A drilling rig in the Utica Shale. (Chesapeake)
Posted on 06/12/2014 4:05:34 PM PDT by ckilmer
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.
What hath God provided in the cleft of the rock?
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.
Buyer beware.
Buyer beware.
..........
I’m not quite getting your remark. You’ve mentioned you don’t like Aubrey McClendon. He’s the buyer in this case. So are you telling him to beware?
The article focuses on shale gas in ohio.
Here’s an EIA graph of shale gas production in Ohio for the last couple years.
It goes about straight up.
http://www.eia.gov/dnav/ng/hist/ngm_epg0_fgs_soh_mmcfM.htm
Why wouldn’t you believe that shale gas is a big deal in southeast ohio?
As in I wouldn’t be a buyer of Chesapeake or any other company’s stock that is still drilling gas wells and calling them “combo” or “rich gas plays.” Those markets are saturated. The only companies making any money are drilling oil wells. We are still a couple years out before natural gas begins to make a comeback, maybe five.
ok that makes better sense.
Nor does it contradict the article.
The article agrees with your position except in the cases where natural gas well produce incredible volume.
The article points out that the reason there are successful natural gas drillers in the east is because they’re finding places with incredible volume. The center of the natural gas play in the east—according to the article— is Susquehanna county in Pennsylvania. The article says they’re pulling incredible volume there.
The article also says that southeast ohio shows promise of also producing incredible volumes — on the scale of volumes in susquehanna country.
Here’s the quote:
“Some operators have recorded initial production rates [in southeast ohio] 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.”
I don’t disagree with you on any of that.
This year may wind up being a wild ride for oil.
Back in 2008 as I recall the price of oil shot up over 120 @ barrel. That summer gas prices were way high.
But the high oil prices choked the economy and the economy tanked forcing down oil prices to a big low.
I don’t think that will happen this time. There’s enough excess capacity in Saudi Arabia to make up for most of any lost Iraqi production.
So for through this year there’s a huge tail wind behind the best drilling companies and a forgiving price environment for 2nd-6th tier drillers and wildcatters.
Although government forecasters expect U.S. oil production to peak around 9.5 million barrels per day in 2016, Scott Sheffield, CEO of Irving, Texas-based Pioneer Natural Resources told an energy conference here the real pinnacle could be 14 million barrels daily.
“The only thing that can stop it is oil prices,” Sheffield said, warning that a price collapse for domestic West Texas Intermediate crude would cause “a tremendous turndown.”
http://fuelfix.com/blog/2014/08/06/pioneer-ceo-us-oil-production-could-hit-14-million-barrelsday/
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It looks like oil prices are headed lower. my WAG is that oil can go as low as about $92@ barrel without affecting drillers. (I think I’ve seen numbers in the last years that suggest the highest priced producers in the Permian are at about $92@barrel.)
Does that number seem right to you all? Or Higher/Lower?
As thackney would say, if we knew then we would be making real money.
Fundamentals are in two areas, supply and demand that affect price.
On supply, we are getting encouraging oil increases here in us, but the instability in ME can wildly overcome that.
On demand, the wold’s economy is what matters. If the Chinese tanks, demand will fall like a stone.
My WAG is upward pressure as politics is the ultimate trump and caused the biggest swings in past years.
And Putin is lurking
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