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Who’s Who in Leasing & Drilling the Utica Shale?

Many people eagerly await Ohio’s annual production numbers, which will (hopefully) be out sometime later this week. Drillers had to file their production numbers no later than yesterday, Mar. 31. MDN has brought you some of the recent “idle” speculation that inevitably happens while waiting. The speculation lately has been along the lines of, “Is the Utica really all it’s cracked up to be?” (see More Angst Over OH Utica’s Oil Prospects). It is natural gas liquids (NGLs) and oil that makes the Utica special. If it turns out Utica production is mostly dry gas (methane only), it will be a major disappointment.

Investor websites are famous for analyzing this stuff to death before any hard data is available. We say: Let’s see what the numbers actually say! In the meantime, yet another “idle speculation” article on one of our favorite sites, The Motley Fool, once again talks about the potential for the Utica. However, a big part of the article interests us. It’s a handy, condensed roundup of the major energy companies that are active in the Utica Shale:
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Is Anadarko Leaving the Ohio Utica Shale?

A story in the Columbus Dispatch floats the rumor that Anadarko Petroleum, one of the country’s largest drillers, has not only suspended plans to drill in a 9,000-acre wild game preserve in Muskingum County, OH (known as “the Wilds”), but they also may be abandoning plans to drill anywhere in the Ohio Utica and the 141,000 acres they control…

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Western Gas Enters the Marcellus, Buys 2 Pipeline Systems in PA

Western Gas Partners, a master limited partnership created by Anadarko to “own, operate, acquire and develop midstream energy assets” has until now built and expanded pipeline and processing plants in the southwest, west and mid-continent region. They are now players in the Marcellus Shale as well by paying $623.5 million for a one-third ownership of two natural gas pipeline gathering systems in north-central Pennsylvania. Together, the two systems have a combined throughput of 1.2 billion cubic feet of natural gas per day.

The company’s announcement about the two deals and how they will finance them:

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Encore Energy to Anadarko: We’ve Got OH Land for You

A for-profit company that pools acreage from both landowners that want to lease their land, and from energy companies with leases who want to re-sell those leases, is trying to get the attention of Anadarko and other drillers in the Ohio Utica Shale. Encore Energy issued a press release yesterday announcing they have land available for lease. They specifically tap Anadarko on the shoulder to tell them they have 1,300 Utica Shale acres “just 3 miles” from land they’re already drilling on in Washington County, OH.

Encore is shopping more than 18,000 acres across a number of Ohio counties, including Morgan, Washington, Noble, Guernsey, Monroe, Athens and Meigs. Here’s their “hey Anadarko, pay attention” press release:

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Who’s a Member of the Marcellus “1 Bcf/d” Club?

1 bcfd club At the end of an article about EQT, Seeking Alpha blogger and energy analyst Richard Zeits includes a short list of companies who either already belong, or soon will join, the “1 billion cubic feet per day club” of Marcellus Shale gas production.

So far only one driller has achieved 1 Bcf/d of Marcellus production (quick, which one is it?). EQT will likely join the club in 2014. Who else is on the short list to join them? Read on to find out…

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Motley Fool’s “Ubiquitous in the Utica”

The Motley Fool investing website published a “round-up” type of article two days ago that focuses on the major players (drillers) in the Marcellus Shale (see this MDN story), part of a series that looks at major energy plays in the U.S. Yesterday they continued the series with an article that looks in detail at the Utica Shale.

The article starts off by listing the top 7 companies by the amount of acreage they lease. They are (from highest to lowest amount of acreage):

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PA PUC Rules Against Anadarko & Talisman on Impact Fee

Contrary to the wishes of Anadarko Petroleum and Talisman Energy, the Pennsylvania Public Utility Commission (PUC), charged with collecting Act 13 impact fees from shale drilling in the state, ruled that setting conductor pipe does in fact trigger or require a company to pay an impact fee from that point forward. Anadarko and Talisman had argued it does not constitute spudding (or starting the drilling process) for a well. The impact fee is levied when a well is spud.

From the PUC announcement yesterday:

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Motley Fool’s “Moguls of Marcellus”

The Motley Fool investing website published a “round-up” type of article yesterday that focuses on the major players (drillers) in the Marcellus Shale, part of a series that looks at major energy plays in the U.S.

The article starts off by listing the top 11 companies by the amount of acreage they lease. They are (from highest to lowest amount of acreage):

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Anadarko’s Big Marcellus Growth in Past 4 Years

Anadarko, one of the largest independent oil and natural gas E&P (exploration and production) companies in the world, issued an update yesterday for it’s onshore drilling. Among Anadarko’s onshore drilling locations is the Marcellus Shale, which has shown a dramatic increase in production over the past several years.

Anadarko’s full update is included below. The main point of the update is to crow that they’ve now passed the 100,000 barrels of oil equivalent per day for onshore production (a great milestone to be sure). The interesting thing (to MDN) are the charts that go with the update, which we’ve embedded below. The Marcellus chart shows Anadarko’s massive increase in production from virtually nothing in 2009 to more than 300 million cubic feet feet per day in 2012.

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Anadarko: Gas Must be $4 Mcf Before More Marcellus Drilling

An interesting comment yesterday from Anadarko Petroleum’s CEO about where price levels for natural gas have to be before he’s willing to commit more money for dry gas drilling. The magic number for Anadarko is $5 per thousand cubic feet (Mcf). Equally interesting was a comment by the VP of E&P that for the Marcellus Shale, the magic number is $4 per Mcf—because drilling in the Marcellus costs less than other plays. The current price of natural gas on the Nymex is currently $3.70 (as of this morning).

Until prices improve, Anadarko will stick to drilling in wet gas areas and not invest in Marcellus drilling. Here’s what Anadarko’s executives said yesterday on an earnings call:

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Anadarko 3Q12 Update: Lowered Marcellus Well Cost by $1.5M

Anadarko Petroleum reported third quarter results on Monday. Anadarko is an independent exploration and production (E&P) company—a very large one—with a good deal of drilling in the Marcellus Shale. Third quarter revenues were $3.33 billion for the company, up 4.2% on the year.

In their operations update (MDN has extracted the Marcellus/Utica Shale portion below), Anadarko reports they’ve lowered drilling costs by $1.5 million per well since 2011. It now costs them an average $2.3 million to drill a Marcellus Shale well. They also report encouraging results in targeting the shallower Geneseo Shale with plans for drilling the Geneseo in 2013.

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Ohio’s Less Than Stellar Results from Oil Drilling

The story line for development of the Marcellus and Utica Shale going back to the beginning of this year was, “Drillers are leaving the dry gas areas and going after wet gas,” meaning natural gas liquids. Why? Because the price for liquids is more favorable. That meant drilling activity was lessening in places like northeast Pennsylvania and (supposedly) moving to southwest PA, northern WV and eastern OH. To some degree that has happened.

However, the price for natural gas liquids has fallen due an abundance created by Marcellus and Utica Shale drilling. So the more recent story has been a move toward drilling for crude oil, especially in Ohio. But drilling for crude in Ohio isn’t working out so well—at least for some drillers.

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Utica Shale Permits/Drilling Expand in Eastern Ohio

The latest stats for Utica Shale drilling in the three-county region of Muskingum, Guernsey and Noble in Ohio: Guernsey County now has 12 permits, 2 of which are already producing natural gas. Muskingum County has 3 permits. And Noble County has 12 permits, 7 of which are currently being drilled.

Statewide, the Ohio Dept. of Natural Resources (ODNR) has issued 285 horizontal Utica Shale drilling permits, with 92 wells drilled, 14 of those wells now producing.

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Anadarko Utica Shale Update: Strong Initial Results

Anadarko provided an update on its Utica Shale drilling program yesterday, saying that although it’s still very early, the “strong initial results are encouraging.” To date Anadarko has drilled and is producing from three wells in the Utica Shale. Anadarko has 390,000 leased acres in the Utica, most of it in eastern Ohio. In addition to the update, they included a map showing where they have leased acreage, where the three wells are they have drilled, and where they plan to concentrate their drilling activity (map embedded below).

From the Anadarko press release:

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