Utica wells don't pay for themselves

The newest ODNR figures appear to show Ohio/northern Utica production volumes that could never cover the costs of developing many of the wells. But CHK continues to develop the area. Any thoughts on how the economics of the wells and the field work? Can a large percentage of wells be individually unprofitable while the overall Utica field ends up profitable?

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Permalink Reply by David Perotto on July 5, 2014 at 3:45am
TJ,
This play is still very early. Each play is unique and optimizing production is in it's infancy for the Utica. It will be interesting to see how companies solve production challenges and never do in some areas. There will be positive and negative surprises along the way. I wish there were more specifics about each wells completion techniques, to analyze what is working and what is not. Of course, companies keep proprietary information close to the vest to maximize opportunities to add acreage or dump unproductive ones.
Permalink Reply by Dexter Green on July 5, 2014 at 4:05am

"But CHK continues to develop the area."

CHK is developing the northern part of the Utica?  That's likely news to them.  

Permalink Reply by TJT on July 5, 2014 at 4:22am

Uh, yes, CHK is developing Carroll and Columbiana counties, as shown in the ODNR report that was just released. This isn't a conversation about the northern oil window.

Permalink Reply by Joseph-Ohio on July 5, 2014 at 5:03am

Carroll and Columbiana aren't north enough for most folks interested in the northern tier's development to be calling them north if you ask me TJT.

Permalink Reply by James Foster on July 5, 2014 at 6:06am

Not sure what report you are speaking about but clearly Chesapeake is no longer developing Columbiana County. They have drilled maybe one well here this year and are fracking a well that was drilled last year. The activity here has ground to a halt. The only work in this area now is the pipeline to move NGL's frome New Middletown to Kensington to join up to pipeline to Scio. This project is nearing completion. The Huffman Trust well on Winona was drilled earlier this year. The Altonhof well is being fracked currently. From two or three rigs moving around the county with wells going in all around us to only seeing one rig this year.

015334grltd9mPermalink Reply by 015334grltd9m on July 5, 2014 at 10:29am
Leasing is wide open in Columbiana. Chk ciuld be in negotiations to sell.
Permalink Reply by Dexter Green on July 6, 2014 at 3:32pm

Carroll and Columbiana are now the northern part of the Utica?  That's also news.  

Permalink Reply by Joseph-Ohio on July 5, 2014 at 8:50am

I'll guess that the CHK wells you're referring to are throttled back awaiting completion of infrastructure such as that Kensington pipeline James Foster writes about above.

Also, maybe they need more sales contracts to develop more wells ?

Still all dressed up and no place to go yet ?

Still just guessing here.

Permalink Reply by James Foster on July 5, 2014 at 12:16pm

The New Middletown-Kensington pipeline will not be gathering wells.  It will carry processed NGL's from New Middletown to Kensington where NGL's from both cryo plants will go via pipeline to Scio Harrison Fractionation plant. 

All the wells in Southwest Columbiana are gathered by Millport and Teegarden pipelines to Kensington Cryo facility.  Millport is fully operational and Teegarden the final 1/3 of that projection is being finalized.

015334grltd9mPermalink Reply by 015334grltd9m on July 5, 2014 at 1:46pm
Don't forget wet gas diverted to the gateway pipeline supplying diluent to Canada.
Permalink Reply by craig on July 5, 2014 at 2:46pm

Maybe there is more to the picture than just the Utica??... just sayin'.

Permalink Reply by TJT on July 6, 2014 at 1:59am
Columbiana County (my interest) is still among the top counties for permits and infrastructure, I don't necessarily agree that CHK has stopped development or that it is a bust. The first wells are just coming online after billions in investment. It seems we're early in a long game and CHK claims to be very happy with results. But if you have a well that produces only a few thousand cubic feet of gas per day at first and you apply the current thinking on decline curves, the well could never come close to covering the cost of even drilling let alone infrastructure. A large portion of shale wells in the latest Ohio Department of Natural Resources production report seem to fall into this category. The infrastructure is finally in place to handle regular production and I don't see why wells would be choked way back. That's what troubles me. How can this be profitable?

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