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1Q2014 Cold Held Back EVEP's Barnett, But Appalachia Helped Lift Production

EV Energy Partners LP (EVEP) continued struggling with the cold weather of North Texas in the first quarter, which curtailed production from legacy operations in the Barnett Shale that account for more than 50% of the partnership’s overall volumes.

But midstream gains in the Appalachian Basin, where the partnership has a significant footprint in Ohio's Utica Shale, helped to offset those losses and landed it above the midpoint of its guidance during the first three months of the year.

"Our biggest progression point has been in our Utica midstream investments, which includes our 21% investment in Utica East Ohio processing and fractionation and the 9% investment in the Cardinal gas gathering business," Executive Chairman John Walker said. "Now that the midstream bottleneck is being addressed, volumes from the wet gas window in Carroll and surrounding counties continue to come online and grow almost each week with well tie-ins."

Although EVEP has been shifting more of its capital to Appalachia, which it considers a key growth driver (see Shale Daily, Dec. 17, 2013), the majority of its proved natural gas and liquids reserves are in the Barnett Shale.

CEO Mark Houser said icing and freeze-offs across that acreage in North Texas caused production interruptions in January, February and March, compounding similar problems the partnership faced in the fourth quarter (see Shale Daily, March 3). EVEP drilled 16 wells in the Barnett and brought 12 wells online with an average initial production (IP) rate of 1.8 MMcfe/d, missing IPs that have been closer to 3 MMcfe/d there.

Still, Appalachia and EVEP's conventional Austin Chalk program in South Texas, where it also spent time exploring the northern Eagle Ford during the first quarter, found production coming in at 174.7 MMcfe/d last quarter, hitting 2014 guidance of 169.2-182.3 MMcfe/d, and increasing 6% from 1Q2013 and 2% from 4Q2013.

EVEP's first quarter production consisted of 10.8 Bcf of natural gas, 265 million bbls of oil and 550 million bbls of natural gas liquids.

In 4Q2013, the partnership said it added 400 MMcf/d of processing capacity in Ohio and said that it expected another 400 MMcf/d to come online in the second and third quarters, but an expansion at the UEO complex (see related story), which offers storage, fractionation and processing in Carroll, Harrison and Columbiana counties, is expected to bring processing capacity in the Utica to more than 600 MMcf/d, Walker said.

EVEP is also expected to release the first data set from its highly anticipated Parker well in Tuscarawas County, OH, later this summer. That well, part of a joint venture with Chesapeake Energy Corp. and Total E&P USA Inc., is targeting the Utica's volatile oil window in an area to the west of the play's sweet spot that other operators have largely ignored because of rock mechanics.

"The challenge in the oil window appears to be fracture design and minimizing reservoir damage upon completion," Houser said. "We are working with industry partners on studies designed to help the partnership better understand the flow capacity of the oil window rock."

EVEP plans to drill one or two wells in the oil window later this summer, with results expected sometime in the third quarter. Houser said the partnership's oil in place estimates are between 20-30 million bbls per section across 79,000 acres in Stark, Tuscarawas and Guernsey counties. 

EVEP reported a net loss of $6.3 million (14 cents/unit) in the first quarter, compared to $46.6 million ($1.08) during the year-ago period. The first quarter loss stemmed mainly from non-cash losses on derivatives, a higher payroll and asset sales.

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