The natural gas industry is more bullish about the Utica Shale than ever before, but several geologists remain skeptical until more data is publicly available about the play.

Chesapeake Energy Corp. launched a flurry of interest in the Utica after CEO Aubrey McClendon recently called the play “economically superior” to the Eagle Ford Shale of South Texas and estimated that Chesapeake’s 1.25 million net acres in the play could be worth $15 billion to $20 billion for shareholders (see NGI, Aug. 1a). McClendon said the Utica, like the Eagle Ford, should have three phases, but is “economically superior” because of “the quality of the rock and the location of the asset.”

Information is proprietary but McClendon told analysts that Chesapeake has drilled nine vertical wells and six horizontal wells in the Utica, analyzed more than 3,200 feet of core samples and examined more than 2,000 well logs penetrating the shale.

“I have not seen any production data that substantiates the hype and until I see that I would rather not comment on the Utica one way or the other,” said Terry Engelder, the Pennsylvania State University (PSU) geosciences professor who helped prove the value of the Marcellus.

Geologists believe the Utica is the source rock for other productive formations but don’t have a clear sense of amount of resource in question. The U.S. Geological Survey hasn’t formally assessed the “undiscovered resources” in the Utica but the Ohio Geological Survey said Ohio’s Utica could contain some 15.7 Tcf of natural gas and 5.5 billion bbl of oil, but it too noted that it couldn’t “properly” estimate the probable reserves without more production history.

Like its productivity, the quality of the Utica is also uncertain, geologists said. For instance, the Utica is thinner in New York and Ohio than in western Pennsylvania. So while companies might have enough information to begin developing the edges of the play, they are still exploring its center, according to Michael Arthur, co-director of the Marcellus Center for Outreach and Research at PSU.

“It’s probably early days for Pennsylvania for sure,” Arthur said.

The Pennsylvania Department of Conservation and Natural Resources (DCNR) files include only two completion reports from Utica wells, but there are 11 outstanding drilling permits issued for Beaver, Lawrence and Butler counties north of Pittsburgh, and locations in Armstrong and Somerset counties to the west and south (see NGI, May 23). That geographic diversity suggests companies are still studying the play, Arthur said.

To the west, the Ohio Department of Natural Resources has issued more than 40 Utica/Point Pleasant drilling permits in eight eastern counties since June. Ohio operators have been drilling through the Utica for years to get to deeper formations, giving them information about the play, according to Jeff Daniels, a professor in the School of Earth Sciences at Ohio State University. But, he said, “We’ve got to get a lot more holes before we know the potential of the Utica.”

Chesapeake and other companies aim to do just that. After spending nearly $2 billion acquiring acreage, Chesapeake is running five rigs in the Utica and plans to run eight by the end of the year and 40 by the end of 2014. The company also is opening a regional office in Canton, OH.

Chesapeake is operating on some of its acreage in Ohio through a joint venture with Houston-based EnerVest Ltd. and its affiliate company EV Energy Partners. EnerVest, the largest producer in Ohio, is permitting 10 wells in the Utica and plans to drill two or three laterals late this year and early next year. The company said its joint venture plans to release data on six Utica wells in the coming months.

CONSOL Energy Inc. recently sold a big chunk of its Marcellus acreage to Noble Energy Inc., but kept its Utica holdings (see related story). The Pittsburgh-based company plans to run a full-time rig on its 200,000 acres in the Utica of eastern Ohio starting this fall.

Devon Energy Corp. previously drilled one Utica well on its 110,000 net acres in the “heart of the oil window” in Ohio and plans to drill three more this year (see NGI, July 4). “The primary risk to a shale play is of course the ability to move fluid through a very tight reservoir. However, we have now analyzed the core from our first Utica well and are highly encouraged by the positive permeability indications seen in our first well,” exploration chief Dave Hager said during a recent earnings call.

Range Resources Corp. completed a 12,700-foot Utica well in Beaver County in 2010 and plans to spud another early next year, but COO Jeff Ventura recently said that the company will focus on the Marcellus until it understands the Utica better.

State College, PA-based Rex Energy Corp. is drilling its first Utica well in Butler County. The company holds 83,000 gross acres in the Utica of southwestern Pennsylvania and eastern Ohio and believes its acreage sits within the western gas corridor of the play. Seneca Resources Corp., the operating arm of National Fuel Gas Co., is the geographic outlier. The company is planning a Utica test well this fall in Venango County, PA.

Not all Utica leaseholders are bullish, though.

“We believe it’s a little bit too soon to conclude on the potential of the Utica,” Chevron Corp. Vice Chairman George Kirkland said during an earnings call (see NGI, Aug. 1b). “We’ve got a good acreage position in the Utica from the Atlas [Energy Inc.] acquisition [see NGI, Nov. 15, 2010]. We are going to do what we do everywhere in the world. We’re going to evaluate that. And the only way we can evaluate it is we’re going to have to drill some wells and test performance. So it’s something for the future, but it’s, like I say, too early at this point in time to, I think, to hype it.”

If this early drilling leads to production soon, companies might be able to take advantage of unused pipeline capacity in the region, according to several midstream players.

The El Paso Corp.-operated Tennessee Gas Pipeline “couldn’t be in a better position” to capitalize on the liquids-rich Utica, according to El Paso Pipeline Group President Jim Yardley.

MarkWest Energy Partners made similar claims during a recent earnings call. “It’s still early, but again we’re very encouraged by what the producers have been saying publicly and feel that we can leverage our existing position in West Virginia and Pennsylvania to be able to compete for those services,” CEO Frank Semple said.

Dominion Resources Inc. is working on a gas processing and fractionation plant in Natrium, WV, that will compete for Marcellus and Utica production. But Spectra Energy Corp. believes there is still uncertainty, according to CEO Gregory Ebel.

During a recent conference call Ebel said interest in the Utica has not, so far, offset larger economic concerns that have kept companies from signing long-term contracts on its proposed Marcellus Ethane Pipeline System project, on which it partners with an El Paso subsidiary (NGI, May 9). “But that’s a short-term issue,” he added.

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