higher decline rates and making it harder to extract natural gas liquids.
Still, the overall numbers for the Utica in the second quarter appear good, Dick reports. During the period, 24% of the wells, or 119, produced all 91 days in the period.
“In the previous quarter, it was 15%,” or 61 wells, Dick observes. “That’s good news.”
Wells in Belmont, Monroe, Harrison and Noble counties are showing strong results from both a natural gas liquids perspective and an oil perspective, Dick continues. Although the wells in Center Township look good and, at least for now, can hold up against most of the wells in the south, their production still lags behind some of the more astounding discoveries in that part of the play.
Hall Drilling LLC’s Hercher North well in Monroe County, for example, produced an eye-popping 1.4 billion cubic feet of natural gas during the quarter, rivaling some of the best Pennsylvania Marcellus shale wells. Another well on the same pad yielded 1.3 billion cubic feet of gas.
Antero Resources’ Myron well in Noble County produced the most oil of any well in the Utica with 78,309 barrels, according to ODNR.
On the other hand, wells Chesapeake Energy drilled in Carroll County – the county that holds more producing wells than any other in the play – have leveled off considerably since activity started in earnest in 2011, YSU’s Dick observes.
Among the notable takeaways from the latest production report is that midstream and pipeline development in the Utica is now on pace with drilling programs, Dick says.
“If you look at the third quarter of last year, it really flattened out,” largely because of the lack of pipeline infrastructure. Now that pipelines and processors have come online, production is accelerating at a robust pace. “That’s the way it looks,” he says.
Meanwhile, a clearer picture is beginning to form about oil and gas production from Utica wells farther to the north in Mahoning and Trumbull counties in Ohio and Lawrence and Mercer counties in Pennsylvania.
Hilcorp Energy Co., the most active driller in this region, reported during the second quarter that four wells it drilled at its Carbon Limestone Landfill site in Poland Township yielded more than 100 million cubic feet of natural gas after just 22 days of production during the quarter.
The best gas well in Trumbull and Mahoning counties is Hilcorp’s CLL2 3H well, which produced 134.9 million cubic feet over 22 days.
None of the Poland wells reported any oil.
The best oil producing well in the Mahoning Valley is Halcon Resources’ Grenamyer unit in Jackson Township, Mahoning County. That well produced 5,451 barrels of oil.
Other wells just across the state line in Lawrence County in Pennsylvania demonstrate similar results, according to production reports filed by the Pennsylvania Department of Environmental Protection.
The most productive is Hilcorp’s Pulaski Whiting 2H well, which produced 405.2 million cubic feet of natural gas during the first six months of 2014. The Whiting 5H well at the same pad yielded 334.1 million cubic feet for the same period, according to DEP records.
The 13 wells reporting results in Lawrence County for the first six months of 2014 produced 2.4 billion cubic feet of natural gas, DEP reported.
Wells in Mercer County weren’t nearly as productive, records show.
A Hilcorp well in Lackawannock Township, for example, yielded the most natural gas with 179.3 million cubic feet the first half. Production at the four wells in the county reporting results for the six-month period totaled an anemic 277.3 million cubic feet, or less than what Crosser’s one well in Columbiana County produced in 84 days.
As for Crosser, he says that he’s going to use his newfound wealth to make improvements to the farm, while acknowledging, “My wife has some ideas, too.”
The farmer shakes his head and reflects, “Never in my wildest dreams.”
Pictured: Bob Crosser leased the mineral rights for 110 acres to Chesapeake Energy in 2011.
Copyright 2014 The Business Journal, Youngstown, Ohio.
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