Click picture to enlarge
Posted on 08/01/2011 8:14:49 PM PDT by Ernest_at_the_Beach
O Aubrey McClendon Talks About the Utica Shale on “Mad Money”
8/1/2011 8:05 PM
|
On August 1 CEO Aubrey McClendon spoke about the new oil- and natural gas liquids-rich discovery in the Utica Shale on CNBC's "Mad Money." Several topics were covered, including the possible economic impact of the Utica Shale and how this large discovery could help move the U.S. away from foreign oil.
(Excerpt) Read more at chk.com ...
Major find
It’s not crude.
It’s NGLs. “All liquids”. This is the way the plays are hyped now to ramp the price of leases for sale.
NGLs have about 55% of the BTUs per barrel that crude has. You have to put 45% more of them into a refinery to get out the same amount of gasoline vs crude. There are liquids in these shale plays, for sure, but the proof is in the pudding, and the pudding is barrels per day. Not barrels of oil equivalent per day. Barrels per day.
Miracles are nice to think about, but they are not likely.
You would be wrong. It’s oil. Real oil. “Ohio tea.”
As for NGL’s - you don’t make gasoline from them. Think propane, butane.
And think before you post.
**************************************EXCERPT************************************************
Published: Jul 28, 2011
By Mikaila Adams
Chesapeake Energy (NYSE: CHK) released its second quarter 2011 financials July 28, and with the release came confirmation from the oil and natural gas producer that it believes the liquids-rich Ohio Utica Shale to be economically viable.
As part of its report, Chesapeake noted successful results from six horizontal and nine vertical wells drilled in its Utica shale holdings, and based on its proprietary geoscientific, petrophysical and engineering research during the past two years, said its “industry-leading 1.25 million net leasehold acres in the Utica Shale play could be worth $15 - $20 billion in increased value to the company.” Analysts at Baird Equity Research say the results constitute an implied acreage valuation of $12,500-$16,667 per acre.
Chesapeake targets the Utica
When the Oklahoma City-based company purchased roughly 500,000 net Appalachian acres from privately-held Anschutz Exploration in the fall of 2010, Jefferies & Co. Inc. speculated that the natural gas producer was targeting the Utica Shale. Along with the acreage, the company purchased some production in Pennsylvania, Ohio, and NY for roughly $850 million.
In what some may see as most compelling about the report is the direct comparison to the much publicized Eagle Ford Shale. The company believes the Utica Shale “will be characterized by a western oil phase, a central wet gas phase and an eastern dry gas phase and is likely most analogous, but economically superior to, the Eagle Ford Shale in South Texas.”
The Utica Shale occurs in outcrops in New York and in the subsurface in the provinces of Quebec and Ontario in Canada. It is also found in the states of Pennsylvania, West Virginia, and Ohio.
One estimate puts an estimated 20 trillion cubic feet of natural gas in the Utica Shale, and while it offers some unique challenges—a higher carbonate content and lower clay mineral count than the Marcellus as well as significant depth and a lack of information surrounding the play—producers are cautiously optimistic that advances in technology utilizing multi-stage hydraulic fracturing and horizontal drilling techniques can unlock the play’s potential.
Activity ramp-up
Going forward, Chesapeake plans to ramp up its activity in the play where it holds 1.25 million net leasehold acres. The company is currently drilling with five operated rigs and anticipates increasing its rig count to eight by the end of 2011, and up to 20 rigs by year-end 2012. By 2014, the company plans a ramp up to 40 rigs by year-end 2014.
Citing “persistent and significant oilfield service inflation” along with its accelerated Utica Shale drilling program, the company has increased its planned drilling and completion capital expenditure budget for 2011 and 2012 by $500 million to a range of $6-$6.5 billion in each year.
And, as the company has done with its other shale play acreage, joint ventures and/or other monetization alternatives are expected to be utilized, with at least one transaction expected to be completed by the fourth quarter of 2011.
I’m not in the industry but understand that hydrocarbon energy, whatever the form; if extracted and processed economically could be the game changer we’ve been waiting for.
This county is at its strongest when cheap abundant energy is available. The economy will start to create jobs again producing, consuming and exporting this stuff.
kewl
Thanks Ernest.
CEO Aubrey McClendon......... Big donor to the Swift Boaters in 2004. A million or two
Click picture to enlarge
Thanks!
You’ll see.
WTI is not regional. It’s an API rating. You can make it with poor quality crude analagously diluted with NGLs.
Ohio Tea must be pretty weak because that’s all liquids. Wet gas. There’s some crude in there, but it’s not much.
Owen - The Utica Shale will produce three discreet products:
1) Natural Gas - methane (CH4)
2) NGLs - components of a reservoir gas stream that are seperated out into liquids at the surface.
3) Oil - a mix of a huge number of very different and complex hydrocarbon molecules.
How do you know there’s not much crude oil to be recovered from the Utica?? The closest comparison is the Eagle Ford, from where huge quantities of crude oil are being shipped today. Oil and NGLs are two very different animals. If CHK claims they are producing from extensive oil legs in the Utica, I tend to think they are.
Oh and why do you bring up WTI?? (which has nothing to do with the American Petroleum Institute). It is a benchmark for a type of light sweet crude that underlies the NYMEX’s futures contract. (Other global benchmarks include Brent, Dubai, etc.)
Okay, you actually do understand things.
I mentioned WTI because it is specifically not regional. Meaning all WTI does have to come from West Texas, but you understood that, clearly, indicated from your other comments.
Here’s the thing. I despise talk of “huge amounts” and “a great deal” and “large shipments”. I want to see 30K bpd quoted. I want to see 35% recovery rates, or even 45% recovery rates quoted. I want to see API grades assigned to the *liquid*.
And I very specifically do not want to see 150K barrels of oil equivalent per day. You can’t put oil equivalent into a refinery and get gasoline out.
I am suspicious of Chesapeake’s verbage over the past month celebrating Ohio. You have to dig for hours to find ANYONE who will offer an estimate of BARRELS OF CRUDE PER DAY expected. They’ll tell you about cubic feet per day of gas. They’ll tell you how much liquids may be there. They will not say a word about expected production rate of oil.
Why? Because oil pays for these plays. Shale gas is dying under the relentless weight of inadequate profit. These shale gas plays are paying for themselves with the few hundred barrels of CRUDE per day that come up at $100/barrel. The $4 natgas doesn’t pay for them.
Chesapeake will hype and then shop those leases around. Watch.
does NOT have to come from West Texas . . . typo
Yeah I see you also pay attention.
CHK has already stated that they are shopping for a JV partner in teh Utica (just as they have already done w/ Statoil, CNOOC, etc. in the Marcellus, Niobrara, Barnett, Eagle Ford).
And no question CEO is a promoter, and he is promoting the Utica. But service companies I know back up his optimism.
The problem with specificity on BOPD and recovery rates is that it is so damn early in the the life of the play. Hell the Eagle Ford was originally thought to be a gas play, and now oil is driving everything (as you stated). And you can’t really know what you have until you see the production decline curve (called a type curve) over many years.
Bottom line for me: this is the most exciting time for domestic energy in my 30 year career, and it’s all due to hydraulic fracturing advances. I don’t mean to sound like Aubrey on Mad Money, but this is game-changing.
It’s good to like your work.
And it’s going to exciting to get gas out on the upslope.
But it’s not a game changer. The reason is that horizontals die vertically. Meaning hydrau fracking does not increase permeability past the frack zone, and that means when you go empty, you go empty all of a sudden. The right side of the peak is vertical.
So when you integrated the area under the curve, the left side of the peak looks like solid totals, but they are not half of the total, they are all of it. The right side of the peak slopes straight down. Horizontals die vertically.
We’ll see, though. No point leaving it in the ground where it helps nobody. But in my right wing conservative view, the only fix for this crushing scarcity is to depopulate the east coast of China, and I mean militarily. There is no point in Americans not burning oil so Chinese can.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.