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Tuesday, October 14, 2014

Utica Shale NGLs Continue to Be Key to Play

From SNL Financial:
After a slowdown in merger and acquisition activity took place in the Utica Shale in 2013, the pace of deals in 2014 has increased as midstream operators are in the process of catching up to production advances made by drillers. That should encourage further exploitation of the play in addition to development of end use markets such as petrochemical crackers. 
"Large scale transactions fell off dramatically [in 2013]," Marty Booher, a partner with Baker Hostetler said during a webinar Oct. 6. "In 2012, there were 20 transactions of a billion dollars or more and only eight in 2013. I can tell that there are more deals going on this year than last year." 
Private equity firms are significant holders of acreage in the Utica Shale play but are continuing to sell their assets as the value in Utica increases and wet gas areas are better defined, according to Booher. Private equity firms that have holdings in those areas will look to offload them because they're going to get better value in terms of price. 
The value in the Utica is increasing as the midstream development in the play catches up to higher production levels. 
"The development of midstream infrastructure has lagged behind drilling," Booher said. "Pipelines and other kinds of midstream infrastructure [are] expensive and people aren't going to spend the money to build them unless they know they have product to move." 
The lag in midstream development has slowed down production and drilling in the Utica, according to Booher.
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