“Energy glut, low commodity prices hitting Ohio’s Utica Shale; cutbacks are growing in eastern Ohio”

A new year often brings on new, positive outlooks and new beginnings for most people. This is not the case for the energy industry and energy companies. Many energy companies are happy that 2015 has ended, which was the worst year for the energy industry in recent history. However, the outlook for 2016 is looking rather bleak. That is the case for most all of the large operators in eastern Ohio. Eastern Ohio and the Utica shale has been a focus for natural gas production over the past 3 or 4 years, however with the current state of the oil and gas industry, the large natural gas operators in Ohio are starting 2016 in “survival mode” as Shaw Bennett, executive Vice President of the Ohio Oil and Gas Association put it. Factors including, low commodity prices paired with warm winter temperatures, has created the “perfect storm” of circumstances for Ohio area operators. A lot of these operators/drillers are facing significant turmoil and are starting 2016 by voluntarily canceling, scaling back or postponing drilling in eastern Ohio. Other operators are trying to sell of non-core assets or seeking out a financial partner to share the costs. Some of these large operators simply do not have the funds and have been forced to file for bankruptcy, such as Magnum Hunter Resources Corp, an active Utica Driller. According to Bennett, improvements are far off and it is unlikely the situations will improve in the first nine months of 2016 and it may be 2017 before any of these conditions start to see improvements. “We’re looking at more of the same from late 2015. Ohio is going to see less wells drilled and less wells producing, until prices rise,” Bennett added. From July through September, Ohio had about 25 horizontal wells being drilled, compared to 170 in 2014. As Bennett put it, “Every company is pulling back, and that hurts.” In just 12 months, the number of drilling rigs in Ohio has decreased by roughly 75%. Many Ohio mineral owners try to continue to stay optimistic, in hopes that prices will improve and they may start to see their lands get drilled and start producing royalty checks for them and their families in 2016. Unfortunately, their optimism may prove to be based on false hope. While mineral owners are eager that a new year will bring new hope, their 2016 will likely be very similar to their 2015.

Source: “Energy glut, low commodity prices hitting Ohio’s Utica Shale; cutbacks are growing in eastern Ohio” by Bob Downing, Beacon Journal staff writer.