Chesapeake Energy Corp. and most other companies having stakes in Ohio's Utica shale say they remain optimistic about the emerging play's potential, but one company, EnerVest Ltd., has said it wants to sell some of its Utica holdings.
Meanwhile Devon Energy Corp. executives recently said they intend to move to the east of Devon's initial leasehold.
Yet another company, PDC Energy Inc., dropped efforts to find a joint-venture partner to help PDC develop its Utica holdings. Although it received various joint ownership proposals, none were high enough to meet PDC's value expectations, executives announced in September.
Separately, Chesapeake Chief Executive Officer Aubrey McClendon recently told conference call listeners that Chesapeake still remains confident of its plans to find a joint-venture partner during 2013 for some of its 1.3 million Utica acres.
"Right now, we love what we see on the wet gas side," McClendon said. "The Utica is clearly an area of intense interest for the industry."
Other companies having Utica holdings include Anadarko Petroleum Corp., Magnum Hunter Resources Corp. of Houston, Gulfport Energy Corp. of Oklahoma City, and Rex Energy Corp. of State College, Pa.
Conventional production throughout Ohio has produced natural gas and some oil for more than 100 years. Operators emphasize that they are in the early stages of horizontal drilling in the Utica shale.
Companies exploring the Utica shale have concentrated so far in Ohio. The shale also reaches under the Great Lakes and into Canada. Operators found gas in the Utica in several wells in the St. Lawrence Lowlands before Quebec placed a moratorium on hydraulic fracturing, needed to extract the gas at commercial rates.
The late Ordovician Utica shale generates paraffin-rich petroleum with low adsorption affinity and also low resins and asphaltenes, said Daniel M. Jarvie, president of Worldwide Geochemistry LLC in Humble, Tex., and adjunct professor at Texas Christian University, Fort Worth.
Presenting at the American Association of Petroleum Geologists Eastern Section meeting in Cleveland during late September, Jarvie discussed his geochemical assessment of the Utica and Point Pleasant shales of Ohio.
The Ohio Department of Natural Resources estimates recoverable Utica Shale potential at 1.3-5.5 billion bbl of oil and 3.8-15.7 tcf of natural gas. As of Sept. 16, the ODNR said 382 horizontal drilling permits had been issued for the Utica shale in Ohio since Dec ember 2009 of which 144 horizontal wells have been drilled. About half of the permitted wells are in Carroll and Columbiana counties.
EnerVest, Devon changing Utica plans
EnerVest and its subsidiary, EV Energy Partners, are the biggest oil and gas producers in Ohio based on conventional production. EnerVest said its unconventional well, the Cairns 5H, produced at 1,300 b/d of oil and natural gas liquids on a 24-hr test in August.
The Cairns 5H well is Harrison Township, said Mark A. Houser, president of EV Energy and the executive-vice president and chief operating officer of EnerVest, a holding company based in Houston.
EnerVest executives told the Wall Street Journal they have little appetite for the risk and expense of developing new shale formations. Some estimate Utica wells can cost $5 million each.
Divestiture plans call for EnerVest to sell drilling rights to 70% of its Utica acreage where it completed four wells on its own. In addition, EnerVest has interest in 58 wells drilled by partner Chesapeake.
The Utica assets that EnerVest wants to sell involve tracts it owns outright and on tracts owned with other companies. EnerVest plans to retain 231,000 net Utica acres.
During an earnings call in August, David A Hager, Devon's executive vice-president of exploration and production, said his company's Utica efforts continue but are going to shift.
Devon's initial Utica drilling was west of where other companies have explored for gas or natural gas liquids. Most of industry's Utica drilling has been in Carroll, Harrison, Columbiana, Jefferson, Mahoning, Stark, Portage, and Belmont counties.
"We will continue drilling in a liquids-rich window," Hager said. Devon's initial efforts were in Medina, Ashland, and Knox counties, which did not produce the results for which the company had hoped.
Chesapeake focuses on gas windows
Chesapeake is the largest lease holder in the Utica shale of eastern Ohio and is focused on developing the wet gas and dry gas windows.
As of June 30, Chesapeake had drilled 87 wells in the Utica play but reported production information on 28 wells. On a post-processing basis for those 28 wells, peak rates have averaged 1,000 boe/d: 205 b/d of oil, 150 b/d of NGL, and 3.8 MMcfd of gas.
Chesapeake on June 30 had 28 additional wells waiting on pipeline connection, with the others in various stages of completion.
Recently, Chesapeake completed the following three wells in the Utica, all in Ohio:
• Brown 10H in Jefferson County flowed at a peak rate of 1,445 boe/d, including 8.7 MMcfd of gas.
• Bailey 3H in Carroll County flowed at a peak rate of 1,420 boe/d, which Chesapeake said was 205 b/d of oil, 270 b/d of NGL, and 5.7 MMcfd of gas.
• Snoddy 6H in Carroll County flowed at a peak rate of 1,260 boe/d, which was broken out by 320 b/d of oil, 250 b/d of NGL, and 4.2 MMcfd of gas
Chesapeake's best Utica well, the Buell 8H in Harrison County, flowed at an initial peak rate of more than 3,000 boe/d in September 2011 with about half coming from liquids. The Buell well produced 1,040 boe/d of as early May, the company reported (OGJ, May 7, 2012, Newsletter).
In September, Chesapeake operated 11 Utica rigs and planned to exit 2012 with 16 operated rigs. Chesapeake's remaining drilling carry from joint venture partner Total SA was $1.35 billion as of June 30, and Chesapeake planned to use 100% of that by yearend 2014.
PDC gives up on Utica JV
PDC of Denver said it did not receive a high-enough bid from potential joint venture partners for a stake in its Utica holdings. The Denver company announced plans to independently pursue development of its Utica holdings in southeast Ohio.
Although PDC's 2013 budget was not finalized when this story was being written, executives said they expected to invest $50 million in the Utica. James Trimble, president and chief executive officer, said the Utica "could be one of the top-tier economic shale plays in the US onshore."
In a Sept. 19 release, PDC went on to say: "The emerging Utica play is exceeding the company's expectations in several key areas including initial production rates, liquids mix, the pace of derisking, and the delineation of the gas-condensate window of the play." Much of PDC's leasehold position involves the gas-condensate window.
Although PDC had sought a Utica JV to reduce the risk of its leasehold position, the company instead said it has development flexibility for its estimated 200 horizontal wells because 50% of its acreage is held by production and the other 50% involves multiyear primary term leases.
PDC drilled two horizontal wells in Guernsey County, Ohio, and expects to spud a horizontal well in northern Washington County during the fourth quarter.
Separately, Anadarko remains in the early stages of its exploration program on its 390,000-acre gross position in the Utica, Bob Daniels, Anadarko senior vice-president, worldwide exploration, said in an April statement on the company web site.
The Brookfield A-3H well in Noble County produced 9,500 bbl of oil and 12 MMfc of high-btu gas during its first 20 days on stream. The Spencer A-1H and Spencer A-5H wells, in Guernsey County, cumulatively produced a combined 20,000 bbl of light-gravity crude oil and 37 MMcf of liquids-rich gas in 2 months.
All three horizontal wells were drilled to a vertical depth of 6,500 ft and a lateral length of about 5,000 ft with 16-19 stage completions. Anadarko operates the Brookfield and Spencer wells with a 100% working interest (82.5% net revenue interest) subject to a participation agreement with Artex Energy Group LLC.
