Interesting research on Utica/Point Pleasant

http://www.itg.com/wp-content/themes/itg-decode/energy-2013/19-Manu...

This outfit, ITG, put together an interesting analysis of the Utica/Pt Pleasant in Ohio. I find the porosity analysis quite revealing, the best performing areas have the highest porosity. The northern utica has much less porosity, answering the question as to what is causing it to underperform. Based on my daily reading of the Utica (I need a better hobby), I now believe the two most meaningful factors are the depth to formation and porosity. Thickness of the shale and total carbon are just as high in the north, but the wells are not producing like the southern ones. This study shows Belmont, Guernsey & Monroe as higher porosity areas and the depth to formation is approximately 2,000 feet deeper than the north. 

Anyone have other observations as to what is the determining success factors?

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Permalink Reply by Joseph-Ohio on July 3, 2014 at 2:18pm

The following is a re-write since I perceived that my reply was being misunderstood and required clarification.  Basically I added the words 'produce and report' or the words 'choke / throttle the production and report' to take the place of only the word 'report'.  The following reply makes my point and my initial reply was lacking.  Corrected reply follows:

Always remember that only what they produce and report to the ODNR is what the ODNR records and makes public and they can produce and report whatever they want. If it makes sense to them to choke / throttle back production and report the wells performance as under par / deficient and somehow that tactic improves their ability to enhance their bottom line I wouldn't  rule it out as occurring - I can't rule it out - it's a tricky marketplace out there !

Permalink Reply by Summer Johnston on July 3, 2014 at 3:39pm

Always remember that only what they produce and report to the ODNR is what the ODNR records and makes public and they can produce and report whatever they want.

JO, these companies cannot report whatever they want. The tax man is standing over them. Government entities want "their share." I know you want to believe that the gas companies have throttled back production--but how that could enhance their bottom line, IDK--and much of the land in Trumbull and Mahoning Counties is already HBP. Halcon has amended leases to cure them of defects in preparation to drill. They just aren't. Sure, some land is available to lease but since there is no pending sense of urgency, especially when there's typically a 5-year term to the leases. I just don't think the companies are interested. 

I do think there are resources to recoup. But, I just don't think recovery at this point in time is economically feasible. If the resources WERE easily recoverable, I think buyers would be lined up for Halcon's and BP's leaseholds. They aren't. For a landowner, ANY royalty is more than they had before--but they got no skin in the game regarding drilling costs. 

The risk landowners run is the same as some in southern Ohio faced--hold out too long and take the chance the company drills around the landowner--assuming some company was drilling in the north. It's like walking a tightrope to negotiate the best deal without falling off. Pigs get fed, hogs get slaughtered. Plain and simple.

Permalink Reply by Joseph-Ohio on July 3, 2014 at 3:50pm

Summer,

As I've read on these pages apparently developers can produce what they want from any well they develop.

Wells are choked back all the time by developers as I've also read on these pages.

As I understandand the developers are bound to accurately report what they produce.

As I understand ODNR only records what the developer reports.

So I conclude that production recorded by the ODNR may be production results from a choked back / throttled well.

Also to condemn a well / a given geography based on ODNR production reports which may reflect production from throttled wells is open to error.

I get that the developers have to pay taxes on production and the tax man bases the tax levied based on the production reported but the tax man doesn't control the production - the developer does.

Permalink Reply by Summer Johnston on July 3, 2014 at 4:02pm

As I've read on these pages apparently developers can produce what they want from any well they develop.

Wells are choked back all the time by developers as I've also read on these pages.

As I understandand the developers are bound to accurately report what they produce.

Of course drillers are going to produce NGLs from any well; that's the whole point. And yes, wells can be choked back for various reasons such as lack of infrastructure. But based on the numbers from the southern wells, once infrastructure is in place the production numbers are impressive. The same can not be said about the northern Utica wells.

I think all everyone can do is hope that some company discovers a way to better extract the product.

Permalink Reply by Joseph-Ohio on July 3, 2014 at 4:18pm

Probably a lot more reasons than I can think of to throttle a well back and certainly also a lot more than we've discussed.

Recovery methods I'm sure will improve and improve quicker as they continue into the north and west.

Practice makes perfect and necessity is the mother of invention.

Drill Baby Drill.

Permalink Reply by Joseph-Ohio on July 3, 2014 at 3:27am

Read much earlier on these pages that HK was in it to build a saleable position / company from the very beginning.

To build and sell was always their intent / driver.

Those ideas were presented by a source that everybody seemed to have agreed was and is very much in the know about these things.

I believe the source was correct myself.

Permalink Reply by Dexter Green on July 3, 2014 at 3:34am

I mean, the source was the founder and CEO.  He flat out told everyone that he was building the company to sell it.  He still may be able to get that shareholder value that he was looking for because their TMS acreage looks really, really good and their Eagle Ford position is strong as well.

Permalink Reply by jonathan M. on July 3, 2014 at 4:31am
Dexter,

I own GDP stock so follow the Tms closely. Hk acreage looks promising but i would disagree with "really really good". They have drilled one well, albeit it was successful but it's only one well. For every good well drilled by GDP, encana, or hk there have been 2 or 3 bad ones. I'm cautiously optimistic that they will make the play commercial by years end.
Permalink Reply by Dexter Green on July 3, 2014 at 4:57am

I like GDP.  I think the TMS is going to be very economical and it looks like HK has a good position, some of which has already been derisked by GDP, ECA, and SN. 

Permalink Reply by jonathan M. on July 3, 2014 at 5:31pm
I hope so. It's been a slow play to develop but it seems like they may have finally figured it out. Hopefully they can get those well costs down.
Permalink Reply by jonathan M. on July 3, 2014 at 4:32am
Sorry meant to say only announced results from one well. They have drilled a handful that I don't believe are completed yet.

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