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Ohio Utica Shale

More on Gulfport Energy's Utica shale report

By Bob Downing Published: March 4, 2013

 More from Gulfport  Energy Corp, Feb. 27:

 Its production for the  last quarter of 2012 was 90 percent oil and natural gas liquids and 10 percent natural gas. The full-year production in 2012 was 93 percent liquids and 7 percent natural gas.

The shale gas glut has reduced the price of natural gas and companies like Gulfport have switched to liquids.

The company said production from the Utica shale has been “lumpy and choppy over the past few months.”

That’s due to infrastructure delays, and those problems should be resolved as early as April, the company said.

The Utica shale has “exceptional potential,” said CEO James D. Palm.

His company drilled 14 Utica wells in 2012 with two in production and eight completed and resting, two awaiting completion and two being drilled.

It says its first 10 wells averaged a peak rate of 798 barrels of oil per day, plus  10 million cubic feet of natural gas and 1,166 barrels of natural gas liquids. That is equal to 3,630 barrels of oil equivalents per day.

It is operating three horizontal rigs and two top-hole rigs in the Utica shale. A fourth horizontal rig should be added by April.

It has earmarked $404 million in 2013 on Utica shale development. A total of 50 wells are planned in 2013. Many of those wells will be on pads next to existing wells.

The company said 17 percent of its Utica acreage is dry gas, 13 percent is in the oil window and 70 percent is wet gas. The drilling has been in the wet window only, to date.

The company is getting 17 to 18 barrels of condensate or oil per 1 million cubic feet of natural gas, and that rate seems to be holding, officials said.

Gulfport is still trying to determine the best resting period for wells before they go into production.

Here's what my co-worker Jim Mackinnon wrote about the earnings call on Thursday:

Gulfport Energy Corp. says it may spend more than $400 million this year to tap Ohio’s Utica shale, a strong indication that there is a lot more money to be found drilling deep underground in the eastern part of the state.

The $249 million Oklahoma energy company has some of the state’s strongest-producing wells in what are still the early stages of developing the Utica shale for its oil, natural gas and natural gas liquids.

Company executives on Wednesday discussed Gulfport financial figures and outlook for the year after releasing fourth quarter and fiscal 2012 earnings previously on Tuesday.

Gulfport expects to spend between $382 million to $426 million this year in Ohio and drill as many as 50 gross wells, company executives said. Gulfport’s total capital expenditures this year will be between $458 million and $512 million, the company said.

The company’s first 10 Utica shale wells have averaged the equivalent of 3,630 barrels of oil per day in natural gas, oil and natural gas liquids. Gulfport owns the rights to drill on 128,000 acres in Ohio.

“We plan to accelerate our 2013 drilling program in the Utica,” Jim Palm, Gulfport’s chief executive officer, told industry analysts in a conference call Wednesday afternoon.

Gulfport has other oil and gas operations in the United States and Canada, but the Utica shale is the company’s primary focus now, Palm said.

According to the Ohio Department of Natural Resources, the Utica shale may produce between 1.3 billion to 5.5 billion barrels of oil and as much as 15.7 trillion cubic feet of natural gas. At Wednesday’s closing price of $92.77 per barrel, that puts the Utica shale’s crude oil potential value between $120.6 billion and $510.2 billion.

Gulfport will be experimenting with different drilling and fracking methods to find the most productive method of extracting liquids and gas from the Utica shale, Palm said. Gulfport will drill two wells per location pad at most of its sites, he said.

Gulfport’s drilling activity is expected to increase in the spring and continue into summer, then level off.

It can take five to seven months from when a well is drilled to when the first gas and fluid sales take place, Palm said.

Gulfport’s activities will include drilling new “Darla” wells just north of its strong-producing Wagner wells in Ohio’s Harrison County. It also will drill additional wells on its Wagner site, too.

The Darla wells will be unique in part because Gulfport will drill three wells per pad instead of two. The company also will experiment with the pattern of its horizontal drilling, the kind of materials it injects to hydraulically fracture, or frack, the shale and more, Palm said.

“We will be putting in radioactive markers” to trace the wells, he said. The company will utilize fiber optic sensors and other technology at a cost of about $600,000 per well that will tell Gulfport “in real time” what is happening thousands of feet underground, he said.

The information gathered by the tracing and sensors will help the company determine such things as how much and what type of fracking sand to use, how far apart to space wells and other information. The idea is to help the company figure out where it can reduce costs and not hurt production, Palm said.

Gulfport earned $15.9 million, or 28 cents per share, on revenue of $56.6 million for the fourth quarter ending Dec. 31. Earnings were down from $30 million, or 59 cents per share, on revenue of $68.9 million a year ago. While earnings were down from a year ago, they beat consensus estimates from industry analysts; quarterly revenue fell a bit short of estimates.

For fiscal 2012, Gulfport reported net income of $68.4 million, or $1.21 a share, on revenue of $248.9 million. Net income was down from $108.4 million, or $2.20 a share, on revenue of $229.3 million in 2011. Shares on Wednesday rose $3.37 to $39.33, meaning the company was worth $2.99 billion. Shares are up 9.9 percent from a year ago.

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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.