Energy companies explore lower shales for greater yields of gas, liquids
Low natural gas prices that have companies balancing spending cuts with promises of ramped-up production are driving some new development in the Utica and Point Pleasant shale, where deeper wells can yield more gas and liquids.
Range Resources, Consol Energy, and Rice Energy are among Marcellus shale producers reporting positive results from their Utica and Point Pleasant wells, and are expecting to drill more there despite budget cuts of up to 45 percent.
“It's relatively early days in the Utica so I think companies are still trying to figure out the optimal drilling and production and fracturing techniques, but I think you'll continue to see increasing production rates and ultimate recovery rates from these wells,” said Dave Yoxtheimer, a researcher at Penn State University's Marcellus Center for Outreach and Research.
The Utica shale formation in Ohio and Pennsylvania runs between 2,000 and 6,000 feet below the more popular Marcellus. It sits just above Point Pleasant, another layer of shale rich in oil and gas liquids.
Deeper Utica wells typically have higher pressures than Marcellus wells, and can generate two to three times the gas. They're also more expensive, sometimes several million dollars more than a Marcellus well, depending on the depth and the kind of fracking that's required.
“Certainly, even in a low commodity price environment, you can still, in essence, make up the difference by just the sheer volume of gas you're producing,” Yoxtheimer said.
Service companies that frack wells and operate equipment on well pads have lowered their prices in response to producers' smaller budgets, making this is a less-expensive time to tap the Utica.
Discussing a new Greene County well last month, Dan Rice, CEO of Cecil-based Rice Energy, told analysts “the best time to test an expensive deep well like this one is in the deflationary cost service environment like the one we're in.”
Deep Well Services, based in Zelienople, which specializes in tapping deep shale that emits gas at high pressures, said it cut prices for its clients but declined to disclose by how much.
“Every one of our customers has asked for a price reduction,” said President Mark Marmo. The company is active in Ohio's Utica and business is up this year from last, he said.
“We're very busy, our April and May right now we're booked just about at 100 percent,” he said. “There's still a lot of activity that we see that's going to happen in 2015.”
Houston-based Schlumberger, the world's largest oilfield service company, lowered its hydraulic fracturing and completions cost because of pressure from drilling clients squeezed by low commodity prices.
“We began to work actively with customers in all basins to help lower overall drilling and completions costs,” Patrick Schorn, president of operations and integration, said at an energy conference in Vail, Colo., last month.
Companies may be quicker to develop Utica wells in order to hold on to the land they leased before contracts expire, said Yoxtheimer.
“There's still to a certain degree more leasing activity and certainly more of a push to keep parcels held by production so the lease terms don't expire,” he said.
The Utica and Point Pleasant have more opportunities than the Marcellus for a driller to hit oil as well as natural gas liquids and methane. Even at low commodity prices, a producer can recoup costs by selling oil along with other liquids, which can make Utica wells a more viable investment for companies.
“Suddenly the economics start to pan out,” Yoxtheimer said.
Cecil-based Consol Energy said this year it's adding two Utica wells to Marcellus well pads in Westmoreland and Greene counties. It drilled four Utica wells from well pads in Monroe County, Ohio, late last year. The technique called “stacked pay” allows a company to more efficiently extract gas from acres it holds across both shale plays.
“That's going to open up entirely new frontiers for Consol,” CEO Nick DeIuliis said during the company's latest earnings call.
Even when prices are low, the gas glut can be a deterrent. Houston-based Seneca Resources has drilled in the Utica shale in Tioga County, but said depressed prices are hurting the prospects for more.
“Utica development, just as in the Marcellus, is dependent on firm transportation, and pipeline expansions are key to providing access to better prices that support future development,” said Rob Boulware, a spokesman for the company.
Katelyn Ferral is a staff writer for Trib Total Media. She can be reached at 412-380-5627 or email@example.com.