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ODNR Ticks Off Anti-Drilling Sierra Club with Drilling PR Plan

memoIn August of 2012 staffers at the Ohio Dept. of Natural Resources (ODNR) made a boo-boo. They put into writing (in the form of a 13-page memo, embedded below) a draft plan to promote Utica Shale drilling under (not on) Sunfish Creek State Forest (in Monroe County), under (not on) Barkcamp State Park (in Belmont County), and under (not on) Wolf Run State Park (Noble County). The memo begins by saying there will be a communications problem to solve: “An initiative to proactively open state park and forest land to horizontal drilling/hydraulic fracturing will be met with zealous resistance by environmental activist opponents, who are skilled propagandists. Neutral parties in particular — such as ordinary citizens concerned about their families’ health — will be vulnerable to messaging by opponents that the initiative represents dangerous and radical state policy by Gov. Kasich.” (emphasis original) The memo states later on that, “Anti-fracking activists will attempt to legally and physically disrupt or halt the drilling projects, including staging dangerous protests on state lands. (This will require sustained legal countermeasures and crisis readiness by ODNR.)”

May we translate? Groups like the Sierra Club lie to people about the drilling issue–and they sometimes engage in bullying (and violent) behavior. Of course the Sierra Club liars are just a bit miffed at being called out as liars and bullies–by no less than a state agency charged with regulating oil and gas. So they are on the offensive. The first thing the Sierra Club and similar groups will do (are doing) is to get their buddies in the slavishly devoted mainstream media to pick up their “ODNR are scumbags” meme and run with it. The second thing is they will use the ODNR memo in fundraising letters, which is really what the shale drilling issue is for them–a big, fat fundraiser…
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Another Antero Utica Well Top of the Heap: IP Rate of 40.2 Mmcf/d!

super achieverCaution: MDN’s comments below are not completely accurate. It seems that Antero pulled a fast one on us, and unlike their previous updates, they have (starting with this update) used gas equivalents in their production reporting. The Antero Yontz well is still the highest initial production methane (natural gas only) well in the OH Utica. That’s not to take away from the incredibly productive Milligan well mentioned below–but much of Milligan’s production is NGLs and not methane. The Milligan is still a great (and profitable) well! It’s just not the top dog natgas producing well we thought it was.

Wow, we’re speechless! (And that’s saying something.) Last August MDN told you that Antero Resources had de-throned Gulfport Energy for having the highest yielding 24-hour rate Utica Shale well (see Antero Resources Utica Well Produces Stratospheric 38.9 Mmcf/d). Antero’s amazing Yontz well is located in Monroe County, OH, south of Gulfport’s super achieving wells in Belmont and Harrison counties. South continues to be better. Yesterday Antero released an operational update, and tucked away in that update is a new reigning Utica champ. Antero reports the Milligan 2H well in Noble County produced a 24 hour initial production (IP) rate of 40.2 Mmcf/d gas equivalent (it produces lots of hydrocarbons other than methane, so the number is converted to gas for apples to apples comparisons). That is the single highest producing shale well we’ve ever heard of–anywhere. No wonder Aubrey McClendon once famously said the Utica Shale is the biggest thing to hit Ohio since the plow!

Aside from the Milligan 2H, there’s a lot of other news in the Antero update, including a very active Marcellus Shale drilling program (they currently have 15 rigs in the Marcellus), and the first of three compressor stations to help get their gas to market has come online in the Utica (two others are behind schedule). Here’s the full Antero update for 4Q13, with a bit of forward looking to 2014…
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Rex Energy 4Q13: Several Marcellus Experiments Paying Off

The “little” driller in the Marcellus, Rex Energy, posted impressive gains in production for the fourth quarter of 2013. According to their 4Q13 update issued yesterday, Rex’s production, nearly all of which comes from the Marcellus and Utica Shale region, was 110 million cubic feet per day–a 12% increase over 2012. Of keen interest to investors is that 31% of net production for 4Q13 was oil and natural gas liquids (NGLs). The company gets a lot more money for those products than just plain “dry gas” methane.

Rex has operations in western PA and eastern OH. Of interest to MDN is that Rex is testing a strategy of drilling both the Marcellus and the shallower Upper Devonian layers in a single well, apparently with good success. They’re also experimenting with spacing wells closer together–at 600 feet apart instead of the traditional 750 feet. Rex is innovating, and reaping the rewards. Here’s their full 4Q13 update:
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Magnum Hunter 2014 CapEx: Utica/Marcellus

In our season of 2014 guidance statements, Magnum Hunter Resources has just issued theirs. And what do we find when we open this particular Christmas present? The company will spend $400 million on capital expenditure projects in 2014, and the vast majority of it will go to the Utica and Marcellus Shale. Magnum Hunter plans to lease more acreage in the Marcellus/Utica, increase drilling rigs from two to three, and build out more pipelines in the northeast too. The Ohio Utica is a particular focus for Magnum Hunter in 2014.

Here is their 2014 blueprint, including which counties in OH and WV will see drilling action from Magnum Hunter in 2014:
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OH’s Largest School District Gets $1M+ from Lease Bonuses

Ohio’s largest school district (geographically speaking), the Switzerland of Ohio Local Schools in eastern Ohio, has raked in over $1 million so far from Marcellus/Utica Shale drilling deals. It’s located in some of the best drilling spots in the Ohio Utica (Monroe/Belmont/Noble counties). Even so, the school is headed for “devastating cuts” according to the school treasurer, due to a collapse in enrollment over the last 20 years.

The money received so far from shale deals is from lease payments, not royalties. Will the school district go on over the fiscal cliff? Or will shale royalties come along in time to save the day? School officials are not sure…
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MarkWest Hits 2.2 Bcf/d in Processing, 2 New Plants Go Live

Marcellus midstream (pipelines and processing plants) heavyweight MarkWest Energy issued an operations update last week to trumpet the fact that two new cryogenic processing plants–to separate wet gas compounds from methane–have now started operations in the Marcellus/Utica. With the additional capacity of these new plants, MarkWest’s total processing capacity is now 2.2 billion cubic feet per day (Bcf/d) of natural gas processing in the Marcellus/Utica. It is an impressive number and will only grow in the months and years ahead.

MarkWest announced they have begun operations at their fifth Majorsville (Marshall County), WV cryogenic processing plant and at their first Seneca (Noble County), OH cryogenic processing plant. Here’s the justifiably proud announcement from MarkWest on reaching the 2.2 Bcf/d milestone, on their way to 4 Bcf/d by the end of next year:
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Muskingum Watershed District Approves 3rd Water Sale for Fracking

As they have done in the past, the Muskingum Watershed Conservancy District in Ohio has approved more water sales for using fracking. This batch comes from Seneca Lake in southeast OH. The Utica Shale driller buying the water is Antero Resources…
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CONSOL’s Excellent Q3 Results, New Deal with Blue Racer Midstream

CONSOL Energy issued an extensive operations update yesterday, for the quarter ending Sept. 30. The company says they sold more natural gas (and coal) than they had expected to during the quarter. They also said they have just signed an agreement with Blue Racer Midstream to ramp up infrastructure buildout for CONSOL’s drilling in Ohio’s wet gas area–specifically in Noble County, OH.

During 3Q13 CONSOL drilled 15 horizontal wells–12 of them targeting the Marcellus Shale, 3 of them in the Utica Shale. Here’s everything you ever wanted to know about CONSOL’s northeast drilling for 3Q13…
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EVEP/EnerVest Cuts Deal to Sell 22.5K OH Utica Acres for $284M

In September last year, EV Energy Partners/EnerVest put more than a half million acres of Ohio Utica Shale acreage on the market. Near the end of last year, a deal for 104,000 of those acres seemed to be almost done, but in April of this year, the deal fell apart (see EV Energy Partners Deal to Sell 104K Utica Acres Dead, What Now?). EVEP then changed gears and said instead of putting big blocks up for sale, they’ll look at selling off smaller chunks (see EV Energy: Changing from Big Deals to Small for Utica Land Sale). Looks like the change in strategy worked.

Today, EVEP announced they’ve made a new deal to sell 22,535 acres in Guernsey, Harrison and Noble counties in Ohio for $284.3 million to an unnamed buyer. According to EVEP, the deal works out to be a very high $12,900 per acre. We ran the math and came up with $12,616 per acre. Either way, EVEP is getting a LOT of money for unloading Utica Shale acreage they don’t want. This deal is scheduled to close in the third quarter–the next few months. Let’s see if this one actually happens.

The announcement from EVEP/EnerVest (with a map of the acreage sold):
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MWCD to Sell 138M Gallons of Seneca Lake Water for Utica Drilling

Last February, the Muskingum Watershed Conservancy District (MWCD) signed a lease with Antero Resources to lease 6,700 acres under and around Seneca Lake. The MWCD got a $40.3 million signing bonus, plus 20% royalties (see Muskingum Watershed District Signs with Antero for $40.3M Bonus). Last week, the MWCD voted to sell up to 138 million gallons of water from Seneca Lake to Antero so they can use it in their drilling and fracking operations, making another potential $828,000.

We’ll lease you the land and sell you the water to drill it too. Cool…
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REX Reverses Pipeline Flow from OH for Mystery Utica Customer

What a difference a year makes. Last August, RBN Energy President Rusty Braziel said the Rockies Express Pipeline (REX), which originates in Rio Blanco County, Colorado and sends gas to Monroe County, Ohio, was in danger of drying up because there’s so much shale gas coming from the Marcellus. His prescription? Turn it around and send gas the other way (see REX NatGas Pipeline Faces Stiff Competition from Marcellus). Looks like REX has taken Rusty’s advice.

In a press release issued yesterday, REX announced they have a binding agreement with an unnamed “large Utica Shale producer” who wants to use the pipeline to ship 200,000 decatherms of processed natural gas per day to the Midcontinent region of the country. That is, REX is reversing the flow for at least part of the pipeline. And who might the unnamed “mystery” producer be? We think we know…
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Rex Energy Production Numbers for 3 Utica Wells in Noble County

Rex Energy has just released production numbers for its first three Warrior South Prospect wells in the Ohio Utica Shale (Noble County). Rex’s CEO, Tom Stabley, called the results “strong” and “impressive,” and indeed they are good numbers. The wells produced on the on the order of 4.2-4.7 million cubic feet of methane per day, 724-763 barrels of natural gas liquids per day, and 228-247 barrels of condensate per day. While we’ve seen better methane flow rates from other Utica wells, all three production metrics together (methane, NGLs and condensate) make these wells very profitable indeed.

The full Rex announcement from yesterday:
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CONSOL’s View of Best Counties to Drill in Ohio Utica Shale

simply the bestLast Friday at a Columbiana (OH) Area Chamber of Commerce event, Harry Schurr, general manager of Utica Shale operations for CONSOL Energy, spilled the beans on which Ohio counties he believes will see drilling for oil and gas in the near- and medium-term. He outlines where oil drilling is not going to take off (not enough pressure to pump it out), and where gas drilling will not take off until gas prices go higher. But like the story of Goldilocks, there are a few Ohio counties where the conditions (i.e. large volumes of condensate) are “just right” for drillers…
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MarkWest Announces Third Processing Plant in Noble County, OH

MarkWest Energy is the biggest midstream company (pipelines and processing plants) in the Marcellus Shale. They’ve also set their sights on becoming the biggest midstream player in the Utica Shale, and they’re well on their way. Yesterday, MarkWest announced their joint venture with EMG, called MarkWest Utica, will build a third cryogenic gas processing plant at its Seneca processing complex in Noble County, Ohio. The new plant, which will add an additional 200 million cubic feet per day of capacity (MMcf/d), is scheduled to be completed in about a year and will service wet gas from Antero Resources’ Utica Shale wells. The first two Seneca plants will be online later this year.

Apparently MarkWest has cleared up any funding issues for building the new plant. Previously the MarkWest Utica jv ran low on money while building the first two Seneca plants and scrambled to get more cash, which they did in February (see MarkWest: We Just Banked $450M from EMG, Another $2.8B Available). Funding problems seem to be behind them now and it’s full speed ahead. Here’s the MarkWest press release which also gives a quick update on their Cadiz processing plant along with a fairly complete list of their customers for all of their Utica processing plants:
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Ohio Hits Milestone: 100 Utica Wells Now Online & Producing

As of May 25, Ohio has issued 686 Utica Shale drilling permits. Of the permits now issued, 335 (half) of the wells have been drilled. And of the half now drilled, Utica has 100 wells (15% of those permitted, 30% of those drilled) now online and producing natural gas, gas liquids and oil. Hitting the 100-mark is a true milestone.

During the week of May 19-25, the Ohio Dept. of Natural Resources (ODNR) issued 10 new permits. Here’s where the permits were issued, and the companies that received them:
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Rex Energy OH Utica Wells go Toe-to-Toe with Gulfport Wells

toe 2 toe So far, we’ve had precious little in the way of well production numbers from the Ohio Utica Shale. The numbers we have had are encouraging. On Monday, Rex Energy released well production numbers for their “Warrior South Prospect” wells in the Ohio Utica, and the numbers look very good indeed. From two wells in Guernsey County and one in Noble County, Rex is reporting an average daily production of around 8 million cubic feet of natural gas, 500 barrels of condensate (natural gasoline), and 1,200 barrels of natural gas liquids (mostly ethane), per day for each well.

Below are the details from Rex, along with an embedded copy of their company presentation just updated (March 2013) which shows many more details, including maps and a very interesting table (on page 18) that compares Rex’s three Ohio wells with other drillers’ wells, including Ohio’s largest producing wells drilled by Gulfport. When converted to BTUs produced—which takes into account not only methane, but also gas liquids, condensate and oil—the Rex wells are among the best producing wells in the state…

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