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Ohio Utica Shale

Analyst says Ohio's Utica production data may not be overly helpful

By Bob Downing Published: April 8, 2013

From Sterne Agee analysts:

 

April 8, 2013

Exploration & Production

 

Exploration & Production

Analysts: Tim Rezvan, CFA

What to Expect in the Release of 2012 Utica Shale Well Results by the Ohio Department of Natural Resources

Our Call
The investment community continues to wait for the Ohio Department of Natural Resources (DNR) to release all Utica Shale wells drilled in Ohio in 2012. We expected a release late last week, but still haven't received anything. We believe results are likely to be posted on the state's web site this week.

  • What to Expect With the Data. If the 2012 list looks like the 2011 list, we will be left without much insight into the production potential of the play. We expect to see a list of 50-60 wells that were turned to sales in 2012. We also expect to see total gas, oil and brine production, as well as days on production. We do not expect to get any insight into NGL processing that may have occurred on the high-BTU content gas producing across much of the Utica Shale. For comparative purposes, we have included the 2011 results on page 2.

No Surprises Expected With Gulfport Energy. We expect to receive production data from two Gulfport Energy (GPOR, Buy) wells that began producing in late 2012 -- the Wagner 1-28H and the Boy Scout 1-33H wells. The company provided detailed production data about these two wells in its 4Q earnings call.

Chesapeake Data to Dominate the Release. In an operations update last Monday morning, Chesapeake (CHK, Underperform) highlighted some of the issues that will emerge with the release of the data. With infrastructure build-out remaining the largest near-term growth impediment, 2012 production data are unlikely to impress, as they will reflect restricted-rate production. Further, we are unsure how/if the "days on production" figure provided with each well reflects wells the production of which was temporarily curtailed. Our review of Chesapeake's permitting and drilling program over the last year suggests that we are likely to learn of several wells drilled in the northern part of the play that are unlikely to produce with similar pressures as those wells drilled in the fairway of the play in Carroll, Harrison, Belmont and Guernsey Counties. Weak fringe results from Chesapeake should not be new to investors. The company has stated publicly in recent months that the play's fairway may be farther south than anticipated when the company acquired its leasehold position. Chesapeake has reiterated its interest in focusing drilling on the southernmost 450K net acres it has in its JV with Total (TOT, $48.18, NR) within its ~1 million net acre position.

Derivative Read-Through of a Likely Opaque Data Set. We expect well results to vary greatly, given 2012 drilling activity across many fringe areas of the play. We believe weak results from other operators are likely to validate that Gulfport remains the most exposed operator to the over-pressured liquids fairway in Harrison, Belmont and Guernsey Counties. We also believe that Chesapeake results from Carroll County could validate that county's inclusion in the known fairway of the play.

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Utica and Marcellus shale web sites

Ohio Department of Natural Resources' Division of Oil and Gas Resources Management State agency Web site.

ODNR Division of Oil and Gas Resources Management. State drilling permits. List is updated weekly.

ODNR Division of Geological Survey.

Ohio Environmental Protection Agency.

Ohio State University Extension.

Ohio Farm Bureau.

Ohio Oil and Gas Association, a Granville-based group that represents 1,500 Ohio energy-related companies.

Ohio Oil & Gas Energy Education Program.

Energy In Depth, a trade group.

Marcellus and Utica Shale Resource Center by Ohio law firm Bricker & Eckler.

Utica Shale, a compilation of Utica shale activities.

Landman Report Card, a site that looks at companies involved in gas and oil leases.FracFocus, a compilation of chemicals used in fracking individual wells as reported voluntarily by some drillers.

Chesapeake Energy Corp,the Oklahoma-based firm is the No. 1 driller in Ohio.

Rig Count Interactive Map by Baker Hughes, an energy services company.

Shale Sheet Fracking, a Youngstown Vindicator blog.

National Geographic's The Great Shale Rush.

The Ohio Environmental Council, a statewide eco-group based in Columbus.

Buckeye Forest Council.

Earthjustice, a national eco-group.

Stop Fracking Ohio.

People's Oil and Gas Collaborative-Ohio, a grass-roots group in Northeast Ohio.

Concerned Citizens of Medina County, a grass-roots group.

No Frack Ohio, a Columbus-based grass-roots group.

Fracking: Gas Drilling's Environmental Threat by ProPublica, an online journalism site.

Penn State Marcellus Center.

Pipeline, blog from Pittsburgh Post-Gazette on Marcellus shale drilling.

Allegheny Front, environmental public radio for Western Pennsylvania.