Posted on 10/23/2012 5:05:35 AM PDT by thackney
Analysts say that the Utica Shale, which is nearly equal to the size of the Eagle Ford play in Texas could become the third-largest shale play in the United States, producing as much as 250,000 to 500,000 barrels of oil a day. The Ohio Department of Natural Resources estimates that the Utica’s potentially recoverable reserves could range from 3.75 TCF of gas and 1.31 billion barrels of oil to 15.7 TCF gas and 5.5 billion barrels of oil.
In comparing the Utica to the Eagle Ford, the following: TVD in the Utica can be as shallow as 4,500 feet versus ~ 6,000 feet in the Eagle Ford, recovery factor can be 5% versus 4%, formation thickness 140 feet versus an average of 100 feet and porosity of 8% versus 5-8% in the Eagle Ford.
With regard to activity and players here is what's happening so far:
* Chesapeake holds more than 1 million net acres in the Utica and is by far the most active driller with a total of 87 wells with plans to finish 2012 with 15 operated rigs. They have significant funds to support their development through the end of 2014 thanks to the remaining drilling carry from their January 2012 joint venture with Total.
* After Chesapeake released data for five wells drilled in Carroll and Harrison Counties in the Utica/Point Pleasant play earlier in the year, everyone took notice. Their Buell well IP was 9.5 MMCFED of gas, 150 BD of condensate, and 1,275 BD of NGLs for a total of 1,040 BOED.
* Then came Gulfport Energy's Wagner 1-28H well in Harrison County producing 14 MMCFED of dry natural gas and 1,881 BD of natural gas liquids (after processing) along with 432 barrels of oil, significantly higher than the IP rate of Chesapeake's Buell well. Gulfport plans to drill 200 wells in the area in the next four years.
* There are other big players here also: BP has invested, then there’s Hess and CONSOL who entered into a 50/50 joint venture a year ago valued at almost $600 million to fund their drilling and development across 200,000 acres.
And there is more activity when it comes to deals taking place in the Utica involving acquisitions and infrastructure as indicated by the following examples:
* EnerVest Ltd. amassed a huge collection of Utica drilling rights beginning in 2003 with plans to harvest their investment. Accordingly they plan to sell drilling rights to about 70% of this acreage and retain slightly more than 200,000 net acres whose potential will be determined in the future. It's estimated this sale could generate more than $6 billion.
* In September Spectra Energy, EnBridge and DTE Energy formed a Utica pipeline joint venture with plans to commence operations by late 2015 depending upon demand at that time. Total investment for this new pipeline system is estimated at $1.2 billion to $1.5 billion.
* Also in September NiSource and Hilcorp Energy announced a joint venture to construct their Pennant Midstream gathering pipeline infrastructure with NGL processing in Northeast Ohio/Western Pennsylvania. Reportedly it will cost around $300 million.
Summary: There are more announced (and unannounced) deals and plans that will be adding to Utica momentum, supporting a transition from early-stage to a bigger development opportunity that will probably rank with the big shale plays in the future. It will depend, of course on continuing investment by larger players like Chesapeake, Hess, BP, CONSOL and others plus the near-term economics of crude oil and liquids to affirm a logical path forward in Utica development.
No argument with that, but it is also true that it is inevitable that production costs will drop.
"Wages in the patch have finally risen to reasonable levels compared with, say, union auto workers, and be thankful there is no dead weight in the patch, no one sitting in the 'break room', just guys who work 12 hour days in virtually any weather, two weeks on, two weeks off.
My best bud from high school has done that his whole life (and is still doing it). Offshore. Fortunately, Louisiana is a "right-to-work" state, so no problems with unions there.
"Others of us do our jobs 'for the duration', and only get time off during rig moves and casing runs, and we're not going to work cheap after living off our savings during price crashes over the last few decades more than once. It goes out a lot faster than it stacks up. For many of the old hands out there, this is the shot at retirement. There are fewer than 20,000 people in the world who do what I do, and likely fewer than half that.
My sis-in-law fits into your category. She's geophysicist specializing in interpreting 3D seismic. Fortunately, during the last "bust", she was good enough to be able to transition to another company when her first one went down the tubes. Scary intelligent woman....but somewhat nuts. But her company is majorly focussing on NATGAS off Israel right now.
"As far as building rigs, some are, but stop and consider that the drilling contractors aren't in a hurry to invest millions in rigs and the equipment to run them and the hands to man them to have them sit idle. They, too keep a sharp eye on demand, and will not oversupply the market or they could end up with a yard full of iron bought at top dollar and selling for scrap.
All true, but eventually the supply of rigs WILL increase, and I think faster than you might think. Read the PDF files linked by SC_Pete.....the numbers are truly mind-boggling.
"Some oil will be displaced by natural gas, which is already a prime heating fuel in this region (Northern Plains), and a lot will go to power generation."
"With the ever moving target of EPA regs, coal has been hurt, but while it is down, I do not think it is out just yet. It is still a viable fuel, available in mind-boggling supply, and cheap. The destruction of the coal industry has been a government construct from day one, using regulations to pick 'winners' by eliminating the competition, one of the standard operating tactics of this administration. As the power plants got cleaner, they moved the bar.
While this is all true, I don't see a future for coal in the short run. The magic word is "pipeline". Coal has to be moved by train, and simply cannot compete. Add into that equation the very near proximity to the northwest USA shale plays (much shorter pipelines) to existing coal-fired plants. Eventually some bright guy is going to figure an easy way to convert an existing coal-fired plant to gas-fired, or even combined cycle. When that happens, coal is "done" for the near future. Of course, eventually even the shale gas will run out, and coal "might" come into it's own again.
"It amazes me that any UAW member would vote Democrat this time around. "
I suspect you may mean UMW instead of UAW, though the UAW members will also be affected.
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