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Magnum Hunter's Utica Gusher Bests the Rest in West Virginia

Magnum Hunter Resources Corp.'s (MHR) first Utica Shale well in West Virginia -- the most southeastern within its Appalachia portfolio -- has tested at a peak monster rate of 46.6 MMcf/d, the highest flow rate announced in the region to date.

The Stewart Winland 1300U well in Tyler County, under wraps until results were issued late Wednesday, tested on an adjustable choke rate with 7,810 pounds per square inch (psi) final circulating pressure and is flowing to sales through MHR's Eureka Hunter Pipeline system. The well has a true vertical depth of 10,825 feet, a 5,289 foot horizontal lateral and 22 fracture (frack) stages.

"This new well further delineates the southeastern acreage position that Magnum Hunter has been assembling over the past three years in this region," CEO Gary Evans said. "By owning and controlling our midstream operations, we were able to test this well directly into pipeline sales, which continue today. The gas composition of this new Utica well is 97.88% methane with only 1.52% ethane and a Btu factor of 1,023."

Three companion wet gas wells on the Stewart Winland pad, 1301M, 1302M and 1303M, like the 1300U 100% owned by MHR, have been completed. They await required air permits from state regulators because of additional necessary equipment and then would be tied to sales. The 1301M, with a true vertical depth of 6,155 feet, has a 5,762-foot horizontal lateral and was completed with 27 frack stages. The 1302M has a true vertical depth of 6,147 feet with a 5,676 foot horizontal lateral and 29 stages. The fourth well, 1303M, has a true vertical depth of 6,149 feet with a 5,762-foot horizontal lateral and 29 stages.

MHR is "most anxious" to put the new wells on production...over the next few weeks," said Evans. "These Marcellus wells represent some of the longest lateral wells we have drilled to date. We believe that this new discovery on the Stewart Winland pad...represents the greatest flow rate and one of the highest sustained flowing casing pressures of any Utica well drilled in the entire play of Ohio and West Virginia," he said of the 1300U. "Additionally, it is one of the highest flow rate gas wells ever reported in any shale play located in the U.S. The initial shut-in casing pressure of this monster well was 9,050 psi. Even at a gas flow rate of 46.5 MMcf and choke size of 32/64 inches, flowing casing pressure was maintained at 7,810 psi."

Subsidiary Triad Hunter LLC operates all of wells. MHR owns more than 200,000 net acres, including 43,000 acres that overlap, within the Marcellus/Utica plays of West Virginia and Ohio.

For other operators working in the region, MHR's well is a huge deal, said Tudor, Pickering, Holt & Co. analysts. "MHR regains claim to the highest dry gas Utica." The well "is in line with reported offsets, but its 8.8 MMcf/d per 1,000-foot lateral dwarves peers' 4.8 average." The "monster" well "certainly adds fuel to the fire for offset operators" that include Antero Resources Corp., Chesapeake Energy Corp., Consol Energy Inc., Eclipse Resources Corp., EQT Corp., Gastar Exploration Inc. and Stone Energy Corp.

Appalachian operators for the past several months have been delineating the southern Utica acreage in West Virginia to push the formation's boundaries. They also are drilling deeper and longer on the lateral, and using completion techniques with more fracks to pull more reserves from the formations (see Shale Daily,Sept. 3,May 16;March 26).

Earlier this month Gastar delivered promising results from its southern Utica acreage, with above-expectation results from the Simms U-5H well in Marshall County, WV. The well, with a 48-hour gross sales rate of 29.4 MMcf/d, was drilled to a total depth of 11,410 feet, a relatively short lateral of 4,447 feet and 25 frack stages (see Shale Daily, Sept. 8). In June Rice Energy Inc. reported initial production results from Bigfoot 9H, its first well in southern Ohio's Belmont County, that were similar to Stewart Winland 1300U's peak results, which flowed at nearly 42 MMcf/d after five days (see Shale Daily, June 2).

Topeka Capital Markets analyst Gabriele Sorbara, who follows MHR, said the highly anticipated 1300U well was at the "top end of our aggressive expectations of 30-50 MMcf/d. This is the best Utica well to date, with a rate of 8.8 MMcf/d per 1,000 foot of lateral. More importantly, this well is a significant step-out pushing the boundaries of the play southeast into West Virginia. While results have not been disclosed on the three Marcellus shale wells off the pad, MHR indicated that they have been fractured and are ready for sales. Within our coverage universe, we believe MHR is the best way to play the dry gas Utica shale in Ohio/West Virginia..."

Sorbara acknowledged the recent decline in stock prices for natural gas-heavy explorers, including MHR, but suggested investors "take advantage of the recent sell-off (triggered by tight liquidity and weak natural gas prices), given the company is sitting on one of the most economic dry gas shale plays in the country and we believe several liquidity events are coming. We reaffirm our buy and expect shares to outperform on the announcement."

Wunderlich Securities Inc.'s Irene Haas said in a note Thursday the West Virginia Department of Environmental Protection "is being overwhelmed by the number of air permitting applications" for wet gas wells like the three for which MHR is awaiting permits. "Currently, there are only 11 engineers for the entire state and the number of air permits issued this year has almost doubled since last year. In addition, the state believes that there is confusion about the process among producers who are on a learning curve, thus slowing down the process."

MHR had "planned ahead and submitted the air permits in May/June of 2014." However, "the permit issuance dates can be difficult to forecast," Haas said. "We checked with other West Virginia producers, who in some cases, begin applying a full year in advance in order to avoid unexpected delays." DEP regulators are concerned with carbon dioxide, volatile organic compounds, hazardous air pollutants, as well as water impoundment.

Air permits also are required in Ohio for Utica-Point Pleasant wet gas wells, but according to Wunderlich sources, "the process in West Virginia is taking much longer." MHR "is expecting eight more wells to come online before year-end, all but two are located in Monroe County, OH, which should have less risk of air permitting related delays."

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