Update on Utica Shale Drilling & Fracking

Gas drillers eyeing Utica shale’s promise in OH, WV and PA

From an Article by David Conti, Pittsburgh Tribune Review, November 1, 2015

Big results from recently drilled Utica shale wells have several Marcellus producers eyeing a possible push into the deeper rock, though not every driller is sold on its promise.

“If the deep Utica works, it is likely to be larger than the Marcellus over time,” said EQT CEO David Porges, who discussed plans to drill 10 to 15 Utica wells next year in Southwestern Pennsylvania and West Virginia. Pennsylvania’s No. 5 shale gas producer is halting drilling outside its core Marcellus area while natural gas prices remain low.

“We’re highly encouraged by the success we have seen in the Utica to date and over the next two to three years expect the dry Utica to become the primary focus of our development plan,” said Tim Dugan, chief operating officer for gas at Consol, which announced good initial results from a well in Monroe County, Ohio. Consol is fracking and completing wells but has stopped all drilling until 2017.

The Utica is less explored in Pennsylvania — development has centered on Ohio — but could hold as much or more recoverable gas than the Marcellus, a government report found this year. Companies pinched by the lowest gas prices in three years and extra costs for pulling low-priced liquids from so-called wet gas are lured by the possibility of getting more bang for their buck in the dry gas gushers, industry leaders and analysts say.

“Eventually, when we have a place to take it, it’s going to be very good,” retired U.S. Steel CEO John Surma told financial and industry leaders during an energy summit in Pittsburgh last week, acknowledging the pipeline constraints that have contributed to depressed prices. Surma, a onetime Marathon Oil executive, serves on the boards of driller Concho Resources and Marathon Petroleum’s pipeline partnership.

Given the wells’ costs, though, committing to their development likely will hinge on how they compete with cheaper Marcellus wells. “It all boils down to the well economics of the play,” said Doug Kris, a vice president at State College-based Eclipse Resources, which is producing from the Utica near Consol’s first wells in Monroe County, Ohio.

Range Resources Corp., Pennsylvania’s fourth-largest shale driller, over the past year completed two Utica wells in Washington County that it says are among the top 10 producing wells in Appalachia. But it doesn’t make sense to commit to such expensive wells — Range’s third Utica well will cost $15.9 million — when $6 million wells in the more proven Marcellus are producing more gas than ever, company leaders said last week.

“We’re excited and encouraged by what the Utica could be. But in the short run, you’re going to see our focus be totally on the Marcellus,” CEO Jeff Ventura told analysts Thursday, saying the company would monitor results from Utica wells as a potential complement.

Consol’s and EQT’s initial Utica wells cost upwards of $25 million. Both companies said they’re cutting that cost on subsequent wells. Consol reduced the amount of time it took to drill a Utica well on its Monroe County pad by 60 percent.

“This confirms our view that drilling and completion costs in the Utica will follow the same downward trend as the Marcellus as we move up the learning curve,” Dugan said. Companies can further reduce costs if they drill Utica wells from existing Marcellus pads.

The proximity and availability of pipelines and processing facilities also will play a role in whether and where companies push into the Utica. Monroe County is served by several interstate pipelines that can carry the gas to markets such as the lucrative Midwest, Kris noted.

Spectra Energy’s Ohio Pipeline Energy Network comes online this quarter and hits the heart of that state’s Utica fields. Erin Petkovich, director of Spectra’s Northeast business development, said that line and others can be expanded quickly if drillers increase production there.

“Where the dry Utica is picking up, a lot of our projects are heading there,” said Glenn Koch, director of engineering and construction for pipeline operator Williams Cos.

EQT is targeting an area stretching from southern Allegheny County to Wetzel County, W.Va., that coincides with its core Marcellus area, where its midstream business has been building gathering systems and pipeline for years. Such high-producing wells would require even more pipe, though.

“If we see things consistent with those early results in future wells, I think we’re probably going to be looking at takeaway limitations for a while,” Porges told analysts.

For background information on Utica Shale, see this:

http://geology.com/articles/utica-shale/

Tagged as: cost analysis, drilling, fracking, low natural gas prices, natural gas, Utica Shale