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  • rlp2451 rlp2451 Mar 25, 2013 9:12 AM Flag

    Industry Anxiously Awaiting Utica Well Data

    From Reuters this morning:

    Ohio publishes well data only once a year, making it one of the least transparent states in reporting energy output. Most states publish every quarter. On April 2 last year, production was published from just five wells. That is the only official state record on the play two years after drilling began there.

    Results from the five wells drilled by Chesapeake Energy in Carroll and Harrison counties showed lower than expected oil production, and stronger natural gas output, the state report said.

    Since then, a long list of companies, including Britain's BP, Anadarko Petroleum and Hess Corp, have acquired acreage in Ohio. Most remain quiet about their progress for fear that it will push lease prices higher.
    "It has to do with the competitive nature of things," said Mark Houser, chief executive officer of EV Energy Partners which, together with its parent company Enervest Ltd, owns more than 800,000 acres in the Utica. "If you have a good acreage position, you still may want to buy the acre next door. You don't want to have everything public."

    BP, Anadarko and Hess did not respond to request for comment for this story.

    Devon Energy is in the process of selling more than 200,000 acres in the Utica after drilling a series of what a company spokesman described as "disappointing" wells in what it expected to be oil-producing acreage. Chesapeake Energy, which did not immediately respond to calls for comment, has also sold off a portion of its more than 1 million acres there.

    "The little I have seen from the Utica shows it has been a bit disappointing given the expectations," said Phil Weiss, an analyst with Argus Research who covers companies drilling there. "Given that the amount of information is relatively sparse, people will be paying attention."

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    • lots of money in infrastructure going in by lots of smart people. I think that is a good indication of the future potential of the utica. The naysayer will be saying could'a, should'a.

    • more from article./ notice last sentence
      "..."Ultimately, the production and estimated ultimate recovery of our wells and those of our peers will provide definitive answers," said Paul Heerwagen, Gulfport's director of investor relations.

      The company, which owns 128,000 net acres in the Utica, published impressive "peak rates" of gas and condensates from its Utica wells, a measurement of initial flows taken over a limited time period, usually no longer than 24 hours. A peak rate is typically much higher than eventual longer term output that declines over time.

      "The peak rate is more a bragging type thing," said Randall Collum, a natural gas production analyst at data provider Genscape. "It is nice to know and gives some indication of potential production, but I would rather get a longer term outlook."

      During a quarterly conference call with analysts on Feb 27, Gulfport chief executive James Palm revealed longer term rates for two wells, which had fallen off significantly from the first flows.

      Natural gas output from the Wagner 1-28H well fell from a peak rate of 17.1 million cubic feet per day reported on August 7 to an average of 5.2 million cubic feet per day after 129 days of production. Output of gas condensates fell from 432 barrels per day to 94 bpd.

      Decline rates are normal, and Gulfport executives said on Feb. 27 that output from the Wagner well has increased slightly since the end of the year.

      Gulfport is not alone in reporting peak rates. Rex Energy chief executive Tom Stabley said he was "very excited" about output from three new Utica wells in a statement on March 18 that disclosed 24-hour test rates for the wells.

      But the speed of the declines in the Gulfport wells, and the scarcity of longer term data, makes it hard for investors to judge whether it will be a good long-term investment.

      "The first four months show that the peak rate was not over-representative of what could ultimately be recovered from the well," said Morningstar's Hanson. ...

2.40+0.01(+0.42%)Sep 30 4:00 PMEDT