Utica Shale Play remains part of investor focus

SALEM – While Columbiana County failed to get a specific mention during Chesapeake Energy’s second-quarter earnings call on Thursday, the Utica Shale Play was the focus of several investor questions and remarks by company officials.

The Utica Shale Play is in eastern Ohio, Pennsylvania and West Virginia and during past Chesapeake earnings calls, former CEO Aubrey McClendon mentioned Columbiana and Carroll counties by name when talk turned to the play.

Chesapeake owns the drilling rights to the majority of Utica Shale oil and gas leases in Columbiana and Carroll counties, and to a large region in eastern Ohio.

It currently has 79 of the 81 permitted, drilled or producing wells in Columbiana County. Hillcorp Energy and SWEPI (Shell LP) have rights to the other two.

The Hillcorp well (Salem-Grubbs) is in Salem Township and was recently drilled while the SWEPI (Dalton) is in Unity Township and shown on Ohio Department of Natural Resources records as being permitted.

There is one other well in Unity Township, the Fowler well which has been drilled. Salem Township has seven wells listed on the ODNR’s cumulative permit activity weekly update as of the week ending July 27.

On the Seeking Alpha website which transcribed Chesapeake Energy’s second quarter call, Chief Operating Officer Steve Dixon responded to a question about the Utica Shale Play saying that is “gassier” than expected but was “performing well.”

With midstream systems coming on line, he said the company is anxious for more production while noting delays in third-party gathering, compression and processing were anticipated. But overall it was still to early get an accurate fix on what is there but he noted by year’s end it will have a better idea.

There is a lot of drilling left before reaching what the industry calls “held by production” (HBP), or producing in paying quantities, he said.

Chesapeake said Thursday its net production from the Utica Shale Play rose in the second quarter and averaged approximately 85 million cubic feet of natural gas equivalent (mmcfe) per day for an increase of 48 percent over the first quarter.

With a total of 321 wells in the Utica, including 106 producing, Chesapeake has 93 additional wells waiting for midstream hookups and 122 wells in the works.

There are 42 wells that started production in the second quarter with an average peak daily production rate of approximately 6.6 mmcfe per day. It has 11 rigs in the Utica Shale Play but plans to reduce that to 10 rigs by year end. Average spud-to-spud cycle time during for the quarter was 18 days, down from 26 days a year ago.

A JP Morgan analyst asked new Chief Executive Officer Doug Lawler during the earning’s call to identify Chesapeake’s top three plays and the likelihood of selling them off.

Lawler said while they may consider selling assets “across the whole portfolio” they were looking for the best value and, “… I just would prefer to stay away from saying any one particular asset is untouchable or that we wouldn’t focus on. But I will also comment that I’m really excited about our strong portfolio. I think the Eagle Ford assets, the Marcellus assets, Haynesville although it’s hurt a little bit by gas prices. The position there is outstanding. The Utica is outstanding, and we have several other emerging areas that are in the evaluation process that we’ll be looking at.”