Reactions to 2012 Utica Shale Production Figures: Dreams of Copious Oil Dashed, But Gas Bonanza is Real

The reaction is pouring in to the Ohio Department of Natural Resources official 2012 Utica shale production report, which was released during a "State of the Play" event in Columbus yesterday.

The 87 wells for which data was reported by companies produced over 635,000 barrels of oil, which is seen as a disappointment (although not a surprise since reports that the oil play wasn't what it was originally hoped to be have been surfacing for several months), while also producing nearly 13,000,000 MCF of gas, an impressive total considering the midstream infrastructure problems that have drillers moving slowly on production at this time.

What follows is a sampling of the reaction to the numbers.

From the Akron Beacon Journal:

Ohio on Thursday released long-awaited production data from 87 Utica wells drilled by 11 companies — with the wells producing 12.8 billion cubic feet of natural gas and so-called natural gas liquids and 635,896 barrels of oil in 2012.

That means the average well produced a modest 1.6 million cubic feet of natural gas per day plus 80 barrels of oil.

Ohio’s oil production grew by 93 percent and 80 percent for natural gas from a year earlier.

The long-awaited report offers the first glimpse of the true potential of the Utica shale that underlies eastern Ohio.

The data appears to show that the Utica shale will be dominated by natural gas more than oil. The oil volumes were lower than had been projected, and that’s likely a disappointment to analysts and energy companies.

From The Columbus Dispatch:

Industry leaders and analysts were more cautious in their response to the report, however, saying there is not enough information to make any broad statements about the shale formation’s potential. They noted that the oil and gas from the Utica last year is worth about $100 million at current market prices, which isn’t much, considering the high cost of developing shale wells.  

“It’s still very preliminary data,” said Ben Ebenhack, professor of petroleum engineering at Marietta College, who previously worked in the oil industry. “Of the wells producing, the average producing time is about four months. That’s a pretty narrow window of observation.” 

Some of the most-relevant data will be how much production drops in each well over time, something that cannot be seen in annual figures for a bunch of new wells, said Mark Jordan, president of Knox Energy, a Columbus oil company. 

From the Youngstown Vindicator:

The new production numbers are in line with earlier estimates of the potential impact of horizontal hydraulic fracturing, or fracking, into the state’s Utica Shale formation and marked increases of 93 percent and 80 percent for oil and gas, respectively, from volumes reported in 2011. 

And state officials are projecting that oil and gas produced from horizontal wells could outpace conventional vertical wells within three years, with about 1,000 of the new wells expected to be in production by 2015. 

Ohio Department of Natural Resources Director Jim Zehringer said the results mark “the beginning of a historic era of oil and gas production.”

From Reuters:

Oil output from the Utica shale in Ohio was less than expected last year, the Ohio Department of Natural Resources said on Thursday, denting the Utica's image as America's next oil-producing frontier. 

Despite initially being touted as a $500-billion bounty when drilling began in 2011, early evidence shows that the Utica may disappoint, holding mostly natural gas, a far less lucrative product already in abundance in the United States. 

"Oil production will be incidental to gas production in much of the Utica/Point Pleasant play," the DNR said, confirming some analysts' concerns that it may not live up to the early hype. 

Oil output averaged 1,742 barrels per day in 2012, according to production data issued by the DNR. Gas output totaled 18.837 billion cubic feet (bcf), or 35 million cubic feet (mmcf) per day. 

The eagerly anticipated data from 87 wells that produced in 2012 showed the stuttered beginnings of a drilling boom in Ohio as producers searched for the sweetest acreage and output was hampered by a lack of pipeline infrastructure.Still, analysts were disappointed by the well numbers, particularly given the early hype. 

"This is less impressive than was initially touted," said Mark Hanson, energy analyst at Morningstar in Chicago. "It doesn't look like it's going to be the next Eagle Ford," he said, referring to the shale play that has proved a major success in Texas. 

From the Lancaster Eagle Gazette:

A traffic jam of sorts suppressed oil and gas production from Ohio’s prized Utica Shale last year, according to horizontal well production data released by the state Thursday afternoon.

A total of 635,896 barrels of mostly low-quality oil and more than 12.8 billion cubic feet of wet and dry gas were siphoned from the Utica Shale in 2012.

Those results are from 87 wells, but most weren’t in production for even half a year and most were choked back, meaning they weren’t producing up to their full ability, said Rick Simmers, chief of the Oil and Gas Resources Management division of the Ohio Department of Natural Resources. 

The reason for the reduction is Ohio suffers from a lack infrastructure for this level and sophistication of oil and gas production. There are not enough lines to funnel the oil and gas from those finished wells and more importantly not enough processing facilities to capture the valuable liquids — ethane, butane, propane — that are suspended in the gas.

Here is video of the "State of the Play" event that took place yesterday.


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