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Magnum Hunter's First Utica Well Is A Giant

After more than a month of delays caused by cold weather, Magnum Hunter Resources Corp. reported what analysts called "monster" results at its Stalder 3UH Utica well in Monroe County, OH, which tested at a peak rate of 32.5 MMcf/d.

The 3UH, drilled on a pad designed to handle 10 Marcellus wells and 8 Utica wells (see Shale Daily, July 3, 2013), is still producing significant amounts of production water at a rate of 1,400 b/d, and the company said it expects the actual sales rate to increase over the next several days when the flowback declines.

Monroe County is in the eastern tip of southeast Ohio where an increasing number of exploration and production companies are focusing on a profitable dry gas window (see Shale Daily, Nov. 19, 2013). Ever since the company announced plans for the 18-well pad last year, results from the first Utica well there have been highly anticipated.

CEO Gary Evans said the well's production consists almost entirely of pure methane at 97%. He said the pipeline quality gas required no processing, which will reduce the company's costs.

"The benefit of owning the majority interest of our midstream division is that this well went directly through our gathering system to sales earlier this week," Evans said Friday. "Therefore, we did not require any third party to build a pipeline to this location."

Magnum has permits just south of Monroe County in Washington County, OH, where PDC Energy Inc. has one producing well and two others drilled. But in Monroe, operators have been granted 65 horizontal drilling permits, according to state records. Analysts at Tudor, Pickering, Holt & Co. (TPH) called Magnum's 3UH a "monster" and said results there help to move the Utica's fairway delineation farther east.

Gabriele Sorbara, an analyst at Topeka Capital Markets, agreed in a research note to investors, adding that Magnum's first Utica well beat widely-held expectations that it would have an initial production rate of 15-30 MMcf/d.

"We note that this is a pure dry gas well, requiring no processing," Sorbara said. "We believe the dry gas window of the Utica Shale play is the core part of the play generating top-tier economics and provides a faster ramp-up in the production than the liquids area."

The state's latest quarterly production report shows that Ohio's top producers mostly hold acreage in Belmont, Monroe, Harrison, Noble and Carroll counties in the southeast (see Shale Daily, January 2). After that report, analysts speculated that production trends would find more companies staying put in the region, with others moving farther south into northern West Virginia in the hopes of replicating some of the prolific returns seen in the corner of Ohio.

TPH analysts added on Thursday that Magnum's latest results should bode well for operators with acreage nearby, including Antero Resources Corp. and Gulfport Energy Corp. Magnum's 3UH gas well is one of the best yet reported in the Utica, surpassing Gulfport's Irons 1H well in nearby Belmont County, which tested at a peak rate of 30.3 MMcf/d in 3Q2013 (see Shale Daily, Nov. 8, 2013).

Magnum has a 47% working interest in the Stalder pad. Other non-operated partners include Eclipse Resources, Statoil and Northwood Energy Corp. In an analyst presentation this month, Magnum said it ultimately expects the 3UH to produce at a gross rate of 22.5 MMcf/d.

"With the test result at 32.5 MMcf/d, we feel really good about Magnum's ability to produce the well as planned," said Irene Haas, an analyst at Wunderlich Securities.

The 3UH was drilled to a vertical depth of 10,600 feet, with a lateral length of 5,000 feet and it was hydraulically fractured with 20 stages. Evans said the company is excited about its prospects farther south in West Virginia, where it plans to drill its first Utica well on the Stewart Winland pad in Tyler County.

"This new well should geologically be deeper and higher pressure than the Stalder well," Evans said. "Our Eureka Hunter gathering pipeline is already present at that location so all four of these new wells will go directly to pipeline sales upon completion."

The Stewart Winland will also be home to three other Marcellus wells, one of which has already been drilled. Earlier this month, Magnum filed a Form 8K with the U.S. Securities and Exchange Commission indicating that inclement weather was hampering the completion of its Utica and Marcellus wells (see Shale Daily, Feb. 10). If the weather cooperates going forward, analysts said they expect the first results from the Stewart Winland pad sometime in the third quarter.

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