Friday, January 31, 2014

Tuscarawas County Sees Bright Future Thanks To Shale Development

When preparing for the increased demands and economic benefits due to Utica Shale development, TuscarawasCounty is ahead of the curve.  This is thanks in part to a chance meeting that Harry Eadon, President and Executive Director of the Economic Development and Finance Alliance of Tuscarawas County, had with an oil and gas supplier in the middle of 2011.  Since then, Tuscarawas County has been busy planning meetings and working with the Eastern Ohio Development Alliance (EODA) to prepare for the positive changes Utica Shale development has had and will continue to have on the region.
When Utica Shale development was still in its infancy, Harry Eadon was visited by a gentleman who was with an oil and gas supplier.  During their breakfast many topics were broached, including locating the best places to acquire goods and services in Tuscarawas County.  The conversation turned to what Tuscarawas County will look like in the next 5-10 years.  The gentleman told Mr. Eadon that the area would be a much busier area, with restaurants on waits instead of half full.
Due to his role with the Economic Development and Finance Alliance of Tuscarawas County, and recognizing the increased activity in the Utica Shale in surrounding counties, Mr. Eadon saw this as a call to action.  The Economic Development and Finance Alliance of Tuscarawas County developed an app for companies looking to purchase goods and services in the county calledPOGO (Potential Oil and Gas Opportunities) and started an oil and gas committee.
Looking for a catchier name, the oil and gas committee quickly morphed into the Tuscarawas Oil and Gas Alliance — or TOGA — in early 2012 and gained a dynamic Co-Chair, Mike Lauber, President of Tusco Display.  From there, TOGA planned its first event in early June.  The purpose of the event was to learn about the industry from individuals like Rhonda Reda of the Ohio Oil and Gas Energy Education Program and Dr. Bob Chase, Chair of the Petroleum Engineering Department at Marietta College, as well as commissioners from Pennsylvania and other economic development professionals.
“TOGA, what we call our oil and gas alliance, was created primarily because of an effort to try to make this region the most attractive region for oil and gas businesses to settle here.  Since we created TOGA we’ve seen almost 50 businesses or actually 50 businesses settle here in TuscarawasCounty.  All of them oil and gas businesses or oil and gas related businesses.”- Harry Eadon, President and Executive Director of the Economic Development and Finance Alliance of TuscarawasCounty and Co-Chair of TOGA
Since the June 2012 event, TOGA has remained an active partner with EODA to develop a real estate inventory list of available commercial properties for oil and gas related businesses to locate in the 16 county eastern Ohio region.  EODA has listed the properties on their website and held events in Pittsburgh, Columbus and outside of Cleveland for commercial realtors.
“We’re really quite excited about the opportunity to continue those efforts and looking at it from several different perspectives, from the real estate perspective, from educational perspective, from quality of life/tourism, from the business perspective.  How do our incumbent businesses cooperate or collaborate with the new businesses coming in.  So we’re really excited with the opportunity to continue doing that.  We have have an event coming up on January 31st, 2014 at the KentState, Tuscarawas Campus.  That event is dubbed Utica 2020”- Harry Eadon, President and Executive Director of the Economic Development and Finance Alliance of Tuscarawas County and Co-Chair of TOGA
UTICA 2020 will be held this Friday as a way to look even further into the future about benefitting from the growth occurring from Utica Shale development. The event is focused on the counties in eastern Ohio and will offer a different outward looking perspective.
The fast paced presentations, resembling the popular “TED Talks,” will focus not only on development of oil and gas, but on midstream and downstream industries that will be locating in the region.
The intent of UTICA 2020 is to create an educated public to spur innovation.  With over 300 attendees expected to participate, the stage is set for another successful event.
The hard work of TOGA and the Economic Development and Finance Alliance of Tuscarawas County is paying off.  Since that breakfast meeting in 2011, Tuscarawas has courted 50 new businesses related to the oil and gas industry, including Schlumberger, who will be creating 200 jobs, and Kinder Morgan / MarkWest, which is planning to build a natural gas processing facility in the county.
It is always great to see the progress that can be made when a county and region is welcoming to an industry.  By planning for the future in order to capture as much economic benefit as possible, TOGA and EODA are making the best out the enormous opportunities provided by Utica Shale development.
Written by Shawn Bennett for Energy in Depth.  Reprinted with permission.  View original article here:

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New Natural-Gas Fired Power Plant Planned in Ohio

From the Dayton Daily News:
A Florida-based energy company has proposed building a natural gas-fired power plant in Middletown that would represent an investment of more than $500 million and bring more than 400 jobs to Butler County. 
NTE Energy plans to develop, own and operate what it’s calling “one of the most efficient natural gas-fired power plants in the United States.” The facility, to be called the Middletown Energy Center and located on Cincinnati Dayton Road, near Oxford State Road, will generate enough power to supply approximately 400,000 homes, the company said. 
Tim Eves, executive vice president of development, said the company is still exploring who will be its customer base. 
Middletown Mayor Lawrence Mulligan, Jr., compared the project and its financial impact to the region to Suncoke, a cokemaking and heat generating plant that opened in 2011 in Middletown.
The whole article can be viewed here. 

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Hess Announces Sale of 74,000 Utica Shale Acres; Aubrey McClendon the Buyer?

A Hess Corporation press release announced that the company has agreed to sell about 74,000 acres of its dry gas acreage in the Utica shale to a third party.  The press release did not disclose who bought the acreage.

However, the Wall Street Journal reports that it was Aubrey McClendon's new company, American Energy Partners LP:
American Energy Partners LP, led by Aubrey McClendon, continues to bulk up in Ohio’s Utica Shale, purchasing natural-gas fields from Hess Corp. for $924 million, according to people familiar with the matter.
Hess said Wednesday it struck an agreement to sell 74,000 acres in the Utica to an undisclosed buyer. The company has sold more than $7.8 billion in assets over the past year to raise cash and narrow its focus on growing oil output in the U.S.
Hess issued fourth-quarter financial results on Wednesday, reporting a profit of $1.93 billion, up from $374 million in the year-ago period. It will use the proceeds from the Utica sale to repurchase stock.
American Energy Partners said on Wednesday that an affiliate had raised $500 million to invest in wells across the country, but a spokesman for the company declined to comment on the Utica deal.
As that article mentioned, American Energy has raised another half billion in funding.  Bloomberg reports:
American Energy Partners LP, the energy company founded by former Chesapeake Energy Corp. CEO Aubrey McClendon, raised as much as $500 million through an affiliate to acquire stakes in U.S. onshore oil and natural gas deposits. 
The funds will be used to purchase non-operated working interests, the Oklahoma City-based company said today in a statement. Houston-based private-equity firm Energy & Minerals Group, led by John T. Raymond, is the exclusive private equity investor, with additional equity provided by management of the affiliate, known as American Energy - NonOp LLC.
You can view the entire Hess press release after the jump.

Ohio Rep. Hagan Sounds the Alarm Over Radioactive Fracking Waste

Ohio State Rep. Robert Hagan
From the Ohio House of Representatives:
State Representative Robert F. Hagan (D-Youngstown) sent letters on Monday to the regulators charged with overseeing the burgeoning hydraulic fracturing industry, calling on them to be proactive in protecting the health and safety of Ohio’s communities. The letters follow a recent news report that highlights the steps neighboring states are taking to prevent radioactive contamination from fracking waste.

“With Ohio’s expanding fracking operations, the notion that radioactive waste could make its way into Ohio’s landfills or waterways is increasingly realistic and alarming,” Rep. Hagan said in his letter to the Directors of the EPA and ODNR. “And yet, state officials reportedly have no plans to take the same precautions that are deemed necessary by our neighboring shale states.”
Here is the text of the letter:
January 27, 2014 
Dear Interim Director Butler, 
I write to you today in regards to recent news reports that highlight the radioactive threat from fracking waste and Ohio’s worrying attitude of nonchalance on the matter. I have received a significant volume of correspondence from constituents regarding concerns of radioactive waste contaminating our communities’ lands and waterways, and I believe that being proactive in testing and inspections would be in the best interest of our state. 
As the Columbus Dispatch reports, Pennsylvania officials recently tested creek mud near a fracking wastewater-treatment plant and found radiation levels to be forty-five times higher than federal drinking water standards. Research by the U.S. Geological Survey of Pennsylvania’s shale found that naturally occurring radium is more common in Marcellus shale, and with Ohio’s expanding fracking operations the notion that radioactive waste could make its way into Ohio’s landfills or waterways is increasingly realistic and alarming. And yet, state officials are reported to have no plans to take the same precautions that are deemed necessary by our neighboring shale states. 
I understand that thus far the legislature has failed to create a strong regulatory framework that mandates comprehensive testing of radioactive fracking waste. Indeed, the most recent legislation crafted by House Republicans carved out a giant loophole that exempts most shale gas waste from the definition of Technologically Enhance Naturally Occurring Radioactive Materials (TENORM). Some TENORM, of course, contains very high concentrations of radionuclides that can result in elevated human exposure to radiation. 
Given the pervasive influence of the oil and gas lobby in the Statehouse, I do not expect Ohio’s fracking laws to be strengthened anytime in the near future. This is all the more reason that I urge your agency to be more proactive in its mission to protect Ohio’s environment and work with ODNR to pursue rigorous testing for hazardous levels of radiation near fracking operations in our eastern counties. While Pennsylvania and West Virginia continue to take steps that protect the health of their citizens, Ohio should not wait until a crisis arises in order to act. 
As I mentioned above, my concern over these issues is shared by my constituents and by many worried citizens across the state. I trust that you will take this letter – and theirs – under serious consideration. 
I look forward to your response. 
Representative Robert F. Hagan
House District 58 

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General Partner of Summit Midstream Partners, LP Announces Closing of Acquisition of Equity Interests in Ohio Gathering From Blackhawk Midstream

DALLAS, Jan. 28, 2014 /PRNewswire/ -- Summit Midstream Partners, LLC ("Summit Investments"), the privately held company that owns and controls the general partner of Summit Midstream Partners, LP (NYSE: SMLP), announced today that it has closed the acquisition of equity interests in Ohio Gathering Company, L.L.C. and Ohio Condensate Company, L.L.C. (together, "Ohio Gathering") from Blackhawk Midstream, LLC ("Blackhawk"), a joint venture between Gulfport Energy Corporation ("Gulfport") and Wexford Capital LP.

The acquired equity interests from Blackhawk include an option to increase Summit Investments' ownership interest in Ohio Gathering up to 40.0% at a price based on the capital invested by the owners at the time the option is exercised. Summit Investments expects to fully exercise this option in the second quarter of 2014. Upon exercise of the option, each of MarkWest Utica EMG, L.L.C. and MarkWest Utica EMG Condensate, L.L.C. will retain its respective 60.0% ownership interest in Ohio Gathering and will continue to operate and develop the gathering infrastructure. Summit Investments intends to offer all or a portion of its interest in Ohio Gathering to Summit Midstream Partners, LP following the exercise of the option and the subsequent development of the assets.

Ohio Gathering owns, operates and is developing significant midstream infrastructure in southeastern Ohioconsisting of a liquids-rich natural gas gathering system, a dry natural gas gathering system and a condensate transportation, storage and stabilization facility in the core of the Utica Shale play. Ohio Gathering is supported by fee-based gathering agreements and acreage dedications from producer customers including Gulfport, Rex Energy Corporation and PDC Energy, Inc., which are actively developing Utica Shale positions throughout Harrison, Guernsey, Belmont, Noble and Monroe counties in Ohio. Ohio Gathering's liquids rich gathering system serves as a critical inlet to MarkWest Utica EMG'sCadiz and Seneca processing complexes, the largest integrated rich-gas processing and fractionation facilities in the Utica Shale.

Steve Newby, President and Chief Executive Officer of Summit Investments commented, "This announcement marks our first step to position Summit with an equity interest in a premier set midstream assets located in the core of the Utica Shale. We intend to fully exercise our option and increase our equity interest in Ohio Gathering and maximize our exposure to this important and fast growing basin. We are excited to begin this joint venture partnership with MarkWest and The Energy & Minerals Group and we look forward to playing a role in expanding the infrastructure required to unlock the production potential of the Utica Shale."

Summit Investments engaged Barclays Capital, Inc. to act as its financial advisor and Vinson & Elkins LLP to act as its legal advisor on the transaction.

Thursday, January 30, 2014

Ohio Court Rules That a Driller Filing Paperwork Qualifies as "Operations" to Extend Lease

From ShaleOhio:
In Henry v. Chesapeake, Case No. 12-4090, January 14, 2014, the United States Court of Appeals for the Sixth Circuit  held that by filing a Declaration of Pooled Unit (DPU) with the Ohio Department of Natural Resources, Chesapeake Appalachia, L.L.C. (“Chesapeake”) engaged in “operations” under the terms of the lease.  

Plaintiffs leased approximately 447 acres of land in 2006 for a five-year term.  The habendum clause provided that “Any Operations” would extend the lease.  The lease defined operations as inter alia, “any acts in search for or in an endeavor to obtain, maintain or increase the production of oil and/or gas[.]”
Read the rest here.  You can read the complete case by clicking here.

So all Chesapeake had to do in this case was file some paperwork 3 days before the expiration of the lease to extend it.  Landowners take note: getting out of an old lease that isn't generating any royalties won't be as simple as one may have thought prior to this ruling.

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Article Asks When Ohio Will Start Seeing the Expected Lift from Utica Shale Drilling

From The Columbus Dispatch:
A debate over job creation and the economic benefits of eastern Ohio’s Utica shale boom has continued unresolved since drilling and fracking began in late 2010. 
Oil and gas industry officials predicted in September 2011 that the growing effort to tap oil and gas in the Utica shale would lead to more than 200,000 new jobs in four years. 
So far, that has not panned out, even in the counties with the most drilling activity. 
For example, Carroll County’s job market is still below pre-recession levels based on two key measures. In November, the county had 12,800 employed residents and an unemployment rate of 7.6 percent, according to the Bureau of Labor Statistics. In November 2007, the county had 13,100 employed residents and an unemployment rate of 5.7 percent. 
Carroll County is the center of shale drilling in eastern Ohio. Its employment statistics are similar to those in other counties where shale drilling is underway. The figures are based on where people live, so short-term workers from outside are not included.

You can read the entire article here. 

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Marathon Subsidiary to Stay and Expand in Findlay, Bringing 150 Jobs

From the Toledo Blade:
Marathon Petroleum Corp’s new distribution subsidiary MPLX is expected to keep its operations in Findlay, creating an estimated 150 jobs worth $15 million in new payroll, after Ohio apparently won the expansion project over what was characterized as “fierce” competition from other states.
The Ohio Tax Credit Authority today voted to extend Marathon's Petroluem's existing 60 percent, 10-year job creation tax credit, originally approved in 2011, to 14 years. The new jobs are expected to pay an average of $48 an hour. The package was negotiated by the private non-profit economic development corporation, JobsOhio, and then placed in the hands of the state panel for final approval.
Marathon is expected to expand its corporate headquarters campus in Findlay to accommodate MPLX’s headquarters and, in the process, recommit to maintaining the 1,650 jobs it promised when it was itself a beneficiary of a tax-credit package itself in 2011.
The rest of the article can be read here.

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Ohio Supreme Court Justice: Energy Cases Set to "Dominate the Court Docket"

From The Intelligencer/Wheeling News-Register:
Ohio Supreme Court Justice Judith French predicts energy-related cases will dominate the court's docket in years to come.
Lower courts are already seeing large numbers of filings regarding property ownership and mineral rights, and French said the majority of these cases will proceed through appellate courts to the Ohio Supreme Court.
"I think just energy in general will dominate the court docket once those cases get started," she said. "In this part of the state, it's about oil and gas. But in the western part of the state, it's about wind. ... The environmental issues could also come our way."
Read the rest of this article by clicking here. 

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Wednesday, January 29, 2014

Ohio Company Benefits in a Big Way From Utica Shale

From the Columbus Dispatch:
The Utica shale boom hasn’t brought drilling rigs to this eastern Ohio town, but it has transformed one local company.
Producers Service Corp. used to make its money selling low-volume fracking services to companies that drilled conventional oil and gas wells. Inspired by the large-scale fracking demands of horizontal shale drilling, the 32-year-old company has acquired new equipment and more than doubled its work force, from 40 to 100 employees.
“We’re the only fracking company that’s home-grown in Ohio,” said Dan Pottmeyer, the company’s president. “And our … income has certainly more than doubled.”
Pottmeyer declined to share revenue figures.
Shale drillers typically hire fracking crews from multinational businesses, including Halliburton and Schlumberger. Producers Service now sends two 30-man fracking teams to well sites in Ohio and West Virginia to pump the millions of gallons of water, sand and chemicals needed to shatter the shale to free oil and gas.
Read the entire article by clicking here. 

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What Do the Latest Numbers From Antero Resources Tell Us?

From the Akron Beacon Journal:
Colorado-based Antero Resources has unveiled three of the biggest natural gas wells in Ohio — all in Noble County. 
The Milligan 2H well in Seneca Township is producing 40.2 million cubic feet per day of natural gas equivalents in initial production, the company announced. 
In addition, the company’s Coal 3H well showed 35.3 million cubic feet of natural gas equivalents per day and the Milligan 1H well had 32.1 million cubic feet of natural gas equivalents per day. 
All three wells are now among the Top 10 natural gas producers in Ohio, said Shawn Bennett of Energy in Depth-Ohio, a pro-drilling trade group.
Read more analysis of Antero's impressive Utica shale results by clicking here.

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Antero Resources Releases More Impressive Utica Shale Well Results

DENVERJan. 27, 2014 /PRNewswire/ --
  • Net daily production recently surpassed 750 MMcfe/d including 15,000 Bbl/d of liquidsFourth quarter 2013 average net daily production is estimated to be 675 to 680 MMcfe/d, above the midpoint of previously announced guidance range
  • First 10 Marcellus Shale wells with shorter stage lengths (SSL) had an average 120-day wellhead production rate of 7.9 MMcf/d, 27% above the Company's type curve
  • Five additional Utica Shale wells completed since 3rd quarter 2013 press release had an average 24-hour peak processed rate of 32.2 MMcfe/d assuming ethane recovery (65% liquids)
  • First 11 core area Utica Shale wells had an average 30-day processed rate of 14.7 MMcfe/d, assuming ethane rejection (35% liquids), despite producing into an operating environment with 1,100 psi line pressure (no compression)
  • First Utica compressor station recently completed and placed into operation (120 MMcf/d capacity)
  • Firm takeaway capacity and sales has been expanded to 1.5 Bcf/d by year-end 2014
Antero Resources (NYSE: AR) ("Antero" or the "Company") announced today recent operational highlights. 
Operational Results
All operational figures are as of the date of this release unless otherwise noted. 
Antero's combined net daily production from the Marcellus and Utica Shales recently surpassed 750 MMcfe/d including 15,000 Bbl/d of NGLs and oil.  Gross daily operated production from the Marcellus alone recently crossed the 750 MMcf/d threshold.  The Company has completed 242 horizontal wells in the Marcellus and Utica Shales since commencing drilling operations in Appalachia in 2009.  Antero's net production for the fourth quarter of 2013 is estimated to have averaged 675 to 680 MMcfe/d, which is above the midpoint of the previously announced guidance range of 660 to 690 MMcfe/d.  The fourth quarter of 2013 estimated production represents an organic production growth rate of 20% and 87% compared to the third quarter of 2013 and fourth quarter of 2012, respectively.
Commenting on the production milestone, Paul M. Rady , Antero's Chairman and CEO, said, "We recently set a company record high net production level of 750 MMcfe/d as a result of the continued success of our SSL program in the Marcellus, and the start-up of first Utica compression along with several new wells in the Utica in late January. Fourth quarter 2013 production is estimated to be slightly above the midpoint of our guidance range despite delays in the start-up of two third party compressor stations in the Utica.  The robust nature of our highly economic drilling program allows us to generate one of the strongest growth profiles in the industry. This growth should continue well into the future."
Marcellus Shale — Antero transitioned to shorter stage length (SSL) completions on virtually all of it Marcellus wells during the fourth quarter of 2013.  While Antero wells utilizing SSL completions have limited production history, Antero is encouraged by its well results, as well as those of other operators in the southwestern core of the Marcellus who have implemented shorter stage lengths and reduced cluster spacing completions.  To date, Antero has completed and placed on line 22 Marcellus wells utilizing SSL completions that have at least 30 days of production history.   The various actual average production rates are compared to the June 30th, 2013 reserve report type curve in the table below:

SSL vs Non-SSL Wellhead Average Rate Comparison (MMcf/d)

30-day rate
60-day rate
90-day rate
120-day rate

SSL Well Count
SSL Average Rate – MMcf/d(1)
1.5 Bcf/1,000' Type Curve Average Rate – MMcf/d(1)
SSL % Rate Improvement

 Wellhead condensate production (where applicable) is converted on a 6:1 basis

The 10 wells that have been on line for at least 120 days are 27 percent above Antero's 1.5 Bcf per 1,000 foot of lateral type curve.  The average well cost for SSL wells, defined as wells with stage lengths less than 225 feet, are approximately 12 percent higher than comparable non-SSL wells with an average stage length of 350 feet.
Antero is currently operating 15 drilling rigs in the Marcellus Shale play.  The Company has 63 gross (60 net) horizontal wells either in the process of drilling, completing or waiting on completion in the Marcellus.  Antero currently has two dedicated frac crews working in West Virginia along with three spot frac crews.  The Company plans to increase to seven frac crews for portions of the year to accommodate the additional inventory from increased rig activity, drilling productivity and the transition to SSL completions.  The increased frac crew activity will also allow the Company to fill increasing takeaway capacity.
Utica Shale - Since the third quarter 2013 press release, the Company has completed and tested five additional Utica Shale wells.  Based on gas composition analyses and assuming full ethane recovery (per current industry practice and assuming typical ethane plant production recoveries of 85% to 90%), these five wells had an average 24-hour peak processed rate of 32.2 MMcfe/d as summarized in the following table below:

Additional 5 Antero Utica Shale Wells - 24-Hour Peak Rate

Well Name
Gas Equivalent
Wellhead Gas
Shrunk Gas

Milligan 2H
Coal 3H
Milligan 3H
Dollison 1H
Milligan 1H
Average – Ethane Recovery

Average – Ethane Rejection(1)

Average of Antero's latest five Utica wells assuming ethane rejection.

The Company's rich gas production going into the Seneca processing complex in the Utica Shale has been flowing against 1,100 psi of line pressure while waiting on compression capacity, resulting in constrained production.  Expected line pressure with compression is in the 175 to 250 psi range. 
The Company has a compression and condensate stabilization agreement with a third-party midstream provider to construct and operate three compressor stations in Noble and Monroe Counties, Ohio.  These three compressor stations have a combined capacity of 340 MMcf/d and the three condensate stabilization facilities have a combined capacity of 16,000 Bbl/d, all of which are fully dedicated to Antero.  The first two compressor stations and condensate stabilization facilities were expected to be completed and placed in service during the fourth quarter of 2013.  However, these two facilities were delayed with the first 120 MMcf/d compressor station just recently coming on line in late January.  This compressor station is currently operating at approximately 67 percent of capacity as 6 of 9 units have been placed in service.  The remaining three units are scheduled to be placed in service over the next week.   The second 120 MMcf/d compressor station is now expected to be completed late in the first quarter of 2014.
Four out of the five wells detailed in the table above are currently producing to sales.  The Dollison 1H is waiting on pipeline infrastructure and scheduled to be turned to sales later in the first quarter of 2014.  In addition, two more wells have been completed and will be placed to sales over the next week as the first facility reaches full capacity. 
Antero's previously announced Utica wells are on line and continued to produce against significant high line pressures during the fourth quarter of 2013 as they awaited compression.  Assuming ethane rejection (Antero is currently rejecting ethane due to current market prices), the respective average 30-day processed production rates for these 11 previously disclosed wells, producing in an 1,100 psi operating pressure environment, have been summarized in the following table:

Initial 11 Antero Core Area Utica Shale Wells – 30-Day Constrained Production Rates

Well Name
Wellhead Gas
Shrunk Gas

Gary 2H
Rubel 2H
Rubel 3H
Yontz 1H
Norman 1H
Rubel 1H
Wayne 2H
Wayne 3HA
Wayne 4H
Miley 2H
Miley 5HA
Average – Ethane Rejection

Average – Ethane Recovery(1)

Average of Antero's first 11 Utica core area wells assuming ethane recovery.

As described earlier in the press release, Antero is currently placing into service 120 MMcf/d of compression capacity which will allow the above wells to flow into a lower pressure operating environment which should improve productivity.
Antero is currently operating 5 drilling rigs in the Utica Shale play.  The Company has 18 gross (13 net) horizontal wells either in the process of drilling, completing, waiting on completion or waiting on pipeline or compression, including the three wells described earlier in the release.  Antero currently has two spot frac crews working in Ohio, and is adding a 3rd crew which will run during various periods throughout the year to accommodate its increased drilling activity.