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EV Energy Partners Deal to Sell 104K Utica Acres Dead, What Now?

now whatEV Energy Partners/EnerVest Executive Chairman John Walker admitted yesterday that a deal to sell the company’s interest in 104,000 Utica Shale acres has fallen apart. MDN has chronicled the journey thus far in a number of articles. In September 2013, EVEP announced they had put 539,000 Utica acres on the auction block and were confident they would sell it by year’s end and receive in the neighborhood of $6 billion (see EnerVest Puts 539,000 Utica Shale Acres on Auction Block). That didn’t happen.

Earlier this year, EVEP seemed to pull back from the original offer and instead push 104,000 acres concentrated in Stark, Tuscarawas and surrounding counties (see EnerVest Strategy: Sell Utica, Drill Vertical, Expand Midstream). That smaller deal has now also “failed” according to yesterday’s call. Apparently the price was right, but the terms were not. So what happens now?
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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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EnerVest Strategy: Sell Utica, Drill Vertical, Expand Midstream

In September of last year, EV Energy Partners/EnerVest put 539,000 Ohio Utica Shale acres on the auction block, thinking they would get around $6 billion for it (see EnerVest Puts 539,000 Utica Shale Acres on Auction Block). In November, the company said they should complete the sale of the Utica acreage by the end of 2012 (see EV Energy Selling 539K Utica Shale Acres by Dec 31). That turned out to be a tad optimistic. EnerVest still does not have a deal for their Utica acreage.

An update on the company’s strategy from EV Energy Partners Chairman John Walker and EnerVest President Mark Houser, from Friday’s analyst call:

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Drilling Company CEOs Talk up WV Marcellus Shale at IOGA Meeting

The heads of several drilling companies spoke this week at the West Virginia Independent Oil and Gas Association (WV IOGA) in Charleston. They gushed with praise for the Marcellus Shale in West Virginia.

Among the speakers were the CEOs of Gastar, PetroEdge and EnerVest. A few of their comments:

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Kensington, OH NGL Processing Plant Construction Progress

Midstream build-out will be the big story of 2013 in the Utica Shale. One of the big projects under way is a natural gas processing facility in Kensington, Ohio, being built by a partnership between M3 Midstream (better known as Momentum), Chesapeake Energy and Enervest. The entire project will take five years to build, with the first portion going online sometime this year.

The latest on the Kensington project, being built in Columbiana County:

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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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EnerVest CEO Contradicts McClendon: Utica Oil Will be Big

yes no maybeAt the Developing Unconventional Gas (DUG) East Conference in Pittsburgh yesterday, EnerVest CEO John Walker contradicted the view of Chesapeake CEO Aubrey McClendon. McClendon said the Ohio Utica Shale will not produce much oil—at least for Chesapeake (see this MDN story). Walker said he believes the Utica will produce a lot of oil—that is, once they figure out the “right completion method.”

Gulfport’s CEO Jim Palm also spoke glowingly about the Utica at the conference. Gulfport, you may recall, has the highest producing Utica well so far (see this MDN story). The conference is organized by Hart Energy, who provided information stating lease payments in the Ohio Utica Shale have reached as high as $8,000 per acre.

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EV Energy Selling 539K Utica Shale Acres by Dec 31

big saleEV Energy Partners, part of EnerVest Ltd., is in the final stages of a deal to sell its interest in 539,000 Utica Shale acres in Ohio, according to EV founder and chairman John Walker. (See this MDN story for background on how EV amassed such a large stake in the Utica.) When the final deal is done, it may bring in as much as $6 billion for EV.

Here’s what we know about the deal and what motivated it, from an investors call with Walker on Friday:

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EnerVest Puts 539,000 Utica Shale Acres on Auction Block

auction gavelEnerVest has put leases for 539,000 Utica Shale acres in Ohio on the auction block and hopes to get more than $6 billion dollars for it. That would be something north of $11,000 per acre. Pretty optimistic, but hey, you never know!

Apparently EnerVest is the accidental energy company who just happened to amass a 3/4 of a million acres of leases some time ago and now wants to take advantage by selling some of it. From the Wall Street Journal:

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Chesapeake Sells Permian Basin, Midstream Assets for $6.9B

Although we’ve known for a while that the embattled Chesapeake Energy has been shopping some of it’s shale basin and other assets in order to pay down debt, they’ve made a huge announcement today. Chesapeake has sold most of its Permian Basin acreage along with “substantially all of its midstream” assets for $6.9 billion. The buyers for the Permian were Shell, Chevron and EnerVest. Most of Chesapeake’s remaining midstream assets were sold to Global Infrastructure Partners (GIP).

Chesapeake previously announced they would sell off assets in areas where they were not number one or two in an attempt to repay loans and concentrate their drilling in core areas. Two of the core areas where Chesapeake is sticking around are the Marcellus and Utica Shale.

From the Chesapeake Energy press release:

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EV Energy Partners 2Q12 Update: Utica NGLs Now Producing

EV Energy Partners (EVEP) reported their 2Q12 financial results yesterday. EVEP is a master limited partnership controlled by oil & gas company EnerVest. They look for lower risk, long-term oil and gas properties, with investments in a number of oil and gas plays across the U.S., including the Utica and Marcellus. It seems they’re doing a good job. Their 2Q12 profits were up 20% from a year ago—to $66.1 million. Production for the second quarter of 2012 was up 47%—10.7 billion cubic feet of natural gas, 282,000 barrels of oil and 403,000 barrels of natural gas liquids, or 14.8 billion cubic feet equivalent.

The only direct quote in the press release from the CEO was in reference to their activities in the Utica Shale:

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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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