After disconcerting Utica Shale production figures were released earlier this month by Ohio regulators, industry analysts said they were disappointed with the results of the first two test wells Halcon Resources Corp. drilled in the play, and EV Energy Partners (EVEP) said it is continuing to look for buyers interested in its holdings there.

On Thursday, Houston-based Halcon said its Phillips 1H well, located in Mercer County, PA, tested at a peak rate of 2.5 MMcf/d of natural gas and 120 b/d of condensate. The company said that based on composition analysis and assuming full ethane recovery, Halcon estimates the well, which is currently being placed into a sales pipeline, would produce an additional 240 b/d of natural gas liquids (NGL) for a total peak production rate of 730 boe/d.

Halcon said a second well, the Allam 1H in Venango County, PA, is shut-in and awaiting infrastructure after testing at a peak rate of 6.6 MMcf/d of natural gas and 22 b/d of condensate. After taking a composition analysis into consideration, and assuming full ethane recovery, the company estimates the Allam well is capable of producing an additional 728 b/d of NGLs for a total peak production rate of 1,652 boe/d.

Gordon Douthat, an analyst with Wells Fargo Securities LLC, said both wells were drilled along what Halcon considers to be borders in the Utica Shale — the Phillips between the volatile oil and gas windows, and the Allam between the wet and dry gas windows farther east — but said production from the former was substantially below the type curve.

“[These are] not great results, in our view, but [it’s] still [in the] very early stages of [the] play,” Douthat said Thursday, adding that Halcon “now has one rig operating in the Utica [and] expects an additional rig to return shortly.

“With three wells currently resting, one being completed and one being drilled, we expect several data points coming out of the northeastern portion [of the] Utica in [the] coming months that will help give much more clarity on the direction of the play on the Pennsylvania side of the border…However, in comparison to solid results on the Ohio side of the play, initial production rates disappoint. [That’s] not to say that the play won’t work, but [it] will likely take time to crack the code.”

It’s all about cracking the code, EVEP CEO Mark Houser told analysts recently. The company believes there is a significant oil potential, that only needs more drilling and refining techniques.

“However, only six wells have been drilled in the oil window today, and the results have not been good. [But] we believe this is a result of suboptimal completion design and there is more drilling [to be done]…All codes can be cracked. It will take further work over time,” Houser said.

Dan McSpirit, an analyst with BMO Capital Markets Corp., agreed, “one well doesn’t make a trend. Two wells may not either, but you can draw a line,” McSpirit said Thursday. He said that even though just two wells were at issue, the test rates “failed to excite just the same. [There’s] lots of gas here.”

McSpirit said BMO’s own calculations and assumptions showed the Phillips well was capable of producing about 49% liquids (condensate and NGLs), while the Allam well would yield about 45% liquids. “We believe these numbers are at least directionally accurate as the Allam 1H well was located much further east near the dry gas window and, thus, should carry a lower liquids cut (or higher dry gas yield),” he said.

The Ohio Department of Natural Resources (ODNR) reported on May 16 that 87 wells in the Utica collectively produced 12.84 Bcf of natural gas and more than 635,000 bbl of oil in 2012. Industry experts responded by saying they were disappointed with the results, but conceded that a clearer picture was beginning to emerge over the location of the play’s sweet spots for oil (see Shale Daily, May 20; May 17).

During the NAPTP 2013 Investor Conference in Stamford, CT, on Thursday, Houser said the company and its parent, EnerVest Ltd., were still committed to selling 103,800 net acres in Ohio.

“We [are continuing] to market our properties in the volatile oil window for potential sale,” Houser said. “We’ve been approached by oil service companies, E&P companies with oil shale experience and potential financial partners for joint venture opportunities as a means to de-risk the play, and we’re pursuing those now.”

Houser added that EVEP believes the volatile oil window in the Utica holds significant potential. “We estimate, based on historical well logs and core data from our conventional wells, that portions of the oil window hold 20 million bbl to 30 million bbl per section. This compares very favorably with other oil shales”

EnerVest, the second biggest leaseholder in Ohio’s Utica after Chesapeake Energy Corp., had originally hoped to sell its acreage in four packages in 2012, but it received insufficient offers (see Shale Daily, Dec. 27, 2012). The portfolio has since been repackaged into 13 parts, one for each Ohio county in the acreage (see Shale Daily, April 18).

During the Q&A session, Houser said a swap was unlikely for EVEP’s Utica acreage, but another type of deal was possible.

“What we’ll probably see is not a swap but the potential for like kind of exchanges,” Houser said. “We actually went down the road toward a pretty major swap for some of our acreage, but it was hard to get the two parties to meet on valuations. So we feel the best opportunity for us is to pursue cash transactions.

“[But] again, EnerVest has a good number of assets that we could potentially drop down to make those like kind of exchanges happen.”