News Column

Driller Says It's Thrilled With Ohio Shale Results

Nov. 5, 2012

Bob Downing, The Akron Beacon Journal

Oil shale
Oil shale

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.

Source: (c)2012 Akron Beacon Journal (Akron, Ohio) Distributed by MCT Information Services

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