Sparked by a sudden resurgence in activity by Chesapeake Energy Corp., permitting activity for Utica Shale wells in Ohio in August more than doubled from July and increased 28% over August 2017.
Drilling permits, which can be a leading indicator of future activity in the play, have declined 38% for the year when compared to the first eight months of 2017, according to figures from the state Department of Natural Resources. Permits are not a perfect reflection of production increases or decreases because operators drill and complete individual wells that are increasingly more productive than their predecessors.
Privately held Ascent Resources, now the state's leading shale gas producer by volume, pulled the most permits, while Belmont County in the dry gas portion of the play again was at the top of the list for new wells, tied in August with Harrison County in the wet, or more liquids-rich, portion of the shale.
Gulfport Energy Corp., Ohio's previous production leader, pulled three permits in August and none in July. Company executives have made no secret that Gulfport wants to milk the Utica for cash to invest in oil and liquids-rich Oklahoma wells in that state's SCOOP play.
"Utica production growth is forecasted to meaningfully slow down to about 17% year-over-year in 2018 compared to the previous two years when production growth rates were over 30% year over year," Stifel Nicolaus & Co. gas analyst Jane Trotsenko said Sept. 5. "The 2019 program is likely to continue to focus on this asset, as it delivers the highest return of 55-57% in their Utica portfolio. Gulfport will have 50-60 DUCs [drilled but uncompleted wells] left by year-end 2018, which will help to partially offset the lower rig count in 2019."
Chesapeake, which was issued no new well permits in July and only one in August 2017, did not comment on the sudden jump in permitting activity. On July 26, Chesapeake announced that it reached a deal to sell its Utica operations to private-equity-back startup Encino Acquisition Partners LLC for $1.9 billion. The deal is expected to close in the fourth quarter.