Operators say IP rates indicate great potential from deep Utica dry gas

Sept. 28, 2015
Several independent operators have reported highly promising initial production from the deep Utica dry gas play in southwestern Pennsylvania, northwestern West Virginia, and southeastern Ohio.

Several independent operators have reported highly promising initial production from the deep Utica dry gas play in southwestern Pennsylvania, northwestern West Virginia, and southeastern Ohio. Few companies have yet estimated ultimate recovery, and actual long-term results are pending.

Although the Utica dry gas play remains largely undeveloped and its production remains small compared with the nearby Marcellus, operators have made numerous IP announcements (See table p. 3 this issue).

Initial costs have been high, but Range Resources Corp., EQT Corp., Consol Energy Inc., and others have suggested Utica costs will drop over time. Range Resources is based in Fort Worth, Tex., and EQT is based in Pittsburgh while Consol is in Cecil, Pa.

Charles Robertson, an analyst with Cowen & Co., noted exploration and production companies are in the early delineation stages in the dry gas Utica.

"Utica dry gas potential is great, and looks like it will push out higher-cost Upper Devonian and Marcellus gas plays," Robertson said in an Aug. 26 research note.

EQT reported its Scotts Run well in Green County, Pa., flowed on a 24-hr test rate at 72.9 MMcfd.

RBC Capital Markets analyst Scott Hanold believes the core deep Utica dry gas could achieve a 70% internal rate of return given a wellhead price of $3.50/Mcf. His assessment was based on the expectation that EQT's Scotts Run could have an estimated ultimate recovery of about 30 bcf.

In a research note, Hanold said, "These wells could generate a 15% break-even near $2/Mcf."

Consol drilled the Gaut 41H Utica dry gas well in Westmoreland County, Pa., and the well had at a 24-hr test rate of 61 MMcfd at 7,500 psi flowing pressure. At times, the maximum flowing pressures exceeded 9,000 psi.

That well cost $27 million, but Consol executives told a July 28 conference call that they expect they can trim costs in the future. Tim Dugan, Consol chief operating officer, noted Consol-controlled acreage brackets EQT's record-setting well in Greene County.

"Our Greene Hill field is a few miles to the south, the Nineveh field is due north, and the Majorsville field is due west," Dugan said. "Not only does Consol own a significant footprint across Green and southern Washington counties, but almost half of this is fee acreage, which is a huge boost to rate of return."

But low oil and gas prices are taking a toll. Consol reported a second-quarter net loss of $603 million, including an impairment charge of $829 million on its shallow, conventional wells across Appalachia.

Russell Porter, president and chief executive officer of Gastar Exploration Inc., believes the Marcellus and Utica "are going to be the low-cost basins for natural gas in North America." He spoke to an Energy Prospectus Group luncheon in Houston on Sept. 4. Gastar, based in Houston, is developing liquids-rich gas in the Marcellus and just beginning to drill its dry gas Utica shale acreage.

In addition, Gastar also has acreage in Oklahoma involving the Hunton limestone horizontal oil play as well as the Woodford shale and the Meramec shale, known as the Mid-Continent STACK play.

In the Utica, Gastar has drilled two wells in West Virginia. The Simms U-5H well tested at 29.4 MMcfd, while the Blake U-7H well in Marshall County on a 48-hr test flowed at 36.8 MMcfd at 6,200 psi. The Blake U-7H was drilled with a 6,617-ft lateral and 34 fracturing stages.

Both Gastar's Utica wells were completed and placed on production at restricted rates because of low gas prices.

Porter said the two wells demonstrate the consistency of what he calls "prolific production from the Utica-Point Pleasant play across our leasehold. Currently, we have no plans to drill another Utica-Point Pleasant well on our acreage until regional natural gas prices improve and returns on investment become competitive relative to our other internal investment opportunities."