Monday, June 23, 2014

Carrizo Reports Utica Shale Investment Increase in 2014, Outlines Details

Carrizo outlines 2014 development plans, Utica Shale specifics


During it's June 18, 2014 presentation at the Tudor Pickering Holt 2014 Hotter N' Hell Conference, Carrizo Oil & Gas outlined their investment and development plans for the Utica Shale in Ohio in 2014. The company also shared other particulars which shed some light on their views of the Utica Shale in general.

Projected to drill 9 wells in 2014
The company reported net acres in the Utica at 25,700 where they expect to eventually drill a total of 140 wells with a 150-acre spacing (6,500' laterals spaced at 1,000'). The company plans to operate one rig in the Utica in 2014 and to both Drill and Frac 9 gross  / 7 net wells. Total Carrizo spend in 2014 in the Utica Shale is pegged at an estimated 100MM vs. a spend of just 18MM in 2013.

Favorable acreage position and projected economics
The company made a point of highlighting that their acreage lies in a favorable high rate condensate area validated by the other operators with proven production in close proximity (Gulfport, PDC, and Antero). According to the latest June 14, 2014 Ohio DNR activity report, Carrizo's permits thus far lie in Guernsey County, which is noted as a favorable area that has had particular focus from other operators with 19 wells currently drilling in the the county.

The company also identified a per well total cost at $10.1MM in 2014. And based on expected type curve economics of $85 NYMEX Oil and 1,348 Gross Mboe production (455 Mbo Condensate only), wells should payback should be 1.6 years.

Type curve for production decline
The report also included a Utica Shale production "type curve". Steep production decline is nothing new in shale plays and significant decline over the months is expected, though such projections can and will have some error. Production decline is far from an exact science. How significant the decline curve error is (positive or negative) will remain a mystery until some real data comes in. The decline curve is impacted by many things, including stimulation and completion technology and practices, along with production management. And as noted, despite steep decline curves, projections are viewed as favorable for the wells with a "payback" in about 1.6 years given assumptions on NYMEX Oil price, amount of condensate/liquid production and the production decline, or "type curve" over time.

The complete Carrizo presentation can be found here.