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Ohio shale gas production spikes as driller Ascent pushes expansion

Highlights

Ascent more than doubled production in a year

Gulfport turning to higher-margin Woodford Shale

Utica Shale gas from three counties and five producers led Ohio's 50% year-on-year increase in production to 6.4 Bcf/d in the second quarter.

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The three counties -- Jefferson, Monroe and Belmont -- all directly across the Ohio River from West Virginia, accounted for 75% of the total second-quarter production reported to the Ohio Department of Natural Resources by Wednesday. Likewise, the state's top five producers, led by Ascent Resources, accounted for 75% of the state's shale gas production.

Jefferson County wells, which tripled production from the 2017 second quarter, are split almost exactly in half between two drillers, Ascent and Chesapeake Energy. Ascent was formed around a core of the same executives who pioneered the Utica play for Chesapeake and is now backed by private equity investors First Reserve Management and Energy & Minerals Group.

Ascent more than doubled production in a year and continued to widen its lead over rival Gulfport Energy as Ohio's top Utica Shale producer by volume. The company looks to expand in the play, having struck deals to buy $1.5 billion of Utica wells and leases from Hess and CNX Resources as the second quarter was ending.

Gulfport, the state's previous production leader, increased production 17% compared with the same period of 2017. Gulfport is in the process of milking its Utica dry gas operations, which do not require much new spending, for cash to fund what it says are higher-margin oily wells in the Woodford Shale of Oklahoma's SCOOP play.

Stifel Nicolaus & Co. shale gas analyst Jane Trotsenko said Wednesday that Gulfport is cutting back from two drilling rigs to one in the Utica after operating as many as six rigs in Ohio and will turn its attention to completing the 50 to 60 Utica wells it has drilled but not yet fracked and placed online.

"At current crude oil and natural gas prices, the SCOOP offers higher returns (71% for Woodford wet gas) than the Utica (57% Utica dry gas east) and commands a higher allocation of capital," Trotsenko said. "Over the foreseeable future, we are projecting Gulfport production growth to decelerate in the Utica and future production growth to be driven by their SCOOP assets."

Judging by the number of drilling permits pulled by Ohio's producers, the three river counties can expect a mild slackening of activity as drillers start to chase wetter wells with higher proportions on NGLs in interior counties such as Harrison and Guernsey as gas prices stay flat and NGL prices increase.

-- Bill Holland, S&P Global Market Intelligence, newsdesk@spglobal.com

-- Edited by Annie Siebert, newsdesk@spglobal.com

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