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McClendon Utica Development Confirms Drilling Plans

Aubrey McClendon is bringing a whole lot of friends to the party to help him start up a substantial Utica Shale operation in eastern Ohio, the new company formed by the ex-Chesapeake Energy Corp. co-founder confirmed on Wednesday.

American Energy-Utica LLC (AEU), an affiliate of McClendon's American Energy Partners LP, plans to begin drilling in eastern Ohio before the end of the year after clinching close to $1.7 billion in private equity financing. Lead equity investor is The Energy & Minerals Group (EMG), with additional equity provided by First Reserve Corp. and AEU's management team.

McClendon founded American Energy Partners in April shortly after he retired from Chesapeake (see Shale Daily,April 17). The partnership is in Oklahoma City near his former headquarters, which has been undergoing a company-wide restructuring.

The financing initially is being used to secure 110,000 net acres in the southern portion of the Utica. Specific details were not disclosed.

One rig is being installed this quarter, with plans to bump up drilling activity with at least 12 rigs over the next two to three years. The outlines of the project and the financing had been confirmed earlier this month (see Shale DailyOct. 3).

Midstream gathering, processing and fractionation operations for about 80% of the acreage is being handled by MarkWest Utica EMG, a joint venture between MarkWest Energy Partners LP and EMG. MarkWest has said it plans to invest $20 billion to build facilities in the Utica and Marcellus shales, by itself and with EMG (see Shale Daily, Nov. 11, 2012).

The remaining acreage would be processed by Utica East Ohio Midstream LLC (UEO), a joint venture of M3 Midstream LLC, Access Midstream Partners LP and EV Energy Partners LP (EVEP). UEO is investing nearly $1 billion over the next five years to develop an integrated midstream services complex in eastern Ohio (see Shale Daily, Dec. 13, 2012). Earlier this month Pennant Midstream LLC agreed to build a 12-inch diameter, 38-mile liquids pipe link in Ohio to deliver 90,000 b/d to connect the Hickory Bend Cryogenic Processing Plant in New Middletown to UEO's Kensington facility in Columbiana County (see Shale DailyOct. 2).

 Access, formed after Chesapeake sold most of its midstream assets, would gather UEO's gas. Access, now half-owned by Williams, has lots of projects underway in the Marcellus and Utica formations (see Shale DailyDec. 13, 2012). EVEP, a frequent Chesapeake partner, had been rumored to be the seller of a package of Utica properties scooped up by McClendon in August (see Shale DailyAug. 21Aug. 13).

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