As it continues to narrow its focus on the Appalachian Basin, Magnum Hunter Resources Corp. announced its third joint venture (JV), agreeing to further develop acreage in the southernmost tip of Ohio's Utica Shale with privately held EdgeMarc (EM) Energy Ohio LLC.
Under a joint operating agreement, EM Energy has already started drilling a Utica/Point Pleasant Shale well at the Merlin pad in Washington County in which it would have an 86% working interest (WI) to Magnum's 14%. Later this year, Magnum would assume an 89% WI at the Haynes pad and start work on two wells targeting the Utica and another targeting the Marcellus Shale. In all, the agreement would help both companies develop 1,080 net acres in Washington County.
The Merlin pad is just south of Magnum's Farley pad and east of PDC Energy Inc.'s Garvin pad in the wet gas window of Washington County. The Haynes pad is to be situated at the northern edge of the county, where a dry-gas trend stretches north through Monroe County and up into Belmont County. Those areas are home to some of the best dry gas results yet reported in the Utica, with Magnum, Gulfport Energy Corp. and Rice Energy Inc. exceeding initial production (IP) rates of more than 30 MMcf/d (see Shale Daily, June 2; Feb. 14; Nov. 8, 2013).
Magnum CEO Gary Evans said the JV would allow the company to more efficiently develop its acreage in Washington County, where operators are only now starting to stake and complete wells. Just 11 horizontal Utica permits have been issued in the county, and only three have been issued to the west in Morgan County to PDC Energy, but more operators are buying up land in the area (see Shale Daily, April 15)
The new wells in Washington County add to a closely watched list, as operators such as Gastar Exploration Inc., Chevron Appalachia LLC, Antero Resources Corp. and Cabot Oil & Gas Inc. prepare to test the boundaries in southernmost Ohio and northern West Virginia (see Shale Daily, May 16; March 26).
"We look forward to seeing the Haynes wells drilled later in the year as it would help prove up the monster Utica/Point Pleasant dry gas trend," said Wunderlich Securities analyst Irene Haas in a note to clients. The Merlin pad is strategic too, "as it will add one more data point in northern Washington County in the wet gas-condensate belt within the Utica/Point Pleasant trend."
Magnum has already drilled three wells at its Farley pad in Washington County but said in May that a lack of pipelines in the area would delay flows until later this year. PDC has said it's optimistic about initial results at its Garvin pad, but it hasn’t released any public results (see Shale Daily, May 7).
Magnum has JVs with Stone Energy Corp. in West Virginia and Eclipse Resources Corp. in Ohio,. Canonsburg, PA-based EM Energy also holds acreage in Monroe County, OH, and Beaver County, PA.
Magnum's latest partnership doesn't come as a surprise.The company been divesting noncore acreage for more than a year to focus on its core in Ohio and West Virginia (see Shale Daily, April 22). Topeka Capital Markets analyst Gabriele Sorbara said the company could complete its transition to an Appalachian pure play by year's end if it executes its plan to sell assets in the Williston Basin.