As early as 2011, Range Resources CEO John Pinkerton was already being quoted trying to control his enthusiasm for what he calls a “triple play” in Ohio. Mr. Pinkerton was referring to a combination of several shale plays which exists along with intermingled sandstone formations throughout Ohio. In the East, it is the Upper Devonian Shale, the Marcellus Shale, and the Utica Shale, in that order, according to depth. As you move westward, the Marcellus plays out, but is replaced by the Lower Huron.

Range is one of many exploration companies scouring the country for shale rich in oil and natural gas liquids rather than the gas-rich shale you usually read about. “The technology is pretty much the same” to drill for oil or gas in shale, said Marquette Research analyst Jason Gammel. “So if you can find an application that produced oil rather than gas, given how much of a premium oil trades to gas, that would be your preference.” The economics are vastly superior.

What made the economics look truly outstanding in Ohio that early during Utica development was that much of the necessary infrastructure for transportation and development was already in place. It may actually live up to Pinkerton’s boast of being “one of the most economic plays in North America”, as he was recently quoted as saying in a transcript released by the Morningstar investment research firm. Ohio was already a myriad of criss-crossing and intersecting pipelines and home to at least five existing refineries capable of processing almost a million barrels per day, before ramp-up. Currently, there is about $10 B in infrastructure and midstream activities underway in Ohio, WV and SW PA.

Despite projects planned or underway, Ohio’s Utica production is still encountering similar logistical problems to that experienced in the Marcellus with wells being shut-in for lack of access to pipelines or appropriate transportation facilities. For now, let’s just establish the fact that Ohio is addressing its mid-stream needs aggressively and without delay.

Pinkerton believes, an incredible benefit can be derived from the already existing drilling pads, roads, permits, gathering and processing systems, etc. It is a little known fact that this is one of the huge benefits enjoyed by the Eagle Ford, which was actually discovered re-working an existing well in a field developed in the 1940’s. Pinkerton brags that “the incremental costs to develop the Upper Devonian and Utica will be reduced by approximately one-third versus developing those zones on a stand along basis. We believe this will allow us to continue to drive down the cost of entire play”. Makes sense to me.

Ohio also provides attractive geological opportunities in that it appears to have perhaps three commercially productive shale structures within its borders, some of which have overlapping borders. Combined, these structures contain estimated reserves of more than 20 trillion cu ft in its Utica Shale formation (20), our primary target, and over 2 trillion cu ft in the Lower Huron Shale (21), which replaces the Marcellus in Central Ohio when it plays out. Where the Lower Huron does not exist, the Marcellus Shale does, extending westward into Ohio. There are no reserve estimates available for the formation vaguely referred to as the Upper Devonian shale, but Range Resources recently increased its Marcellus estimates 167% by including it in their reporting. The best news of all? Where they in fact exist and overlap, wherever one is “wet” the others shall be too (as per John Pinkerton, CEO of Range Resources).

The Marcellus was the source of much of the early publicity associated with natural gas exploration and fracking in the U.S. It purported contains “technically recoverable reserves” estimated to be as high as 489 TCF of natural gas. (*22) What percentage of these reserves lie within Ohio’s borders is yet to be determined, but there are already at least 27 Marcellus wells drilled and at least 44 wells permitted and ready to be spudded as of report date . ODNR’s July 19, 2014 permit report reflects 30 horizontal permits either pulled or already drilled in Monroe County alone.

In retrospect, much of the above has been proven true, with a few caveats. First of all, several E&P companies have found Monroe County to be productive for both Utica and Marcellus drilling. Magnum Hunter has been among the most aggressive in pursuing both, and have done so, with great success, from one well pad. Their Stalder wells in particular have featured multiple laterals from each formation, reportedly scoring quite significant liquid production from their Marcellus wells and high-volume, pipeline quality gas from the Utica.

This certainly backs up Pinkerton’s talk about saving money incrementally regarding sharing well pads and infrastructure. However, his comments regarding all structures being “wet” were obviously tempered with the understanding that the depth and thermal maturity of some otherwise productive Utica areas will be high-quality, high-production dry gas with attractive purity and BTU figures.