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Ohio Utica Shale

Money-strapped Chesapeake halts Utica, Marcellus drilling

By Bob Downing Published: February 25, 2016

Financially strapped Chesapeake Energy Corp. is halting new drilling in Ohio’s Utica Shale.
The company, Ohio’s No. 1 Utica driller, announced on Wednesday  that it does not intend to drill new wells in eastern Ohio in 2016 because of financial constraints.
That could change if the prices paid for natural gas and liquids increase significantly, the company said.
It has released the two drilling rigs that had been at work in Ohio in the fourth quarter 2015 in Carroll and Harrison counties.
Chesapeake also said it is halting drilling in Pennsylvania’s Marcellus Shale where one rig had been at work in late 2015. It is the No. 1 driller in Pennsylvania. Rigs also have been released by Chesapeake in the Powder River Basin in Wyoming and will be dropped in the Eagle Ford Shale in Texas by June.  
The Oklahoma-based company said it expects to place 45 to 55 Utica wells previously drilled in Ohio and 20 in Pennsylvania into production in 2016.
The firm placed 43 Utica wells into production in the fourth quarter 2015. That compares to 51 wells that began production in the fourth quarter 2014.
Chesapeake has 813 Utica Shale drilling permits in Ohio, far more than any other company. The state has issued 2,134 Utica permits. The company swept into eastern Ohio in 2010 and leased millions of acres. It has 578 Utica wells in production in Ohio; 106 have been drilled; eight are being drilled; and 121 are permitted.
Said Shawn Bennett, executive vice president of the Ohio Oil & Gas Association, a statewide trade group, “While the association does not comment on specific companies’ business plans, recent decisions by a number of companies operating in the state to scale back drilling operations for 2016 are unfortunately not unique in the current price environment.”
Continuing low commodity prices and difficulties getting product out of Ohio to high-paying markets because of pipeline delays have hurt Ohio drillers, experts said.
Chesapeake’s announcement comes as no surprise but does raise red flags, said Paul Feezel of the Carroll Concerned Citizens. If the drillers lack money to operate, it may be that they won’t have the funds to correct problems when they occur and that is troubling, he said.
He said he was surprised how quickly the boom-and-bust cycle of drilling went bust on Chesapeake
The company’s action “may not be that big of a deal… and its impacts on Ohio may not be that great,” said Jeffrey Dick, professor and chair of the department of geological and environmental sciences at Youngstown State University and a Utica Shale expert.
The company drilled most of its wells from 2011 to mid-2015 and has not been an overly active player in Ohio in recent months, he said.
Ohio still has 15 drilling rigs at work for Gulfport Energy, Antero Resources, Rice Energy and other companies in counties like Belmont, Monroe and Guernsey where Chesapeake has few holdings, he said.
The halt to drilling in the Utica is tied to Chesapeake reducing its 2016 capital budget by 57 percent to between $1.3 billion and $1.8 billion. It spent $3.6 billion in 2015. It plans to drill 330 to 370 new wells in 2016. But 70 percent of the money will be spent on completing wells, not drilling new ones, the company said.
It is also projecting a decline of up to 5 percent in 2016 production.
Chesapeake’s Utica net production averaged 140 million barrels of oil equivalents per day in the fourth quarter 2015. That is a 33 percent increase over the previous quarter, the company said. The increase is due to Chesapeake bringing curtailed volumes to market as new transportation with better pricing became available to the company, officials said.
The company had cut Utica production since last May  but that has changed with the completion of a new pipeline in eastern Ohio. Wells that had been curtailed are now producing fully, said spokesman Chris Doyle. The Utica cash results are good but not fantastic, he said.
Overall, Chesapeake 2015 daily production averaged 679,200 barrels of oil equivalent, an 8 percent increase from 2014, the company said. Its oil and natural gas production increased by 8 percent and natural gas liquids including ethane and butane jumped by 14 percent from 2014.
Chesapeake has $700 million in pending asset sales in Texas and Oklahoma that are expected to close by June 30 and could have an added $1 billion in additional sales by Dec. 31,  said CEO Doug Lawler in an earnings call with analysts and the media. The company has been actively seeking buyers for its assets in the Utica Shale.
For 2015, Chesapeake reported a loss of $14.9 billion. It lost $2.2 billion in the fourth quarter.
The company says it has hedged half of its natural gas and oil sales in 2016 to boost its finances and reduce its debt.

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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.