Ohio-Utica Shale News Update-3.9.16

The wet window of the Utica Shale in Ohio was once expected to rival the Marcellus Shale. However, with the extreme drop in commodity prices over the last 18 months, the well economics are simply proving to not be what was once expected. None of the 2015 wells drilled in the Wet Utica were able to breakeven at wellhead prices of $30/barrel crude and natural gas prices sub-$2/MMBtu. Heavyweight Utica operators and joint venture partners, Rice Energy and Gulfport Energy have plans to attempt to optimize their Utica acreage by increasing their well spacing from 750’ to 1000’ with hopes that this will improve their productivity of their wells located within this Wet Utica area of Ohio. Techniques like these are ways that large Ohio area operators are trying to combat exceptionally low commodity prices.

It is the hope of many that these prices won’t last and we will hopefully see improvements in the second half of 2016, but most analyst believe that the prices will last much longer than that. Shawn Bennett, executive vice president of the Ohio Oil and Gas Association spoke at the first Guernsey Energy Coalition meeting, he mentioned the problems impeding production in the Utica Shale of Ohio. “Production will continue to drop off. It is difficult for them to make ends meet with those prices.” Unfortunately, there are some major external factors that are not controlled by the U.S. or major shale operators. Saudi Arabia and Russia did meet and agree to freeze production at January 2016 levels. However, those production levels were extremely high. Russia pumped out a post-Soivet record high of 10.88 million barrels a day and Saudi Arabia’s output was near its record high around 10.2 million barrels a day.

In addition to low commodity prices, Bennett mentioned another problem, “Infrastructure, or lack of it. Pipelines, processing facilities, ethane crackers, refineries and storage are in dire need.” IF, we are lucky enough to see an increase in commodity prices in 2016, and production of the Utica Shale is able to recover even slightly, production would not be able to ramp up as quickly as they might like if the infrastructure is not in place to be able to handle the increased levels of oil and gas production in the Ohio-Utica Shale.