New Utica wells rival core Marcellus output
HOUSTON – Natural gas, and not oil, has turned out to be the dominant fossil fuel in Ohio’s Utica Shale, a big disappointment to the industry that prompted BP and Halcón Resources to abandon the play earlier this year.
But Aubrey McClendon’s new wildcatting venture American Energy Partners and a handful of players are racing to snap up land in the southeastern corner of the play, where operators have found wet gas and high-performing, affordable wells that rival some in the core of the Marcellus Shale, an analyst said at a press briefing last week.
“The wells are so strong in the southeast that $4 gas is fine out there,” said Jeanie Oudin, an analyst with Wood Mackenzie.
Domestic gas prices sank to record lows two years ago after shale gas supplies flooded U.S. markets, leading to a mass exodus of companies from gas fields. But Henry Hub natural gas prices rose to $6 per million British thermal unit in February, and traded around $4.72 on Thursday.
Exxon Mobil, Magnum Hunter, Rice Energy and Antero Resources are among the oil and gas producers moving southeastward to Belmont and Monroe Counties, about 100 miles east of Columbus, Ohio, where 19 of the top 20 best-performing Utica wells were drilled in the fourth quarter.
Some operators have recorded initial production rates that are on par with wells in in Susquehanna County, the Marcellus’ core area, about 150 miles north of Philadelphia. They have pumped close to 40 million cubic feet of natural gas per day, Oudin said.
In the northern areas of the Utica, closer to Cleveland, Wood Mackenzie expects more operators to pull out, as the rig count has dropped in areas like Chesapeake Energy’s coveted “oil window,” a hard-to-reach chunk of oil-soaked rock that turned out to be a lot smaller than the industry had first believed.
But the Utica “has been a little more exciting of late because of its potential and the capital that’s going into eastern Ohio,” Oudin said. Wood McKenzie projects the region’s daily output will grow to 5 billion cubic feet by 2018.
Chesapeake, one of the first companies to capture hydrocarbons in the Utica, drills further north in Carroll, Columbiana and Jefferson Counties. The company called the play its “newest world-class asset” last month, and is aiming to boost its production tenfold its level two years ago.
The Oklahoma City-based oil and gas producer accounts for about 60 percent of the producing wells in the play, but its ousted former CEO McClendon is jockeying for position in Ohio, too, snapping up more leases this week for its 280,000 net-acre position in the southeastern corner of the Utica.
American Energy, which has raised $10 billion in equity and debt to pay for more land in major U.S. shale plays, is “a wild card” worth watching, Oudin said.