Drillers in Ohio increasingly shifting to southern counties

Source: Akron Beacon Journal (OH), September 4, 2013
Posted on: http://envfpn.advisen.com

Carroll County is the reigning Utica shale capital of Ohio.
With 319 wells permitted, Carroll represents nearly 38 percent of the 858 wells the Ohio Department of Natural Resources has approved since late 2010.
Chesapeake Energy, the No. 1 driller in Ohio, staked out early and extensive claims in Carroll and surrounding counties: Columbiana, Portage and Stark. Today the Oklahoma-based energy giant, the No. 2 producer of natural gas in the United States, has a total of 503 permits in eastern Ohio — nearly 59 percent of the statewide total.
Interest from other drillers is shifting, however, and extending to the south in a big way — into Harrison, Belmont, Monroe, Guernsey and Noble counties. Those five counties have become the drilling hot spot in eastern Ohio.
Of Ohio’s 2013 Utica shale permits, more than 50 percent have been issued to energy companies interested in those counties, and that region is not Chesapeake’s stronghold, according to a Beacon Journal review of state data.
Harrison County leads the way with 124 permits since 2010, followed by Noble County with 62, according to information from the Ohio Department of Natural Resources’ Division of Oil & Gas Resources Management.
Ohio has issued 45 permits in Belmont County, 33 in Monroe County and 50 in Guernsey County.
Washington County — even farther south — has an additional seven permits, all this year.
“It’s obvious that drillers are paying a lot of attention to the south,” said Youngstown State University geology professor Jeffrey Dick.
The southward movement is not a surprise. Oklahoma-based Gulfport Energy has reported highly successful wells with natural gas, petroleum and liquids — ethane, butane and propane — in Harrison and Belmont counties, Dick said.
Colorado-based Antero Resources also reported favorable initial well production data in the southern counties, he said.
Antero reportedly has the biggest-producing well: the Yontz well in Monroe County. It is producing 38.9 million cubic feet of natural gas per day or 8,879 barrels of oil equivalents per day. That output is valued at $300,000 per day.
The previous high in Ohio was Gulfport’s Shugert well in Belmont County with 28.5 million cubic feet per day, or 7,482 barrels of oil equivalents.
Companies like Hess Corp., Rex Energy, PDC Energy, Anadarko Petroleum, Carizzo, EQT Production, Devon Energy, PDC Energy, Atlas Noble, Chevron Appalachia, HG Energy, Eclipse Resources, Hall Drilling, XTO, Triad Hunter LLC and CNX Gas Co. have moved into the five counties.
They could secure leases there, unlike in Carroll County, where Chesapeake had locked up most of the available land earlier.
Analysts said Chesapeake officials reported that the company had misjudged the Utica shale and erred in not realizing that the fairway — an industry term for where to drill — extended southward from Carroll and Harrison counties where it is strong into the other counties.
There are more signs of the shale boom in the southern counties.
Antero Resources has plans to build a $500 million pipeline to transport water from the Ohio River to its drilling sites in Ohio and West Virginia for hydraulic fracturing, or fracking.
According to reports, former Chesapeake Energy CEO Aubrey McClendon and his new company, American Energy Partners, are buying 22,535 acres in leases in Harrison, Guernsey and Noble counties from EnerVest Ltd. for $284.3 million. McClendon’s company also made the high bid for 50,000 acres Shell holds in Ohio.
American Energy Partners also is seeking new leases in Columbiana, Jefferson, Harrison, Belmont, Guernsey, Noble and Monroe counties, according to advertisements in local media.
A Houston company, Wunderlich Securities Inc., reported last week that it is convinced that Washington County will become the Utica hot spot.
Dick, the Youngstown State geology professor, said there is theory that Ohio’s southern wells are so productive because the geology is different. In the northern part of the window, there has been significant drilling in the past with vertical-only wells in the shallow Clinton sandstone, he said.
In southern Ohio, there is no Clinton sandstone, and that has resulted in less drilling in the past, he said. That could contribute to the significant production coming from southern wells.
Tom Stewart, executive vice president of the Ohio Oil & Gas Association, said companies are most interested in six or seven of the 23 Ohio counties where Utica wells have been drilled.
The desired strip for natural gas and liquids is really a narrow north-south band that is about three townships wide, he said. Natural gas is likely to be found to the east of that band and oil to its west.
Stewart said he expects gas drilling to the east to resume when gas prices climb higher.
It is still unclear what will happen at the northern end of that production band, Stewart said.
BP and Halcon Inc. have moved into Trumbull County. Hilcorp Energy Corp. has growing interests in Mahoning County.
Mountaineer Keystone grabbed leases in eastern Portage County. Those projects slowly are getting under way.
Drilling interest has waned in several Ohio counties as companies home in on the liquid-rich shale window.
Zero permits have been issued this year for Stark County. The state issued nine permits in 2012 and four in 2011.
Portage County has one new permit this year. It had 10 permits in 2012 and four in 2011.
Tuscarawas County has one permit this year. That contrasts with nine in 2012 and three in 2011.
Permits have declined from 18 in 2012 to five in 2013 in Jefferson County and from 52 to 23 in Columbiana County.
Other counties with no new permitting activity in 2013 include Ashland, Coshocton, Geauga, Holmes, Knox, Medina, Muskingum and Wayne.
The southern counties are seeing more permits filed, which is likely to translate into more horizontal wells drilled.
Harrison County had 53 permits in 2012 and already has 70 this year, trailing only Carroll County.
Some companies obtain a permit but choose not to drill right away, waiting for the completion of natural gas lines in an area. The permits are good for two years and would be revoked if no action takes place.
The Ohio drilling picture is always fluid with at least four of the original drillers in the state interested in selling all or part of their Ohio holdings.
What’s happening in Ohio is a repositioning that is common in the energy business, Ohio State University geology professor Jeff Daniels said.
“It’s the nature of the business. Assets shift as companies try to better their positions. It’s not a cause for concern,” he said.

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