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Friday, August 28, 2015

Breaking Down the 1st Quarter 2015 Utica Shale Production Data

The Ohio Department of Natural Resources has now released the production data from the Utica shale for the second quarter of 2015.  As always, we are going to give you a look at how the numbers compare to past quarters, past years, and how they break down among the various drillers who are active in Ohio and the counties where they are drilling.  We also have the top 10 oil and gas wells detailed below.  So let's dive in to the numbers.


QUARTER# OF WELLS/# WITH DATAOILGASDAYSOIL/DAYOIL/WELLGAS/DAYGAS/WELL
2014-1476/4181,950,97967,333,94528,019704,6672,403161,086
2014-2562/5042,467,28388,673,74137,922654,8952,338175,940
2014-3717/6743,013,667132,017,38650,858594,4712,596195,871
2014-4828/7793,558,836164,815,00862,527574,5682,636211,573
2015-1926/8774,401,687183,585,25569,745635,0192,632209,333
2015-21020/9785,578,255221,860,16980,724695,7042,748226,851

One notable thing right off of the bat is that the report shows that there are now over 1,000 wells listing production data for the first time.  The most recent weekly permitting report showed 998 producing wells.

As the above table shows, production continued to increase, and so did rates of production.  After seeing oil production increase by nearly 24% from the 4th quarter of 2014 to the 1st quarter of 2015, it increased by 27% in the 2nd quarter.  Natural gas production went from increasing just 11% in the previous quarter to a 21% increase in the 2nd quarter of 2015.


YEAROILGAS
201146,3262,561,524
2012635,87412,831,292
20133,677,734100,119,054
201410,990,765452,840,080
2015 YTD10,010,559405,445,420
TOTALS25,361,258973,797,370

The numbers above show how rapidly the Utica shale has grown as well.  There has been nearly as much production in the first two quarters of this year as there was in all of 2014.  It's also noteworthy that it the Utica shale has passed 25 million barrels of oil produced and is nearly over 1 billion mcf of natural gas produced.

Here are the top 10 oil producing wells from the second quarter of 2015:


OWNER NAMECOUNTYWELL NAMEWELL NUMBEROIL
AMERICAN ENERGY UTICA LLCGUERNSEYCASTON LND GR4H56,150
AMERICAN ENERGY UTICA LLCGUERNSEYCASTON LND GR2H54,168
AMERICAN ENERGY UTICA LLCGUERNSEYLAWSON LND GR2H50,657
AMERICAN ENERGY UTICA LLCGUERNSEYCASTON LND GR8H49,634
AMERICAN ENERGY UTICA LLCGUERNSEYLAKE WEST LND GR2H48,856
CHESAPEAKE EXPLORATION LLCCARROLLBAUER 14-14-68H47,938
AMERICAN ENERGY UTICA LLCGUERNSEYLAWSON LND GR6H47,762
AMERICAN ENERGY UTICA LLCGUERNSEYCASTON LAND GR6H46,853
ANTERO RESOURCES CORPORATIONNOBLENEUHART WEST UNIT1H46,815
GULFPORT ENERGY CORPORATIONGUERNSEYMILLER3-25H46,557

Just as in the 1st quarter of 2015, the top 10 oil wells are dominated by American Energy Utica and by Guernsey County, although not quite to the same extent.  Guernsey had 8 of the top 10 wells this quarter, compared to 9 of 10 in the 1st quarter.  Similarly, American Energy Utica went from having 8 of the top 10 oil wells in quarter one to 7 of the top 10 in quarter two.

And now, the top 10 gas wells from the 2nd quarter of 2015:


OWNER NAMECOUNTYWELL NAMEWELL NUMBERGAS
RICE DRILLING D LLCBELMONTGOLD DIGGER3H1,547,649
RICE DRILLING D LLCBELMONTGOLD DIGGER1H1,545,818
RICE DRILLING D LLCBELMONTBLUE THUNDER10H1,521,579
RICE DRILLING D LLCBELMONTBLUE THUNDER12H1,519,721
RICE DRILLING D LLCBELMONTBIGFOOT9H1,478,426
RICE DRILLING D LLCBELMONTSON-UVA DIGGER1H1,325,065
RICE DRILLING D LLCBELMONTSON-UVA DIGGER3H1,323,715
RICE DRILLING D LLCBELMONTSON-UVA DIGGER5H-A1,264,873
GULFPORT ENERGY CORPORATIONBELMONTLORNA1C1,118,102
GULFPORT ENERGY CORPORATIONBELMONTPERKINS4-4H1,107,845

In the 1st quarter of 2015, Antero Resources had 6 of the top 10 gas producing wells.  Monroe County was also the top spot for gas production, with 6 of the top 10 wells in that quarter.  But in the 2nd quarter it was all about Belmont County, and dominated by Rice Drilling, which went from having the top 3 gas producing wells of quarter one to having the top 8 of quarter two.

The following table shows the production figures broken down by county.  The two graphs give a visual at how the rates of oil and gas production compare among the 17 counties with wells reporting production.


COUNTY# OF WELLS TOTAL# OF WELLS PRODUCINGOILGASBRINEDAYOIL/WELLOIL/DAYGAS/WELLGAS/DAY
Belmont10710365,37363,620,992502,6477,9766358617,6807,977
Carroll3703661,452,81758,884,744816,29032,1963,96945160,8871,829
Columbiana615156,7339,804,76783,0304,6341,11212192,2502,116
Coshocton112,63419,3971,369912,6342919,397213
Guernsey82801,762,05612,277,256322,2427,11522,026248153,4661,726
Harrison1731721,404,08730,793,879662,43713,2058,163106179,0342,332
Jefferson1711482,049,84112,08879740186,3492,572
Mahoning13116,3111,146,75025,2408365748104,2501,372
Monroe878165,34523,600,707301,6435,26080712291,3674,487
Morgan2212,681102,8085,9991786,3417151,404578
Muskingum1161917,36179591619717,361191
Noble8180726,62718,725,817335,3736,8619,083106234,0732,729
Portage2111816,58216590118116,582184
Stark221,63252,836638182816926,418290
Trumbull772,731177,8783,635544390525,411327
Tuscarawas649,55268,4593592632,3883617,115260
Washington858,891500,09526,3984051,77822100,019281



Next up is a table showing production data broken down by operator, and two graphs showing how daily rates of oil and gas production compare among the 23 active operators in the Utica shale during quarter two of 2015.


OPERATORTOTAL # OF WELLS# OF PRODUCING WELLSOILGASBRINEDAYSOIL/WELLOIL/DAYGAS/WELLGAS/DAY
American Energy Utica LLC5144679,6929,048,495111,5553,06815,447222205,6482,949
Antero Resources Corporation7575523,64823,385,762312,7766,3736,98282311,8103,670
Artex Oil Company653,513100,2082,033455703820,042220
Atlas Noble LLC12817,846696,8988,8227122,2312587,112979
Carrizo (Utica) LLC4382,483117,76719,88924027,49434439,256491
Chesapeake Appalachia LLC2000000000
Chesapeake Exploration LLC5064912,180,04883,206,5081,288,34342,0014,44052169,4631,981
Chevron Appalachia LLC227,02651,0321,3361823,5133925,516280
CNX Gas Company LLC3028214,0536,089,087106,6892,3977,64589217,4672,540
Eclipse Resources I LP4444754,25510,143,531190,3243,61617,142209230,5352,805
EM Energy Ohio LLC115,443265,82618,810505,443109265,8265,317
Enervest Operating L556,05968,6481,7204551,2121313,730151
Gulfport Energy Corporation137137626,62553,161,892515,41610,7544,57458388,0434,943
Halcon Operating Company Inc883,685202,7863,969601461625,348337
Hess Ohio Developments LLC3332103,52910,736,460161,0432,2843,23545335,5144,701
Hilcorp Energy Company8801,166,87524,64669500145,8591,679
NGO Development Corp.112,63419,3971,369912,6342919,397213
PDC Energy Inc1919144,926927,24047,1601,7167,6288448,802540
R E Gas Development LLC3131162,1854,366,05278,7382,8215,23257140,8401,548
Rice Drilling D LLC1616013,233,740117,01886700827,10915,264
Statoil USA Onshore Prop Inc9843,586886,54340,0495305,44882110,8181,673
Triad Hunter LLC1269,6562,521,64321,4234921,60920420,2745,125
XTO Energy Inc.867,3631,463,77927,2203241,22723243,9634,518




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ODNR Releases 2nd Quarter 2015 Utica Shale Production Figures

A press release from the Ohio Department of Natural Resources:

During the second quarter of 2015, Ohio’s horizontal shale wells produced 5,578,255 barrels of oil (bbls) and 221,860,169 Mcf (221 billion cubic feet) of natural gas, according to figures released today by the Ohio Department of Natural Resources (ODNR). These numbers break all previous production reporting records for the last 100 years. Production continues to rise as oil increased by more than 3.1 million barrels and gas by more than 133 billion cubic feet compared to the second quarter of 2014.

Totals (1st & 2nd QTR)   2014        2015      Increase year to year
Barrels of oil:            4,423,381     10,010,559             126%

Mcf of gas:            156,132,032     405,445,420           160%

 
These figures represent a 126 percent increase in oil production compared to the first half of last year while natural gas production rose 160 percent. For further comparison, only 11 million barrels of oil and 450 billion cubic feet of gas were produced in all of 2014.

The new report lists 1,020 wells, 978 of which reported production, an increase of 94 percent from the 504 wells reporting production halfway through 2014. Forty-two wells reported no production as they are waiting on pipeline infrastructure. Of the 978 wells reporting production results:

Totals (1st & 2nd QTR)   2014        2015     Increase year to year
Avg. oil produced:    4,904 bbls       5,704 bbls             16%
Avg. gas produced:  176,116 Mcf    226,851 Mcf          28%
Avg. days in production:  75               83                     10%
 
All horizontal production reports can be accessed at: oilandgas.ohiodnr.gov/production.

Ohio law does not require the separate reporting of Natural Gas Liquids (NGL). Gas reporting totals listed on the report include NGLs.

We will share some more details and breakdowns of the 2nd quarter numbers later today.

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Thursday, August 27, 2015

Board of Elections Votes Not to Send Youngstown Anti-Drilling Charter to Ballot for a Fifth Time

From the Youngstown Vindicator:
With the Mahoning County Board of Elections unanimously voting to keep a Youngstown anti-fracking charter amendment proposal off the Nov. 3 ballot, backers of the initiative are unsure of their next step. 
“There could be a challenge, but I don’t know yet,” said Susie Beiersdorfer, a member of FrackFree Mahoning Valley, the group that supported this proposal and four other similar anti-fracking initiatives. “This is uncharted territory.” 
During a Wednesday special meeting, the board voted 4-0 not to certify the proposal to the ballot. 
Board members said they largely based their decision on a Feb. 17 decision by the Ohio Supreme Court. That decision says the state constitution’s home-rule amendment doesn’t grant local governments the power to regulate oil and gas operations in their limits, and that Ohio law gives the state government – specifically the Department of Natural Resources – the exclusive authority to regulate oil and gas wells.
Click here to read more.

FrackFree Mahoning Valley has been able to get the charter onto ballots four times before.  Each time it has been defeated by voters, but each time the group has vowed to keep coming back for as long as it takes.  It would seem to be a virtual guarantee that they will challenge this decision and fight to get the charter put to a vote again.

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08/27/15 Links of the Day: Oil Prices Plunging, Drillers Penalized for Methane Migration, Natural Gas Under Attack, and More

NGI:  Appalachian Producers Considering More Pennsylvania Utica as Budget Season Nears   -   "Following last year's rush to test the boundaries of the Utica Shale outside Ohio, some producers are reevaluating their prospects in the Appalachian Basin to determine how best to spend capital after consistent success from the formation in West Virginia and Southwest Pennsylvania..."

Gas & Oil:  The Landman Legacy   -   "Bryan Hanks, president and owner of Beta Land Services, knows a thing or two about building relationships with clients, he has been a certified professional landman for 34 years. Hanks was introduced at the recent Buckeye STEPS (Service, Transmission, Exploration, Production Safety Network) meeting at Zane State College by Joe Greco, president of..."

Investors.com:  Dems Change Tune on Exporting Crude as Oil Plunges   -   "With oil futures falling below $40 per barrel, it's getting harder to find reasons to support the long-standing ban on exporting U.S. crude, and top Democrats may be warming up to killing it. Republicans have long been for lifting the ban, but most Democrats want to keep..."

Seeking Alpha:  Oil Sands vs. Shale - Who Gets Hit First?   -   "In an environment of oversupply where nobody will cut production, it is up to the market to ultimately rebalance supply through pricing. Such is the current situation with crude oil. Of some 90 million barrels of global production, most experts estimate an oversupply of 2 million barrels per day. While that might not seem like so much, the amount of crude oil storage space in the world is ..."

Forbes:  Market Rout Deepens as Deflation Jumps from Oil to Everything Else   -   "In the early stages of a commodities downturn, lower prices help spur overall economic growth. Cheap inputs make manufactured goods cheaper, profits fatter and consumer costs lower. Cheap oil encourages everyone to drive more. Thus, until recently, global stock markets shrugged off the commodities slump and leapt..."

Forbes:  Oil Price Slump:  Nearly $250B of Industry Cost Cuts on Cards   -   "As China’s so-called ‘Black Monday’ knocked the stuffing out of global equities and commodities market, yet another classic reactionary sentiment driven selloff in the oil futures space was glaringly obvious. By 15:47 ET, Brent October futures contract was down 6.27% to $42.61 a barrel, while the WTI was down 5.41% or $2.19 to..."

Pennsylvania DEP:  DEP Reaches Penalty Agreements with Three Natural Gas Exploration Companies in the Northern Tier   -   "The Department of Environmental Protection (DEP) today announced it has finalized penalty agreements with three natural gas exploration companies for methane gas migration violations that impacted private drinking water wells in Bradford, Lycoming, and Tioga counties. “These were complex and lengthy investigations that took a considerable amount of time to resolve, but the department was..."

E&E Legal:  E&E Legal Releases Report Exposing Coordination Between Governors, the Obama White House and the Tom Steyer-“Founded and Funded” Network of Advocacy Groups to Advance the “Climate” Agenda   -   "Today, the Energy & Environment Legal Institute (E&E Legal), a 501 (c) (3) watchdog group, released an investigative report, Private Interests & Public Office: Coordination Between Governors, the Obama White House and the Tom Steyer-“Founded and Funded” Network of Advocacy Groups to Advance the “Climate” Agenda (and an appendix of source documents), revealing a vast, coordinated, three-track effort by public officials and private interests to promote EPA’s expansive, overreaching and economically devastating greenhouse gas rules, specifically the..."

GuruFocus.com:  Priceline, Google Among Cooperman's New Holdings   -   "Cooperman also bought 1,759,300 shares of Gulfport Energy at an average price of $45.84 per share. Gulfport is an oil and natural gas exploration and production company with properties in the Utica Shale and along the Louisiana Gulf Coast. The stock dropped 41% over the past year, closing at $33.76 on Aug. 20, with a current P/E of 24.99. EPS in 2014 was $2.88, up from..."

Wall Street Journal:  Political Target: Natural Gas   -   "America’s natural gas boom has been a rare economic bright spot, and even President Obama likes to take credit for it. But as his term winds down, the Administration is waging a war of regulatory attrition to raise drilling costs and reduce its..."

FTS International:  FTS International Provides Well Stimulation for EQT’s Record-Setting Utica Well   -   "FTS International (FTSI) is proud to be the stimulation provider for EQT Corporation’s record-setting Utica well in southwestern Pennsylvania. EQT announced that its first deep Utica well, for which FTSI provided hydraulic fracturing and wireline services, achieved an average 24-hour test rate of 72.9 MMcf per day into sales during the initial 24-hour flow back test. This initial production (IP) rate equates to..."

The Intelligencer/Wheeling News-Register:  AEP Profiting from Shale Expansions   -   "Even while the electricity generator addressed new Environmental Protection Agency regulations on CO2 and mercury emissions, American Electric Power earned $40 million more from April 1 to June 30 than it did during the same stretch in 2014. Now, the Columbus, Ohio-based firm believes..."

Vorys:  Supreme Court of Kentucky Adopts 'At The Well' Rule For Post-Production Costs; Producers Solely Responsible for Severance Tax Payments   -   "In companion decisions released on August 20, 2015, the Supreme Court of Kentucky confirmed that Kentucky follows the “at the well” rule with respect to post-production costs, but held that the payment of severance taxes must be borne solely by the producer. In Baker v. Magnum Hunter Prod., Inc., the Court affirmed the lower court’s decision in favor of..."

U.S. Chamber of Commerce:  Ozone Standard Would Give a Black Eye to the Buckeye State   -   "About the only thing worse for Ohio than EPA imposing a stricter ozone standard would be a Michigan win over Ohio State. According to the Center for Regulatory Solutions (CRS), 34 counties in Ohio will not meet federal ozone air quality standards if EPA lowers the standard from 75 parts per billion (ppb) set in 2008 to somewhere between..."

Fuel Fix:  Shock of Layoffs Still Stings Oil and Gas Workers   -   "On a recent weekday morning, Maisam Otoum and his daughter arrived at a Houston park amid a fever pitch of humming cicadas to find they had the playground all to themselves. “C’mon daddy,” 3-year-old Lamar said, grabbing his hand and shepherding him from the empty swings to the monkey bars. Since losing his job in March crunching seismic data for a local..."

Reuters:  Schlumberger to Buy Oilfield Gear Maker Cameron in $14.8 Billion Deal   -   "Schlumberger Ltd (SLB.N) will buy equipment maker Cameron International Corp (CAM.N) for $14.8 billion, as the world's top oilfield services firm scrambles to offer a broader range of products at lower prices to oil companies..."

Seeking Alpha:  Natural Gas is About to Recover, a Look at the Fundamentals   -   "Electric plants are switching from coal to cheap natural gas and production growth rates are slowing. It was the same in 2012, when natural gas prices plunged below $2/mmBtu. This time the price was stopped at $2.5/mmBtu and it might be a more gradually sloping..."

Reuters:  Oil Falls Towards 6 1/2 Year Lows on Gasoline Build   -   "Oil fell on Wednesday after U.S. gasoline stocks rose more than expected, compounding negative sentiment after worldwide falls in equities that helped drag fuel prices to 6-1/2-year lows. U.S. crude stocks fell sharply..."

Environmental Integrity Project:  Groups File Notice of Intent to Sue EPA Over Dangerous Drilling and Fracking Waste   -  " A coalition of environmental organizations filed a legal notice with the U.S. Environmental Protection Agency today demanding regulations to stop oil and gas companies from dumping drilling and fracking waste in ways that threaten public health and the environment. The groups filing today’s notice letter are the..."


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Wednesday, August 26, 2015

Appeals Court Rules That Ohio Landowners Can't Cancel Lease Due to Nonpayment of Royalties

Tuscarawas County landowners Myron and Nikki Armstrong probably feel like it just makes sense that the oil and gas lease on their property should no longer remain in place.

After all, after purchasing their property in 2003 with an existing lease in place, their land was pooled into a drilling unit and a well was drilled.  Despite that well being drilled, the family has not received a single royalty check.  One would imagine, perhaps, that failure to pay royalties on a well would be very valid grounds to sue for cancellation of a lease.

Two Ohio courts have now ruled that it is not.

First, Armstrongs were defeated in Tuscarawas County Court, and now the Fifth Appellate District has ruled on appeal that because the lease does not specifically state that the lease can be cancelled if the company does not pay the royalties that the lease says it will pay, the lease is still valid.

What does this potentially mean for Ohio landowners?  Jim Willis of Marcellus Drilling News raises the question: “Will this decision embolden Ohio drillers to simply stop paying royalties since the courts won’t cancel leases if they do?”

That seems unlikely, but it still leaves the question of what a landowner should do if they are not being paid royalties as specified in their lease.

View the opinion from the court of appeals below.




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Marathon's Deal with MarkWest Gets Governmental Green Light

A press release from Marathon subsidiary MPLX:

FINDLAY, Ohio, and DENVER, Aug. 25, 2015 - MPLX LP (NYSE: MPLX) and MarkWest Energy Partners, L.P. (NYSE: MWE) today announced that they have received notification of early termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, in connection with the proposed merger whereby MarkWest would become a wholly-owned subsidiary of MPLX, thereby satisfying one of the conditions to closing of the transaction. The transaction remains subject to approval by MarkWest unitholders and to other customary closing conditions, and is expected to close in the fourth quarter of 2015.
# # #
About MPLX LPMPLX is a fee-based, growth-oriented master limited partnership formed in 2012 by Marathon Petroleum Corporation to own, operate, develop and acquire pipelines and other midstream assets related to the transportation and storage of crude oil, refined products and other hydrocarbon-based products. Headquartered in Findlay, Ohio, MPLX's assets consist of a 99.5 percent equity interest in a network of common carrier crude oil and products pipeline assets located in the Midwest and Gulf Coast regions of the United States and a 100 percent interest in a butane storage cavern located in West Virginia, with approximately 1 million barrels of natural gas liquids storage capacity.

About MarkWest Energy PartnersMarkWest Energy Partners, L.P. is a master limited partnership that owns and operates midstream service businesses. MarkWest has a leading presence in many natural gas resource plays including the Marcellus Shale, Utica Shale, Huron/Berea Shale, Haynesville Shale, Woodford Shale and Granite Wash formation.

Ascent Resources, Formerly Part of American Energy Partners, Receives Lowest Credit Rating from Moody's

For Aubrey McClendon and his current company, the bad news keeps on coming.  Ascent Resources, which recently broke off from parent company American Energy Partners, does not have a very positive financial outlook, according to Moody's Investors Service.

From Moody's:
Moody's Investors Service, ("Moody's") downgraded Ascent Resources -- Marcellus, LLC's (ARM) Corporate Family Rating (CFR) to Caa2 from B2, Probability of Default Rating (PDR) to Caa2-PD from B2-PD, Senior Secured First Lien rating to Caa1 from Ba3 and Senior Secured Second Lien rating to Caa3 from Caa1. Moody's also lowered the Speculative Grade Liquidity Rating to SGL-4 from SGL-3 to underscore weak liquidity. The rating outlook is negative. 
"The downgrade reflects our view that ARM has an unsustainable capital structure and that it will struggle with weak liquidity and limited cash flow generation in a low commodity price environment," said John Thieroff, Moody's VP-Senior Analyst. "While we anticipate the company will be able to fully access its currently restricted cash balances through an equity infusion by the company's sponsors, the absence of additional external sources of liquidity and the expectation of persistent low oil and natural gas prices call into question ARM's ability to cover its interest expense or fund capital spending in the second half of 2016." 
..Downgraded:.... Corporate Family Rating, Downgraded to Caa2 from B2.... Probability of Default Rating, Downgraded to Caa2-PD from B2-PD.... Senior Secured First Lien Bank Credit Facility, Downgraded to Caa1(LGD3) from Ba3(LGD2).... Senior Secured Second Lien Bank Credit Facility, Downgraded to Caa3(LGD5) from Caa1(LGD5).... Speculative Grade Liquidity Rating, Lowered to SGL-4 from SGL-3. Outlook changed to Negative from Stable
Click here to read more. 

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12 New Permits Issued Last Week; Number of Producing Wells Climbs

The latest weekly permitting update from the Ohio Department of Natural Resources has been released.  It was one of the more active permitting weeks seen recently, and some of the other figures on the report saw significant increases as well.

12 new permits were issued during the week ending August 22.  Harrison and Belmont counties were the most active spots, each seeing four new permits.  All four in Harrison County went to Chesapeake Exploration, while the four in Belmont were all issued to Rice Drilling.  Noble County saw three new permits, all issued to Antero Resources.  The lone remaining permit was issued to American Petroleum Partners for a well in Jefferson County.

The relatively active week of new permitting pushes the cumulative total of permits issued to 1,997, making it somewhat likely that the Utica shale in Ohio will cross the 2,000 permit mark on the next report.  The number of wells drilled also increased by 16 to reach a new total of 1,586.  And a week after climbing by 34, the number of producing wells saw a sizable increase again.  It rose by 29 to reach a new total of 998.  The Utica rig count fell, however, from 25 to 21.

View the whole report below.


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