Shale Daily / NGI All News Access

Rex Secures Water Supply to Drill in Ohio's Utica

The Buckeye Water District (BWD), a utility based in Columbiana County, OH, agreed to supply water for at least three years to a subsidiary of Rex Energy Corp. for oil and natural gas drilling in neighboring Carroll County, OH, the most prolific in the Utica Shale.

BWD Director Al DeAngelis told NGI's Shale Daily that R.E. Gas Development LLC has agreed to purchase at least 30 million gallons of water annually for three years at a rate of $6.60/1,000 gallons. At the end of the primary term, the company has the option to continue the agreement on a yearly basis with no minimum purchase requirements, but at a rate of $8.00/1,000 gallons.

"We've been seeing a lot of [activity] in Carroll County and the bordering counties, like Columbiana and Jefferson. We've seen some movement up in Mahoning County, too," DeAngelis said Tuesday.

According to DeAngelis, water would be drawn from the Ohio River and treated at a BWD facility in Wellsville, OH, before being pumped 11 miles by pipeline to a site in Carroll County. He said the Rex subsidiary was, at one point, considering building three containment ponds, each with a capacity of 10 million gallons, at the Carroll County site, where the company would then run pipelines or use water trucks to transport the water to nearby wells.

Rex has already paid $198,000 for water supplied this year, DeAngelis said. The Columbiana County Port Authority received an $18,000 share of the revenue for helping to broker the deal, and Aqua Terra Asset Management LLC received a $5,400 cut of the port authority's share because it helped find an operator that needed water.

In an investor presentation earlier this year, Rex said it had a 100% working interest in about 16,100 gross (15,900 net) acres in the Warrior North prospect in Carroll County. The company's first well, Brace No. 1H, began producing in 3Q2012 and has posted a 24-hour sales rate of 1,094 boe/d. The G. Graham Nos. 1H and 2H were scheduled to be placed into sales in May.

Rex management estimated that by the end of 2013 the company would have six wells drilled, four wells hydraulically fractured (fracked), four wells placed into service, and three wells awaiting completion. To date, it has drilled three wells, fracked two and is waiting for two to be completed.

DeAngelis said oil and gas drilling in the region "really hasn't taken off like everyone has been waiting for. There has been a lot of drilling at different sites. I think we're getting just right now into the beginning of it."

Last month, the Muskingum Watershed Conservancy District (MWCD) agreed to sell up to 38 million gallons of water to Gulfport Energy Corp. for oil and gas drilling in the Utica for three months, at a rate of $8 per 1,000 gallons (see Shale Daily, May 22). That deal followed another between the MWCD and Gulfport in April, when 25 million gallons were sold at the same rate (see Shale Daily, April 23).

Meanwhile, GreenHunter Resources Inc. is planning a water treatment, recycling and condensate handling logistics terminal in Wheeling, WV, which is expected to be operational in the second half of this year (see Shale Daily, May 29; March 15). The facility could provide drillers in the Marcellus and Utica shales with free recycled wastewater for fracking operations.

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