http://fuelfix.com/blog/2014/05/19/chesapeake-chasing-all-but-forgo...

HOUSTON – Just a month after BP decided to take a $521 million hit to abandon its plans for the ..., Chesapeake Energy last week called the region its “newest world-class asset.”

It was the second surprising determination that Chesapeake executives made this year on where the company could find its biggest future growth drivers. The first out-of-the-blue call came in February, when the Oklahoma City-based oil and gas producer told investors it would march back into the gas-rich Haynesville Shale in northwes....

The Utica, an Ohio shale play that operators originally believed would yield large bounties of pure oil, turned out to have much bigger deposits of natural gas and natural gas liquids. Chesapeake and others “whiffed” on the Utica a few years ago, but now the company believes it’s going to be “a big growth driver,” said Jason Wangler, an analyst with Wunderlich Securities in Houston.

Chesapeake officials said Friday they believe the Utica holds more than 4 billion barrels of recoverable resources, and that the play will deliver 45-percent returns this year. After ramping up to seven to nine operated rigs, the company is aiming to boost its production in the region to almost 10 times its level two years ago. It’s a switch that could bring on a lot more natural gas production for Chesapeake.

Natural gas: Haynesville Shale alive and well for some

“No longer bound by a focus on shifting towards an oily portfolio, we expect rig count to accelerate in the Haynesville, Marcellus and Utica over the next few years with infrastructure constraints governing near term growth,” Matt Portillo, an analyst with Houston-based Tudor, Pickering, Holt & Co., wrote in a note to investors on Monday.

The Marcellus Shale crosses several states in the Northeast, including Pennsylvania and New York.

Utica’s oil window

Even the Utica’s skinny “oil window,” the hard-to-reach chunk that turned out to be a lot smaller than the industry had first believed, holds plenty of potential value, a Chesapeake executive said during a meeting with analysts in Oklahoma City last week.

“We are believers in the Utica,” said Chris Doyle, Chesapeake’s senior vice president of operations for its northern division. “Who thought I would talk about the oil window today? Nobody. This is largely forgotten by the entire investment community, written off as unworkable.”

But Chesapeake, Doyle said, has the technical expertise and an advantage on production costs that could turn the oil window into a much more viable piece of its portfolio.

Doyle said most companies spend an average $11.8 million on Utica wells. Chesapeake spends $6.7 million, and is looking at ways to cut costs further. The company also lifted its oil-well production from 500 to 1,000 barrels per day under new post-drilling completion models.

Haynesville gas: Asia eyes US natural gas as Louisiana shale profits taper

And the company has dedicated a team of researchers at its Reservoir Technology Center in Oklahoma City to figure out the best way to approach its position, he said.

“We have the full technical might of this company driving additional value,” he said. Geologists, drillers, engineers and lab workers have worked together to figure out a new completion model the company expects will boost its production further in the play. “It’ll be online in the next month or so. I can’t wait to see how it does.”

Boosting returns

Chesapeake’s production regime in the Utica is expected to pump an average 1,360 barrels of oil equivalent per day this year, and the company is looking to boost its returns next year to 60 percent, a move that could make the Utica one of Chesapeake’s most valuable assets.

It shaved its well costs from $7.7 million in 2012 to $6 million this year, and cut down its drilling days to 18 last year – compared to the industry average of 35 in the Utica, Doyle said.

Portillo of Tudor Pickering wrote that Chesapeake’s 540,000-acre dry natural gas footprint in the Utica is “one of its biggest levers for (net asset value).”

Like some parts of the Utica, the Haynesville Shale “was largely forgotten” by investors as natural gas prices sank and companies moved their rigs to oil-rich plays, said Jason Pigott, Chesapeake’s senior vice president of operations for its southern division.

But Chesapeake has ramped up to eight rigs up from two in the past four months, and higher gas prices, coupled with lower drilling costs, have driven higher returns in the region.

“I think it’s a big surprise to a lot of our investors that we’ve had such great returns out of there,” Pigott said. “We’re focused on driving down costs.”

Chesapeake, he said, has made a recent switch in the Haynesville to drilling on multiwell platforms called..., which has cut its costs from $10.1 million in 2012 to $7.9 million this year.

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Thanks for all info. Philip.

Standing by for any info. on this.

I understand from other posts they're supposed to be 'perfecting' the technique.

I think that may mean they need to develop the best gas and 'propant' specific to each well - but I don't know that for sure.  Does anybody ?

Like you Philip, I've read of using 'butane', 'propane', Nitrogen and even diluent.

Any info. ?

Guess I read a little about CO2 also.

Giddy Up Gas and Oil Industry !

james,

I'm curious, also.   What's the well name, please.  I'd like to look it up on the ODNR well map and track the progress.  Thanks for your input and any add'l info you may provide to us all....

thanks,   mark

Thanks Philip.

Read it and commented on it as 'Joseph' a few minutes prior to receiving your e-mail.

Here's what I wrote there :

'We have read that the earthquakes that have occurred were attributable to waste water injection wells, not fractured gas / oil production wells.

There are alternatives to Hydro-Fracturing being employed elsewhere in the state that don't create waste water that needs to be cleaned and gotten rid of.

Gas Fracturing is currently being employed using butane which can be recovered from the production and resold.

Also heard of using Nitrogen, CO2, propane and even diluent.

There's a Gas to Liquid plant scheduled to be built in Ashtabula soon.

If takeaway capacity is needed all that has to happen is to lease the lands along the pipe route and build it out.

Perhaps the low price of a barrel of oil will cause developers to produce more to make up lost income (but a market must exist for that to work).

We need political cooperation not obstruction to bring prosperity to our county which appears to me to be depressed economically.

We've read what a politician has to say but we wonder what the Gas and Oil Industry has to say on when things will begin to happen.

The sooner the better the way we see it.

Writing on behalf of myself and family.'

The article sounds heavy on the 'anti-fracturing' / 'anti-landowner prosperity' side to me.

Maybe the Gas and Oil Industry will intervene and accelerate development.

IMHO as it always is.

 

BTW, I for one am thinking that we all should interpret / infer (from the referenced article) that it is obvious that Natural Gas and Oil resources reside within Ashtabula County's Utica Shale just waiting for all the ducks to line up in a row to enable their recovery.

I interpret the politicians acknowledge it as the article cites their statements as to development being delayed (as opposed to not present / not going to happen).

Wrote it earlier and I think it bears repeating - giddy up.

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