Utica Shale Sees Sharp Jump In Natural Gas Output

(July 9, 2019) — Gas producers active in the Utica Shale play, both big players and those with smaller operations, have seen sharp spikes in output over the past several years, reports S&P Global Platts, citing speakers at June’s Hart Energy DUG East conference in Pittsburgh. Ascent Resources, (Oklahoma City), one of the dominant participants in the Utica, has seen a dramatic ramp-up in production since it began drilling in earnest about three years ago, Ascent CEO Jeff Fisher said.

The producer saw its production increase from 377 MMcfd in 2016 to about 1.36 Bcfd at year-end 2018. Gas comprises about 90% of the operators’ output, Fisher said on the sidelines of the conference. Going forward, he said he expects production to continue rising, while the output of oil and natural gas liquids will increase as a percentage of total production.

“If you look at our drilling activity, we are about two-thirds active on the dry gas, and about a third in the NGL and oil windows in terms of our capital investment,” he said. The commodity diversity strategy will help the company lessen its exposure to the price dynamics of a single hydrocarbon, Fisher added. “We’ve seen oil prices go up and down, and NGLs the same thing and the same with gas. We like the diversity because we know there’s going to be differences in those markets, but we also like to take a balanced approach.”

The Ascent Resources CEO commented that that the enterprise expects to continue to benefit from the additional pipeline capacity that has been built to move gas out of the Appalachian Basin over the past several years. “We identified early on that the basin was going to need additional capacity.” Ascent is an anchor shipper on the Rockies Express and Rover pipelines, “and certainly that capacity enabled our growth. Without it we would have had to moderate our activity.”

Those pipelines, along with other recently built projects such as the Nexus Pipeline, “have served the basin very well,” he said. As a result, Ascent not only has ample capacity to ship gas out of the basin now, but it has also seen Appalachian gas prices strengthen relative to Henry Hub prices. “That has actually improved not only the capacity, but the economics of our drilling as well,” Fisher said.

Another Utica producer, albeit one with a much smaller footprint in the play, has also seen marked production gains over a short time period. Equinor ASA (Stavanger, Norway), formerly Statoil ASA, increased its production fivefold to about 300 MMcfd between 2016 and 2018, Nicole Baird, Equinor asset manager, told S&P Global Platts.

“Within our operated position in Ohio we really started picking up drilling activity in 2016, and a lot of our 2016 wells drilled we completed in 2017,” Baird said. She added that, on average, her company is drilling from nine to 14 wells annually and turning about the same number into production assets each year.

Like many of its peers, Equinor is experimenting with drilling extended-length laterals as a way to increase output efficiencies. “In the Utica, most of our laterals are over 10,000 feet and we’ve got quite a few that are 14,000 to 16,000 feet. So we’re seeing the benefits of the longer laterals, allowing us to retain a production profile for a longer period of time,” Baird said.”

(SOURCE: The Weekly Propane Newsletter, July 8, 2019)