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Rex Kicks Off Ohio Utica Activity

Rex Energy Corp. recently spud it first Utica Shale well in Carroll County, OH.

The State College, PA-based company began drilling the Brace 1H well on April 13 to target the liquids-rich window of the Utica in Ohio and hopes to have results available by this August.

Rex plans to drill two additional horizontal wells in its Warrior Prospect this year. The company recently closed on the 15,000 net acre prospect and continues to "actively" lease in the region. Rex estimates the total resource potential of Warrior to be around 48 MMboe.

Rex said it has secured 15 MMcf/d of firm wet gas processing capacity in the region at the Dominion Hastings plant until the Dominion Natrium facility comes online this December.

Carroll County is currently the center of Utica drilling in Ohio.

The state of Ohio recently released 2011 production data for nineChesapeake Energy Corp. wells drilled in the play last year, including six in Carroll County. Although the most productive well in the group was drilled in Harrison County, the Carroll County wells reported constrained production levels ranging from 1.5 MMcf/d to 3MMcf/d (see Shale Daily, April 3).

Rex brought its first Utica well online earlier this year. The Cheeseman 1H well in Butler County, PA, produced 9.2 MMcf/d over a 24-hour period (see Shale Daily, Nov. 3, 2011). The company expects to drill and complete another horizontal Utica well in Butler this year and estimates the total Utica resource potential of its leases in the county to be around 405.9 Bcfe.

Although exploration remains in its early phases, Carroll County is thought to be near the margin where the wet-gas window becomes the oil window in Ohio, while Butler County appears to be near where the dry-gas window becomes the wet-gas window in Pennsylvania.

A total of 28 horizontal wells have been spud in Carroll County and another dozen in Jefferson County, making them the most active counties in Ohio's portion of the Utica Shale, according to the Ohio Department of Natural Resources. Of the 77 wells which have been spud in Ohio's Utica, seven are producing, 17 are completed, 31 are drilled and 22 are being drilled.

Rex holds more than 100,000 gross acres across the Utica in both states. In addition to its Warrior prospect, the company holds around 9,300 gross (3,400 net) acres in Mercer County, PA, located around 90 miles northwest of Carroll County and 40 miles north of Butler County.

Rex also holds around 129,200 gross (66,400 net) acres in the Marcellus. That includes its assets in Butler operated through a 70/30 joint venture with Japan's Sumitomo Corp., its operated assets in other areas across southwestern Pennsylvania and its 40% participation in WPX Energy Inc. operated leases in central Pennsylvania, with Sumitomo as a 10% partner.

As Pennsylvania operators release first quarter financials, they are quantifying the "impact" of the new impact fee on unconventional gas drilling in the state. Rex paid $2.8 million for wells drilled through 2011 and expects to pay $600,000, or 12 cents/Mcfe, in the first quarter of 2012.

By comparison, Range Resources Corp., one of the most active companies in the Marcellus, recorded a one-time expense of about $24 million, or 40 cents/Mcfe, based on the required retroactive payment for wells drilled in 2011 and previous years (see Shale Daily, April 13).

Rex produced 60.7 MMcfe/d during the first quarter, beating the high end of its guidance for the quarter by around 1% and increasing production from first quarter 2011 by 120%. Oil and natural gas liquids accounted for around 26% of total quarterly production. The company expects to produce between 63-68 MMcfe/d for the year.

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