Experts say ‘wait and see’ on shale situation

WARREN – Matt Kleese, a fourth-generation oil and gas industry businessman, learned from his grandfather years ago that everything comes around twice.

That’s why Kleese, vice president of operations for Warren-based Kleese Development Associates, said Wednesday he isn’t fretting yet over word this week that one of Trumbull County’s most active drillers, Halcon Resources, has pulled its rigs from the county with no immediate plans to return.

Kleese’s company, which operates about a half-dozen injection wells and about 70 production wells, is contracted with Halcon to continue hauling the company’s oilfield waste, known as brine, from its local wells. Halcon has four wells producing in Trumbull and Mahoning counties along with one other drilled and awaiting production in each of the two counties.

“What I am being told by their representatives that I work with in the field is basically they have enough (wells) right now, and they are going to monitor it and keep it as an option. It’s not very uncommon to do that. A lot of companies do that,” Kleese said. “They will drill three or four or five wells, let them produce for a couple years and then go back to that.”

Joseph Stanislaw, an independent senior adviser on energy and sustainability who founded JAS Group LLC, a Boston-based advisory firm, also predicts that, in time, Trumbull County drilling will resume. The nagging question, though: When?

Stanislaw is a Champion native and a 1967 graduate of Champion High School. He is an adviser to the Deloitte Center for Energy Solutions.

Like any business, successful drilling is all about covering costs, he said.

“They are looking for the resources to cover the costs. We have to be in the right place with the resources we have,” Stanislaw said by phone Wednesday from his Boston office. “It’s going to come back. When? I couldn’t tell you the exact point in time. They are looking for higher potential for quick recovery.” And while drillers like Halcon are hydraulically fracturing in other shale plays that might offer higher production levels at a lower cost, they will be perfecting technology that they then may be able to apply to areas where the shale may be more difficult to access, he said. Industry experts have said the northern part of the Utica Shale is thinner and more difficult to access. “In the short term it’s bad, but they are going to come back,” Stanislaw said.

He noted that the option also exists for the mineral rights to be sold to a new driller, and even that would not necessarily be bad for the land owner.

That’s because smaller drillers may have less overhead and may be better able to absorb the expenses of drilling in a more challenging location. All in all, unconventional drilling into a shale play like the Utica allows drillers to move quickly.

“They can go to the next hot spot quickly. They can move quickly. They are very nimble. That’s what’s different about the shale industry. This is a very different game. You can’t do it overnight, but you can do it pretty quick,” Stanislaw said.

In the meantime, local companies related to the drilling industry say Halcon’s decision won’t affect their business plan.

Andrew Blocksom, president of Patriot Water Treatment in Warren, which treats brine water as part of the disposal process, said his business is unaffected by the decision, largely because its operations cover a much larger, three-state area. “It’s sad, but we will always evolve and make things work,” Blocksom said Wednesday. “No one knows what else is down the road or what technology is around the corner.”

Sarah Barczyk, manager, community relations and stakeholder outreach for the Columbia Pipeline Group, an arm of NiSource, which operates a natural gas processing plant in Springfield, Mahoning County, likewise said her company is not affected by natural gas production in Trumbull County.

“We are confident the Utica will yield the results that we had expected,” she said Wednesday, noting the company’s operations focus on Mahoning and Columbiana counties, along with Lawrence and Mercer counties in Pennsylvania. She said she is not aware of any commercial negotiations with Trumbull County producers to utilize the NiSource gathering or processing system.

Kleese also said his business would not suffer from the drilling slowdown. “People that are in this industry, we are going to be fine. The same thing happened in the ’70s and ’80s. Everything always comes around twice. My grandfather told me that years ago,” Kleese said. “I think things will work out in the end.”