Even though Magnum Hunter Resources Corp (ticker: MHR) was an early entrant into the Utica Shale (2010), the company elected to wait and watch the play’s development during 2011 and 2012. Most companies don’t have the luxury in an emerging basin to wait and watch due to lease expiry concerns. However, the majority of MHR’s acreage prospective for the Utica Shale (purchased through the acquisition of Triad Energy in 2010) is held by production from shallower targets.
It certainly seems as though MHR likes what it saw during 2012. The company has elected to drill four Utica Shale test wells during 2013 utilizing a four-well pad design. Plans are to spud their first well (Washington County, Ohio) in late February or early March and complete the 6,000-foot horizontal in the Point Pleasant portion of the formation. If management likes early results from the test wells, they may elect to further develop the play during 2013. MHR owns about 107,000 gross acres (81,000 net acres) of Utica potential. Approximately 41,000 gross acres (26,514 net acres) are deemed to be in the wet gas window. After the first horizontal test well, the remaining three test wells will be drilled in conjunction with MHR’s previously announced joint operating agreement (JOA) with Eclipse Resources I, LP, to form three drilling Units in Monroe County, Ohio. The terms of the JOA can be found here.
Based on the estimates published by the Ohio Department of Natural Resources, the Utica Shale is believed to have recoverable potential of 1.3 billion to 5.5 billion barrels of oil and 3.8 trillion to 15.7 trillion cubic feet of natural gas. The majority of activity in the Utica has been focused north of Magnum Hunter’s first well location in Noble, Carroll and Harrison Counties, Ohio. As you can see from the map below, the majority of MHR’s acreage is in Noble County, Ohio.
Utica Activity
As of January 19, 2013, the Ohio Department of Natural Resources (ODNR) reported the number of horizontal wells drilled in the Utica shale hit 212. Of the 212 horizontal wells, approximately 48 are producing and 138 have been drilled and are ether on confidential status or awaiting completion. The ODNR reports 500 horizontal permits have been processed to date – 181 of the permits are in Carroll County.
The following chart below depicts the total number of drilling permits by most county and operators. Chesapeake Energy (ticker: CHK) has been the most active operator in the most active counties.
Recent well results:
On January 22, 2013, Gulfport Energy (ticker: GPOR) reported two Utica Shale results. The Clay 1-4H tested at an average sustained 12 hour rate of 747 barrels of condensate per day, 5.9 MMcf/d of natural gas, and 761 barrels of NGLs per day assuming full ethane recovery and a natural gas shrink of 27%, or 2,226 BOEPD. The Clay 1-4H well was drilled on the Guernsey and Harrison County line. The second well, the Stutzman 1-14H tested at an average sustained four hour rate of 21.0 MMcf/d of natural gas and 945 barrels of NGLs per day assuming full ethane recovery and a natural gas shrink of 11%, or 4,060 BOEPD. The Stutzman 1-14H well was drilled on the Monroe and Belmont County line.
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