Source: Akron Beacon Journal Online
Chesapeake Energy Corp. remains very satisfied with what it is developing in Ohio’s Utica shale.
“First let me say that I really am encouraged by what I’ve seen in the Utica,” said Doug Lawler, the company’s chief executive officer, on Thursday in a teleconference.
He added: “The Utica is outstanding.”
“We’ve got a lot of wells that we’re getting ready to bring online … I’m very encouraged by it … and I think it’s an exciting area for the company,” he told financial analysts in a report on second quarter 2013 earnings and operations. “We see the Utica to be a very strong asset going forward.”
The company intends to focus on the most-productive areas in the Utica shale for natural gas, petroleum and other liquids including ethane, butane and propane, he said.
More multiwell pads will be developed in Ohio — with multiple wells being drilled from the same pad or drilling area, a move that will increase production with lower drilling costs, he said.
Oklahoma-based Chesapeake, the No. 1 player in Ohio’s Utica shale, said Utica production is expected to increase sharply in late 2013, after this week’s start-up of a natural gas processing plant in Columbiana County and a liquids-separating facility in Harrison County.
That complex, connected by a pipeline, is servicing Chesapeake-drilled wells in eastern Ohio. It is owned and operated by Utica East Ohio, a joint venture owned by Access Midstream, M3 and EV Energy Partners.
Additional pipelines and processing facilities in eastern Ohio are also under construction.
Through June 30, Chesapeake has drilled 321 wells in the Utica shale in eastern Ohio, western Pennsylvania and northern West Virginia.
That includes 106 producing wells, 93 more awaiting pipeline construction and 122 wells in various stages of completion.
Net production from the Utica shale averaged 85 million cubic feet of natural gas equivalents per day during the second quarter.
That is up 48 percent from the first quarter in 2013, the company said.
The average peak daily production rate of the 42 Utica wells that began production in the quarter was about 6.6 million cubic feet of natural gas equivalents per day, the firm said.
The number includes natural gas, oil and other liquids.
The Utica shale may be gassier with less oil than some experts had predicted, but it is still an attractive drilling area, said Steve Dixon, Chesapeake’s chief operating officer.
“I think it’s still early … So more is to come,” he said.
Oil produces more income so it is more attractive to drillers than natural gas that remains low priced.
Chesapeake has had 11 rigs drilling wells in eastern Ohio. That number will be reduced to 10 by Dec. 31, the company said.
Companywide, Chesapeake will be operating 64 rigs, compared to 81 rigs in the first half of the year.
The company also reported that its drilling time for Utica wells has been cut from 26 days a year ago to 18 days, a move that saves significant costs.
Chesapeake said there were no announcements on possible asset sales in Ohio.
The company has indicated that it intends to keep its core area in Carroll County and surroundings areas, but intends to sell off non-core assets in Ohio as part of an effort to reduce the company’s significant debt.
Chesapeake is also shifting internal policy. Previously, its priority was to preserve leased land for drilling. Now it is seeking the most value and that may result in Chesapeake selling off assets and abandoning some leases, Lawler said.
Chesapeake reported a better-than-expected quarterly profit as it produced more crude oil than Wall Street had projected.
Chesapeake, the second largest U.S. producer of natural gas, said oil production in the quarter rose 44 percent to 116,000 barrels per day. Analysts had estimated the company’s oil production at 105,000 barrels per day.
Second-quarter profits fell to $457 million, or 66 cents per share, from $929 million, or $1.29 per share, a year earlier. But adjusting for one-time items, Chesapeake had a profit of 51 cents per share. Analysts had expected 41 cents per share, on average.