Since there hasn’t been much news out of Ohio this week, I thought it would be a good time to revisit the Utica Shale.Wedged between the Cincinnati Group and the Black River Group formations, deep below Ohio, Pennsylvania, West Virginia and even parts of Canada, lies the Middle Ordovician stratigraphical unit we have come to know as the Utica Shale.
Utica Shale Geology
The Ordovician came on the heels of the mass extinction event that ended the Cambrian period, and the Middle Ordovician (the tail end of a greenhouse cycle that extended back well into the Cambrian) was notable for high sea levels and marine temperatures that are assumed to be ~113 degrees Fahrenheit. Laurentia, the “continental craton” that forms the ancient geological core of the United States, was one of the 4 major landmasses in play (along with Gondwana, Balticia and Siberia). This map of The United States superimposed with the Middle Ordovician version of Laurentia shows a substantial basin stretching across much of our area of interest. This hot marine bed encouraged an explosion and accumulation of macro algae and other simple life forms that, 460 million years later, have become the hydrocarbon focus of this blog post.
Today’s Appalachian Basin Oil & Gas
Mostly when we talk about Oil & Gas in the Northeast, we talk about the huge resource of dry gas that unconventional E&P has brought online, and for good reason. The unbelievable growth of natural gas production has turned east coast LNG import facilities into LNG export facilities, and, by supplanting coal with much cleaner burning Natural Gas, have made the USA the leader in lowering CO2 emissions. Most of this dry gas comes from the mighty Marcellus Shale, and early unconventional exploration in the Utica Shale was also focused on the dry gas resource.
However, current E&P in the Utica is focused more on the liquids rich portion, particularly in the state of Ohio. On the left of this image we see the extant of the Utica in yellow and the 50,0000,000 year younger Marcellus outlined in black. Additionally we see the Utica depths in the green tops – notice how it tends to be shallower to the west. The fantastic map on the right shows the different play areas of the Utica, and we can see both wet gas and oil windows prevalent in Ohio. The two images together make a pretty good case for Ohio focused Utica activity.
Images Source: FORGET THE MARCELLUS – THE UTICA SHALE PLAY IS THE NEXT BIG THING by John A. Harper
Point Pleasant Formation
The Point Pleasant is also a Middle Ordovician formation that is interlayered with the Utica Shale. Both formations have similar TOC estimates, but the Point Pleasant is generally regarded as the sweet spot of the oil window.
Appalachian Basin Rig Activity
First, some good news for everyone who makes money when rigs are running. Here on the left is our current National Daily Rig Count from the newly redesigned DI Index Page (y’all should check it out – it’s got more interactivity, and you can read this month’s perspective), and on the other side, DI Rig Analytics, we see the very familiar US Onshore decline over the past 18 months.
On this next image we see rig count activity for Ohio Utica or Point Pleasant wells contrasted with the Eagle Ford play. We can see although there are still quite a few more rigs by number in the Eagle Ford, the attrition has been much steeper there than in the Utica. We will talk about Utica/Point Pleasant operators more a little later, but we can clearly see there are fewer of them engaged. As for the Eagle Ford, I thought it was pretty striking how the more powerful rigs have come to dominate activity – it stands to reason of course, but here we see it in the data.
Next lets compare the rig count drop of Ohio’s Utica/Point Pleasant with the state of Oklahoma. For both areas of interest we see that the attrition has been calmer than the national and Eagle Ford charts. The activity in Ohio has mostly been focused on 5 or so of the 12 that have Utica or Point Pleasant targets. On the Oklahoma chart we see that, compared to Mid-Continent, the Anadarko Basin has had even less drop off.
Utica/Point Pleasant Permitting
The lion’s share of Utica/Point Pleasant focus has been in Southeast Ohio’s Belmont, Monroe, Harrison, Jefferson and Carrol Counties. The next image shows the last 18 months of permitting for those counties. Horizontal permits account for over 2/3 of the activity, and the positioning by operator on the map show’s the various fairways that are involved in the exploring this liquids-rich area.
The Aubrey McClendon founded American Energy – Utica LLC changed it’s name to Ascent Resources – Utica mid-summer 2015, and between them they have filed the most permits over these five counties in the past 18 months – 232 vs. runner up Chesapeakes’ 173 permits filed.
The shallower, less organically mature, and more liquids-rich portion of the Utica/Point Plesanat in southeast Ohio is worth keeping an eye on, particularly as we see more stable pricing return to the energy market.
What do you think? Leave a comment below.
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