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Ohio Utica Shale

Shale Tidbits 3: Chesapeake Energy Corp.

By Bob Downing Published: March 2, 2014

Shale Tidbits 3 from Chesapeake Energy Corp. The No. 1 player in Ohio’s Utica shale

From investor reports, an analysts’ call and company statements linked to fourth quarter 2013 and year-end financial and operations reports made last week:

Company says it drilled 425 wells in 2013 in eastern Ohio, Pennsylvania and West Virginia.

That includes 230 producing wells and 195 wells that are awaiting pipeline connections or are not yet complete.

Company said it expects to increase or double Utica capacity by the end of 2014.

Its Utica leased holdings are centered in Ohio’s Carroll County.

The company is continuing to reduce costs and sell off assets in order to improve its overall financial condition.

(From company statement) Chesapeake’s daily production for the 2013 fourth quarter averaged approximately 665,100 boe, an increase of 2% from the 2012 fourth quarter and a 1% decrease from the 2013 third quarter. This decrease is primarily due to a planned reduction in well connections during the fourth quarter as the company completed most of its well inventory reduction initiatives in the 2013 second and third quarters. Severe weather also negatively impacted the company's production in October and December. Average daily production in the 2013 fourth quarter consisted of approximately 111,300 bbls of oil, 63,700 bbls of NGL and 2.9 bcf of natural gas.

(From company statement) For the 2013 fourth quarter average daily oil production increased 15% year over year and decreased 7% sequentially, average daily NGL production increased 26% year over year and 9% sequentially and natural gas production decreased 3% year over year and 1% sequentially. Liquids accounted for 26% of total production during the 2013 fourth quarter, up from 23% during the 2012 fourth quarter and down from 27% during the 2013 third quarter. Adjusted for asset sales, the company's total production in the 2013 fourth quarter increased approximately 10% year over year.

It averaged 189 million cubic feet of natural gas equivalent per day during the last three months of 2013. That is a 309 percent increased from 2012.

It expects to produce 700 million cubic feet of natural gas equivalent per day in the Utica by late 2014, if the build-up of the Kensington gas-processing plant in southern Columbiana County continues.

Company has seven to nine rigs in the Utica shale.

The company reported fourth quarter 2013 Utica production of 31 Mboe/day.

Company says it has reduced spud-to-rig release time from 24 days in 2011 to 21 days in 2012 to 15 days in 2013 to 13 days in the first quarter 2014.

Now 93 percent of its Utica wells are multi-pad operations, it said.

The company said it expects Utica operations to ramp up in the second half of 2014.

Company also said the September fire that closed Blue Racer Midstream’s  Natrium, W. Va., natural gas-processing plant for months had a significant impact. The plant that can handle 200 million cubic feet of natural gas per day reopened in late January. Chesapeake had to find alternative processing, it said.

The company said its reserves are 73 percent natural gas and 27 percent liquids.

In recent years, Chesapeake has been focused on liquids production.

Getting rid of ethane from the natural gas at the Kensington processing plant caused minor issues, the company sai

Those issues and the Natrium problem caused deferred volumes, not lost volumes, the company said.

The company said well costs in the Utica have been reduced to about $7 million per well.

The company said the Utica and southern Marcellus will power its NGL sales in 2014.

Here’s what the company statement had to say about the Utica shale operations:

Utica Shale (eastern Ohio, Pennsylvania, West Virginia):Utica net production averaged approximately 189 mmcfe per day (345 gross operated mmcfe per day) during the 2013 fourth quarter, an increase of 309% year over year and 15% sequentially from the 2013 third quarter.

During the 2013 fourth quarter Chesapeake operated an average of nine rigs and connected 49 gross wells to sales in the Utica, compared to 11 average operated rigs and 63 gross wells connected to sales during the 2013 third quarter. The average peak daily production rate of the 49 wells that commenced first production in the Utica during the 2013 fourth quarter was approximately 7.7 mmcfe per day.

As of December 31, 2013, Chesapeake had drilled a total of 425 wells in the Utica, which included 230 producing wells and 195 wells awaiting pipeline connection or in various stages of completion.

Midstream processing infrastructure build-out delays and operational issues impacted Chesapeake's growth ramp in the Utica during the second half of 2013 and will continue to have an impact to a lesser degree in the first quarter of 2014. As a result of the infrastructure and operational issues, the vast majority of Chesapeake's wells that are connected to sales lines are on restricted choke and have not been producing at full capacity. Service resumed at the Natrium processing plant in January 2014, and assuming the mid-year addition of the third phase of gas processing at the Kensington facility, Chesapeake anticipates that it will achieve net production of 700 mmcfe per day in the Utica by year-end 2014.





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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.