Utica shale's big natural gas flows, and Edvard Munch

— Did you ever feel like that kid in the poster for the classic movie "Home Alone" who is clutching his face with both hands, mouth agape in shock at having to foil two nitwit burglars?

I did when I saw the initial natural gas production rates that have come out of some recent Utica Shale wells.  Although it wasn't out of shock but sheer awe at the volumes being yielded by wells the Northeast US natural gas-prone play.

While galloping domestic gas output is no longer the bogey of domestic gas prices -- at least it won't be after US exports begin next year and begin to reduce the supply overhang -- these ginormous IPs hint at the existence of an even an more capacious gas cache underneath not only the Utica's traditional subsurface nesting spot in Ohio but possibly in northern Pennsylvania and West Virginia too.

Last week, Gastar Exploration unveiled what its CEO Russell Porter called potentially "one of the most productive wells to date in the dry gas Utica play," in the Simms U-5H well in Marshall County, West Virginia, which debuted at 29,400 Mcf/d of gas.

The well, the company's first in what some technically call the Utica/Point Pleasant play, "was particularly impressive” considering the relatively short lateral (horizontal well leg) length of 4,447 feet, Porter said.

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Operators are drilling extended lateral lengths, in some cases out to 10,000 feet in recent years. They have found that longer laterals equate to higher hydrocarbon volumes.

According to Michael Scialla, an analyst with investment bank Stifel Nicolaus, five high-rate Utica dry gas wells with IP rates above 20,000 Mcf/d have been drilled in recent weeks not only in eastern Ohio, the birthplace and home of that play, but in northwest West Virginia.

And, "some companies, such as Range Resources, are now looking to extend this prolific trend to southwestern Pennsylvania," Scialla said in a recent report on new Utica wells.  He added 21 rigs are currently drilling for dry gas in the region.

Moreover, northern Pennsylvania may also have big Utica potential:  last week, Shell announced two new Utica wells in that state’s Tioga County, just south of the border with New York state.  The wells were drilled to a depth around 11,300 feet.

Shell's Neal D 815 1V had an eye-popping IP rate of 26,500 Mcf/d and a relatively modest lateral length of 4,200 feet.  Scialla cites state data saying the well, which began flowing in February, produced 1.8 Bcf through June 2014, or an average of 12,100 Mcf/d.  Shell has unveiled plans to bring additional Utica wells online later this year.

The Point Pleasant/Utica formation thins to the east and thickens to the southwest of the Shell wells, Scialla said.

“Following largely disappointing results from wet gas wells in Mercer and Venango counties, investors had all but written off northern Pennsylvania’s Utica potential,” he said. “That could be about to change, however, as two strong wells could extend the economically viable dry gas fairway more than 100 miles to the northeast.”

Mercer and Venango counties are in northwest Pennsylvania, in the vicinity of Titusville near Colonel Edwin Drake’s oil strike oil in 1859 in northern Venango County.

“These ... dry gas wells have really caught everyone by surprise this year,” Robert W. Baird analyst Daniel Katzenberg said.

While discovery of high-volume wells are “a positive for development potential” in the Appalachian basin, it “does add to the oversupply concern” there, Katzenberg said. “This potentially leads to additional dry gas volumes in a region that is already near capacity and without clear visibility on where all this gas will go near-term.”

What is the behind the prolific wells?   Analysts say industry is getting much more effective at locating the sweet spots and understanding the best approach to drilling.  In West Virginia, wells are deeper (9,000-11,000 feet) than in southeast Ohio, and have higher associated pressures which underpin high IPs.

“We’ll have to see how these wells look in 12-plus months," Katzenberg said.

Even after the shale revolution began in earnest a dozen years ago—one marker of its birth is Devon Energy's acquisition of Barnett Shale pioneer Mitchell Energy in 2002—typical shale gas wells were still producing maybe 2,000 Mcf/d, sometimes 3,000-4,000 Mcf/d if you were really lucky. Gradually, these rates began to rise to norms in the mid-to-high single digits as operators became more proficient at well drilling and completion.  And over time there was the occasional 12,000 Mcf/d or 15,000 Mcf/d outlier.

It took the Haynesville Shale in Northeast Louisiana/East Texas, a dry gas field, to kick the wow factor up several notches.   A number of wells with double-digit IP rates in the teens or higher, along with high “normal” IPs for most wells, contributed toward gas self-sufficiency in the US and later, caused a glutted gas market.  That tilted industry's thinking away from building gas import infrastructure and toward the idea of exporting it.

Concurrently, absent a need for so much gas in the US, along with depressed domestic prices that persisted for years, gas producers shifted their attention and drilling dollars to oil production several years ago.  But even there, they couldn't run away from mounting gas oversupply, since crude production even in the oiliest plays coughed up some gas, which typically comprised anywhere from 5% to as much as 40% or even more of an oil well's output.

The Utica is projected to produce 1.39 Bcf/d of gas this month and 1.46 Bcf/d in October, a report issues last week by the US’ Energy Information Administration, the statistical branch of the Department of Energy, said.   US marketed gas production has grown from about 58.8 Bcf/d at the start of 2011 to 74.6 Bcf/d in August 2014, EIA said in its latest Short-Term Energy Outlook.

By the way, the image of the "Home Alone" boy (portrayed by actor Macaulay Culkin) holding his head in shock is based on a famous painting by Norwegian artist Edvard Munch, called "The Scream(opens in a new tab)."  Munch was 30 years old in 1893 when he finished the iconic painting, whose permanent home is the National Gallery in Oslo.  According to Munch's later recollection, the painting had nothing to do with existential modern angst, but simply attempted to stylize the vivid colors he had seen of a sunset against a dark sky.