Meet the Utica Shale's Top Producer

According to a long-awaited report from the Ohio Department of Natural Resources, Chesapeake Energy (NYSE: CHK  ) was the leading driller in Ohio's Utica Shale last year. The company produced 372,212 barrels of oil and 10.1 million mcf of natural gas last year from 53 wells in the play.

That level of production for both oil and gas allowed the Oklahoma City-based company to capture the title of the play's leading producer. On the oil side, Anadarko's (NYSE: APC  ) E&P Onshore came the closest to challenging Chesapeake's dominant position, producing 118,726 barrels of oil from its Utica wells. And on the natural gas side, Hess Ohio Resources took second place, producing 922,979 mcf of gas.

Chesapeake's Utica success to continue
Chesapeake expects its success in the Utica to accelerate this year. In the first quarter, the company reported a daily net production of around 60 MMcf of natural gas per day. As of March 31, it had drilled roughly 250 wells in the play, including 66 producing wells, 87 that are waiting on pipelines, and 97 wells in various stages of completion.  

Importantly, the company has seen a sharp decline in its Utica well costs, which plunged by 30%, from around $8.5 million to just under $6 million currently. With 14 rigs running in the play, Chesapeake is projecting estimated ultimate recoveries of 5-10 Bcfe in the Utica's wet-gas window.

The company is especially optimistic about the effect of new infrastructure slated to come on line this year. According to Jeffrey A. Fisher, Chesapeake's executive vice president of production, the opening of two major processing plants this year should provide a big boost to production.

New infrastructure additions
The first of those facilities – the expanded Natrium processing plant in Marshall County, W.V., built by Blue Racer Midstream, a joint venture between Dominion (NYSE: D  ) and Caiman Energy – came on line earlier this month, reporting recent flows at more than 80% of its 200,000 Mcfpd capacity, according to data from Bentek Energy, while the second facility – a processing complex in Columbiana and Harrison counties – is expected to open midyear.

With the addition of new infrastructure, Chesapeake says it is confident that it will achieve its year-end target of 330 MMcf of gas per day from its Utica wells. If it manages to meet that goal, it would represent a more than quadrupling of its average first-quarter natural gas volumes.  

Infrastructure additions also bode well for Gulfport Energy (NASDAQ: GPOR  ) , a company highly levered to the play. In fact, Gulfport is plowing the majority of its capital budget toward developing its Utica acreage, with quite impressive well results thus far. Improved infrastructure should also provide a boost to Rex Energy (NASDAQ: REXX  ) , which is allocating nearly a third of its roughly $255 million capital budget for the year toward developing its assets in the Utica.

Though Chesapeake is optimistic about the Utica, the company is more focused on the Eagle Ford and Greater Anadarko Basin – assets that will be crucial in helping it transition away from natural gas production and toward oil. Will Chesapeake manage to meet its oil production target and boost cash flow? Or will it languish under the weight of its heavy debt load? To answer that question and to learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy, and as an added bonus, you'll receive a full year of key updates and expert guidance as news continues to develop.

 


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