FWIW: Ohio’s $500B Oil Dream Fades as Drillers Misjudge
U.S. drillers that set up rigs amid the rolling farmland of eastern Ohio on projections underground shale held $500 billion of oil are packing up.
Four of the biggest stakeholders in untapped deposits known as the Utica Shale have put up all or part of their acreage for sale, as prices fall by a third in some cases. Chesapeake Energy Corp. (CHK) of Oklahoma City, the biggest U.S. shale lease owner, last week offered up 94,200 acres (38,121 hectares). EnerVest Ltd. and Devon Energy Corp. (DVN) are selling as early results show lower production than their predictions.
“The results were somewhat disappointing,” said Philip Weiss, an analyst with Argus Research in New York. Early data show “it’s not as good as we thought it was going to be.”
The flip-flop underscores the difficulties faced by even experienced drillers around the world in tapping the sedimentary rock. In California, Occidental Petroleum Corp. was stymied by the Monterey Shale’s fault-riddled terrain. In Poland, Exxon Mobil Corp. (XOM) stopped drilling because shale output was minimal. China’s failures with shale gas drove producers Cnooc Ltd. and China Petrochemical Corp. to seek expertise in North America.
In Ohio’s Utica formation, which runs eastward as far as New York, drillers frequently found the rock too dense and underground pressures insufficient to produce oil.
The rush to buy acreage has reversed.
The Utica saw one deal valued at more than $50 million in the fourth quarter of 2012, compared with seven in North Dakota’s more productive Bakken Shale and six in Texas’ Eagle Ford Shale, according to the accounting firm PricewaterhouseCoopers LLP.
By 2017, the Utica should produce a daily average of 200,000 barrels of oil, Wood Mackenzie Ltd. estimated. The Eagle Ford by then will be producing 1.15 million barrels a day, almost six times more.
“People started to realize that, you know what, maybe the oil window of the play
NDIC Department of Mineral Resources
Jan Oil 22,871,411 barrels = 737,787 barrels/day
Feb Oil 21,811,176 barrels = 778,971 barrels/day (preliminary)(NEW all-time high)
Jan Gas 24,553,644 MCF = 791,408 MCF/day
Feb Gas 23,809,389 MCF = 850,335 MCF/day (preliminary)(NEW all-time high)
Jan Producing Wells = 8,342
Feb Producing Wells = 8,492 (preliminary)(NEW all-time high)
Jan Permitting: 218 drilling and 0 seismic
Feb Permitting: 185 drilling and 2 seismic
Mar Permitting: 218 drilling and 1 seismic (all time high was 370 in Oct 2012)
February weather was more normal with no major storms or extreme temperatures and wind chills. Even though the drilling rig count dropped slightly; the number of well completions doubled to 170. That number of completions is well above the threshold needed to maintain production so oil production rate rose sharply, up 5.6% from January. Operators continue to keep the brakes on, pushing for higher efficiency and cost cutting measures. Uncertainty surrounding future federal policies on taxation and hydraulic fracturing remains. Over 95% of drilling still targets the Bakken and Three Forks formations.
We estimate that at the end of January there were about 375 wells waiting on completion services.
Crude oil take away capacity continues to be adequate with a majority of North Dakota’s oil now shipped by rail to east coast, gulf coast, and west coast destinations.
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Rig count in the Williston basin is stable. Utilization rate for rigs capable of +20,000 feet is steady at about 85% and for shallow well rigs (drill to 7,000 feet or less) utilization remains about 60%.
Drilling permit activity was up significantly in March, returning to normal. We have a sufficient permit inventory to accommodate multi-well pads, the inability to constructing locations during load restrictions, and the time required to publish hydraulic fracturing rules if required.
does that last sentence saying "the inability to constructing locations during load restrictions" mean that- as is the case for some canadian producers like pbkef-that the spring melt temporarily reduces production/drilling as dirt roads become impassible to takeaway trucks and drilling equipment servicers?