Wednesday, May 21, 2014

Where the Utica Shale Ranks Among U.S. Shale Plays

While many of us that closely follow the Utica Shale can point to the growth in activity as a great sign, it is interesting to look outside to some of the other U.S. tight plays for some perspective.

Where does the Utica Shale fit?
According to the May 16, 2014 report from Baker Hughes (rig count), the Utica shale ranks 9th in rig count. And this 9th position equates to just 3% of rig count among the major basins, most unconventional. For example, the Permian, Eagle Ford, and Williston (Bakken) basins account for a whopping 68.8% of the rigs. The Marcellus + the Utica account for just 6.3% of rigs.

Rig Count Comparison

Data Source - Baker Hughes Rig Count:

Chart of rig counts

Data Source - Baker Hughes Rig Count:   

Production Comparison
Another useful comparison is to look at the total monthly production from the play. Here the U.S. Energy Information Administration does not show the Utica Shale in the top six, apparently the play has yet to reach a total production amount worth mentioning. Utica Shale production is just starting to ramp up but it may be some time, if at all, before it reaches the status of the six most prolific areas as defined by the EIA.
Source - EIA:

So, while we cheer the Utica and do expect great things to come, this play will not likely rival many of the larger plays in the U.S. Of course there is nothing wrong with this. Anything that the Utica Shale can add to the nation's supply and to the economy is greatly appreciated. 

Monday, May 19, 2014

Utica Shale Ohio - Who is Drilling Where

As of May 17, 2014
Drilling activity in the Utica Shale in Ohio continues to be dominated by Wells in the Southeast.

Wells drilling by county
Harrison - 35
Carroll -  28
Monroe - 24
Noble - 20
Belmont - 16
Guernsey - 11
Columbiana - 3
Jefferson, Morgan - 2 each
Portage, Trumbull, Washington - 1 each

Well drilling by operator
Chesapeake - 47
Antero - 27
Gulfport - 16
Hess, Eclipse - 10 each
American - 9
HG, PDC - 5 each
Triad Hunter - 4
Hall - 3
CNX, EQT - 2 each
Chevron, Devon, Halcon, Mountaineer - 1 each

Map of wells drilling

Click for large version of map
Click for large version of map

Utica Shale Ohio - Permits Issued Week of May 12, 2014

Twenty new Utica Shale permits were issued in Ohio during the week of May 12, 2014. Permitting activity was still dominated by wells in the Southern part of Ohio.

Chesapeake - 4 permits in Carrol County, 1 platform
American - 5 permits in Harrison County, 1 platform
Gulfport - 2 permits in Belmont County, 2 platforms
Antero - 5 permits in Marion County, 1 platform
CNX Gas - 4 permits in Noble County, 1 platform


Click for large version of map

Click for large version of map

Wednesday, May 14, 2014

New Utica Shale Permits Issued Week of May 5th.

Updated May 10, 2014 with data from the Ohio DNR
1262 total horizontal permits with 849 wells drilled.

The week of May 5th saw 19 new permits issued lead by Guernsey county and Harrison county, both with 5 new permits issued. Carroll and Monroe Counties came in with 3 new permits each, followed by Belmont, Columbiana, and Jefferson Counties with one new permit each.

Click here for a larger version of the map below

Click here for a larger version of the map

Friday, May 9, 2014

Utica Shale Ohio Production - Winners Circle Q4 2013

Who has bragging rights in Ohio's Utica Shale?

In Ohio's Utica Shale, acreage is nice, talks is cheap, and production numbers tell.

The Q4 2013 production results released by the Ohio DNR last month leave no doubt as to who has the bragging rights when it comes to production. Production = making money (as long as economics hold up). While infrastructure is holding up some projects, it is still telling when you look at where the biggest oil and gas producers are. And while the trend does indicate a sweet spot, the sweet spot is "spotty" and the methods used by individual operators to bring production online can have an enormous impact on results.

So, the winners are...

Total oil production over 15,000 barrels. 
Map of well locations and operators.
Top 14 wells and operators: Gulfport (8 wells), Antero (3 wells), PDC (3 wells)

Total gas production over 300,000 MCF
Map of well locations and operators
Top 18 wells and operators: Gulfport (8 wells), Antero (6 wells), Chesapeake (3 wells), Hess (1 well)

Behind Gulfport's Earnings Disappointment - A Utica Mystery Story

A mystery story unfolding, with twists and turns
Ohio's Utica shale is a mystery story that will be unfolding for some time to come. And as producing wells are coming online at an increasing rate, much is being learned and development strategies are changing.

The earth does not give up its secrets easily
To be sure, these are a highly complex operations. The earth does not give up its secrets easily. From well location and horizontal well path, to drilling, stimulation, completion, and production methods, there is an enormous number of factors that impact production and EUR (estimated ultimate recovery).

A new strategy
In Gulfport Energy's Q1 2014 earnings release they stated that in order to achieve maximum long term results (higher ultimate recovery), they will reduce production rates in the short term. Attempt to drain the subsurface of its hydrocarbons too quickly and your production decline curve may accelerate to the point that you are sacrificing long term total recovery. The company also mentioned that they now have adequate production data to "benchmark" how to produce wells for maximum long-term results. I suggest that current strategies will continue to evolve though establishing a benchmark sounds like a good start.

Variability illustrated - >100% production differences from wells on the same pad
The issue of variable and hard-to-predict  production results is perfectly illustrated by looking at the often enormous differences in production between wells on the same pad. These wells are typically no more than about 40 meters from each other yet production numbers can vary to the extreme.

Click on the links below to see the wells on a map, with wells locations click-able to see production numbers. All wells have at least 72 days of production. Numbers come from the Ohio DNR Q4 2013 report.

Boy Scout wells: Production varied from 93 to 326 barrels of oil/day
Wagner wells: Production varied from 19 to 108 barrels of oil/day
Stout wells: Production varied from 51 to 101 barrels of oil/day
Clay wells: Production varied from 78 to 203 barrels of oil/day

With such large differences, from 100% (minimum) to about 500% we can say with confidence that this is not an exact science and that there is much to learn. I predict that some variability of even 100% will continue to be common as more and more is learned about how to maximize production for these wells.

A scientific approach
Gulfport made a number of additional references to a more scientific approach to completing their drilled-well inventory. More and more operators are learning that higher production and return on investment in shale plays requires a more scientific approach. This is NOT a simple mining operation as many believe. Wells drilled adjacent to each other can have vastly different production rates based on many of the factors mentioned above. Those companies that look for data and science to drive continuous improvement, over taking a pure mining approach, should benefit long term.

Long term strategy and short term pain = long term gain
It is smart that Gulfport is rethinking their strategy and looking to maximize total recovery over the life of a well. Time will tell if their new methods and more scientific and measured approach yields improved results. With current well spacing they look to put over 1,000 additional wells into production in the years to come, over the 50 wells brought online to date. And while wall street punished the company for revising its numbers downward, the company's strategy adjustment should benefit the company long term. Downward revisions are painful, and I expect that as more and more production data becomes available and data for predicting future production becomes more abundant, there won't be such wide swings in company estimates.

Note: Full disclosure, I own a number of Gulfport Energy shares at the time of this writing.

Utica Shale Ohio - See Who is Drilling Where (5/2/2014)

Ohio's Utica Shale activity continues at a lively pace.

Top drillers and counties by the numbers (as of May 2, 2014)

County with link to map, number of wells drilling and operators

Harrison: 34  (Chesapeake-14, American Energy-7, Hess-5, Eclipse-3, Gulfport-3, Chevron-2
Monroe: 28 (Antero-12, Eclipse-5, HG-5 Hall-3, Triad-3)
Carrol: 26 (Chesapeake-25, Rex Energy-1)
Noble: 23 (Antero-20, CNX-3)
Belmont: 14 ( Gulfport-11, Hess-3)
Guernsey: 11 (PDC-3, American-2, Eclipse-2, EQT-2, Chesapeake-1, Devon-1)
Columbiana: 4 (Chesapeake-4)
Morgan: 2 (PDC-2)
Jefferson: 1 (Hess-1)
Trumbull: 1 (Halcon-1)
Portage: 1 (Mountaineer-1)
Washington: 1 (Triad Humter-1)