Although investors were disappointed by Utica Shale production figures recently released by the Ohio Department of Natural Resources (ODNR), a surge in output should be at hand as infrastructure comes online, according to an analysis from RBN Energy LLC.
In a blog post, analyst Sandy Fielden also predicted that midstream companies operating in the Utica will face a host of new challenges as significant condensate production comes online.
Earlier this month the ODNR reported that 87 wells in the Utica collectively produced 12.84 Bcf of natural gas and more than 635,000 bbl of oil in 2012. Industry experts responded overall in disappointed terms, but many conceded that a clearer picture was beginning to emerge about the play’s sweet spots (see NGI, May 20).
“Actually, the news is not all bad, and we need to look deeper to understand the results and the real opportunities in this play,” Fielden said. “Part of the reason that the ODNR results are misleading stems from the fact that 2012 drilling in the Point Pleasant shale formation in Northeast Ohio — the sweet spot for producers — was targeted in that part of the shale that produces primarily wet gas and not oil.”
Fielden said producers were attracted to the oil window along the western edge of the Utica, but they weren’t as successful there because the oil was locked in low-pressure formations. That, in turn, led the producers to target natural gas liquids (NGL) in what was considered a wetter section of the play.
The ODNR figures were also misleading, said Fielden, because a sizeable number of wells have been drilled but aren’t yet tied in to production because of a lack of infrastructure. He estimated that to date, the ODNR had approved 660 permits for horizontal wells, of which 326 have been drilled but only 97 are producing. The ODNR said it broke the 600 mark for horizontal well approvals in April (see NGI, April 22).
“Producers are holding off bringing wells into production until pipelines, natural gas processing plants and other infrastructure is complete,” Fielden said. “Since these wells are not producing, they do not show up in the ODNR production data and the lack of ‘actual’ production weighs heavy on analysts used to hearing about dramatic increases in production every month in North Dakota. In this environment, no news is viewed as bad news.”
Fielden said Ohio should expect to see a surge in gas and liquids production in 2013 because significant takeaway and processing capacity were coming online in the Marcellus and Utica shales over the next six months, including the Mariner West pipeline by MarkWest Liberty Midstream & Resources LLC and Sunoco Logistics Partners LP, as well as expansions at three MarkWest facilities in West Virginia (see NGI, May 13). Williams also has several projects planned to build more infrastructure in the region (see related story.
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