Drilling efficiency in the Utica Shale has improved since the third quarter of 2013, according to a recent report by RBC Capital Markets. The play looks “very economic” at $4 per thousand cubic feet (Mcf) of gas, RBC said, adding that the area's oil production is declining.
The report focused on operators’ results in the shale. RBC analyzed 500 wells using data from the Ohio Department of Natural Resources, which tracked the wells and focused partly on 94 that had not produced prior to third-quarter 2013. RBC examined data sets that included operators with the best-producing new wells since third-quarter 2013, and rig counts.
The Utica wells have improved their performance since that time period, RBC said, noting that the production data for roughly the first 90 days increased on average by 7% on a quarterly basis. “Operators are getting up the learning curve and focusing drilling efforts in the better parts of the play.”
The “better parts” are gassier, and in this year’s first quarter, “oil production decreased by an average of 2% per quarter since the third quarter of 2013, suggesting operators are shifting their focus to gassier parts of the play.” The "gassier areas" of Belmont and Monroe counties, Ohio, have seen “much” of this recent growth, the report noted.
In the second quarter, State College, Pa.-based Eclipse Resources Corp. (NYSE: ECR) produced 2,019 barrels of oil equivalent per day (boe/d), none of it oil. The second-highest producer was Denver-based Antero Resources Corp. (NYSE: AR), with 1,688 boe/d, 27% oil. The lowest producer was Houston’s Magnum Hunter Resources Corp. (NYSE: MHR), with 448 boe/d, 30% oil.
Antero Resources wells "looked to be by far the best overall."
Out of all its operations, Antero’s Utica operations have been its best since third-quarter 2013, RBC said, noting that it had 10 of the top 20 oil-producing wells. Its 1,688 boe/d came from seven new wells, the report added.
Other companies that are the most active by rig count are Oklahoma City-based Chesapeake Energy Corp. (NYSE: CHK) and Gulfport Energy Corp. (NASDAQ: GPOR). Gulfport produced 1,128 boe/d, 18% of it oil, from 47 wells. RBC said the area’s rig count could rise by 50% by year-end 2015, based on its “steady” gas outlook—between $4 and $4.50/Mcf, “solid” NGL prices and the need to make acreage HBP.
Oil production in the area is declining.
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