Ohio-Utica Operators Continue to Cut Production

The oil and gas industry has started 2016 just like 2015 ended and many Ohio heavy operators are looking for ways to continue to survive and fight the dismal fate that some operators have already had to endure. Gulfport was one of the first Ohio operators to say that they would be scaling back going into 2016 when they announced last November that they would be cutting their Ohio-Utica rig count in half going into 2016. Now, two more large Ohio area operators are following suit with Gulfport. Eclipse Resources and Hess Corporation have announced their plans for future production for their respective companies. According to an article in the PLS Eastern Scout, Eclipse says it will only drill and complete one extended-reach well during the first quarter of 2016. The company plans to dial back operated production to try to maintain ~200 MMcfe/d output which is an attempt to maintain it’s 2015 average. Even if Eclipse is able to main this production it would still be a 15% drop from it’s 2015 4th quarter output. This new approach by Eclipse will remain until commodity prices improve significantly.

A week after Eclipse Resource announced their company’s approach for 2016, their E&P peer, Hess Corporation announced they would also be taking a similar approach. Hess Corp’s CEO John Hess released a statement that shows they believe that they have positioned their company in a strategic way to help navigate the current low commodity prices, they are more focused on their company’s “high quality portfolio that is leverage to oil and offers attractive investment opportunities which will create long term value for our shareholders.” Greg Hill, Hess Corp’s President and COO reiterated the company’s 2016 approach when he stated: “We take a long term view to managing our business and we will continue to invest in our growth projects and prospects. Moreover, in response to the current low oil price environment, we have significantly decreased our 2016 capital and exploratory expenditures and we plan to reduce activity at all of our producing assets. Moreover, we will continue to pursue further cost reductions and efficiency gains across our portfolio.”

Eclipse Resources and Hess Corporation are just the most recent large Ohio area oil and gas operators to announce their plans to significantly reduce their 2016 output and production. The current industry wide glut continues to force even the largest operators to find new ways to reduce costs and become more efficient which has become the new status quo for all large operators. These cutbacks, which include the laying down of rigs to cut production costs as well as massive employee layoffs, creates a trickledown effect to Ohio area mineral owners who have seen and continue to see their hopeful dreams of receiving royalty checks be shoved further and further into the abyss for at least the near and foreseeable future. Even if prices begin to see an uptick, these large operators will proceed with caution and will be hesitant to begin drilling any new wells. As Gulfport CEO Michael Moore stated at the end of 2015, it is time for everyone involved in the industry to “batten down the hatches.” This includes everyone from large operators to Ohio area mineral owners.