Wednesday, September 5, 2012

New Names Challenging Old Ones as the Fight Over Utica Shale Profits Continues

From Crain's Cleveland Business:
For the past few months, there's been much speculation on what would become of the 337,000 acres that Chesapeake Energy put up for sale as part of an effort to pay off a mountain of debt that the company ran up to — among other things — buy the mineral rights on those lands. 
But while that's the single biggest bundle of mineral rights likely to change hands in Ohio's Utica shale gas play, it's not the only one. Companies and investors alike still are jockeying for positions to profit from the Utica's apparently vast deposits of natural gas, crude oil and liquids used in the petrochemical industry — and some observers say we've yet to see all of the energy companies that will eventually emerge to drill in Ohio. 
“We are seeing new names pop up, smaller companies with names we've never heard of,” said Mark Dolezal, president of the Eastern Geauga Landowners, a group of about 300 landowners in Geauga County that has put together 17,000 acres for which it hopes to sell mineral rights.

Indeed, new players not only are entering the Ohio Utica, but are being formed to do so. Texas-based Beland Energy Utica LLC, for one, was created in May by Beusa Energy principals, who have had success drilling for shale gas in the Haynesville shale play, which includes parts of Arkansas, Louisiana and East Texas, said Gregory Brown, the general counsel for both Beland and Beusa. They hope to repeat their success in the Utica, he said.

“The Utica is an interesting area and an interesting play and people go where opportunities are,” Mr. Brown said. “And lots of people see potential in the Utica.”

Mr. Brown declined to say how much capital Beusa, a privately held company, has to spend on Utica leases or for drilling here, but said the company would like to initially acquire the mineral rights to 15,000 to 20,000 acres here. If those acres prove profitable, it likely will try to buy more, he said.

That's not going to be a cheap ticket in at this point. Mineral rights in the Utica have skyrocketed in price in the last two years, and currently fetch between $2,000 and $5,000 per acre.

Even at the low end of that price range, the mineral rights alone on 15,000 acres would cost $30 million — which does not include the roughly $6 million to $10 million that Utica drillers say they currently are spending to drill each new well.

A 15,000-acre parcel could support about 23 well pads, at 640 acres per pad, with each pad containing as many as six wells, drillers say.
Read the rest of the article here.

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