Chesapeake Energy Corp. is still in love with the liquids-rich Utica shale in
eastern Ohio.
It is eyeing Carroll, Harrison and Columbiana counties as Ohio's "core of
the core" where the Oklahoma energy giant will continue drilling for natural
gas, oil and other liquids.
Friday marked the first time that Chesapeake had publicly identified
those counties as the heart of its drilling plans.
The Utica shale still appears as lucrative as the Eagle Ford shale in
Texas, and Chesapeake is "absolutely thrilled" with the early Utica results,
CEO Aubrey McClendon said in a teleconference with analysts discussing its
third-quarter financial results.
The company envisions drilling up to 4,000 wells on its leased Ohio core
area in the next 20 years, officials said.
To date, Chesapeake -- the No. 1 player in Ohio -- has drilled 134 wells
in the Utica shale.
That drilling will produce bigger results in 2013 as new pipelines and
processing facilities come online, McClendon said.
A total of 32 of those wells are producing, and 37 other wells await
pipeline construction. Another 65 wells are in various stages of completion.
Chesapeake has 13 drilling rigs operating in eastern Ohio, one of 10
drilling areas around the nation. It has leased 1.3 million acres, but the
heart is 300,000 to 400,000 acres in Carroll, Harrison and Columbiana
counties, McClendon said.
Oil and wet-gas liquids found with natural gas in that part of Ohio are
especially lucrative to drillers, because the price of natural gas has dropped
sharply because of a supply glut.
In fact, the company is expanding its search for liquids, especially oil.
Ethane, butane and propane, the so-called natural gas liquids, are also
valuable, the company said. Liquids now account for 21 percent of the firm's
production and 63 percent of revenue in one of its accounting forms.
Chesapeake has indicated that it intends to keep and develop that core
and to sell off excess Ohio acreage. Four Ohio land sales are in the works but
have not yet been announced.
Asset sales delayed
Company-wide, sales of gas fields and other assets that had been
scheduled to occur this year won't happen until 2013, Chief Financial Officer
Nick Dell'Osso said on the conference call. Among the delayed items is
Chesapeake's 2 million acres in the Mississippi Lime, an Oklahoma and Kansas
shale formation that holds crude and gas.
Bloomberg News reported that Chesapeake is no longer courting Asian
investors for a joint venture in the Mississippi Lime formation, partly
because of concerns about rising political opposition to foreign investment in
domestic energy resources, according to Chief Executive Officer Aubrey
McClendon. McClendon said he's now in discussions with oil industry players
about buying some or all of the company's drilling rights.
Chesapeake has a joint venture with a French oil company, Total SA. It
still has $1.25 billion from Total and that money will fund Utica shale
drilling through 2014, Chesapeake said.
It also intends to develop a new joint venture in 2013 to drill for
natural gas only in the eastern part of the Utica shale. A partner has not yet
been arranged.
The natural gas in that area is expected to be equal to what is known as
the Marcellus shale in northeast Pennsylvania, the company said.
Chesapeake also released production data on three additional wells: two
in Carroll County and one in Harrison County. Data on production from Utica
wells in Ohio is very limited.
The Houyouse well in Carroll County's Lee Township is producing 1,735
42-gallon barrels of energy equivalents per day. That is derived from 465
barrels of oil per day, 325 barrels per day of natural gas liquids and 5.6
million cubic feet of natural gas.
The White well, also in Lee Township, is producing 1,360 barrels of oil
equivalents per day: 390 barrels of oil, 285 barrels of natural gas liquids
and 4.1 million cubic feet of natural gas.
The Stuart Henderson well in Harrison County's Stock Township is
producing 825 barrels of oil equivalents per day: 410 barrels of oil, 100
barrels of natural gas liquids and 1.9 million cubic feet of natural gas.
Top well in Ohio
The production numbers are very solid but are not close to the top
producing well in Ohio.
Gulfport Energy's Shugert well in Belmont County tested at an initial
rate of 20 million cubic feet of natural gas per day, plus 144 barrels of oil
per day and 2,002 barrels per day of natural-gas liquids. The peak production
rate was 4,913 barrels of oil equivalents per day, the company said.
The Oklahoma company said the Shugert well is expected to go into full
production in early December.
The typical nonhorizontal well in Ohio produces about 50,000 cubic feet
of gas per day and less than 1 barrel of oil. Such a well produces between 100
and 150 barrels of oil equivalents per day.
Spring report
The drilling companies do not have to report any production numbers on
new wells until next spring to the Ohio Department of Natural Resources'
Division of Oil and Gas Resources Management.
Ohio has limited production data filed last March from nine wells from
2011-2012.
Gulfport Energy released information this week on two new wells in
Harrison and Guernsey counties.
The Ryser well in Harrison County is producing 2,914 barrels of oil
equivalent per day. That includes 1,488 barrels of oil, 5.9 million cubic feet
of natural gas, and 649 barrels of natural gas liquids per day, the company
said.
The Groh well in Guernsey County is producing 1,935 barrels of oil
equivalents per day: 1,186 barrels of oil, 2.8 million cubic feet of natural
gas and 367 barrels of natural gas liquids per day, Gulfport said.
Gulfport Energy plans to put both wells onto production in January.
